China begins shipping trains for Indonesian high-speed rail line

Nazarudin Latif
2022.08.05
Jakarta
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China begins shipping trains for Indonesian high-speed rail line Chinese company CRRC Qingdao Sifang Co. Ltd. announced that high-speed trains to be exported to Indonesia had rolled off its assembly line, Aug. 5, 2022.
CRRC/Twitter

The first trains for Indonesia’s Beijing-backed high-speed rail line are being shipped from China, the Ministry of Transportation said Friday as questions linger about who should pay for a U.S. $2 billion cost overrun that has beset the controversial project.

Meanwhile, an opposition lawmaker said he and others would seek an investigation into the project to connect Jakarta and Bandung. Once constructed, the nation’s first high-speed railway is expected to cut travel time by more than half between the two cities.

“Electric Multiple Units (EMU) or trains for the Jakarta-Bandung High Speed ​​Rail (KCJB) project began shipping from China to Indonesia today,” the ministry said in a statement on Friday.

Transportation Minister Budi Karya Sumadi said the rail line was to undergo dynamic testing in November to coincide with the G20 summit in Bali that Chinese President Xi Jinping is expected to attend. Dynamic testing is a procedure to ensure that the system works properly.

Budi said the project is expected to be fully operational in June 2023.

The rail line “is a manifestation of friendship between Indonesia and China,” he said.

“For that, let’s support this project so that it can run well and in a sustainable way.”

The trains can travel at a speed of 350 kph (217 mph) and make up to 68 trips per day between the Indonesian capital and Bandung. Travel time is expected to be between 34 and 45 minutes, compared with 2.5 hours by regular trains, Budi said.

Ballooning cost 

The cost of the rail line, however, has swelled to nearly $8 billion from its original $6 billion estimate. The project is part of the Belt and Road Initiative, China’s $1 trillion-plus program to finance and build infrastructure across the globe.

Since construction began in 2017, the rail line has been dogged by criticism about its impacts on surrounding areas as well as concerns about rising costs.

In October 2021, President Joko “Jokowi” Widodo decided to allow the government to share the cost of the project, contradicting an earlier pledge and decree in 2015 that prohibited the use of state funds for its construction.

A month later, the finance minister told a parliamentary panel that the government had decided to inject 4.3 trillion rupiah ($299 million) into the project. Critics had expressed concern that the move could deplete state coffers and lead Indonesia into a debt trap.

The Indonesian government had 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. 

KCIC, the rail line contractor, is a joint venture of a consortium of four Indonesian state-owned companies – KAI, Wijaya Karya, PTPN VIII, and Jasa Marga – and a consortium of Chinese companies.

The Indonesian consortium controls 60 percent of KCIC, while China Railway Engineering Corp. and other Chinese companies control the rest.

On Sunday, Alia Karenina, spokeswoman for the Coordinating Ministry for Economic Affairs, said the China Development Bank had asked the Indonesian government to fund the cost overrun.

“The request was not immediately approved by the government and discussions will still be carried out to ensure that if the government does indeed bear the burden of the cost overrun, then it is in accordance with applicable regulations,” she said in a statement.

Meanwhile, Arya Sinulingga, a spokesman for the Ministry of State-Owned Enterprises, said 75 percent of the cost overrun might be funded through a loan.

“It [the loan] may come from China, or from elsewhere,” Arya said on Wednesday, according to CNBC Indonesia.

Opposition lawmakers seek inquiry

A legislator from the opposition Prosperous Justice Party (PKS) said his faction wants an investigation into the project.

“The proposal to use the right of inquiry is very important to investigate and get to the bottom of the problems that beset the project, for the sake of accountability for the use of government money,” said Jazuli Juwaini, chairman of the PKS faction in the House of Representatives.

Jazuli said China’s request that Indonesia bear the cost overrun and the project’s financing structure puts the country at disadvantage. 

“China’s dominance in the project … will be a problem for Indonesia’s national interests in the future,” he said.

“The PKS faction will immediately communicate with the parliamentary leadership to submit an official proposal and garner support from other members so the project does not become a burden for the state,” he said.

In February, the consortium said the high-speed rail service was expected to become profitable 40 years after completion – not 20 as earlier projected – partly because plans to move the national capital from Jakarta to Borneo could sharply reduce the number of riders.

‘Hidden debt’

An AidData study released last year noted that Indonesia owes $17.28 billion in “hidden debt” to China, more than four times its $3.90 billion in reported sovereign debt.

Nearly 70 percent of China’s overseas lending is directed to state-owned companies and private-sector institutions and the debts, for the most part, do not appear on government balance sheets, said the U.S.-based international development research lab.

Bhima Yudhistira, director of the Center for Economic and Law Studies, said Indonesia must fund the cost overrun through a loan – or it could request debt relief from China.

“It’s a double whammy. The construction costs have swollen, and you have to look for a loan.”

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