Indonesia eyes high-speed rail to Surabaya, but China debt barriers loom
“The proposed extension would build on Whoosh – Southeast Asia’s first high speed rail line – a US$7.3 billion project connecting capital Jakarta to Bandung in West Java province. The 142km (88-mile) railway, which was largely funded by China, was beset with delays and cost overruns before its inauguration by former president Joko Widodo in October 2023.”
“Originally budgeted at 66.7 trillion rupiah (US$4 billion), total costs ballooned to 113 trillion rupiah. The China Development Bank covered 75 per cent of the cost, with the remainder funded by Indonesia’s state budget – despite earlier assurances that public funds would not be used, according to Muhammad Zulfikar Rakhmat from the Centre of Economic and Law Studies in Jakarta.”
“The Chinese loan has a 40-year term with a 10-year grace period, but additional borrowing may be required to manage rising debt. Zulfikar said documents released by Indonesia’s state-owned railways company showed that the project posted a deficit of 3.15 trillion rupiah (US$193 million) in its first year of operation.”
“The railway’s internal rate of return was 8.56 per cent – below the minimum acceptable threshold of 10 per cent, he said, citing a recent study into its operations. The project is not forecast to break-even until its 40th year of operation, raising serious doubts about financial viability.”