China’s Java high-speed rail project hits buffers

It is easy to see why Indonesians might want to find alternative forms of transport. Source: Flickr

The Chinese US$5.5 billion high-speed rail project in Indonesia has been halted a week after its opening ceremony.

Beijing won the contract to build Indonesia’s first high-speed railway, beating off competition from Japan.

The Jakarta-Bandung link, one of many Chinese projects being planned in Asean, is seen as a test of Chinese firms’ ability to operate in a democracy. India, Malaysia and Singapore are all watching the project with interest as they weigh up the strengths of Chinese high-speed rail.

But Jakarta’s transport ministry stopped work, saying the construction permits and the concession agreement had not been signed off because the Chinese-Indonesian consortium developing the project had not submitted the correct documentation.

Apparently some of the documents were in Chinese and could not be understood.

Indonesia’s transport minister, Ignatius Jonan, who has been sceptical about the project, is demanding a guarantee that the landscape would be restored to its original condition if the project is abandoned before completion, as happened with a Jakarta monorail scheme.

Hanggoro Budi Wiryawan, CEO of Kereta Cepat Indonesia China, the consortium behind the project, said construction would not begin until the correct permits were issued.

Permit problems are a repeated challenge for foreign investors in Indonesia, which came 109th in the World Bank’s ease of doing business ranking, behind China in 84th place.

China is hoping to complete the project, one of Indonesia’s biggest infrastructure schemes, by 2018.

Jakarta has vowed to speed up infrastructural development to boost the struggling economy although many projects have been delayed for years or abandoned because of trouble with land purchases, ecological concerns and political disputes.

Zhao Hong of the Singapore’s Institute of Southeast Asian Studies said China’s state-owned enterprises (SOEs) were conditioned to bulldozing their way through objections and would need a different approach in Indonesia, which had better democratic rights.

He said: “Chinese SOEs can get credit from the Chinese government very easily but they need to understand local societies more precisely, especially in Indonesia, where the local politics are very complicated.”

State-owned China Development Bank is providing three-quarters of the funding for the Indonesian railway at a minimal rate and with no guarantee required from Jakarta.

Political analyst Paul Rowland in Jakarta said despite the cheap financing, the Jakarta government faced many risks in conducting such a complicated project in the middle of the crowded island of Java.

“It was always extraordinary wishful thinking to believe they could get this done in a little over two years,” he added.

Meanwhile, China’s official news agency Xinhua quoted Foreign Ministry spokesperson Hua Chunying saying: “Media reports that claimed the railway project has been suspended due to a lack of construction licence are not true.”

Both sides attached great importance to the project, Hua said.

“China and Indonesia will push for the smooth construction of the railway to benefit the Indonesian people and use the project as an opportunity to improve bilateral practical cooperation,” Hua said.

“The construction of the railway is going smoothly,” an anonymous member of China Railway staff said.

Last October, China Railway signed a deal with Indonesia’s state-owned enterprises to form a joint venture to construct and operate the railway, with Indonesia to control 60 per cent of the stake, the agency reported.

If completed, the 150km line would cut travel time from Jakarta to Bandung from more than three hours to less than 40 minutes, Xinhua reported.