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International relations

Trans-Java railway costs swell as Indonesia tacks on plans

Japan, negotiating planned loan, left leery amid hefty changes

Indonesian President Joko Widodo

JAKARTA -- Indonesia's plans to build a trans-Java railway with aid from Japan have ballooned to include many upgrades, quadrupling the projected cost to around 100 trillion rupiah ($7.42 billion) and leaving Japan cautious as negotiations deepen.

The roughly 750km railway would link the capital of Jakarta and the nation's second-largest city of Surabaya, slashing travel time between them from 11 hours to five by 2019. The project includes revamping existing railways to let trains reach higher speeds, such as by reducing the more than 800 crossings and easing sudden curves. The current diesel engines would stay in use.

The cost originally was estimated at 25 trillion rupiah. President Joko Widodo suggested to Prime Minister Shinzo Abe that the two countries negotiate a construction plan during a May 2016 visit to Japan. Tokyo began talks based on the idea that it would contribute via a government-backed yen loan.

But Widodo reshuffled his cabinet at the end of July, with the transportation and finance ministers among those replaced. Since then, the plans have swelled to include electrifying the railways and building new cars to match, as well as updating traffic systems -- and the costs grew in kind.

An Indonesian transport ministry official said Jakarta formed the plan "so that it benefits the Japanese side as well," but the sudden expansion has left Tokyo scrambling for a way forward.

Jakarta also worried that official development assistance from Japan, in the form of a yen loan, could boost Indonesia's budget deficit temporarily. Sri Mulyani Indrawati, the reform-minded new finance minister, began calling for the project to become a public-private partnership so as not to overburden Jakarta. Indrawati also did not intend to recognize typical government guarantees from such partnerships that would shield the private sector from risk should the plans stall.

But opposing voices maintain that the plan would be "absolutely impossible" with only the private sector involved, in the words of a Japanese manufacturing executive.

Moreover, a stalled Chinese and Indonesian high-speed rail project sets a discouraging precedent for public-private partnerships. The Jakarta-Bandung railway, projected to cost $5.5 billion, was under construction by a joint venture between companies from the two countries. But it ran into difficulties over land expropriation and fund procurement, with little headway made more than a year after work began.

Indonesia recently sent Luhut Pandjaitan, the coordinating maritime affairs minister and a Widodo confidant, to Japan to negotiate. The Widodo administration aims to achieve a certain infrastructure development target by 2019, the year the president's first term ends, and hopes to iron out the details with Japan and get the plan rolling quickly.

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