JAKARTA — Construction of Indonesia's first high-speed railway network, connecting the capital and the West Java provincial capital of Bandung and funded by an Indonesia-China consortium, kicked off on Thursday.
The two-hour groundbreaking ceremony, inaugurated by President Joko "Jokowi" Widodo, took place in West Java province's Cikalong Wetan area, where one of the four planned stations will be located.
In his remarks, calling the project a part of a huge cooperation between Indonesia and China, Jokowi said the high-speed railway network is being built because Indonesia needs to develop fast.
"Today, we live in the era of competition. A country that acts quickly will win. A country which is efficient, fast in making decisions, quick to build, will be the winner in the international competition," he said.
The joint venture between Indonesian consortium PT Pilar Energi BUMN Indonesia and China Railway International Co was set up in October after the Indonesian government dropped proposals from China and Japan for developing the project using the state budget.
Jakarta then decided to pick China after the latter agreed to cooperate under a business-to-business contract without financing from the state and without a government guarantee. Japan had insisted on a government guarantee for the project and was subsequently rejected.
"We want to focus our state budget on the infrastructure development outside Java Island," Jokowi said, stressing equal development plans for Java and other islands across the sprawling archipelago.
The Indonesian consortium consists of four state-owned companies: construction company PT Wijaya Karya, railway operator PT Kereta Api Indonesia, toll road builder PT Jasa Marga, and plantation company PT Perkebunan Nusantara VIII.
Construction of the 142-kilometre railway is expected to be completed by the end of 2018, while operation of the service is expected to begin during the first half of 2019.
When it begins, the train will be able to carry 494 passengers in one trip, with 50 trips a day planned.
Construction costs are expected to total about US$5.5 billion (200 billion baht), but this could end up lower as the estimated cost is still based on an earlier proposal with train speeds of 320 kilometres per hour and plans for eight stations.
In the latest negotiations with China, the trains in the railway network are expected to run at 250 kph and for the first stage only four stations will be developed, with a total of eight envisaged.
The fare is estimated to be between 200,000 rupiah (520 baht) and 250,000 rupiah, depending on the rupiah exchange rate against the US dollar.
The railway network will facilitate the formation of the Jakarta-Bandung economic corridor as the project will be integrated into the development of the areas along the route.
Late last year, in an interview with Kyodo News, State Enterprise Minister Rini Soemarno said the project will follow the Hong Kong mass transit system, where the transit-oriented development of surrounding towns provides important income at the beginning of the project.
The minister was referring to mixed-use, densely populated residential and commercial areas designed to maximise access to public transport, and often incorporating features to encourage transit ridership.
For financing the project, 75% of the money will come from loans from the China Development Bank that offers a 40-year repayment with a 10-year grace period and 2% interest rate.
The remaining 25% will come from the joint venture's equities, which include land, toll roads and other infrastructure facilities owned by Indonesian state-owned companies involved in the project, reducing the cost for land acquisition.
The Chinese side promised that the joint venture will use as much Indonesian local material, machinery and equipment as possible and hire as many local managers, technicians and workers as possible.
In the joint venture, which is made based on a profit-and-risk-sharing arrangement, Indonesia holds 60% of the shares while China holds the remaining 40%.
Under the joint venture, China and Indonesia will also jointly explore overseas markets including Middle East and East Asian countries.