The discussion is part of the ongoing contract amendment between the government and KCIC signed last year, which has led to continuous delays in construction. KCIC has been reported as requesting a blanket government guarantee against the risk of default in any future operation.

“Regarding any operational failure [of the railway], there will be a clause in the contract that KCIC and the government will later discuss. There will be a study of the cause of the failure,” Transportation Ministry railway traffic and transportation director Zulmafendi said recently.

While declining to elaborate on whether the government would provide a guarantee as well as the possibility of taking over the project, he stressed that the government’s measures would depend on the cause of failure.

The government had previously insisted that no public money would be spent on, nor guarantee provided for, the project, despite its inclusion on the list of national strategic projects.

Zulmafendi said the amendment was almost finished, with the contract to be signed soon.

The revision will include clauses on force majeure and concession period. The 50-year concession will start after the construction stage, rather than the contract-signing last year, as stipulated in the current
agreement.

After the construction permit issuance for the 142.3-kilometer track connecting Jakarta and Bandung, West Java, in July last year, there has been insignificant physical progress on the megaproject. Latest reports claim that KCIC has only achieved 53 percent of land acquisition, for the 600 hectares of land required.

The anticipated construction of one of the railway stations has also raised controversy since the railway — connecting four stops between Jakarta and Bandung namely Halim, Karawang, Walini and Tegalluar — has a starting point in the area of Halim Perdanakusuma Air Force base.

In financial terms, China Development Bank (CDB), which will cover the project cost through a $4.5 billion loan, has yet to disburse any funds. The Chinese lender requires KCIC to procure 100 percent of the land and for the project to be included in the national spatial plan (RTRW) to provide legal certainty.

With a seemingly never-ending flow of problems plaguing the project, President Joko “Jokowi” Widodo has publicly questioned the feasibility of the project and has floated the idea of China shouldering greater risk, by reducing the Indonesian share in KCIC from the current dominating 60 percent to merely 10 percent.

PT Kereta Api Indonesia (KAI) logistics and development director Budi Noviantoro said the firm had no problem with slashing its majority share in KCIC.

Jokowi also questioned the cash-flow risks during the operation of the high-speed train and the technical problems that could potentially cause a huge budget overrun in the future.

Responding to the call, State-Owned Enterprises Minister Rini Soemarno and Coordinating Maritime Affairs Minister Luhut Binsar Pandjaitan launched a recalculation of the project costs and its future cash flow.

“We just have to make sure that the project’s IRR [internal rate of return] makes sense, as discussed with CDB as the funder of the project,” she said, adding that KCIC had pledged to complete all of the requirements for signing the agreement.

KCIC initially pinned high hopes on the extra revenue from the transit oriented development (TOD) around the four stations, aside from passenger fares, to reach the break-even point in four years, a claim questioned in the latest government meeting.

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