May 11, 2017 4:52 pm JST

Indonesia's high-speed rail getting back on track

Jakarta seizes land to meet China's conditions for funding stalled project

JUN SUZUKI, Nikkei staff writer

JAKARTA -- Construction is ready to roll on Indonesia's high-speed railway project as soon as this month, as President Joko Widodo's administration has started seizing land for the efforts to meet China's conditions for funding.

The railway will link the 140 km between the capital and Bandung in the province of West Java in 45 minutes. A joint venture between Indonesian and Chinese state enterprises will build and manage the project.

Jakarta's plan is to borrow most of the total project cost -- more than $5 billion--from the China Development Bank, but the loan is contingent on Jakarta securing all the land required for the railway prior to construction, a process that faced long delays. Despite the project's official groundbreaking ceremony in January 2016, only limited land preparation has been completed.

Officials in related government bodies such as the Ministry of State-Owned Enterprises say finalizing the land acquisition is in sight. Yet delays and additional costs are lifting the price tag 17% from the initially estimated $5.1 to around $6 billion.

Jakarta resorted to legal expropriation to claim land around the planned terminal in Bandung, which had been a source of concern. Widodo met on May 2 with the governor of West Java and others to request they act promptly.

Negotiations are also wrapping up for the railway operator to lease military land for the Jakarta terminal near the Halim Perdanakusuma International Airport.

Widodo hopes to reach a funding deal with an eye toward Beijing's Belt and Road Forum for International Cooperation this Sunday and Monday, which he plans to attend. The countries plan to sign a loan contract Monday, said Widodo's confidant, Thomas Lembong, the current chairman of Indonesia's Investment Coordinating Board and former trade minister.

Beijing is expected to start with a partial loan of $1 billion. With these funds, Jakarta could get construction underway within May, but the 2019 target for completion would still be a struggle. Residents are likely to lash out over the land seizure, and it is unclear whether construction will go according to plan.

The countries clashed last year over Chinese fishing boats operating in Indonesia's exclusive economic zone--a part of the South China Sea which Beijing called its "traditional fishing grounds." Lately, however, Jakarta has softened its tone and expectations abound for investments by China.

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