Government invests Rp4.3 trillion in Jakarta-Bandung High-Speed Railway project
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.
Investor Daily - Pemerintah Suntikkan Rp4,3 Triliun ke Proyek KA Cepat Jakarta-Bandung
13 October 2021
By: Thresa Desfika, Triyan Pangastuti, Muawwan Daelami, and Arnoldus Kristianus
Jakarta – The government is investing Rp4.3 trillion in PT Kereta Api Indonesia (KAI) to cover the lack of funds for the construction of Jakarta-Bandung High-Speed Railway that increased by around Rp27 trillion or 31% from the original cost. The investment is provided in the form of an additional state capital participation (PMN) for PT KAI, one of the four SOEs (State-owned Enterprises) in PT Pilar Sinergi BUMN Indonesia. The construction of the high-speed railway that spans 142 km is predicted to be finished at the end of 2022, which is 12 months later from the original schedule.
Other SOEs in PT Pilar SInergi BUMN Indonesia (PSBI) are PT Wijaya Karya (Persero) Tbk, PT Jasa Marga (Persero) Tbk, and PT Perkebunan Nusantara (PTPN) VIII. To work on the high-speed railway, PSBI is cooperating with a Chinese company by establishing the KCIC consortium. PSBI’s ownership portion in KCIC reaches 60%, while the Chinese company owns the remaining 40%.
When the consortium PT Kereta Cepat Indonesia China (KCIC) was established, KCIC was obligated to provide a capital of around RP21.56 trillion. This is 25% of the estimated cost of Jakarta-Bandung High-Speed Railway worth US$6.07 billion or Rp86.25 trillion in total.
PT Pilar Sinergi BUMN Indonesia that owns 60% of KCIC shares must provide a capital of around RP12.94 trillion, while the Chinese consortium Beijing Yawan that owns 40% of the shares must provide Rp8.63 trillion. With 25% provided from their own capital, the remaining 75% or around RP64.69 trillion (US$4.55 billion) will be provided by a loan from China Development Bank.
PT Kereta Api Indonesia (Persero) or KAI President Director, Didiek Hartantyo, said that, as a follow-up action from Presidential Regulation Number 93/2021 that appointed KAI as the new leader of PSBI, the PMN for KAI was prepared to provide the base equity capital for Jakarta-Bandung High-Speed Railway. Previously, PSBI’s leader was PT Wijaya Karya (Pesrero) Tbk as they owned 38% of the shares, while KAI owned 25%, PT Jasa Marga (Persero) owned 25%, and PT Perkebunan Nusantara (PTPN) VIII owned 12%.
The Rp4.3 trillion PMN will be used to cover the lack of capital from the SOE consortium, Rp240 billion from WIKA, Rp440 billion from KAI, Rp540 billion from Jasa Marga, and Rp3.14 trillion from PTPN. “So, the Rp4.3 trillion PMN will be used to provide the base equity capital,” Didiek said when he was contacted by Investor Daily on Monday (11/10).
He explained that, to work on the high-speed railway project, PSBI established a joint venture with a Chinese consortium, Beijing Yawan, called PT Kereta Cepat Indonesia China. The fund required for the high-speed railway spanning 142 km reaches US$6.07 billion.
Special Staff for SOE Minister, Arya Sinulingga, explained that, previously, the funding would be provided from the state budget as the four SOEs involved in the project was impacted by the Covid-19 pandemic, which hindered the capability of the state-owned companies in financing the cooperation project between Indonesia and China.
“This is what forces the government to provide funding so that the high-speed railway can be excellently constructed,” Arya said to an interviewer on Sunday (10/10).
In article 4 paragraph 2 of Presidential Regulation Number 93 of 2021, it is mentioned that other funding can be provided from the state budget to maintain the progress of a national strategic project by considering the fiscal capacity and sustainability. Then, paragraph 3 of article 4 states that financing can be provided from the state budget in the form of state capital participation for the SOE consortium leader and/or guarantee for the SOE consortium leader.
“Presidential Regulation Number 93/2021 appoints PT KAI as the consortium leader, while the previous leader was PT Wijaya Karya Tbk. So, this is nothing. The issue is only that [the SOEs are impacted by the pandemic]. Wherever you go, in almost all countries, the government is involved in their high-speed railway project. Almost all countries are like that,” Arya said.
He added that the construction progress of Jakarta-Bandung High-Speed Railway project had reached 80%. With funding from the government later, Arya continued that the project completion was expected to be accelerated.
Cost overrun
On a separate occasion, SOE Deputy Minister, Kartika Wirjoatmodj, revealed that, previously, there were several issues regarding Jakarta-Bandung High-Speed Railway. First, regarding the initial capital. According to him, PT PTPN VIII’s plan to provide additional capital in the form of lands in Walini in West Java was rejected by the consortium.
“PTPN VIII was planning to increase the capital in the form of lands in Walini. In its development, the consortium KCIC does not receive contribution in the form of lands, only cash. PTPN VIII does not have the capability to provide cash of that amount,” Kartika Warjoatmodjo, familiarly called Tiko, said.
Besides that, he continued that Jasa Marga was also planning to provide capital in the form of a right of way (ROW) on their toll roads. However, a ROW turns out can only be provided by the State Asset Directorate General of the Finance Ministry.
“This misunderstanding on ROW is due to a lack of legal study at the early stage. Furthermore, capital from WIKA and KAI are also still lacking,” he said.
To cover the lack of capital, Tiko continued that KAI was proposed to receive a state capital participation of Rp4.3 trillion this year. The fund will be included in the 2021 additional PMN.
“We expect that the culmination [of the lack of the capital from Jasa Marga and PTPN VIII] and the lack of the additional capital from WIKA and KAI can be provided by the PMN. The PMN through KAI that will be used to smooth out [the construction of] Jakarta-Bandung High-Speed Railway is required as the companies are under pressure from the Covid-19 pandemic,” Tiko stated.
Furthermore, Tiko said that the second issue regarding the Jakarta-Bandung High-Speed Railway project was the cost overrun. In Tiko’s presentation during the working meeting with House of Representatives (DPR) Commission VI, it was shown that the cost overrun of Jakarta-Bandung High-Speed Railway was estimated to reach around US$1.4 billion to US$1.9 billion.
“We are currently having a discussion on the cost overrun. I think that it will not be provided in this year’s [PMN], but next year’s,” Tiko revealed previously.
Then, he revealed that the third issue was the cash deficit. According to Tiko, discussions with China are still held to handle the negative operational cash flow, which will occur at the start of Jakarta-Bandung High-Speed Railway’s operation. “We are thinking of a scheme with financing from a bank, which is CDB (China Development Bank),” Tiko said.
Special Staff for SOE Minister, Arya Sinulingga, previously explained that another problem was the change of Jakarta-Bandung High-Speed Railway’s route to Jakarta-Padalarang-Bandung. This is set in Presidential Regulation Number 93 of 2021. Previously, the route was set to be Jakarta-Walini-Bandung.
“Price changes can occur and are normal in a project. Moreover, in a project with a long route such as the Jakarta-Bandung High-Speed Railway project that spans 142 km. During construction, the design can change due to geological and geographical conditions that change from the original condition. Do not say that the original plan is wrong. Then, the price of lands can increase in time, which occurs during almost every construction,” he added.
