Is Indonesia about to fall into China’s infamous debt trap with the Jakarta-Bandung HSR?


South East Asia’s first high-speed rail project is expected to connect the country’s largest cities of Jakarta and Bandung, the 2nd largest city and capital of West Java, covering a distance approaching 142.3 kilometres. As of September 2022, the prime contractor, PT. Wikipedia


It seems that there is a payment related problem for the Jakarta-Bandung HSR Project. China asked the Indonesian Ministry of Finance to use the National Budget and Income Estimate (Budget) to be a guarantor to pay the debt of the project.

Indonesia’s Coordinating Minister for Maritime Affairs and Investment, Luhut Panjaitan, informed that the guarantor and payer for the debt will remain PT Penjaminan Infrastruktur Indonesia which is a private company established in Indonesia in 2018

Luhut also informed that negotiations are underway between Indonesia and China to reduce debt interest from 4 to 3 percent but Indonesia requests that it be lowered to 2 percent. If the APBN (Budget) is used, it will cause the Indonesian Government to bear the burden of this project.

There are 2 proposals related to HSR from Japan and China. Japan’s initial cost price is 6.2 Billion USD compared to 5.5 Billion USD for China but the interest rate for Japan is only 0.1 percent compared to China of 2.0-3.4 percent.

This makes the maturity period of the debt for 40 years. It is estimated that Indonesia will save 2.4 Billion USD if it borrows from Japan. But now Indonesia borrows from China. I hope that when Malaysia makes the HSR, it will be the best.



Indonesia high-speed railway still beset by problems

Safety, profitability and accessibility issues haunt $6bn China-led project

KOYA JIBIKI, Nikkei staff writerFebruary 11, 2023 12:01 JST

JAKARTA — Indonesia’s planned high-speed rail project, an integral part of China’s Belt and Road initiative, is raising fresh concerns about its safety, profitability and accessibility.

Scheduled to start service in July, a month later than planned, the 142-kilometer-long railway will connect the capital Jakarta with Bandung in West Java province.

In mid-December, a maintenance train and locomotive derailed at a construction site near Bandung, killing two Chinese workers and spurring concerns about the safety of high-speed rail in the country. It was the first fatal accident involving the line.

A senior Indonesian government official said there was a problem with the locomotive’s brake and that human error could also have played a part in the accident. Both Jakarta and Beijing said that the accident poses no threat to the safety of high-speed rail in Indonesia.

Both governments stressed that the accident was caused by the maintenance vehicle and that the locomotive imported from China escaped major damage.

Kereta Cepat Indonesia China (KCIC) — the consortium running the project, which is funded by state-owned railway operator Kereta Api Indonesia (KAI) and other organizations — resumed construction before findings of the government investigation into the accident were released. The president of KAI told reporters on Jan. 28 that the railway’s opening will be postponed until July.

Another concern is profitability. The Indonesian government initially tried to adopt Japan’s bullet train for the project, but in 2015 switched to a Chinese proposal that did not involve funding by the Indonesian government.

It was decided that 75% of the construction cost would be funded by loans from China Development Bank with the remainder coming from KCIC.

Read the whole article here:



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