China to get rolling on stalled Indonesian high-speed rail line

Chinese bank expected to release funds for project after delays in government clearances and local resistance to the route

PUBLISHED : Saturday, 25 March, 2017, 7:02am
UPDATED : Saturday, 25 March, 2017, 7:02am

China is expected to get moving “soon” on construction of Indonesia’s beleaguered high-speed rail project, a landmark venture for both countries.

China Development Bank could disburse pre-agreed loans for the 142km Jakarta-Bandung rail line as early as the end of this month, according to sources.

The project has been stalled for over a year amid delays in government clearances and local resistance to the route, but if it does go ahead, it will be a milestone in Beijing’s ambitions to export its high-speed rail technology around the world.

“The project is now moving forward positively,” Soegeng Rahardjo, Indonesia’s ambassador to Beijing, said on Tuesday.

Back on track: China’s high-speed railway project in Indonesia to resume soon as permit granted

Indonesian State-owned Enterprises Minister Rini Soemarno also said on Tuesday the CDB funding would be in place as soon as the plan for the route was signed by Indonesian President Joko Widodo.

The route plan had already been given approved by the ministers involved and submitted to the Cabinet Secretariat.

“[The CDB] are still waiting for the ... plan, and if that’s done then there is no problem,” she said.

CDB has committed to cover around 75 per cent of the project’s US$5.2 billion cost, but reportedly under the condition that all of the land be acquired before disbursing the loans. Rini said CDB was not withholding funds for the land. “So far they have already put in Rp 500 billion (HK$291 million),” she said.

Zhang Mingliang, a Southeast Asian affairs analyst at Jinan University, said it would be a big step forward to have the funding in place but there could be more obstacles on the way to the 2018 completion deadline and the 2019 target to have the line running.

China is keen to export its high-speed rail technology and has made it a key element of its “One Belt, One Road” initiative to revive trade from Asia to Europe.

It’s made its biggest progress on the Indonesian project to connect Halim in East Jakarta to Tegalluar in Bandung, West Java, fending off Japan in 2015 to win the bid to build and operate the line. If realised, it would be the first time another country has fully adopted Chinese high-speed rail standards, from train carriages to operating systems.

Xu Liping, a specialist in Southeast Asian studies at the Chinese Academy of Social Sciences, said countries in the region had less experience of and trust in the Chinese technology compared to that from the West and Japan.

To secure the deal, China offered the Indonesian government breaks on financing. Under the agreement, China Railway International will be in charge of 70 per cent of the construction work, while Indonesian state companies will handle the rest of the line.

Ground was broken on the line in January last year but the project was halted soon after it started due to objections from provincial representatives on the route.

Why does Indonesia cling to its plagued Chinese infrastructure projects?

Progress has been held back since then as the developer Kereta Cepat Indonesia China has sought acquire land and clearance from disparate government departments

KCIC is a joint venture between China Railway International and an Indonesian consortium of four state-owned firms, with the Chinese holding 40 per cent of the shares.

“China was too hasty to set up a model project in Southeast Asia and for ‘One Belt One Road’ ... and underestimated its difficulties,” Zhang said. “Even after the start of the actual construction work, political, economic, environmental, religious and labour issues could all well stumble this project in the future.”

Additional reporting by Kristin Huang