Indonesia urges China to invest more in high-speed railways

A year after the opening of Indonesia's first high-speed railway linking Jakarta to Bandung, named Whoosh, Indonesia is wooing China to invest in an extension of the line east to the port city of Surabaya, East Java.

The rail service is one of former President Joko Widodo's signature infrastructure projects and is part of China's Belt and Road Initiative. The Whoosh attracted more than 4 million passengers in its first year, and the government added more trips.

Currently, the government is conducting a feasibility study to extend the Jakarta-Bandung line to Surabaya in hopes of increasing the use of the rail service. The extension would reduce the journey from Jakarta to the port city from eight hours to just four hours.

Danang Parikesit, professor of transport policy at Gajah Mada University, said the extension to Surabaya would have a positive economic impact, especially on cities where high-speed rail stations are located. “This will further promote Java’s economic integration and maintain Indonesia’s growth momentum in the service and trade sector.”

Indonesia showcased three major railway projects at a railway exhibition in Shanghai in June. The projects include the interconnection of the Whoosh high-speed train to Bandung's urban rail systems, an airport line in the future capital of Nusantara, and an urban railway connecting Nusantara with neighboring towns.

Director General of the Ministry of Transport and Railways Risal Wasal said these projects were part of the ministry's strategic plans for 2024-2029.

The Bandung Railway is expected to have a return on investment rate of 11.9 percent and the government will support it with a viability fund covering 49 percent of the costs, according to the ministry.

“With such potential, we invite you to participate in the Bandung Urban Railway Project through a public-private partnership (PPP) with a concession period of up to 30 years,” Risal said in a statement addressed to potential private investors.

Danang added: “Our transportation infrastructure has been lagging behind for many years and has reduced our competitiveness in goods and services, both domestic and international.

“Indonesia's long-term development plans will cut logistics costs in half. That's why we need international partners to invest and improve our highways, rail system, ports and airports as well as other infrastructure such as gas pipelines and floating storage.”

Chinese investments in Bali and Nusantara

In August, a Chinese-funded autonomous rapid rail transit system, or ART, was showcased during Indonesia's 79th independence anniversary celebrations in Nusantara.

Other growing urban cities, like Bali, are also courting China to build its first light rail transit, or LRT, system. State-owned China Railway Construction Corporation (CRRC), involved in the construction of the Jakarta-Bandung high-speed railway, is expected to participate in the construction of Bali's LRT system.

However, Danang warned that over-reliance on Chinese investment would not be sustainable.

“Diversifying and expanding the partnership with other countries will provide a better basis for our future transport development. So I think we need to strike a balance between the urgent need for our transport investments and the diversification of our partnership , making the most of what different countries can offer,” he explained.

China overtakes Japan in Indonesia's rail sector

China is not only making great progress in building new railways, but is also playing a growing role in replacing the aging fleet of the Greater Jakarta Commuter Line, according to some experts.

Research by Malang University found that Japan, through official development assistance loans, assisted Indonesia in railway modernization projects in Jakarta, Bogor, Depok, Tangerang and Bekasi (Jabodetabek).

But Fadlan Muzakki, a researcher at the ASEAN-China Research Center at Universitas Indonesia, said China was now overtaking Japan in the development of the domestic railway sector.

“Indonesia chose China because it offered to transfer its technical knowledge without any complicated conditions or requirements and persisted in its lobbying efforts,” he said.

Fadlan's research indicates that Japan would be willing to fully transfer knowledge of its railway technology if Indonesia had paid 25 to 30 percent of its debt. This means that Indonesia would have had to wait at least five to ten years before the technology transfer was fully realized.

As a result, in February, PT Kereta Commuter Indonesia, a subsidiary of PT Kereta Api Indonesia, signed an agreement with the Chinese CRRC to purchase three complete trains for $49.15 billion. Five months later, it decided to acquire eight additional trains.

Fadlan warned that Indonesia should not become too dependent on Chinese investment in the transport sector. He suggested that Indonesia diversify its investment sources, allow public fundraising and implement strong risk assessment and negotiation strategies in its dealings with Chinese investors.

According to Mark Green, president of the Wilson Center, ten years after the start of the Belt and Road Initiative, 80% of Chinese government loans to developing countries went to countries in debt distress, further exacerbating economic problems such as as inflation, currency depreciation and growing poverty. levels.

Transportation analyst Djoko Setijowarno agreed that Indonesia should further develop the state-owned train manufacturing company, PT Industri Kereta Api (INKA), to meet Indonesia's growing demand for trains rather than just importing trains from China. INKA exported trains worth $72.39 million to Bangladesh and over $26 million to the Philippines.

Danang pointed out that Indonesia has set its next 20-year development plan with the hope of becoming a high-income country in 2045. He said increased investment in transportation that would boost the country's competitiveness on the global market and would reduce economic disparities between regions and social inequalities. courses will play a key role in achieving this goal.