Multibillion dollar deal:   PT Pilar Sinergi BUMN Indonesia (PSBI) president director Dwi Windarto (left), China Railway International board chairman Yang Zhong Min (right), Chinese Ambassador to Indonesia Xie Feng (second left) and PT PSBI chairman Sahala Lumban Gaol join hands after the signing of an agreement on a joint venture in Jakarta on Friday. PT PSBI, a consortium of four Indonesian state firms, and China Railway International have officially cooperated to create PT Kereta Cepat Indonesia China to build the high-speed Jakarta-Bandung railway. (JP/Jerry Adiguna)

The Indonesian state enterprise consortium and its Chinese counterpart have promised accelerated economic growth in the areas between Jakarta and Bandung, West Java, as both countries signed a joint venture agreement on the controversial Jakarta-Bandung high-speed rail project on Friday.

During the signing, state enterprises consortium PT Pilar Sinergi BUMN Indonesia, comprised of state construction firm PT Wijaya Karya, state railway operator PT Kereta Api Indonesia (KAI), toll-road operator PT Jasa Marga and state plantation firm PT Perkebunan Nusantara VIII, also formed a joint venture with China Railway International called PT Kereta Cepat Indonesia China.

'€œWith the signing, we have started a new episode of railways and transportation in the country, along with the development of a corridor where business and economic growth centers will be developed,'€ said PT Pilar Sinergi BUMN Indonesia chairman Sahala Lumban Gaol.

The high-speed train, which will run at over 250 kilometers per hour on a 140-kilometer-long track, will pass eight stations, including Gambir, Manggarai and Halim Perdanakusuma in Jakarta and Karawang, Walini and Gedebage in West Java. However, Sahala said the train would service four stations in its first phase of operation.

It is expected to reduce congestion as well as ease movement between the two cities.

The railway project, with an estimated cost of US$5.5 billion, is slated to begin construction by 2016 and be finished by 2018, according to PT Wijaya Karya president director Bintang Perbowo.

Bintang added that the development of the high-speed railway could create new residences around the transit areas, with its transit-oriented development (TOD) planning that is integrated with the railway.

'€œWith these new areas being opened, people will choose to live there. There will also be development of a new city, such as in Walini,'€ he said, adding that the places would be more attractive as they could be reached in a more time-efficient manner after the railway development.

Walini, a hillside area near Bandung, used to be a tea-producing area but has become unproductive. The area is expected to be utilized as a business center and residential area in the future. Some parts of Walini implicated in the project belong to PT Perkebunan Nusantara VIII.

The state enterprises also pinned their hopes on accelerated development in Karawang, which is already known as an industrial area. The Indonesian consortium will have 60 percent of the venture, while its Chinese counterpart will own 40 percent.

Meanwhile, three quarters of the funding will come from the China Development Bank(CDB), which is expected to sign the loan agreement by the end of November.

The high-speed train project sparked controversy following Indonesia'€™s decision to reject a proposal from Japan in favor of China, as the world'€™s second-largest economy agreed to a business-to-business (B2B) scheme instead of a government-to-government(G2G) scheme.

The Indonesian government insisted that the project would only run if it did not require any state funds, guarantee, or state capital injection (PMN), which could not be fulfilled by the competing country.

Infrastructure development has been one of the main focuses of President Joko '€œJokowi'€ Widodo to boost economic growth, which hit a six-year low of 4.67 percent in the second quarter of the year.

Meanwhile, Chinese Ambassador to Indonesia Xie Feng said that going forward, the development would be a landmark project for the countries'€™ strategic partnership.

'€œThis will be our single biggest project and the most important early harvest in the alignment of our development strategies,'€ he said. (fsu)

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