National strategic project: Long concession for high-speed railway
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.
Bisnis Indonesia - Proyek strategis nasional: Konsesi lama kereta cepat
17 February 2023
By: Lorenzo A. Mahardhika and Hendra Wibawa
PT Kereta Cepat Indonesia China is lobbying the Transportation Ministry to obtain an approval for the extension of the concession period of Jakarta-Bandung High-Speed Railway to 80 years.
In the next few weeks, PT Kereta Cepat Indonesia China (KCIC) will probably spend more time at the Transportation Ministry’s office in Jakarta.
KCIC, which is the operator of Jakarta-Bandung High-Speed Railway (KCJB), will focus on the capital city to lobby the railway regulator so that they will extend the concession period of the national strategic project from 50 years.
KCIC Corporate Secretary General Manager Rahadian Ratry stated that KCIC was continuously collecting data and information to follow up their proposal for the extension of the concession period of the high-speed railway to 80 years.
According to him, the required data and information is submitted by the company in stages.
Some data that have been submitted is the demand forecast from Polar of Universitas Indonesia, the financial model from KPMG, the feasibility data from CRDC, and some other data. “These data have to be submitted and discussed thoroughly between KCIC and the Transportation Ministry,” he said in his official statement on Thursday (16/2).
To strengthen the concession period extension submission, he added that KCIC had conducted a study with Polar of Universitas Indonesia to prepare a demand forecast and some other items regarding the commercial aspect.
The study result has been submitted to the Transportation Ministry during the meeting with the Coordinating Ministry for Maritime Affairs and Investment.
Rahadian also affirmed that KCIC always submitted various data and information required by the Railway Traffic and Transportation Directorate of the Railways Directorate General of the Transportation Ministry.
“KCIC will always cooperate and communicate with the Transportation Ministry to submit other additional data required,” he stated.
Rahadian added that the concession period extension would maintain the investment feasibility indicator and ensure a sustainable high-speed railway service.
Rahadian stated that the proposal was supported by Transportation Minister Regulation Number 38/2021 and was included in one of the concession agreement clauses that was previously signed.
KCIC’s management proposal to extend the concession period is based on several factors, such as the change in the demand forecast due to the pandemic and other factors.
Besides that, the proposal to revise the concession period to 80 years is also supported by the change in the total cost of the project after the cost overrun. Moreover, there is the construction period extension, the change in the non-fare business scheme, and various other factors.
Still in discussion
On the contrary, Transportation Ministry Spokesperson Adita Irawati, who is also a Special Staff to the Transportation Minister for Communication and Human Resources, stated that the Transportation Ministry was still discussing the extension of the concession period of the high-speed railway from 50 years to 80 years.
According to her, the submission to extend the concession period is still continuously discussed among related parties.
Besides that, she continued that the Transportation Ministry was still waiting for related data from KCIC as the operator of KCJB. However, Adita did not mention the deadline for the data submission from KCIC.
“Based on those data, we can make a decision and take the next step,” she explained on Tuesday (14/2).
Until now, the Transportation Ministry has yet to make a new statement on the submission to extend the concession period of KCJB project to 80 years.
Meanwhile, this cooperation project among state-owned enterprises (SOEs) of Indonesia and China has stepped further after the agreement on the amount of the cost overrun of the high-speed railway project.
The cost overrun polemic of the high-speed railway has been resolved after the Indonesian government and the Chinese government had agreed on the cost overrun amount that reaches US$1.2 billion or around Rp18 trillion.
During the work meeting with House of Representatives (DPR) Commission VI, SOE Deputy Minister II Kartika Wirjoatmodjo said that there was no cost overrun issue after the agreement between Indonesia and China in Bejing, China.
“We have agreed on the cost overrun [amount] that has been agreed on by Indonesia and China, so it can be immediately disbursed to PT KCIC,” he said on Monday (13/2).
KCIC that consists of SOEs from Indonesia and China is currently negotiating the loan term with China Development Bank (CDB), which is expected to be completed soon.
Kartika, familiarly called Tiko, is targeting the high-speed railway to operate in accordance with the previously set target in July 2023.
Previously, the cost overrun sparked a debate between Indonesia and China.
Special Staff to the SOE Minister Arya Sinulingga even said that the difference in calculation needed to be negotiated. One of the reasons for the cost overrun is the increase in land prices.
In China’s calculation, land prices did not increase.
“Land prices in Indonesia can increase in just 3 months, so we cannot lock the land prices,” he said.
Besides that, the difference in the cost overrun assumption between Indonesia and China also concerned the frequency or signalling cost.
Arya said that the signalling management by Telkomsel was provided with a business contract even though the company was an SOE.
After the cost overrun amount of the high-speed railway has been agreed on to be US$1.2 billion, KCIC currently only needs to wait for the approval for the extension of the national strategic project’s concession period.
