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April 16, 2021

Indonesian companies negotiate with China to increase stake in rail project

Indonesian state companies involved in the construction of the Jakarta-Bandung High-Speed Railway (HSR) project are reportedly in negotiations with Beijing to increase its stake in the project.

Indonesian state companies involved in the construction of the Jakarta-Bandung High-Speed Railway (HSR) project are reportedly in negotiations with Beijing to increase its stake in the project.

The latest move comes as project costs are expected to increase by 20%, Reuters reported.

The 142.3km-long HSR project connects the Indonesian capital city of Jakarta with the textile hub of Bandung.

The project was originally estimated to cost $4.57bn when it was awarded to KCIC, a joint venture (JV) between Chinese and Indonesian state-owned companies in 2015.

For the project, China Railway Construction (CRCC) formed a JV with a consortium of Indonesia’s state-owned enterprises (SOEs).

Construction company Wijaya Karya is leading the SOEs to develop the high-speed rail project and holds the biggest share in a 60% stake it co-owns with other Indonesian firms in KCIC.

The remaining stake is owned by the China Railway Engineering Corporation and other Chinese companies.

Other Indonesian companies in the consortium include railway operator Kereta Api Indonesia, toll-road builder Jasa Marga, and plantation company Perkebunan Nusantara VIII.

The news agency quoted Wijaya Karya president director Agung Budi Waskito as saying that the project cost is estimated to increase by 20% to complete the construction work, which is expected to take place between the end of next year to early 2023.

Waskito added: “We hope Indonesia has a smaller portion than what it is now so the cost overrun can be borne by the (Chinese) Government.”

KCIC corporate secretary Mirza Soraya said that these unexpected expenses are mainly due to the land clearing and dealing with utilities such as water or power.

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