INDONESIA’S transport ministry and three consultants have pushed back on a China-funded consortium’s plan to start full commercial operations of the country’s US$7.3 billion first high-speed train service in August, an internal document showed.

A flagship project of President Joko Widodo – and part of China’s Belt and Road Initiative (BRI) – the 142 km line from capital Jakarta to the large city of Bandung is being built by a consortium of Indonesian and Chinese state firms. The project is already US$1.2 billion over the initial budget and four years behind schedule.

Analysts noted that a smooth opening of the railway line as part of Independence Day celebrations would be a shot in the arm for its ruling party ahead of a general election in 2024.

Teuku Rezasyah, an international relations analyst at Padjadjaran University, said: “A further delay will only become ammunition for the opposition to attack.” He added that setbacks would taint China’s credibility to develop and deliver big projects in the region.

A 48-page presentation reviewed by Reuters showed that the showpiece project is already beset by fresh problems – the consortium’s Chinese participants want a full operational worthiness certificate for the line despite an incomplete station.

The Ministry of Transportation, consultants Mott MacDonald, PwC and local law firm Umbra have instead suggested that full-fledged commercial operations could start in January 2024, the Progress Update report dated May 14 showed.

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“There is a risk that the target of commercial operations in August could be delayed to complete all construction by Dec 31,” the report read.

Another internal document showed that financial restructuring at Wijaya Karya (Wika) – an Indonesian state-owned construction firm with an indirect minority stake in the consortium – is also hitting the working capital needs of the project, which has already accumulated at least US$381.75 million in outstanding payments.

Wika’s corporate secretary Mahendra Vijaya said the company had the financial capacity to finish the remaining work, but it also needed the consortium to pay it for work already done.

Indonesia is negotiating with China on an additional US$560 million loan and asking for an interest rate of 2.8 per cent for the portion of the loan in yuan. This is lower than the China Development Bank’s (CDB) offer of 3.46 per cent, according to a second set of documents dated May 18.

Septian Hario Seto, a senior official with Indonesia’s investment coordinating ministry, said debt negotiations were underway with CDB, with a focus on the interest rate.

He added that there are plans to begin a free trial for passengers on the railway in mid-August, with paid trips expected in September and the incomplete station likely finished by November.

Delays and doubts

The fresh loan is needed to help cover a US$1.2 billion cost overrun.

KCIC was awarded the project in 2015, after lodging a cheaper proposal than a Japanese rival, with completion expected in 2019. But the project has been plagued by delays due to land ownership disputes, questions over its economic impact and the Covid-19 pandemic.

Delays and cost blowouts are not uncommon in high-speed rail projects globally, including in Western countries.

KCIC expects it will take 40 years for its investment to become profitable, twice as long as initial estimates, an executive said last year.

One-way tickets on the line will cost up to 350,000 rupiah (S$31.75) depending on the distance travelled, according to KCIC, nearly a quarter of the average Indonesian’s weekly income.

The planned 45-minute train ride between Jakarta and Bandung compares with a car journey of two to three hours or the current three-hour rail trip.

But with terminal stations located outside the city centres, the high-speed rail line could struggle to attract the business passengers being targeted, said Sutanto Soehodho, a transportation analyst at the University of Indonesia.

“They value time and seek convenience,” he said. “But if they need to transit again, why should they use it?”

Locating the stations in central Jakarta and Bandung would have been too costly, ministry official Seto said. REUTERS