China-Built High-Speed Rail in Indonesia Gets Off to Bumpy Start

INDONESIA-JAPAN-CHINA-INVESTMENT-RAIL

Scale models of Chinese-made bullet trains on exhibition at a shopping mall in Jakarta.

Photographer: Bay Ismoyo/AFP via Getty Images
  • Company is seeking a regulatory guarantee for the link
  • Widodo promoting the rail line as a key infrastructure project

A $5.5 billion Chinese-led railway line in Indonesia has hit early snags amid domestic opposition to the project touted by President Joko Widodo as a key plank of his infrastructure ambitions.

The president attended a groundbreaking ceremony last month for the high-speed line between Jakarta and Bandung. However, the company building the link hasn’t been granted a business permit or provided documents needed to be given the go-ahead, the Jakarta Post reported Jan. 26. Indonesian State-Owned Enterprises Minister Rini Soemarno declined to comment on the permit situation on Monday.

The 150-kilometer link is among 20 planned or ongoing railway projects across Indonesia, whose network has been largely untouched since Dutch colonial days. The president, better known as Jokowi, is trying to revive lackluster growth in Southeast Asia’s largest economy by boosting infrastructure spending.

“They are rushing to get started without the permits and Jokowi will be under pressure to take over in case it fails,” Yoga Adiwinarto, Indonesia director of the Institute for Transportation and Development Policy, said by phone Monday. “This makes me wonder how sustainable the project will be.“

PT Kereta Cepat Indonesia Cina, the company building the line, is seeking a regulatory guarantee to ensure that there will be discussions for a longer concession period if there’s a need to change the train routes or tracks, Soemarno told reporters in Jakarta Monday. The company isn’t seeking a financial guarantee for the project to proceed, she said.

Japanese Rival

Jokowi rejected a Japanese bid for the railway line and awarded it to China Railway International Co. and a consortium of Indonesian state companies in October. He called the decision a pure “business to business” arrangement and said the Chinese weren’t demanding a funding guarantee by the Indonesian government unlike the Japanese.

The line, scheduled for completion by 2019, will cut travel time by rail between Jakarta and Bandung to less than 40 minutes from more than three hours at present. The government then plans to extend the link to the city of Surabaya, a journey that currently takes more than 12 hours from Jakarta.

“I’m asking whether we urgently need a fast train that covers such a short distance,” Epyardi Asda, a lawmaker from an opposition Islamic party, told reporters last week.

Kereta Cepat was “trying to meet” all the permit requirements and wouldn’t take any shortcuts in getting the remaining ones, its president director, Hanggoro Budi Wiryawan, said in an interview broadcast on CNN Indonesia on Jan. 29.

The Indonesian companies in the joint venture include state construction company PT Wijaya Karya, railway operator PT Kereta Api Indonesia and toll-road builder PT Jasa Marga. Three-quarters of the funding will come from China Development Bank.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE