Indonesia’s US$40 billion rail expansion could rival Hong Kong, Singapore while reigniting China-Japan rivalry
- Project is part of President Joko Widodo’s ambitious road map to create a US$7 trillion economy by 2045, with an emphasis on infrastructure
- Japan was awarded the first subway line in the capital, while China secured the first high-speed train deal connecting Jakarta and Bandung
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“We have a target of building 230km by 2030, that’s the masterplan,” Sabandar said in an interview in Jakarta. “We only have 16km right now, so the key is how we can do this in an accelerated way. We can no longer just build them one by one.”
But his efforts to date, which also include the construction of ports, dams and power plants, have put a strain on the banking system and the balance sheets of state-owned construction companies.
Indonesia will need assistance and funding from abroad for the plan to materialise, according to Yayat Supriatna, a transportation analyst at Trisakti University in Jakarta. That opens the door for China and Japan to renew their rivalry in the country, something that Indonesia will have to navigate, he said.
“We have to acknowledge that Indonesia doesn’t have the technical capabilities and the financial resources for this,” Supriatna said in a phone interview. By making Japan and China compete against each other, “we can make sure that we can pick the offer that gives us the best benefit.”
“The Asian Development Bank and Asian Infrastructure Investment Bank are among those who are serious and have submitted financing commitments,” Sabandar said, adding that the Japan International Cooperation Agency has also expressed interest in the new lines.
In September, Indonesia signed an agreement with JICA for a 60 trillion rupiah (US$4.3 billion) project to add an express line between Jakarta and Surabaya on the island of Java.
Indonesia has also commissioned a US$6 billion, 142km high-speed train to connect Jakarta and Bandung, the capital of West Java. The project, which was awarded to China Railway International Co. and a consortium of Indonesian state companies, was scheduled to be completed last year but has faced several delays.
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Indonesia is also planning to build train networks in Sulawesi and Kalimantan as well as connecting some of the country’s key airports with nearby cities by rail, according to a document from the National Development Planning Ministry.
Indonesia’s railway and subway expansion plans mean more opportunities for the country’s construction companies, such as state-owned builders PT Waskita Karya, PT Adhi Karya and PT Wijaya Karya, according to Jemmy Paul, chief executive officer of Sucorinvest Asset Management, whose equity fund has beaten 97 per cent of peers over the past five years.