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Securing land still a problem for Indonesia rail project

Limited progress puts brake on Chinese funding

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Indonesian President Joko Widodo attends a groundbreaking ceremony for a high-speed railway project in January 2016.   © Reuters

JAKARTA -- Indonesia is facing major delays in securing the necessary land for a planned high-speed railway, raising questions over whether Beijing should take the lead instead or if the railway will be finished at all.

The rail link, which would run for about 140km between Jakarta and the city of Bandung, is expected to cost over $5 billion and is a key component of President Joko Widodo's push to develop Indonesia's infrastructure. Kereta Cepat Indonesia-China, a consortium of state-run companies from both countries, has been tasked with its construction and operation.

At a meeting in late July, Widodo strongly demanded that his transportation minister and other related officials explain the lack of progress -- a rare show of frustration for the usually calm president. He attended a groundbreaking ceremony for the railway back in January 2016, but little actual construction has happened since. KCIC also has yet to receive a loan it agreed to with a Chinese bank in May, because it has failed to fulfill conditions like obtaining the necessary land for the project.

The consortium claimed in January to have secured 85% of the land, and in May to be on track to complete the acquisition. But the figure reported at Widodo's July meeting was just 55%. KCIC is suspected to have been submitting false reports overstating its progress.

The Chinese loan is not supposed to come through until KCIC has 100% of the necessary land, forcing Indonesia to consider additional concessions to get a hold of the funds sooner. The consortium previously had the right to operate the railway for 50 years starting May 31, 2019. But given that the project is looking unlikely to be completed, let alone operational, by that date, Indonesia agreed to revise the term to 50 years from when construction is finished. This gives the Chinese side more time to recoup its investment.

Some have also suggested raising China's stake in the consortium from 40% up to about 90%, and having it take the lead on the project.

Indonesia's initial plan for the high-speed rail link had Japan's shinkansen bullet trains in mind. But the Chinese proposal, which involved a public-private partnership with no cost to the Indonesian government, won out after Widodo became president in October 2014.

The consortium has urged the government to shoulder the costs should the project fail. Meanwhile, the government insists that the rail link is at heart a corporate initiative, trying to deflect responsibility despite the fact that the companies in question are state-owned.

Officially, Indonesia is sticking to its target launch date of June 2019. But with almost no progress on the ground less than two years out, meeting that appears extremely unlikely. There is even talk of changing the route.

"It's possible that the entire project will end up in limbo," an expert said.

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