Jakarta-Bandung High-speed Railway at Risk of Another Delay

This article has been translated by PwC Indonesia as part of our Indonesia Infrastructure News Service. PwC Indonesia has not checked the accuracy of, and accepts no responsibility for the content.

Investor Daily - Jakarta-Bandung High-speed Railway at Risk of Another Delay

28 September 2022


The Jakarta-Bandung High-speed Railway (KCJB) that is scheduled to operate in June 2023 is at risk of facing another delay if the government does not disburse the state equity participation (PMN) of Rp4.1 trillion to PT KAI. The state budget (APBN) disbursement in the form of PMN is required to cover the cost overrun of the project that is worked on by the Indonesia-China consortium, PT Kereta Cepat Indonesia-China (KCIC).

The completion target of the project that has an investment value of US$6 billion has been revised numerous times. When it commenced in 2016, the KCJB was set to operate in July 2021, but the target was missed. Then, KCIC set a new target at the end of 2022. However, the new target also could not be realised. Lastly, the KCJB project that spans 142.3 km is set to operate by June 2023, but that target is at risk of not being realised as well.

The delay of the KCJB project increased the construction cost of the project. At first, the construction cost was estimated to reach US$6 billion or around Rp87 trillion with an exchange rate of Rp14,500 per US dollar. However, during development, there is potential that the cost can increase significantly by US$1.9 billion (around Rp27.5 trillion) so that the total cost of the KCJB project will increase to US$7.9 billion or Rp114.5 trillion.

The PMN that reaches Rp4.1 trillion that has been approved by the House of Representatives (DPR) can save KCJB as PT KCIC’s cashflow can only survive until September 2022. Indonesia President Joko Widodo and China President Xi Jinping will conduct a work visit to see the construction progress and try the EMU (electric multiple unit) CIT (comprehensive inspection train) from DK 127 to Tegalluar Station in November during the G20 Summit.

The PT KCIC consortium includes several state-owned enterprises (SOEs), namely PT KAI (Persero), PT Wijaya Karya (Persero) Tbk, PT Jasa Marga (Persero) Tbk, and PTPN VIII. The four SOEs are from the Indonesian consortium, PT Pilar Sinergi BUMN Indonesia, with 60% shareholding. Meanwhile, the Chinese consortium, Beijing Yawan HSR Co Ltd, owns 40% shareholding.

Meanwhile, KCJB’s construction, based on the calculation of KCIC and its consultant CDJO, has reached a milestone achievement of 77.34% until the fourth week of August 2022. Meanwhile, based on HSRCC’s calculation using the contractor investment calculation method, the progress has reached 86.30%.

PT Kereta Api Indonesia (KAI) President Director Didiek Hartantyo previously said that this financial issue had existed since 2017. The project’s construction was delayed further due to the land acquisition issue in 2019.

“That is when KAI was asked to enter. However, KAI became KCIC’s lead sponsor after the issuance of Presidential Regulation No. 93/2021,” he stated.

Didiek said that KCJB’s construction cost increased from US$6 billion. However, during development, there is potential that the cost can significantly increase by up to US$1.9 billion.

“At first, it was land acquisition. One of the largest costs is for EPC (engineering, procurement, construction) that reaches around US600 million to US$1.2 million, followed by utility line relocation and financing costs. Then, there are also costs for the head office and operation,” Didiek said.

EPC cost increased by around US$0.6-1.2 billion, then land acquisition cost increased by around US$0.1-0.3 billion. Meanwhile, costs for the head office and pre-operation increased by US$0.05-0.2 billion. Then, contingency and financing costs increased by US$0.2 billion. Other costs also increased by up to US$0.05 billion.

KAI is an SOE that is approved to receive PMN. Didiek hopes that this fresh fund injection can be disbursed soon to resolve the financing problems of KCJB.

According to Didiek, if the PMN is not disbursed in 2022, the KCJB project can be delayed as PT KCIC’s cashflow can only survive until September 2022.

“So, if [the PMN] is not disbursed, the completion [target] by June 2023 is at risk of being delayed. It is true that we are planning to conduct a trial in November during the G20 Summit,” Didiek explained.

Regarding the disbursement of the Rp4.1 trillion PMN for PT KAI, State Asset Director General of the Finance Ministry Rionald Silaban is reluctant to provide a detailed explanation. “We will disburse the PMN by issuing a government regulation, but it requires discussions with ministries and SOEs. So, the disbursement will be conducted simultaneously with the rights issue of the SOE,” Rionald said to Investor Daily on Tuesday (27/9/2022).

Meanwhile, DPR Commission V Member from PAN Fraction Bakri said that, basically, DPR Commission V encouraged and supported the government to complete the KCJB project immediately. The support includes the Finance Ministry immediately disbursing additional funds from the APBN to continue construction.

“Our commitment as members of DPR Commission V is to support the immediate completion of the project. The government, at the last meeting with Commission V, has also committed to completing the project. However, our meeting with the government regarding the high-speed railway was half a year ago,” Bakri said on Tuesday (27/9/2022) night.

At the last meeting, he continued that DPR Commission V had approved the government to provide additional funds to construct the KCJB project from the APBN as it was already ongoing and must be completed. DPR Commission V is trying to understand as the construction cost increased after the project was underway due to various factors.

“From the government’s explanation, the project must be continued and needs additional funds from the government so that it can be completed and used quickly,” he added.

When the project was initiated, Bakri admitted that he was a DPR member that rejected the project. His reason was because the distance between Jakarta-Bandung was relatively close, so it can be travelled by car and existing trains in just a few hours.

“However, as [the project] is already underway, I must support the completion of the project to be completed as soon as possible by the government and to be provided APBN that they must be responsible for. The project must be completed so that it does not cause loss for the state further,” he affirmed.

He believes that the KCJB project could be completed with strong support from the government in the form of additional funds from the APBN. However, the completion will not be on time even though the completion target has been revised numerous times.


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