Indonesia rail company gets 3.2 trillion rupiah boost for China-backed project

INDONESIA’S state-owned railway firm KAI said on Tuesday (Jan 3) it has received a 3.2 trillion rupiah (S$274.7 million) capital injection from the government to help a consortium of Indonesian and Chinese state companies complete a high-speed rail project.

The capital top up will partially finance rising costs to build a 142-km (88.23 miles) high-speed rail line linking the capital Jakarta with the textile hub of Bandung, West Java.

The total project cost was initially estimated at US$6 billion, but last year Jakarta said an additional US$1.45 billion was needed to meet a deadline for a commercial launch by June, 2023.

Companies involved in the consortium, called KCIC, were expected to increase their equity participation and Indonesia would also seek about US$1 billion through an additional loan from the China Development Bank to cover the cost overrun.

The project, part of China’s Belt and Road Initiative that was awarded to KCIC in 2015, has faced other problems including construction delays due to the pandemic.

Indonesian state companies, including KAI and Wijaya Karya, control 60 per cent of KCIC, while China Railway Engineering Corporation and other Chinese companies hold the remaining stake.

Two Chinese workers died last month when a work train careened off the tracks, state news agency Antara reported, citing China’s ambassador to Indonesia, Lu Kang, who said the incident did not compromise the safety of the railway.

KAI said in Tuesday’s statement that it would commit to ensure project safety. REUTERS