Indonesia’s China-funded high-speed railway hit with fresh problems
- The 142km Jakarta-Bandung line, a high-profile belt and road project, is already US$1.2 billion over its initial budget and four years behind schedule
- Indonesia’s transport ministry is now calling for the proposed commercial launch of the rail line to be pushed back from August this year to January
A smooth opening of the railway line, the most high-profile belt and road project in Southeast Asia’s largest economy, as part of Independence Day celebrations would be a shot in the arm for its ruling party ahead of a general election next year, analysts said.
“A further delay will only become ammunition for the opposition to attack,” said Teuku Rezasyah, an international relations analyst at Padjadjaran University, adding that setbacks would taint China’s credibility to develop and deliver big projects in the region.
Months before its proposed commercial launch in August, the showpiece project is beset by fresh problems, with the consortium’s Chinese participants wanting a full operational worthiness certificate for the line despite an incomplete station, a 48-page presentation reviewed by Reuters shows.
Instead, the transport ministry and consultants Mott MacDonald, PwC and local law firm Umbra have suggested that full-fledged commercial operations could start in January 2024, the “Progress Update” report dated May 14 shows.
“There is a risk that the target of commercial operations in August could be delayed to complete all construction by December 31,” said the report, written in the local language.
Financial restructuring at PT Wijaya Karya Tbk (WIKA) – an Indonesian state-owned construction firm with an indirect minority stake in the consortium – is also hitting the working capital needs of the project, which has already accumulated at least US$381.75 million in outstanding payments, another internal document shows.
WIKA corporate secretary Mahendra Vijaya said the company had the financial capacity to finish the remaining work, but it also needed the consortium to pay it for work already done.
Indonesia is negotiating with China on an additional US$560 million loan and asking for an interest rate of 2.8 per cent for the portion of the loan in yuan, which is lower than the China Development Bank (CDB) offer of 3.46 per cent, according to a second set of documents dated May 18.
The possibility of a further delay and other details in the two documents have not been previously reported.
The railway plans to begin a free trial with passengers in mid-August, with paid trips expected in September and the incomplete station likely finished by November, he added.
PwC declined to comment. China-backed consortium PT KCIC, Mott MacDonald, Umbra, CDB and China’s embassy in Jakarta did not respond immediately to requests for comment.
The fresh loan is needed to help cover a US$1.2 billion cost overrun.
02:04
Presidents Xi and Widodo watch Chinese-built Indonesian bullet train make first trial run
Delays and cost blowouts are not uncommon in high-speed rail projects globally, including in Western countries.
One-way tickets on the line will cost up to 350,000 rupiah (US$23.50) depending on the distance travelled, according to PT KCIC, nearly one-quarter of the average Indonesian’s weekly income.
The planned 45-minute train ride between Jakarta and Bandung compares with a car journey of two to three hours or the current three-hour rail trip.
But with the terminal stations located outside the city centres, the high-speed rail line could struggle to attract the business passengers being targeted, said Sutanto Soehodho, a transport analyst at the University of Indonesia.
“They value time and seek convenience,” he said. “But if they need to transit again, why should they use it?”
Locating the stations in central Jakarta and Bandung would have been too costly, ministry official Seto said.
