Rail ridership in Indonesia has risen substantially in recent years, making decades of underinvestment and growing urban congestion important considerations for transport stakeholders as they upgrade and construct new lines. Statistics Indonesia (BPS) reports that total rail passengers rose from 199.3m in 2011 to 202.2m in 2012, 216m in 2013, 277.5m in 2014 and 325.9m in 2015. The average length of a passenger journey has simultaneously fallen from 95 km to 68 km, while the country’s rail network remains limited to Java and Sumatra, with 22,296 km of total line operational in 2015.
The Medium-Term Development Plan 2015-19 includes an infrastructure development agenda that outlines projects such as having 3258 km of newly built or rehabilitated rail lines, made up of 2159 km of intercity railways and 1099 km of urban railway, and boosting rail cargo volumes to 1.5m twenty-foot equivalent units annually. Urban rail lines, including a planned light rail transit (LRT) system in Jakarta, are also expected to help reduce congestion and transport costs, which have become the highest in South-east Asia.
HIGH-SPEED LINE: One of the largest rail projects currently under development in Indonesia is a high-speed, 150-km line connecting Jakarta to Bandung, the capital of West Java Province. The train would reduce the travel time between the two cities to just 45 minutes. Intense competition between Japan and China to win the project tender ended with the September 2015 announcement that a $5bn contract had been awarded to Kerata Cepat Indonesia China (KCIC), a joint venture between China Railway International and four Indonesian state-owned enterprises.
In terms of funding, KCIC has agreed to cover 25% of the project costs, with the China Development Bank expected to finance an estimated $4.7bn. However, this agreement had not yet been formalised by July 2017, despite plans to sign a contract in November 2015.
LRT: Jakarta’s Rp27trn ($2bn) LRT project, the city’s first high-speed urban commuter system, is facing similar challenges, after officially launching in September 2015. State-owned railway company Kereta Api Indonesia will be an investor and operator in the project under a 50-year concession, during which time it will pay for the line’s operational and capital costs.
The Jakarta Post reported that the government will subsidise operations of the LRT system for its first 12 years of activity, providing a $680m cash injection to be used to secure a $1.4bn loan from state-owned banks. However, Global Construction Review reported in March 2017 that just 12% of the project had been completed due to financing challenges, despite its original construction completion deadline of 2019.
LAND: Land is another a major hurdle after financing. According to a report in the Nikkei Asian Review, China made its portion of the funding for the high-speed project conditional on Indonesia securing all land needed for the line. While the project broke ground in January 2016, it was halted just days later when the Ministry of Transportation reported that KCIC had only obtained construction approval for 5% of the necessary land.
A prolonged shutdown followed, and although preparatory work was ongoing as of February 2017, local media reported that 15% of the necessary land for the project had still not been acquired at the opening of the month, making it unlikely that contractors will finish construction by the planned May 2019 deadline.
Near-term development prospects for the line brightened in April 2017, however, when KCIC signed an engineering, procurement and construction contract with a separate group of Indonesian and Chinese firms, the High-Speed Railway Contractor Consortium.
JAPANESE INTEREST: Despite funding and land challenges, investor interest in Indonesian railway projects remains high. In January 2017 Reuters reported that Indonesia and Japan had begun discussions concerning a major rail project linking Jakarta and Surabaya, which would halve the journey time between Indonesia’s largest and second-largest cities from 10 hours to five.
Read More from OBG
