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Jakarta Post

Limited guarantee for high-speed rail

  • Farida Susanty

    The Jakarta Post

Jakarta   /   Thu, February 4, 2016   /  06:10 pm

Amid the delay in the issuance of permits for the country'€™s first high-speed railway, the Transportation Ministry has offered an opportunity to remove a major obstacle to the project.

The ministry'€™s director general for railways Hermanto Dwiatmoko said in Jakarta on Wednesday that the ministry would provide a guarantee that the operation of the high-speed railway linking Jakarta and Bandung in West Java would not be affected by any change in legislation.

'€œI think this is an important point for investors,'€ Hermanto told a press conference.

The political guarantee will be one of nine points of agreement to be stipulated in the concession to be awarded to Indonesian-Chinese joint venture PT Kereta Cepat Indonesia China (KCIC), which will build and operate the high-speed railway.

Earlier reports said the consortium had demanded a financial guarantee from the government included in the agreement. Because of this demand, the Transportation Ministry delayed the issuance of the concession to operate the railway.

Hermanto dismissed speculation that the government had agreed to provide a financial guarantee for the project, which has been included as one of the priority projects to receive special attention from the government.

Presidential Regulation No. 3/2016, which outlines the priority projects, stipulates that the government can financially guarantee the projects, contradicting a previous pledge that there would be no state funding for the rail project.

By providing a political, rather than financial guarantee, the government will not be held responsible if the company defaults or fails to reach its targeted return on investment (ROI).

As part of the agreement to be stated in the concession, the government will also agree not to issue permits to other high-speed railway operators within 10 kilometers of the Jakarta-Bandung high-speed railway stations.

KCIC is expected to build four stations between Jakarta and Bandung for the railway at Karawang, Walini, Halim and Tegalluar.

'€œThey previously wanted [the area] to be exclusive with no other [railway] operating there. But we would not be able to build the Jakarta-Surabaya railway that way, so we'€™ve made it so that at least the stations will be located far from each other,'€ he said, referring to the planned construction of a high-speed railway connecting Jakarta and the East Java provincial capital.

Hermanto claimed that KCIC president director Hanggoro Budi Wiryawan had agreed to the point, but he had to discuss it with his fellow directors before making any formal agreement.

However, both parties have yet to agree on all nine points of agreement, which would also include the right to operate the railway for 50 years.

In addition to the concession, and building permits, other issues such as the lack of a study on earthquake risks have resulted in delays to the 142.3-kilometer railway project, which will cost around US$5.5 billion to build.

China secured the project after it defeated Japan'€™s bid, which had asked for a government guarantee for the project. However, the project has been plagued by various environmental and administrative issues, since the groundbreaking ceremony for the railway was held in January.

The speedy issuance of an Environmental Impact Analysis (Amdal) permit has met with criticism given the nature of the terrain traversed by the railway, which is considered to be vulnerable to natural disasters.

The Transportation Ministry stated it had received warnings from the Meteorology, Climatology and Geophysics Agency (BMKG) concerning active faults along the route, with the potential for earthquakes.

The BMKG warned the ministry to consider the impact of earthquakes on the structure and facilities of the railway. '€œWe have forwarded this to KCIC to improve their design, along with the data on earthquakes between Jakarta and West Java. We recommend they conduct seismological studies as well as [having] an early-warning system for passengers,'€ Hermanto said.

Land acquisition has also recently been in the spotlight, following a disagreement about land use between the firm and the Air Force regarding 45 hectares in Halim Perdanakusuma air base earmarked for a station.
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