Indonesia’s first high-speed train linking capital Jakarta and Bandung – the country’s fourth-most populous city – completed a trial run at 180kmh on Monday, reaching its destination in just an hour. The first of a series of comprehensive trials will see rail speeds gradually rise to 385kmh in the coming weeks. The duration of the journey by rail will be reduced to about 40 minutes from 2.5 hours by car, once the train starts running at its maximum speed. The start of commercial operations is slated for August.
Construction of the 142km-long railway project began in 2016. It forms part of China’s Belt and Road Initiative.
Indonesian state companies, including rail operator KAI and construction company Wijaya Karya, control 60 per cent of KCIC, while China Railway Engineering Corporation and other Chinese companies hold the remaining stake (40%).
The total projected cost of the Jakarta-Bandung high-speed rail was initially estimated at US$6 billion (S$8 billion), but Jakarta said in 2022 that an additional US$1.2 billion was needed to meet the deadline for a commercial launch by June 2023.
The original cost of USD5.2 billion was financed on 75:24 debt-equity ratio. The debt signed in May 2017 was approximately USD4 billion, with 2 tranches – a USD tranche and a RMB denominated tranche.
There was no sovereign guarantee on both loans.
The delays in implementation included: Covid related issues; land acquisition; EIA; flooding; relocation of utilities amongst others. While the spiralling costs and construction delays have prompted a good deal of negative commentary, the completion of the Jakarta-Bandung High-Speed Railway marks a milestone for the BRI.
For China, the fact that it has found a willing partner in Indonesia, stands as a vindication of its economics-first approach to its Southeast Asian relationships. For Indonesia, too, the project will likely be brandished as a sign of the country’s independent foreign policymaking, in which Indonesia welcomes all foreign partnerships, as long as they are mutually beneficial.
It is an interesting financing model for the KL-Singapore HSR to consider. The drawbacks remain currency exposure unless it is “pegged” or fixed; tenor of 40 years may not be sufficient; and the debt-equity ratio is too “aggressive” for a rail project.
References:
Jakarta to Bandung in one hour: Indonesia’s new high-speed train completes first trial run, The Straits Times, Wahyudi Soeriaatmadja, 23 May 2023
Indonesian high-speed railway to begin operations in August: Minister, Sebastian Strangio, The Diplomat, 11 April 2023
CDB provides $2.3805 billion loan to Bandung High Speed Rail Project, Aiddata, China.aiddata.org
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