Construction Jakarta-Bandung High-Speed Railway Project to Start

August 8, 2016, Indonesia-Investments

Next week construction of the high-speed Jakarta-Bandung railway project may finally start as the government is set to issue the necessary construction permit that allows for the development of Indonesia’s first-ever high-speed railway project. This railway will connect Indonesia’s capital city of Jakarta to the city of Bandung in West Java. Although the groundbreaking ceremony was conducted in January 2016 the project – similar to many other infrastructure projects in Indonesia – has been plagued by a long delay.

Rini Soemarno, Indonesia’s Minister of State-Owned Enterprises, says the permitting process for the 142.3 kilometers-long railway project is now running smoothly after having experienced a prolonged delay. Earlier this week, Soemarno met Indonesia’s Transportation Minister Budi Karya Sumadi to discuss the railway project. However, she added that the Chinese-Indonesian consortium Kereta Cepat Indonesia China (KCIC) that won the tender to build the mega-project may still need to meet some demands before the permitting process can be completed. Still, Soemarno told reporters that she believes the full construction of the high-speed railway can start next week.

After the groundbreaking ceremony in January 2016, construction of the Jakarta-Bandung high-speed railway had to be postponed due to issues related to paperwork (the operational and construction permits still had to be issued) as well as revisions that had to be made to the project’s development plan. There also surfaced reports that land procurement and a shortage of funds exacerbated the situation.

One may wonder why the groundbreaking ceremony for the project was held while there were so much technical matters that needed to be completed. Most likely, Indonesian President Joko Widodo pushed for an early groundbreaking ceremony to give a clear signal to investors: Indonesia is committed to infrastructure development and will not led land acquisition issues come in its way. Another example is the USD $4 billion Batang power plant that saw its groundbreaking ceremony in August 2015 – witnessed by Widodo – while about a dozen of farmers were still reluctant to sell their land to the developers of the power plant. Such fast actions of the government are understandable – although it makes human rights activists nervous – as land acquisition has been one of the main obstacles to infrastructure development in Indonesia.

Regarding the funds that are required to establish the Jakarta-Bandung high-speed project, it was reported earlier that KCIC had experienced problems to secure funds from the China Development Bank (CDB). The project is estimated to require USD $5.1 billion worth of investment. However, CDB was reluctant to disburse funds as the land acquisition process was still ongoing, while KCIC had also still not received all necessary permits. Minister Soemarno said that part of the funding can be disbursed next week as the permits should be granted to KCIC by then. Some 75 percent of the project is funded through a loan from the CDB. Whether all required land has been acquired is unclear.

Kereta Cepat Indonesia China (KCIC) is tasked to construct the Jakarta-Bandung high-speed railway. KCIC consists of Pilar Sinergi BUMN Indonesia (60 percent stake) and China’s largest rail operator China Railway International Co Ltd (40 percent). The Pilar Sinergi BUMN Indonesia consortium consists of four Indonesian state-owned companies: Wijaya Karya, Kereta Api Indonesia, Jasa Marga, and Perkebunan Nusantara VIII.

KCIC was granted a 50-year concession period that will commence on 31 May 2019 when the high-speed railway is scheduled to become operational. It is expected to require 40 years to reach the break even point. Trains between Jakarta and Bandung are estimated to be able to carry 29,000 passengers per day, with ticket prices expected at IDR 200,000 (approx. USD $15.4) per passenger. Trains will be able to reach a maximum speed of 250 kilometers per hour.

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