Indonesia seeks Japanese private investment for $4.5bn trans-Java line

Struggling with its infrastructure projects, Indonesia will seek funding from private Japanese banks as well as from the Japanese government for a $4.5bn project to modernise 750km of railway track across the island of Java between Jakarta and eastern city of Surabaya.

Basuki Hadimuljono, the minister of public works, told the Nikkei Asian Review today that the project would also involve building some 300 flyovers, and that the building and refurbishment of stations would be developed through public-private partnership schemes.

He added that the deal was being finalised, and the terms may change before the planned groundbreaking by the end of the year.

The scheme has been under discussion between the two governments since 2016, when the price tag was put at between $2.5bn and $3bn. It was announced in December that the Japan International Cooperation Agency would provide some funding for the project, but the private sector funding is a new development.

Japan’s involvement in the medium-speed project was seen as a consolation for losing out to China in a bitterly fought battle to build the Jakarta-Bandung high-speed railway in 2015.

Japan complained at the time that China won the high-speed project because of the softness of its loans rather than its superior tender.

Controversially, the Jakarta-Surabaya scheme was offered to Japan without being put out to public tender.

Indonesia is an extremely price-sensitive customer, partly because of government borrowing in any year is legally limited to 3% of the national GDP, and there are concerns over the amount of debt the country is taking on.

In addition, its infrastructure plans have been hit by a construction safety crisis, with all transport schemes halted in February for review after a spate of fatal accidents.

On top of that, the country is struggling to deliver planned projects in the face of bureaucratic and funding hurdles. This week the government said 14 major projects together worth $19bn would be dropped for lack of progress.

Those projects did not include the Chinese-built high-speed railway, but that project is also well behind schedule due to land acquisition problems.

The medium-speed, double-track railway between Jakarta and Surabaya will upgrade an existing track, and have trains running at up to 200km/h to shorten the travel time between Jakarta and Surabaya to 3.5 hours from 11 hours.

Image: A stretch of line in east Java (Uwe Aranas/Creative Commons)

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