The State owned China Railway Engineering (CREC) plans to lay tracks for a high-speed rail project worth $6 billion, stretching from Jakarta to the textile hub of Bandung in Indonesia.
The project is expected to boost China’s infrastructure investments in the region and Indonesia’s role in China’s Belt and Road Initiative. The rail project was delayed for nearly three years owing to a land dispute, and the construction on the 142 km Indonesian line has now finally started.
Beijing is likely to showcase the Indonesia project during China’s summit on the Belt and Road Initiative that will be held this week. In addition, China will also highlight its success on the East Coast Railway Link project in cooperation with Malaysia.
Participants at the summit are expected to agree to support projects that address global debt goals and promote green growth. According to analysts, the two projects mark a significant milestone in China’s attempt to reinforce its sustainable financing programme.
On the project front, workers are laying the groundwork to build the railroad. Also, four new satellite towns will be constructed along the route. Of the project’s $6 billion investment, China’s Development Bank will provide $4.5 billion loan at 2 percent interest, and the remaining 25% of the project cost will be funded by the consortium.
There will be no sovereign guarantees provided, which is a critical aspect of China’s Belt and Road Initiative. Indonesian economist and the Minister of State-Owned Enterprises Rini Soemarno said:
“China wanted to deliberately show that its fast train was better than Japan … we asked for the lowest rate possible and they gave 2 percent.”
The discussions for the rail project took place during the during the Presidential Election in Indonesia.