3 Oct 2018
Indonesia’s Premier-city Link on Track for 2021 Launch
Services on the Chinese mainland-funded Jakarta-Bandung High-Speed Rail Line are set to begin within three years, representing a new high-water mark for Beijing-Jakarta relations.
Construction of the Belt and Road Initiative (BRI)-backed Jakarta-Bandung high-speed rail line is reportedly back on track following a hiatus, with its contractors confident it will now enter operation in 2021.
Once completed, the line will be 150 kilometres long and have the capacity to handle trains travelling as fast as 250 km per hour. Initially, it is expected to have an average daily passenger flow of about 44,000, a figure expected to climb dramatically. Its most significant benefit, though, is the cut in transit time it offers for journeys between two of the country's primary hubs, with the present five-hour duration falling to just 36 minutes.
Summing up the current state-of-play on the project, Tumiyana Tumiyana, President Director of Wijaya Karya (Wika) – the state-owned Indonesian construction company that is the local partner on the project – said: “If work on a 150km high-speed rail project occasionally experiences a few problems, that’s only to be expected. Today, the level of physical construction stands at 65.1%, with 81.7% of the overall land clearance also completed.
“In fact, it's all starting to come together rather quickly now, with significant progress having been made at 22 key construction sites along the route. We are now confident that work on the line will finish by early 2021, with the service then starting to run once three months of trials have been completed.”
Wika, the company Mr Tumiyana represents, is part of Kereta Cepat Indonesia China (KCIC), the mainland-Indonesian consortium responsible for developing the project, the country’s first high-speed rail line, in association with the China Railway International Corporation (CRIC). The optimism shown by such a senior figure within the cross-country partnership will, no doubt, come as some reassurance to many of the project's stakeholders, with several of them having become concerned over the delays to the line’s development.
While land-acquisition has been problematic, funding for the project has been in place almost since the outset.
In line with this, earlier this year Wika received US$770 million from the China Development Bank, the latest tranche of the US$5.5 billion the mainland has allocated to the project. The funding comes within the remit of the BRI, the mainland's ambitious international infrastructure development and trade facilitation programme.
Mr Tumiyana is confident the financial targets are realistic. Assessing the profit potential of the line and the agreed repayment terms, he said: “Firstly, you have to remember that we have been given a 40-year soft loan at a very cheap rate. Secondly, as part of the overall plan, the consortium will develop the property in the immediate vicinity of the railway stations, a strategy that, we believe, will generate up to 362 trillion rupiah [US$24.24 billion] in revenue over the next 40 years.”
Despite land-acquisition difficulties, it is believed both the mainland and Indonesia remain firmly committed to making the completion of the line a reality. A similar optimism also characterises many of the other BRI-related infrastructure projects under way in Indonesia.
Mainland investment in Indonesia has more than doubled since 2015, when the mainland first committed to developing the Jakarta-Bandung line, and seems set to continue to grow. As recently as April this year, the mainland agreed to an additional US$23.3 billion in funding for five further Indonesian infrastructure projects.
Indonesia has also partnered with Japan on the 730km long Jakarta-Surabaya High-Speed Rail Link, a route five times the length of the mainland-backed Jakarta-Bandung line.
Overall, though, closer links wrought between the mainland and Indonesia by the scale and scope of the BRI have clearly benefitted both countries. For Indonesia, the advantages are obvious – to continue developing economically it has no choice but to improve connectivity both within the country and with its neighbours and high-value importers in more developed economies. The mainland picking up the tab for such an undertaking was clearly an opportunity the country could not turn down.
For the mainland, there are many benefits of this BRI partnership. Most obviously, this closer collaboration gives the mainland easier access to Indonesia's strategically significant ports and marine facilities. At the same time, it also gives the mainland a direct route into Indonesia's relatively young, newly affluent consumer base. With a population in excess of 261 million, Indonesia has more than twice as many consumers as any other country in the ASEAN (Association of Southeast Asian Nations) bloc, making it a priority target for the mainland's export-oriented business sector.
For more China market opportunities, please visit: http://research.hktdc.com