Indonesia’s China-funded rail project on track despite cost overrun

This file photo by the STAR shows the Metro Rail Transit Line 3. The STAR/Michael Varcas. Sketched by the Pan Pacific Agency.

TEGALLUAR, Oct 13, 2022, Reuters. A high-speed railway project in Indonesia, part of China’s Belt and Road Initiative, is on track for a 2023 launch despite ongoing negotiations between the two countries about the project being over-budget, officials said on Thursday, Reuters reported.

President Joko Widodo inspected a new train station, where the consortium building the railway, PT KCIC, displayed a stationary China-made bullet train on the tracks. The 142-km line will connect the capital Jakarta with one of the country’s largest cities, Bandung.

“This will be the first high-speed rail in ASEAN and we hope this will increase connectivity between countries, whether this (the railway) will be connected further to an airport or other high-speed railways,” he said, referring to the Association of South East Asian Nations.

Jokowi, as the president is popularly known, said the project was 88.8% complete and its commercial launch is expected in June, 2023.

KCIC has said the project is facing a cost overrun of about $2 billion, raising the estimated total cost to 113 trillion rupiah ($7.36 billion). China estimates the project is less than $1 billion over budget, according to Koran Tempo newspaper.

KCIC’s President Director Dwiyana Slamet Riyadi confirmed the discrepancy in cost calculations, saying negotiations are underway to resolve it.

“We hope the negotiations…regarding cost overrun and financing can be quick so this does not disturb the progress,” said Dwiyana, who accompanied Jokowi on Thursday.

Indonesian state companies, including Wijaya Karya (WIKA.JK) and PT KAI, control 60% of KCIC, while China Railway Engineering Corporation and other Chinese companies control the rest. The project is funded by a loan from China Development Bank.

The Indonesian firms have been lobbying their Chinese counterparts since last year to fund the rise in costs, while a capital injection from the Indonesian government is also awaiting authorities’ approval.

Dwiyana said discussions were ongoing as to whether Chinese President Xi Jinping may witness a trial run of the rail project when he visits the Southeast Asian country next month for the G20 leaders’ summit.

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