Indonesia high-speed rail cost woes: Experts downplay debt trap fears

They cite country's fiscal stability, dismiss concerns about China control over project

- Linda Yulisman

JAKARTA - Indonesia's fiscal stability makes it unlikely to fall into a debt trap over the Jakarta-Bandung railway's ballooning construction costs, said analysts.

They dismissed fears that a 30-year extension to the concession awarded to a Sino-Indonesian consortium to operate the country's first high-speed rail (HSR) line could potentially place the project under China's influence until the start of the 22nd century.

Kereta Cepat Indonesia China (KCIC), a consortium of Indonesian and Chinese state companies constructing the 142.3km JakartaBandung railway, was originally granted a 50-year concession. This was based on a 38-year break-even forecast.

However, in the light of the longdelayed project's costs ballooning by more than 30 per cent of its initial investment figure and a forecast decline in the number of passengers due to the pandemic, among other factors, KCIC proposed an extension of the concession to 80 years. The Indonesian Transport Ministry has signalled its approval for the proposal.

State-owned railway firm Kereta Api Indonesia (KAI), state-owned construction company Wijaya Karya, toll road developer Jasa Marga and plantation company Perkebunan Nusantara VIII control 60 per cent of KCIC. Five Chinese enterprises hold the remaining stake.

The chances of Indonesia falling into a debt trap due to the cost overruns which must be covered by more loans are slim, given its low external debt to gross domestic product (GDP) ratio, said ISEAS - Yusof Ishak Institute senior fellow Siwage Dharma Negara.

"Our capability to pay debt is relatively high. The government is in a strong financial situation," he told The Sunday Times. Indonesia's external debt stood at one-third of its GDP in January.