Indonesia’s Belt and Road fast train is finally on track, but will it be a success?

Singapore: In a meeting room in Bali’s upmarket Nusa Dua district last November, Indonesian President Joko Widodo and China’s Xi Jinping sat down and cast their eyes towards a television screen.

There, on the edges of the G20 summit, which Indonesia was hosting, the two leaders were treated to a live-streamed trial run of one of the flagship projects of Beijing’s Belt and Road Initiative – the Jakarta-to-Bandung high-speed rail.

Indonesian President Joko Widodo visits one of the fast-train stations in West Java last October. Credit:AP

Four years after it was originally forecast to be up and running, the 142-kilometre link between the Indonesian capital and the country’s fourth largest city is finally scheduled to be inaugurated by Widodo, known as Jokowi, in August,

Operating at a speed of up to 350km/h, South-East Asia’s first genuinely high-speed train will reduce travelling time between Jakarta and Bandung – the capital of West Java and a hub for the textile industry – from more than three hours to less than 40 minutes.

Built and to be run by a joint venture of Indonesian state-owned companies, which have a 60 per cent stake, and a Chinese rail consortium, which has 40 per cent share, the train line was financed in large part by a loan from the China Development Bank and is a signature plank in Beijing’s global infrastructure drive.

The project has been plagued by problems including land disputes with residents who faced eviction, delays brought about by geological conditions and other troubles including the derailment of a construction train in December that killed two Chinese workers.

The pandemic delivered a further hold-up, and a cost overrun has inflated the final bill from an initial budget of 76 trillion rupiah ($7.5 billion) to 113 trillion rupiah ($11.24 billion), according to Kereta Cepat Indonesia China, the joint venture company.

The blowout in price has reinforced questions about the economic viability of the high-speed rail, which may take as long as 80 years to break even and begin turning a profit, business research institute Tenggara Strategics has predicted.

Ultimately, that will depend on how many people use it, and as the long-awaited opening nears, that is the big unknown.

A target of 31,000 passengers a day has been set – down from an original projection of more than 60,000 a day – but even the reduced figure will be difficult to achieve, said Muhammad Dimas Mahardika, a transport expert from Indonesia’s Gadjah Mada University.

He said the introductory standard ticket price of 250,000 rupiah ($25) was reasonable given the need to repay a Chinese loan of at least $US4.5 billion ($6.7 billion) but accessibility shapes as an issue due to the locations of the stations at the Bandung end. They have been built 19 kilometres from the middle of the city itself, meaning connecting transport will be needed.

Widodo walks with Chinese President Xi Jinping in Bali, where they met on the sidelines of the G20 summit in November.Credit:AP

“The travel time is 30-45 minutes. Fine, but the stations are still very far from Bandung city centre,” he said.

“People may eventually be interested in taking it. But we are still in the dark about when people will take it as their regular transport.”

The Indonesian government hopes the introduction of the high-speed rail can ease traffic and air pollution on densely populated Java, which is home to 145 million people and, like the rest of the archipelago, is lacking in modern, world-class mass public transport.

Commuters and other travellers, though, will have to be convinced to use the new rapid service ahead of cheaper established alternatives such as cars, mini-buses and an existing three-hour train trip, a ticket for which costs about 160,000 rupiah.

The Indonesian government announced last week that the track for the high-speed rail was now complete.Credit:Bloomberg

“I think people will be curious to try the new train in the first year. If they are satisfied, they will take it again,” said Djoko Setijowarno from the Indonesia Transportation Society.

“The shifting is expected to happen with people using private cars, not from conventional trains, because conventional trains are the same as the high-speed train – they are public transport. The target is to bring down the number of people driving private cars.”

‘China needs a success story’

Indonesia considered a rival bid from Japan before opting in 2015 to go with China on the high-speed rail.

The project has since been one of the most high-profile developments within Beijing’s Belt and Road Initiative, under which state-owned Chinese companies have outlaid hundreds of billions of dollars financing and building airports, highways, ports and other projects on multiple continents during the past decade.

The scheme has been the subject of much scrutiny and concern among Western nations worried about the increasing influence it allows Xi’s regime to wield, particularly in the Indo-Pacific, as the superpower rivalry between China and the United States continues.

But while Chinese investment in the likes of Indonesia, the Philippines and Vietnam has been picking up, it has been slowing down across the board in the region, according to Roland Rajah, director of the Indo-Pacific Development Centre at the Lowy Institute.

