As Indonesia celebrates the launch of its first high-speed railway, the government is dealing with cost overruns and Chinese bank loans with high interest rates. The total cost for the project, estimated at USD$7.5 billion, has far exceeded the initial figure of USD$5.5 billion. In Jakarta, Voice of America’s Devianti Faridz has the story.

Indonesian President Joko Widodo launched Southeast Asia’s first high-speed railway, branded as “Whoosh,” on Oct. 2 in Jakarta.

The railway is a joint venture between an Indonesian consortium of four state-owned companies and a Chinese consortium of 6 state-owned companies, including China Railway International Corporation.

Joko Widodo
Indonesian President
This high-speed railway marks the modernization of our mass transportation, which is more efficient, environmentally friendly and integrated with other modes of transport.

The bullet train serves the popular route between the Indonesian capital, Jakarta, and Bandung, West Java. Traveling at top speeds of 350-kilometers per hour, it stops just outside Bandung, cutting the usual 3-hour rail journey to 45 minutes.

Andrian Pratama
Passenger
To be honest, this train is so fast. While it may not take you to Bandung itself, it reaches Padalarang, on the outskirts.

The project was projected to cost 5.5 billion U.S. dollars and open in 2019.

But costs mounted to 7.3 billion U.S. dollars, says Luhut Pandjaitan, Indonesia’s Minister of Maritime Affairs and Investment.

Luhut Pandjaitan
Minister of Maritime Affairs and Investment
We faced numerous problems and hurdles, from land acquisition, lack of coordination, and financial problems due to the COVID-19 pandemic.”

Indonesia agreed to seek additional loans of 550 million US dollars from the China Development Bank, but at higher interest rates.

Indonesia is now seeking to negotiate with China Development Bank to bring down the interest rates.

Yusuf Wibisono
Institute for Demographics and Poverty Studies
China requested the government provide loan guarantees directly from the state budget. Even worse, China did not request this at the beginning, but now they have demanded it. What do you call it, if not China’s debt trap?

To make high-speed rail economically viable in the long run, Indonesia plans to extend the railway to Surabaya, on the opposite end of the island of Java, and has started its feasibility study.


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