The consortium building a China-funded high-speed railway in Indonesia is seeking a 16.1 trillion rupiah (US$1.03 billion) loan top-up from China Development Bank (CDB) to fund a budget overrun on the project, company executives said on Wednesday (Nov 9).
The US$6 billion project is facing ballooning costs due to several issues including higher land procurement costs, delays in construction due to the pandemic, and rising prices of materials, Dwiyana Slamet Riyadi, president director of the consortium, known as KCIC, told a parliamentary hearing.
The total increase in costs is estimated at US$1.45 billion and China’s National Development and Reform Commission has agreed 75 per cent of this should be funded by bank loan, Didiek Hartantyo, president director of state-owned railway firm PT KAI, one of the companies in the consortium told the same hearing.
The rest of the cost will be funded by an increase in stakeholder capital, Didiek said.
KAI is in the process of requesting parliamentary approval for a 3.22 trillion rupiah capital injection from the state, while China Railway Engineering Corporation and other Chinese state companies are expected to up their stake by 2.15 trillion rupiah, Didiek said.
The increase in costs was smaller than KCIC’s initial estimate that the project was nearly US$2 billion over-budget, after an audit by state auditor BPKP.
The project, which was awarded to KCIC in 2015 and is the most high profile Belt and Road Initiative in the Southeast Asian nation, was initially funded with a loan of US$4.55 billion-equivalent from the CDB with a 40-year tenure.
Didiek told lawmakers discussions with the CDB are underway, in parallel with his company’s request to parliament for the capital injection, underlining that the project could face further delays without an increase in funding.
The government hope to launch the 142km rail line linking the capital Jakarta with the city of Bandung in June 2023.