China's China Development Bank allocates funds to Indonesian Railways to solve high-speed rail overruns

China's China Development Bank (CDB) has allocated US$448 million (Rp 6.9 trillion) to Indonesian Railways (KAI), a loan that will be used to cover the cost overruns of the Jakarta-Bandung high-speed railroad, also known as the "Whoosh" high-speed railroad project.
In an important document submitted by Indonesian Railways to the Financial Services Authority (FSA), the loan was disbursed in two currencies, the US dollar and the Chinese yuan. The loan was divided into two parts, namely Category A loan amounting to US$230.9 million (approximately Rp 3.6 trillion), which was disbursed on February 7th. Secondly, category B loan amounting to 1.54 billion yuan (approximately Rp 3.3 trillion) was disbursed on February 5th.
The loan was transferred to the Indonesian side consortium Pilar Sinergi BUMN Indonesia (PSBI), an Indonesian state-owned company that holds a stake in the Jakarta-Bandung high-speed rail project 60%. The consortium consists of four SOEs, namely Indonesian Railways, state-owned construction company Wijaya Karya, state-owned highway service company Jasa Marga, and state-owned farm and garden company Perkebunan Nusantara VIII. Indonesian Railways is the largest shareholder.
The cost overrun amount for the high-speed rail project has been agreed at US$1.2 billion (about Rp 18.76 trillion). The cost overrun is due to the difference in the cost of constructing the high-speed railroad between China and Indonesia, which mainly comes from the cost of land acquisition, signaling system, and so on.
The loan from China Development Bank (CDB) will be the capital of Indonesian Railways. The Indonesian government had previously applied for a $550 million (Rp 8.3 trillion) loan from the bank, which was proposed in early 2022. However, the disbursement of the loan had also been delayed due to Indonesia's request for an interest rate or interest rate that did not meet the bank's criteria.
In the high-speed rail project, PSBI and Beijing Yawan High Speed Railway Co., Ltd. have formed a joint venture company called China-Indonesia High Speed Railway Joint Venture Company (KCIC). This joint venture will be the operator of the "Whoosh" high-speed railroad. The "Whoosh" high-speed rail line was officially launched on October 2 last year, with free rides for two weeks, before commencing commercial operations on October 17th. The public response to Southeast Asia's first high-speed railroad has been overwhelming, as evidenced by the number of passengers carried, which exceeded 1 million in less than two months since the start of commercial operations.

Sources of information:Indonesia Business News