In­done­sia to buy train en­gines due to rail­way ex­pan­sion

The Pak Banker - - BUSINESS -

In­done­sia will pur­chase around 400 lo­co­mo­tive en­gines from ei­ther Gen­eral Elec­tric Co. or Elec­tro-Mo­tive Diesel Inc. as it ex­pands its rail net­work, the trans­port min­is­ter said.

The govern­ment's progress to­ward a tar­get of build­ing 3,258 kilo­me­ters (2,025 miles) of new track by mid2019 has been slow so far, but it re­mains achiev­able, said Ig­na­sius Jo­nan, in an in­ter­view last week. In 2015, the govern­ment built 250 kilo­me­ters, and it is plan­ning to quicken the pace with up to 700 kilo­me­ters more this year, he said.

"As long as the bud­get is there, I will com­mit to the tar­get," said Jo­nan, who led the state rail com­pany PT Kereta Api In­done­sia for five years be­fore be­com­ing a min­is­ter in 2014. "We will speed up. Go­ing from zero to one is the most dif­fi­cult thing in in­fra­struc­ture. From one to five is a lot eas­ier," he said.

Af­ter years of un­der in­vest­ment, Pres­i­dent Joko Wi­dodo has or­dered in­creased spend­ing on rail­ways, roads and ports to drive growth in South­east Asia's largest econ­omy. The govern­ment can pay for around 30 per­cent of its es­ti­mated in­fra­struc­ture bill of $400 bil­lion, and wants pri­vate in­vestors and multi­na­tional or­ga­ni­za­tions in­clud­ing the China-led Asian In­vest­ment In­fra­struc­ture Bank to fund the rest, Wi­dodo said in an in­ter­view on Feb. 11.

In­done­sia's rail net­work was built un­der the su­per­vi­sion of its Dutch colo­nial rulers but since in­de­pen­dence in 1945 suc­ces­sive gov­ern­ments have al­lowed it to wither. Ac­cord­ing to the World Bank, the ar­chi­pel­ago had 4,684 kilo­me­ters of track in 2014, down from 6,458 in 1981. In­dia has more than 65,000 kilo­me­ters of track. Jo­nan said the ex­pan­sion plan would re­quire some 400 new lo­co­mo­tive en­gines, up from the cur­rent stock of 550, and around 5,000 new wag­ons.

The govern­ment has awarded the coun­try's first high-speed train link to a Chi­nese-led con­sor­tium in­clud­ing sev­eral In­done­sian state-owned com­pa­nies, af­ter turn­ing down a ri­val Ja­panese bid. Con­struc­tion has yet to be­gin on the link be­tween the cap­i­tal Jakarta and the city of Ban­dung, be­cause the con­sor­tium has yet to ap­ply for the per­mits it re­quires, Jo­nan said.

Law­mak­ers have ex­pressed fears the high-pro­file pro­ject will end up be­ing a bur­den on the state bud­get. The Ja­panese bid was re­jected be­cause it re­quired a state guar­an­tee, whereas the govern­ment said the Chi­nese of­fer was a purely busi­ness-to-busi­ness deal. "They have been think­ing if the high speed train col­lapses then the govern­ment will even­tu­ally give a hand to help," Jo­nan said. "We are craft­ing the con­ces­sion agree­ment care­fully, so there isn't even a small hole that would al­low govern­ment help if in the fu­ture the op­er­a­tion col­lapses fi­nan­cially."

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