The China Railway Construction Corp Ltd (CRCC) will team up with a consortium of Indonesia’s state own enterprises (SOEs) led by PT Wijaya Karya Tbk (IDX : WIKA) in developing the first High Speed Train (HST) in the country.
The joint venture (JV) entity and the financing scheme of the project is expected to be closed in October. According to State Enterprise Minister Rini Soemarno, the project cost is estimated to reach Rp 80 trillion ($5.5 billion).
The Indonesian government has selected CRCC to develop Indonesia’s first high speed train after China agreed to build the high-speed train through business-to-business scheme, without the back-up of Indonesia state budget funds or government guarantee.
To support the program, China has agreed to build an aluminium plant in Indonesia, which could provide the raw materials for the production of the train cars, said
Earlier, China and Japan were competing to build Indonesia’s first high speed train with a length of 180 kilometers, connecting Jakarta and Bandung, the capital city of West Java province. After intense lobbying from Japanese and Chinese government officials, Indonesian President Joko Widodo decided to call off the plan. The decision has disappointed both Japanese and Chinese governments.
Days later, in a swift turnaround, the state minister Soemarno decided to move ahead with the development of the high speed train, stressing that the development of the project will not be backed up by the Indonesian State Budget.
According to the minister, the Chinese Railway has agreed to develop and fully back up the project, without guarantee from the Indonesian government. In addition, the Chinese railway company has also agreed to offer other “carrots”, namely jointly producing train cars in Indonesia, not only for the high-speed train project, but also the electric and light trains, which would be developed in Indonesia as well.
Rini stated, China has in principle agreed to develop the high-speed train under a business-to-business scheme without Indonesian government back up. She also said the speed of the train is set at a minimum of 250 kilometers per hour, lower than earlier plan of over 300 km per hour.
Rini said that China Development Bank has given a commitment to fund 75 per cent of the project costs with tenure of 40 years—with grace period of 10 years—with fixed coupon rate per cent.
President Director of Wijaya Karya Bintang Perbowo adding that CRCC will hold majority shares in the planned JV company, while WIKA holds 30 per cent and small portions for local toll operator PT Jasa Marga Tbk (IDX: JSMR), train operator PT Kereta Api Indonesia and plantation company PT Perkebunan Nusantara VIII.
Bintang expects the groundbreaking of the project to be launched in 2016 and complete the project by 2019.