7-6-2023 (JAKARTA) Indonesia’s transport ministry and three consultants have raised concerns over the China-funded consortium’s plan to commence full commercial operations of Indonesia’s first high-speed train service in August, according to an internal document. The US$7.3 billion project, a key initiative of President Joko Widodo and part of China’s Belt and Road Initiative, is already US$1.2 billion over budget and four years behind schedule. The successful launch of the 142 km railway line from Jakarta to Bandung would provide a boost to the ruling party ahead of next year’s general election. However, the consortium’s Chinese participants are seeking a full operational worthiness certificate for the line despite an incomplete station. The transport ministry and consultants Mott MacDonald, PwC, and local law firm Umbra have suggested that full commercial operations may have to be pushed back to January 2024, as indicated in a “Progress Update” report.
The report highlights the risk of delaying the target of commercial operations to ensure the completion of all construction by December 31. PT Wijaya Karya Tbk (WIKA), an Indonesian state-owned construction firm with an indirect stake in the consortium, is facing financial restructuring issues that affect the project’s working capital. Outstanding payments have already reached at least US$381.75 million, according to another internal document. While WIKA maintains the financial capacity to complete the remaining work, it requires the consortium to compensate for the work already done.
Negotiations between Indonesia and China are underway to secure an additional loan of US$560 million. Indonesia is seeking an interest rate of 2.8% for the portion of the loan in yuan, lower than the 3.46% offered by the China Development Bank. The details of the potential delay and other relevant information from the internal documents have not been previously reported.
The high-speed rail project has faced delays and doubts since PT KCIC, the China-backed consortium, was awarded the contract in 2015, outbidding a Japanese competitor. Land ownership disputes, economic impact concerns, and the COVID-19 pandemic have contributed to the project’s setbacks. Similar delays and cost overruns have been experienced in high-speed rail projects worldwide.
While PT KCIC plans to conduct a free trial with passengers in mid-August and introduce paid trips in September, the incomplete station is expected to be finished by November. One-way tickets on the line are projected to cost up to 350,000 rupiah (US$23.56), nearly a quarter of the average Indonesian’s weekly income. The 45-minute train journey between Jakarta and Bandung is significantly shorter than the two to three-hour car journey or the current three-hour rail trip. However, the high-speed rail line may face challenges attracting business passengers as the terminal stations are located outside the city centers. Transportation analysts suggest that business travelers prioritize time and convenience, and the need for additional transit may deter their use of the service. Ministry officials argue that locating the stations in central Jakarta and Bandung would have been cost-prohibitive.
