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Jakarta Post

Tug of war in China-led rail project

  • Farida Susanty

    The Jakarta Post

Jakarta   /   Fri, February 5, 2016   /  06:11 pm

The development of Indonesia'€™s first high-speed railway, which is to connect Jakarta and Bandung in West Java, might see further delays, as the Chinese-led consortium has refused to meet some of the government'€™s requirements contained in the concession agreement.

Although the consortium, led by the China Railway Corporation, agreed that the government would only provide a political guarantee instead of a financial guarantee as earlier demanded, it had asked the Indonesian government to give it an exclusive right to use the route.

PT Kereta Cepat Indonesia China (KCIC) president director Hanggoro Budi Wiryawan said in Jakarta on Thursday that if another high-speed railway could be built near or along its Jakarta-Bandung route, it would hurt the financial viability of the consortium.

'€œA demand for exclusivity is fair,'€ he said, adding that with an investment of up to US$5.5 billion, a consortium not only needed legal but also business certainty. He insisted that such an exclusive right should be part of the political guarantee promised by the government and it should be clearly stated as part of the concession agreement.

The Transportation Ministry pledged on Wednesday it would provide a political guarantee to the consortium to ensure that the rail project would not be affected by any future changes in legislation. Hangoro said that the political guarantee should also include the exclusive right to use the route and the track.

The ministry'€™s director general for railways, Hermanto Dwiatmoko, said that the government was considering building a Jakarta-Surabaya railway next to the Jakarta-Bandung line. Hanggoro suggested the government just merge both railway projects by using Karawang in West Java as the starting point for the Jakarta-Surabaya rail line. From Karawang to Jakarta, he said, it can use the consortium'€™s track.

If in the future another railway operator wants to use the track, it should be the consortium that will decide whether to allow it, he said.

The Transportation Ministry has proposed nine points of agreement to be stipulated in the concession. The consortium has in principle agreed with most of the proposals, except those related to the starting point of the 50-year concession and the government'€™s ability to allow other high-speed rail operators in the same corridor.

The consortium wants the starting point of the concession to be calculated from the launch of the commercial operation of the train, not from the issuance of the concession, as proposed by the government.

The groundbreaking for the development of the high-speed railway was held on Jan. 21 in the presence of President Joko '€œJokowi'€ Widodo, but the 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.

Jokowi recently issued a regulation that included the high-speed railway as a priority project that should receive special treatment from the government. The decision to include the railway development in the list of priority projects has raised some concerns. Observers are worried that by categorizing it that way, the government can skip the tight environmental issues and other requirements that are currently hampering progress.

State-Owned Enterprises Ministry special staff member Sahala Lumban Gaol, who is also a commissioner in the consortium, said that the project should be treated like a toll road project in which the concession starts after the operational permit is issued.

'€œHow can you make a concession of something that has not even been built?'€ he said.

Sahala said the China Development Bank (CDB), which was slated to lend 75 percent of the estimated project cost of US$5.5 billion, was concerned about the uncertainty in the concession agreement. '€œThey need to be sure that this concession agreement gives certainty and protection for their loan. They would think again because of the unclear parts of the concession,'€ he added.

In response to the firm request on the concession, Hermanto said that the ministry would have a talk with the consortium about its request.

The railway, which is to span 142.3 kilometers, will have four intermediary station-stops at Halim, Walini, Karawang and Tegalluar. The railway construction is slated to begin this year and trains are expected to start operating by 2019.

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