Indonesia wants Chinese lender to fund high-speed rail overrun — BenarNews

Indonesia will ask the Development Bank of China to fund 75% of the nearly $2 billion cost overrun for the construction of a Beijing-backed fast train project linking the capital Jakarta to Bandung, a senior official said on Thursday. project manager.

The cost of the rail line, which is now expected to be completed next year, has ballooned to nearly $8 billion. The project is part of the Belt and Road Initiative, China’s more than $1 trillion program to finance and build infrastructure projects around the world.

“Obviously the first to be offered is CBD [China Development Bank]the lender financing 75% of the project,” said Dwiyana Slamet Riyadi, chief executive of the consortium, PT Kereta Cepat Indonesia China (KCIC), according to a report by Tempo, the Indonesian media.

Dwiyana said the Indonesian government had proposed that the same funding structure apply for cost overruns, with the consortium covering 25%.

KCIC 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% of KCIC, while China Railway Engineering Corp. and other Chinese companies control the rest.

The 89-mile (143.2 km) Jakarta-Bandung rail line is expected to cut travel time between the Indonesian capital and Bandung from three hours to 40 minutes, officials said.

In January, President Joko “Jokowi” Widodo said the project should be operational by June 2023.

The contractor, meanwhile, said the project was 82% complete.

Since construction began in 2017, the project has faced criticism over its impacts on surrounding areas as well as concerns over rising costs.

On Wednesday, Transport Minister Budi Karya Sumadi witnessed the laying of the first section of track for the rail link in West Java.

Last October, Jokowi decided to allow the government to share the cost of the railway project, in contradiction to an earlier commitment and decree from 2015 which prohibited the use of public funds for its construction. A presidential spokesman said Jokowi’s directive would allow the project to be completed.

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

Yusuf Rendy Manilet, an economist at the Indonesian Center for Economic Reform, a private think tank, said there was a need to renegotiate funding for the project.

“The government should also consider whether the risks [to state coffers] remain the same or there are additional adjustments or risks,” Yusuf told BenarNews.

The economist said potential overruns should have been agreed during the planning phase of the project.

“This should be particularly noted given that China will become one of Indonesia’s major economic partners in the coming years,” Yusuf said.

Now the government and other stakeholders must recalculate the cost due to the overrun, he said.

Capital Transfer Spillover Effects

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

Moving the seat of government would nearly halve the expected number of passengers using the railway from Jakarta to Bandung in West Java, as many government employees would have to relocate to the new capital, a porter said. word of society.

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

Nearly 70% of China’s overseas loans go to state-owned enterprises and private sector institutions and the debts, for the most part, do not appear on government balance sheets, the development research lab said. international based in the United States.

Jose P. Rogers