CDB’s Loan Disbursed, Indonesia’s KCIC Fast Train Project Goes On

The Mock-up High Speed Railway - Photo by KCIC

JAKARTA (TheInsiderStories) – The China Development Bank (CDB), on Friday (27/04), disbursed $170 million worth of loan to PT Kereta Cepat Indonesia China (KCIC), which is the first stage of loan to help fund development of Jakarta-Bandung high speed train, KCIC’s parent Wijaya Karya said in a statement last week.

KCIC, which is backed by a consortium consisting of Indonesian and Chinese companies, has developed the first stage of the high speed train since 2016. The entire 142.3 kilometer long fast train project is estimated to cost about $5.9 billion, of which $4.5 billion is expected to come from loan from CDB.

The Jakarta-Bandung Fast Train will connect four stations: Halim Perdana Kusuma in Greater Jakarta area; Karawang, West Java; Walini (in Bandung, West Java) and Tegal Luar, also in West Java.

President Director of PT Wijaya Karya Tbk (IDX: WIKA) Tumiyana said CDB’s loan is expected to help boost confidence about Indonesia’s future transportation system.

WIKA participates as a shareholder in PT Pilar Sinergi BUMN Indonesia of 38 percent, while other state-owned company PT Kereta Api Indonesia is 25 percent, PT Perkebunan Nusantara VIII 25 percent, and PT Jasa Marga Tbk (IDX: JSMR) of 12 percent.

The consortium joined with Beijing Yawan HSR Co. Ltd. each owns 60 percent and 40 percent shares in KCIC.

The elite Jakarta-Bandung high-speed train project looks to be switching to a slower track. The target to commence operation by 2020 now looks highly unlikely, instead the government now hints that commercial operation might start in 2024.

The key reason for the delay is not at all surprising: the government blames slow progress in the land clearance process, incomplete talks related to the financing scheme as well as extension of the line, which is now designed to reach Kertajati Airport in West Java.

So far, land clearing has only reached 54 kilometers out of total length of 142 km. The government targets securing all land by April 2018.

Coordinating Minister for Maritime Affairs Luhut Binsar Panjaitan has revealed that his office is assessing progress of the Jakarta-Bandung fast train project as requested by President Joko Widodo. The assessment covers permits, frequency of the trip, land clearing, cash-flow model as well as an option to extend the railway track to Yogyakarta and Solo.

Director General for Railways at the Transportation Ministry Zulfikri has said On Feb. 13 that the delay on the project was a result of a coordinating meeting attended by a number of cabinet ministers. Transportation Minister Budi Karya Sumadi said disbursement of the loan to fund the project is contingent on the completion of land clearing.

The high-speed train project is a landmark joint effort between Indonesia and China and is also seen as a revolution in the country’s land transportation systems.  The project was signed off by the President Director of PT KCIC Hanggoro Budi Wiryawan with the President Director of CDB Hu Huaibang and witnessed by Indonesian President Joko Widodo and China’s President Xi Jinping in 2017.

Followed the slow progress of Jakarta-Bandung High-speed train, Indonesia government looking Japan to construct the first track of the Jakarta-Surabaya semi-high speed train project.
Minister of Transportation Budi Karya Sumadi has said, the two-phase project is estimated to require an investment of Rp80 Trillion ($5.79 billion) and start to commences this year. The first phase will reportedly be a Jakarta-Semarang section, which is anticipated to be completed within two years.
The second, Semarang-Surabaya phase, will start up construction in 2019.

According to him, the semi-high speed train project is currently under study, by a team of Japanese specialists.

Sumadi stated that the semi-fast train will be able to cover the Jakarta-Surabaya route within five hours, at a minimum speed of 140 kilometers per hour. In the construction of level crossings, both for flyovers and underpasses, the Ministry will coordinate with the Ministry of Public Works and Public Housing.

Jakarta-Surabaya medium-speed railway facilities are expected to reduce the eight- to nine-hour travel time to only five hours. Sumadi noted that there are at least 1,000 railroad crossings on the route between Jakarta and Surabaya. Moreover, the government should construct a double track with displaced railroad crossings as well as setting up overhead electricity lines.

Sumadi has revealed that the Japan International Cooperation Agency (JICA) has expressed its readiness to finance the train projects.

President Joko Widodo is focusing on the development of infrastructure in all sectors, the primary objective being to achieve economic growth of at least 7 percent, so Indonesia can reach the status of a so-called “designated country” by 2025, exceeding its current status as a “developing country”.

The Indonesian economy grew by 5.18 percent in the second quarter (Q2) of this year, compared with a revised 4.88 percent in 2016, but is still far from the target of 7 per cent. World Economic Forum in its report on the Global Competitiveness Index ranks Indonesia at 41st out of 140 countries and puts Indonesia in the 60th rank for countries with the best infrastructure and connectivity.

The government has confirmed the economy will grow by 5.4 percent in 2018, and has allocated a budget of Rp455 trillion (3.1 percent of GDP) for the development of infrastructure next year, higher than the Rp387.7 billion set for 2017 (2.8 percent of GDP). The budget for infrastructure development next year will be set 17.35 percent above this year’s budget.

For Widodo, a crucial step in promoting economic growth is developing infrastructure in all sectors, so that economic activity can increase significantly. In 2016 he issued Presidential Decree number 3/2016 on accelerated implementation of national strategic projects.

As of June 2017, five projects (2 percent of the total of 245) entered a final stage of development, 130 projects (53 percent) are under construction, 12 (5 percent) in a transaction process, and 100 (40 percent) are ready for development

The investment for this national strategic project, funded by the state budget, amounts to Rp525 trillion, state-owned enterprises (SOEs) and Rp1,258 trillion for local government, and Rp2,414 trillion for the private sector.

The classical problem in the implementation of any type of these projects is land acquisition. In an attempt to deal with this effectively, the Government issued Presidential Decree No. 56/2017, aiming to address the social impact of land acquisition.

US$1: Rp13,800