Sri Lanka handed over its Hambantota port to Chinese companies after being unable to repay loans.Credit:NYTNS

In a newly released report on regional infrastructure financing and the role Australia could play in it, Rajah identifies multiple factors contributing to the trend, including decreasing demand, tightening Chinese capital controls and the debt distress suffered by countries such as Sri Lanka, Pakistan and Laos after they took out Belt and Road loans. A study by the World Bank and US researchers showed last week that China forked out $US240 billion ($369 billion) between 2008 and 2021 bailing out 22 developing nations, most of them Belt and Road borrowers.

With such a backdrop, and with the US, Japan and Europe intensifying their own infrastructure efforts, there is much at stake for China with the Jakarta-Bandung rail.

“I think the Bandung rail project is very important for Beijing. It’s politically important to Jokowi and therefore important for China and Xi Jinping in both the bilateral relationship but also regionally in showcasing China’s ability to deliver on an important project for a counterpart,” Rajah said.

“These kind of mega-projects aren’t the only thing China is doing under [Belt and Road], but they get the most attention because they are not only big but promise high-tech benefits and so are especially politically and geopolitically salient. Whether they pay off once completed is also very important, though it will take time to tell.”

As China seeks to widen its footprint, Rajah said it should be kept in mind that it was exporting a “build it and they will come” model of development that differed from the economic and institutional reform pushed by Western nations and organisations such as the World Bank. As such, it needs to prove its worth.

“Indonesia is probably the best bet China has for success for this kind of infrastructure-driven strategy, compared to, say, far more difficult places like Pakistan or Laos, where it has also provided many billions for big infrastructure projects,” he said. “Especially with those countries now facing acute debt problems, China needs a success story.”

The semi-high-speed train from Laos to China travels at up to 160km/h.Credit:Istock

Beijing was behind a new fast train connecting its southern city of Kunming with Vientiane, the capital of Laos, which opened in 2021 and travels up to 160km/h. It has also set out to establish a high-speed line linking China with Bangkok via Laos.

In development-focused Widodo, China has found another willing partner. It is the No.2 foreign investor in Indonesia, behind only Singapore.

“I think from China’s point of view Indonesia is strategic,” said Toto Pranoto, a University of Indonesia economic scholar. “So they want to have more grip on this area through their investments. The economic and political aspects cannot be separated.”

Pranoto believes the Jakarta-Bandung rail may be financially problematic, although he also sees great upside.

He does not think the relocation of Indonesia’s capital city from Jakarta to a newly built administrative centre on the island of Borneo will have as much of an impact on the success of the high-speed rail as has some have anticipated, arguing it will appeal to business people.

“This is a showcase project that now we have a modern technology in place which could mean that we are in equal status with other major cities in developed countries,” he said.

“It is like Canberra in Australia. The capital moved, but businesses stay in Sydney, in Melbourne. The ones who will move to [the new capital] Nusantara are only government employees. Maybe the business will move too, but it will be much later. It means the business centres will still be in Java.”

‘As long as they pay us well, it’s OK’

With the track now fully laid, Widodo’s government plans to unveil the high-speed rail on August 17, Independence Day in Indonesia, and launch it the day afterwards.

Amid the pomp and ceremony, watching as closely as anybody will be those who have been directly affected.

Among them are Yanna Simanjorang, a 35-year-old housewife and mother to two sons, one in year 5 and the other 18 months old.

Simanjorang and her husband, a motorbike rider with ride-sharing giant Grab, were evicted from their house in east Jakarta in 2019 and found the compensation they received the same year underwhelming.

“We welcomed [the government] when it was doing the measuring [of their former house],” she said. “But when we received the money we were a little disappointed because the amount was far less than what we expected. It is not enough to buy a house in this area.

“Luckily we already have a small [piece of] land here. So we spent all the money for the construction … nothing was left.”

Her neighbour Erna, a teacher and mother of two who was also forced to move with her bus driver husband to make way for construction, has had a better experience.

Her compensation paid for a new house that is bigger than her old one, which has become the site of the main station building in Jakarta. It is the third time in her life that she has been evicted, having made way for a new road then a canal over the years.

“I personally support eviction if it is done for the benefit of the people … as long as they pay us well, it’s OK,” she said.

“I support all infrastructure projects done by the government because they will benefit our children and grandchildren.”

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