Indonesia: China-funded high-speed rail project set for limited August launch

Arie Firdaus
Indonesia: China-funded high-speed rail project set for limited August launch Workers stand beside an Electric Multiple Unit high-speed train for a rail link project that is part of China’s Belt and Road Initiative, at Tegalluar train depot in Bandung, West Java province, Indonesia, Oct. 13, 2022.
[Yuddy Cahya Budiman/Reuters]

Indonesia’s first high-speed rail is on track to start limited operations in two months’ time, the consortium building the China-funded project announced Tuesday after a media report said its launch could be delayed again.

PT KCIC, the consortium of Indonesian and Chinese companies, said the Jakarta-Bandung rail service was expected to start operating for free for a limited number of passengers on Aug. 18, but it did not say when commercial operations would begin.

“This marks a historic milestone for Indonesia’s railways as we will soon operate high-speed trains,” company spokesman Emir Monti said in a statement.

The Reuters news agency, citing an internal document, reported last week that the Transportation Ministry and three consultants had advised the consortium against launching the service commercially in August because of an incomplete station and other issues.

Monti of KCIC said the company was preparing for the certification process with the Transportation Ministry and other relevant parties.

“We will comply and follow fully the regulations set by the Transportation Ministry,” Monti said in the statement.

The project is already four years behind schedule and U.S. $1.2 billion over budget.  It now costs $7.2 billion, up from an initially estimated $6 billion (89 trillion rupiah).

It has faced several delays due to land acquisition, funding and technical issues. A work train – not a high-speed one – derailed on Dec. 18, killing two workers and injuring four others.

Meanwhile, Luhut Pandjaitan, Indonesia’s minister of maritime affairs and investment, told lawmakers during a parliamentary hearing on Friday that the train would be ready for a speed test of up to 300 kilometers per hour later this month, and invited them to join the test ride.

“Don’t listen to rumors out there. It’s going well,” he said of the project.

The Jakarta-Bandung rail project is the most high-profile of China’s Belt and Road Initiative projects in Indonesia, Southeast Asia’s largest economy. It has been touted by Indonesia and China as a symbol of the close ties between the two countries.

The project is also a showcase of China’s ambitions to export its high-speed rail technology and expand its influence in the region. China has been competing with Japan, which has a long history of building bullet trains, for rail projects in Southeast Asia.

The Belt and Road Initiative is China’s $1 trillion-plus program to finance and build infrastructure across the globe.

The new rail line is expected to reduce the travel time between Jakarta and Bandung to 34-45 minutes from 2.5 hours by regular train. The project has faced several delays and controversies, including criticism of its environmental impact, since it was launched in 2016.

The train service is expected to run at a speed of 350 kph (217 mph) along the 142-km (88-mile) route.

China’s interest rate on loans

Meanwhile, Luhut, who is also Indonesia’s top official for cooperation with China, said the country would make all-out efforts to put the rail project into operation on schedule, according to a statement on China’s foreign ministry website.

Luhut made the remarks on Friday during a phone call with Wang Yi, director of the Office of the Central Commission for Foreign Affairs, the statement said.

“The joint commissioning and testing of the Jakarta-Bandung high-speed railway, a flagship project of Belt and Road cooperation, has started, marking an important step towards the inauguration of the whole line,” the statement said. 

“The railway will inject new impetus into Indonesia’s accelerated development.”  

China has played hardball over the funding of cost overrun. 

Beijing has insisted on keeping the interest rate for the project loan, including the cost overrun, at 3.4%, despite Indonesia’s request to lower it to 2%, Luhut had said in April.

Luhut said the government was also negotiating with China on the loan tenure and the grace period for repayment. The tenure could range from 30 to 40 years, while the grace period could be 10 to 15 years.

On Friday, he told lawmakers that the negotiation was “in [the] final stages.”

Indonesian President Joko “Jokowi” Widodo had promised not to use state funds for the project, but the government decided in 2021 to fund $200 million of the cost overrun through a capital injection.

The Indonesian government had last year proposed that the China Development Bank, which is financing the project, shoulder 75 percent of the cost overrun, with the consortium of Indonesian and Chinese companies covering 25 percent.

An AidData study from 2021 noted that Indonesia owes $17.28 billion in “hidden debt” to China. Nearly 70 percent of China’s overseas lending is directed to state-owned companies and private-sector institutions, meaning the debts, for the most part, do not appear on government balance sheets, said the U.S.-based international development research lab.

Separately, KCIC’s human resources director Adhi Priyanto confirmed a media report that said the consortium asked the government in January to allow more foreigners to work on the rail service.

The Jakarta Post on Tuesday, citing a company document, reported that the Transportation Ministry backed more foreign workers for safety reasons, especially in the first year of operations. 

The Manpower Ministry said in May it would relax eligibility requirements if needed, the newspaper said, citing the same document.

Adhi said China would run the Jakarta-Bandung rail service for safety reasons in the first year of operations and then transfer half of the jobs to Indonesian workers in the second year.

“From the third year on, it will be all Indonesian,” Adhi was quoted as saying. 

He noted the arrangement was better than an earlier proposal that maintained Chinese operations for the first five years.


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