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Q&A: High-speed railway tug of war: Japan vs. China

  • Devina Heriyanto
    Devina Heriyanto

    The Jakarta Post

Jakarta | Mon, April 11, 2016 | 08:20 am
Q&A: High-speed railway tug of war: Japan vs. China Japan’s high-speed train brand of shinkansen has been a profound name in the industry for decades, running at high-speed without any fatal accidents. (Shutterstock/-)

The plan to build a high-speed railway has existed for years. The project was pursued by Japan and China, both having the technological capacity to build a railway that would connect Jakarta and Bandung, West Java, respectively the first and third largest cities in Indonesia.

Who originally proposed the idea?

The idea of a high-speed train can be traced back to Susilo Bambang Yudhoyono’s presidency. During that era, the Indonesian and Japanese governments agreed to conduct a detailed feasibility study on adopting Japan’s Shinkansen high-speed rail technology to connect Jakarta and Surabaya, with phase one connecting Jakarta-Bandung.

However, the project halted once Joko “Jokowi” Widodo was sworn in as president replacing SBY.  Planning Minister Andrinof Chaniago stated soon after his appointment in October 2014 that a high-speed railway was not a priority for the current administration. His view was mirrored by Transportation Minister Ignasius Jonan who added that infrastructure development in rural areas and the country's outermost islands was more important.

In 2015, the plan to continue the Jakarta-Bandung high speed train project was resumed. In March, Jokowi visited Japan and China to talk about foreign investment in Indonesia, particularly in infrastructure.

Does Indonesia need a high-speed train?

The operation of a bullet train connecting Jakarta and Bandung would reduce the travel time for the 150-kilometer route to about 45 minutes from about three hours at present.

President Jokowi has repeatedly emphasized the need to develop more infrastructure in Indonesia. However, his previous view was that this development needed to happen outside Java. Moreover, Jokowi also emphasized the importance of ports and maritime infrastructure, related to his vision to make Indonesia more of a maritime country.

Why Japan and China?

Because both China and Japan have their own competitive advantages.

China promised earlier and shorter construction times, finishing the job by 2019 while Japan promised 2021. China also had a slightly cheaper proposal compared to Japan, but with a higher interest rate of 2.0 percent compared to Japan’s 0.1 percent. More significantly, China did not request funding from the government of Indonesia while Japan expected the government to do so.

Experience also matters. Japan’s high-speed train brand of shinkansen has been a profound name in the industry for decades, running at high-speed without any fatal accidents. China on the other hand has only built trains for just over a decade, but finishing a total of 17,000 kilometers of high-speed railways.

However, a crash in 2011 resulting in 40 fatalities and injuring 200 others triggered the criticism that China tended to prioritize shorter construction periods over safety. Moreover, past Chinese investment pledges failing to materialize and newly constructed power plants lacking the capacity promised on paper also became a source of worry for Indonesia.

So who was chosen?

In July 2015, then coordinating economic minister Sofyan Djalil said the government was holding an open tender and would appoint an independent party that would determine the criteria for the selection of the winner to prevent a conflict of interest.

After much anticipation, in early September 2015, it was announced that the project was canceled due to financial and technical reasons. The project cost up to US$ 6 billion, making it a serious burden on the state budget.

Coordinating Economic Minister Darmin Nasution has said that the government was preparing to develop a semi-high-speed railway instead. Semi-high-speed rail is seen as a more feasible alternative because it is less expensive and more efficient for the planned route, the frequent stops on which would not enable the train to reach its optimum speed. The government stated that the route was more suited to a semi-high-speed train running at 200 to 250 kilometers per hour, compared to a high-speed train running at 300 to 350 kph.

Now, what about the semi-high-speed railway?

A few days after the announcement, State-owned Enterprises Minister Rini Soemarno said a number of state-owned enterprises would set up a consortium to develop the Jakarta-Bandung medium-speed train project as demanded by President Jokowi.

A consortium system was chosen as the government refused to fund the project.

The Transportation Ministry estimated that the medium-speed train project would cost Rp 30 trillion (US$2.12 billion), far below the estimated cost for the high-speed train, which was set at Rp 70 trillion. However, Rini said the cost for both types of trains was pretty much the same.

Japan and China once again were competing to secure the project. However, Japan's proposal requires viability gap funding from the government. Minister Rini implied in an announcement by the end of September that China might win due to the government's preference not to allocate any state funds for the project.

In October 2015, a joint venture agreement estimated to be worth US$5.5 billion was signed by an Indonesian state enterprise consortium and China Railway International. The consortium of PT Kereta Cepat Indonesia China (KCIC) is a joint venture between state firms PT Wijaya Karya, PT Kereta Api Indonesia, PT Jasa Marga and PT Perkebunan Nasional VIII and China Railway International. The Indonesian state-run companies hold a 60 percent share in KCIC while China's company holds 40 percent. Seventy-five percent of the project will be financed by China Development Bank.

Has the construction started?

The first groundbreaking was in January 21, 2016. However, construction work could not be continued because of licensing problems. The consortium needs to secure three more permits from the Transportation Ministry to go ahead with the project: the concession agreement, the railway infrastructure operational permit and the building permit. By the end of February, KCIP still had not managed to secure all the requirements.

Considering the past high-speed project was halted and canceled, is there a possibility that this project will be stopped too?

The Transportation Ministry has provided a political guarantee that the project will not be disrupted by any legislative change. This provision is included in the concession awarded to KCIC. The government also guarantees that it will not unilaterally cancel the concession agreement.

Is there any criticism regarding the project?

Yes, particularly the risks to the line. The terrain is considered to be vulnerable to natural disasters. The Meteorology, Climatology and Geophysics Agency (BMKG) has warned the Transportation Ministry regarding the risk of earthquakes, as there are active faults along the route.

Indonesian Forum for the Environment (Walhi) executive director Abetnego Tarigan said the Jakarta-Bandung rail project had the potential to degrade the environment, as it would reduce water absorption along the length of its track. Moreover, the high-speed rail project would lead to land being converted from farming to industrial and residential land, as has happened on the north coast of Java, especially in areas around Karawang and western Bandung.

Gadjah Mada University transportation researcher Danang Parikesit also argued that the project was too costly. The cost of the project stands at around Rp 78 trillion, with a passenger projection of only 29,000 people per day. Building a medium-speed rail link would be only around Rp 7 trillion, in his calculation.

Most significantly, there is opposition in the House of Representatives. House Commission VI overseeing state enterprises head Hafisz Tohir expressed his concerns over the use of state assets in the project, which could be seized to guarantee the consortium's debts should the project fail. House Deputy Speaker Fahri Hamzah also stated that the project was not consistent with Jokowi’s maritime vision.

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