Why Indonesia gets high-speed rail

Why Indonesia gets high-speed rail.

The president of the Philippines jokes about getting run over by a train. The president of Indonesia actually builds a rail- transit system.

During his presidential campaign in 2014, Joko Widodo vowed to increase government spending for infrastructure and transportation. A plan for a high-speed rail line had been in discussion since 2008, as Japan wanted to export and build its Shinkansen high-speed railway in Indonesia.

After Widodo took office, he halted the project, citing the high cost to the government of the Japanese proposal. However, in April 2015, the Chinese government approached
Jakarta with a counterproposal. Widodo traveled to Beijing, as he had previously to Tokyo, to meet personally with the government officials to discuss the proposal.

After typical government complications with the bidding and awarding process, Widodo again canceled the project on September 3, 2015. Indonesia's president felt that the government was still taking on too great a financial burden and risk. Widodo did not want government loan guarantees for the high-speed rail system nor to put the government on the hook for paying for the project.

By mid-September, the Chinese government had responded and accepted all the demands of the Indonesian president. Construction of the rail project started this past week.

The state-owned China Development Bank will provide 75 percent of the $5.5-billion funding, with the rest coming from the Chinese railway company and an Indonesian consortium. The Indonesian government will not directly provide any money to build the rail system. Several government-owned profit-making companies are involved, but no construction or operating funds will be sourced from the national treasury. The loan will be paid from rail revenues. Fares will still be controlled by existing Indonesian regulatory authorities.

The Chinese will also establish other Indonesian private joint ventures to locally produce up to 40 percent of all the equipment for the rail system and provide cost-free technology transfers for the Indonesians to make their own trains. This will include manufacturing for light-rail systems also for export. The Chinese-led consortium will also pay for the building of new and upgrading of existing rail stations.

Indonesia will build the first high-speed rail system in the region. The 150-kilometer rail line from Jakarta to Bandung City will be funded through a Chinese loan that will not be guaranteed by the Indonesian government. Several rural areas will be opened up for new development. Direct investment and free rail-technology transfer will make Indonesia a potential exporter of rail equipment to the region. Forty percent of the equipment for the new system will be locally manufactured, creating more jobs.

It is amazing what can be accomplished when experienced leadership combined with determination to get infrastructure projects done while leveraging the China-Japan rivalry. Our close relationship with the US gives the Philippines used military equipment that we have to pay to ship here and continuous headlines of "US Companies Eye Investment
Opportunities in the Philippines."

Where's our high-speed rail?

Image Credits: Jimbo Albano