Chinese Fast Train Project in Limbo as Indonesia Insists: No Guarantee
Jakarta. The Indonesian government has reiterated that it will not provide a guarantee for the development of the controversial Jakarta-Bandung fast train, leaving the high-profile project in limbo just over a week after the launch of construction, which was attended by President Joko Widodo.
"We will defend the non-guarantee clause, because we do not want to burden the state [budget]," Hermanto Dwiatmoko, the railway director general at the Transport Ministry, said on Friday.
Hermanto responded to a request from Kereta Api Cepat Indonesia China, the joint venture of Indonesian state-owned enterprises and China Railway International, asking the government to provide a legal assurance for the completion of Indonesia's first fast train project, regardless of any problems that might arise during construction.
"If the government decides to stop the project [for whatever reason], who will be responsible [for expenses made]?" KCIC president director Hanggoro Budi Wiryawan asked.
Not all permits obtained
The $5.5 billion projects uses loans from the China Development Bank and observers have expressed concern that a failure to complete the project would leave Indonesian SOEs in the joint venture — builder Wijaya Karya, toll road operator Jasa Marga, railway operator KAI and plantation company Perkebunan Nusantara VIII — with a massive foreign debt.
As of Friday, KCIC had yet to secure some of the necessary construction permits, such as a prerequisite track concession deal and business permit, Hermanto said. The company cannot start construction before all necessary permits are granted, he said, despite the fact the president himself officiated the groundbreaking ceremony last week.
The Transport Ministry has offered a 50-year concession for the track, after which KCIC has to return it to the government.
The concession would also shield KCIC from any changes in related laws in the future, but does not give the company the exclusive right to operate on the Jakarta-Bandung route.
The critical point in the concession negotiations was that it would be the investors' responsibility to fulfill any financial obligation, and not that of the Indonesian government, if the fast train construction is not completed or otherwise fails to start operations, Hermanto said.
Costlier than Iran's fast train?
Bambang Haryo Soekartono, a legislator from the Great Indonesia Movement Party (Gerindra), said he doubted the train project would contribute much to the country's gross domestic product.
"It would be better if the $5.5 billion is used to revamp existing railways to transport people as well as to boost logistics for goods," Bambang said.
He also raised concerns that Indonesia could have accepted a higher price for the fast train's 142-kilometer track compared to a similar China Railway project in Iran. There, construction of a 400-kilometer stretch of high-speed railway between Tehran and Isfahan allegedly cost $2.7 billion.
In a statement sent to media, however, the Chinese Embassy in Jakarta explained that "CREC [China Railway Engineering Corporation] only undertakes the construction in the above-rail works in the Tehran-Isfahan HSR project, whereas the Jakarta-Bandung HSR project covers the full scope of works."
"We will utilize the best Chinese technologies," the embassy statement added, "deliver our project as scheduled and meet the quality standards."
China's ambassador to Indonesia, Xie Feng, previously stressed: "The project will drive the development of supporting industries such as smelting, manufacturing, infrastructure, power generation, electronics, services, logistics and real estate."
"So long as the two sides can accommodate each other, learn from each other and share the risks and benefits together," Xie said, "no difficulty shall stand in our way."
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