Problems beset Indonesia’s first high speed train project

A week after President Joko Widodo broke ground on Indonesia’s first high-speed railway line, construction has been on hold over administrative issues, including a lack of a permit from the Ministry of Transport.

The director of railways at the Ministry of Transport, Herman Dwiatmoko, said to obtain a construction permit, PT Kereta Cepat Indonesia China (KCIC), the holding company that builds the Rp 70-trillion line, must have a business license for public railway infrastructure.

“The construction permit can not be obtained unless they own a business license,” he told journalists.

Herman said PT KCIC must prepare paperwork including a letter of application,  technical drawings, field data, a timetable, technical specifications and an analysis of the environmental impact.

Herman said a number of documents submitted by PT KCIC have not been evaluated because they are written in Chinese and English, instead of Indonesian.

Some experts also warned that areas designated for the railway line are prone to earthquakes and that government should carefully consider the impact in an event of a disaster.

Transportation Minister Ignasisus Jonan said that his ministry is taking extra precaution since the Chinese loan has a tenure of 50 years and the government wants all assets to be in good condition when they are eventually handed over to the government.

The line will span 42 kilometers from Jakarta to Bandung and is expected to be completed by 2019, at the time when Jokowi is expected to be seeking re-election.

The train is expected to run 350 kilometers per hour, taking 36 minutes to get from Jakarta to Bandung with four stops along the way.

The long and winding road to the agreement

The project has been a confusing affair from the beginning.

First, the government invited Japan and China to bid for the project.

After the Japanese and the Chinese submitted their proposals, the government said it had decided to abandon the whole plan for technical reasons: the railway wouldn’t reach its maximum speed because the distance was too short.

Then the government came up with an idea to develop a medium-speed train instead, telling both China and Japan to submit new bids.

The Japanese and Chinese envoys to Indonesia didn’t hide their displeasure with the government’s decision to cancel the original plan after the two had competed for months to secure the contract. The new train will be “fast” but not “high-speed.”

Jokowi then decided to give the project to China partly because the Chinese’ plan  would not involve the use of the state budget, despite the fact that Japan had undertaken a three-year feasibility study, bringing in experts to work in partnership with their Indonesian counterparts.

China’s feasibility study was said to offer a more competitive price than its Japanese counterpart.

Jokowi said the government will not provide any viability gap fund and that the cooperation will be under a business-to-business scheme.

Indonesia hired the Boston Consulting Group as a third party to assess the bids but the final decision was Jokowi’s call. After months of silence, he sent Indonesia’s national planning minister Sofyan Djalil to deliver Jakarta’s decision to Yoshihide during a visit to Tokyo at the end of September last year.

According to the Indonesian Investments website, Singapore was Indonesia’s largest foreign direct investor in 2014, investing a total of US$5.8 billion, followed by Japan (US$2.7 billion), Malaysia (US$1.8 billion), the Netherlands (US$ $1.7 billion), and the United Kingdom (US$1.6 billion). Japan has huge stakes in the automotive and mining sectors.

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