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Indonesia Breaks Ground for High-Speed Rail Project (UPDATE)

In a surprise announcement in early September 2015, Indonesia scrapped plans for the nation’s first high-speed rail line, despite a buildup in the bidding wars between China and Japan in August. Soon after, they changed their minds (again) and went on to award the high-speed rail contract to China, much to the chagrin of Japan.

Backtracking to early September, President Joko Widodo was to decide who would win the contract and it was reported that he was more receptive to China’s financing terms. Following this, the Indonesian government had a last-minute change of heart after re-evaluating the overall cost (and necessity?) of this project. The cost of the high-speed rail system (US$5 billion) was long known, as was the fact that due to multiple stops along the route, the trains would not be able to reach their maximum speed of 300 km (188 mi) per hour. Why Indonesia waited until the last minute to highlight these issues as reasons for cancelling the project is anyone’s guess.

Also in September, both China and Japan were actually supposed to continue bidding on an alternative project—a medium-speed rail line. This one was said to serve the same route—from Jakarta to Bandung—and would take 45 minutes instead of the 35 minutes quoted for the high-speed rail line. This loss of 10 minutes equates to a potential savings of some US$2 billion when looking at costs for medium-speed rail, so at least on the surface it certainly seemed like the right move on Indonesia’s part, despite being extremely ill-timed.

Now things have come full circle after the Indonesian government received yet another revised proposal from China in October. The main difference now is that China has agreed to fund the project “without Indonesian fiscal spending or debt guarantee”, South China Morning Post reports. Looks like this was an offer that was simply too good to pass up.

The deal signing took place on October 16th, 2015 between China Railway International Co. Ltd. and a consortium of Indonesian state-owned companies involved in construction and railway operations. China Development Bank will finance 75 percent of the US$5.5 billion project and the remaining funding will come from the consortium (PT Pilar Sinergi BUMN Indonesia) and China Railway International.

So perhaps China doesn’t seem too shaken by Indonesia’s confusing behavior but what little confidence Japan had in the country’s reliability is completely gone.

Both have already invested a huge amount of time and money in feasibility studies and aggressive lobbying throughout the bidding process. Earlier last year, Japan thought it had the best chance of winning the contract after pouring over US$3 million into project analysis. Then China took the lead as the more likely winner. Both countries had already revised their contract terms as well, making their offers more favorable to Indonesia.

What remains clear is that despite delays and confusion in getting the green light for a rail project such as this, if China successfully completes construction of this line, they will most likely have a major advantage of being chosen to lead construction of other rail lines not only in Indonesia but Southeast Asia in general. The Kuala Lumpur–Singapore high-speed rail line is the most well-known of these upcoming projects and as expected, Japan and China are again the two biggest players involved in the bidding process.

Will China be able to pull this off? Japan doesn’t seem to think so, at least based on comments from Japanese Chief Cabinet Secretary Yoshihide Suga.

“It defies common wisdom. I doubt if it will be successful,” Suga said when meeting last year with the head of the Indonesian National Development Planning Agency.

H/T: The Star

UPDATE     (January 21, 2016 5:20 PM)
A groundbreaking ceremony was held yesterday (January 21, 2016) for the high-speed railway, marking the official start of the ambitious project.

This highly anticipated and much delayed project is seen as a milestone that could help prompt other areas of the nation to finally adopt mass transit.

For decades now, poor planning has plagued Indonesia’s approach to implementing more extensive rail and mass transit infrastructure. President Joko Widodo seems confident this trend will end, and has already discussed plans for light rail networks on other areas on Java.

Construction for the new high-speed rail line is said to wrap up in 2018 and trains would begin service in 2019.

UPDATE  2   (January 28, 2016)
Just a week after the groundbreaking ceremony, the project has seen yet another delay due to incomplete paperwork from the Chinese-Indonesian joint venture. There are 11 documents still needed before the issuing of construction permits, according to transportation minister Ignasius Jonan.

More details on this latest development here.