China and the Jakarta-Bandung High-Speed Railway: Too Good to be True?

by: Trystanto

But now that we’re done and it’s over

I bet you couldn’t believe

When you realized I’m harder to forget, than I was to leave

And I bet you think about me

• Taylor Swift, I Bet You Think About Me

Those are probably what the Japanese are thinking right now in regards to the Jakarta-Bandung high speed rail project. In 2015, Japan had already conducted numerous studies on the feasibility of high-speed railway in Indonesia. Many anticipated that President Widodo would choose Japan as the main contractor. Instead, to everyone’s surprise, President Widodo decided to choose China to build the high-speed rail. As Purba (2022) puts it: “The Japanese felt Indonesia had betrayed them because Japan had completed a comprehensive feasibility study and offered a very generous financing scheme for the railway project, while China practically would force Indonesia to start from scratch.”

Why? One central Chinese offer to Indonesia was that this project will be a business-to-business scheme, meaning that, ostensibly, the project will not involve a single penny from the state budget (Idris 2022). This is different from Japan’s offer in which Japan requires that the government include the high-speed rail project in the state budget. Indeed, at the time, the Chinese offer was extremely lucrative, even too good to be true.

Indeed, it is too good to be true. President Widodo’s dream of building the high-speed rail without involving the state budget has been dashed. In 2021, after numerous delays and cost overruns, President Widodo was forced to break his promise and spend Rp. 3,4 trillion from the state budget to cover the costs. It is still not enough. After President Widodo’s visit to China in late July 2022, the China Development Bank demands that the Indonesian government spend more money from the state coffers. The central tenet of the Chinese offer has collapsed. Furthermore, the project has been delayed for years. The original completion deadline was 2019. As of July 2022, the project is still unfinished.

Furthermore, there are also questions of whether the rail line will be profitable. Instead of going to Bandung proper, the rail line will only go as far as Padalarang, a satellite city of Bandung (Hakim 2021). To reach Bandung, one will have to take the toll road or a regular road, both of these will be extremely jammed during holiday season and weekends. Consequently, passengers would still prefer the current rail line which goes all the way to Bandung’s city center. Lastly, given that the rail line will cost between Rp. 150.000 and Rp. 300.000, one will have to doubt whether people will want to spend that much money on a train that does not even reach Bandung proper (and more money to spend on taxi fees to reach Bandung) (Uly 2021). The government predicts that the project will break even in 40 years, if everything goes to plan (and that is an extremely big if).

Has President Widodo made the right choice in choosing China? Well, it is difficult to determine the counterfactuals in this story. In all likelihood, it is likely that the project will also experience cost overruns given that the price of land around the rail line will increase. However, given Japan’s track record of punctuality and high standards, as well as the eventuality that President Widodo will have to spend money from the state budget, President Widodo may have made the wrong choice. Indeed, the Japanese can now say to President Widodo: “I bet you think about me.”

Trystanto is the head of the Research and Development Division of FPCI UGM. This article represents his own views and not necessarily those of FPCI UGM

References

Hakim, A.R. (2021). Ternyata Kereta Cepat Jakarta Bandung Hanya Sampai Stasiun Padalarang. [online] liputan6.com. Available at: https://www.liputan6.com/bisnis/read/4733384/ternyata-kereta-cepat-jakarta-bandung-hanya-sampai-stasiun-padalarang [Accessed 29 Jul. 2022].

Idris, M. (2021). Sah, Proyek Kereta Cepat Diguyur Duit APBN Rp 3,4 Triliun Halaman all. [online] Kompas.com. Available at: https://money.kompas.com/read/2021/11/01/150157826/sah-proyek-kereta-cepat-diguyur-duit-apbn-rp-34-triliun?page=all [Accessed 29 Jul. 2022].

Idris, M. (2022). Alasan Utama Jokowi Dulu Pilih China: Janjikan Kereta Cepat Tanpa APBN Halaman all. [online] Kompas.com. Available at: https://money.kompas.com/read/2022/07/28/100846526/alasan-utama-jokowi-dulu-pilih-china-janjikan-kereta-cepat-tanpa-apbn?page=all [Accessed 29 Jul. 2022].

Purba, K. (2022). Abe Displayed Statesmanship, Friendship When Jokowi ‘Betrayed’ Him. [online] The Jakarta Post. Available at: https://www.thejakartapost.com/opinion/2022/07/10/abe-displayed-statesmanship-friendship-when-jokowi-betrayed-him.html [Accessed 29 Jul. 2022].

Putri, C.A. (2022). China Minta RI Tanggung Biaya Bengkak Proyek Kereta Cepat. [online] CNBC Indonesia. Available at: https://www.cnbcindonesia.com/news/20220726144753-4-358677/china-minta-ri-tanggung-biaya-bengkak-proyek-kereta-cepat [Accessed 29 Jul. 2022].

Uly, Y.A. (2022). Harga Tiket Kereta Cepat Jakarta-Bandung Diperkirakan Rp 150.000-Rp 350.000. [online] KOMPAS.com. Available at: https://money.kompas.com/read/2022/02/07/194700126/harga-tiket-kereta-cepat-jakarta-bandung-diperkirakan-rp-150.000-rp-350.000 [Accessed 29 Jul. 2022].