The need for tighter oversight
The KCJB project has been controversial from the start. It was first slated to be built by Japan, before it was given to China. Japan offered a higher cost and indeed called for the use of national budget funds, while China offered a lower price tag and no state budget financing. This made the Chinese offer more attractive. However, in reality, the state budget has been used in the process through the government’s capital injection to state-run railway firm PT Kereta Api Indonesia (Persero).
The cost overrun is inseparable from the significant delay in the operational plan of KCJB. Initially, the project was slated to be completed in 2019. However, it has since been pushed back to 2023. The Covid-19 pandemic should not be used as a pretext. If the management is “disciplined,” the project should have been completed on time in 2019 so the cost overrun should not have occurred.
Therefore, this project needs to be supervised more closely by involving various government agencies, especially regarding its finances. The government seems to have not learned from similar projects in other countries. Even the one in China was almost Rp35.5 trillion in excess of the initial budget. Another example is the Addis Ababa-Djibouti High-Speed Railway, which was also financed by Chinese debt and suffered a significant cost overrun.
Thus, the government needs to monitor two aspects. Firstly, the use of national budget which must be adjusted so that it is right on target. In addition, the budget shortfall should not be patched up again, using public coffers.
Secondly, management of the Chinese loan. Although currently Indonesian SOE consortium has more equity, this does not guarantee that in the future the Chinese consortium will not take control. The project is financed by loans from the China Development Bank (CDB). We must not let a repeat of national strategic projects be controlled by foreign entities, as is the case with Sri Lanka.
A prestige project?
With the development of transportation infrastructure in Indonesia being beset by various problems, it is only natural that the government needs to reconsider its priorities. The case with KCJB, which coincides with the construction of a toll road which will slash the travel time between Jakarta-Bandung significantly, can turn the KCJB’s projected return on investment into chaos. The public is indeed given more options to go to Bandung. But on the other hand, there will be much more competition on this route, reducing the market share of other players.
It is important that the government prioritizes infrastructure development that is financially sustainable over the long run. Judging from the lack of demand for Palembang LRT, its operational period may be short-lived. Even if it is forced to operate, it will require continuous and enormous government subsidies. Of course, this is not healthy for the central government’s and local administrations’ finances.
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In the context of KCJB, another development priority is the support infrastructure. However, the government has instead built a toll road. With a cheaper cost, of course the public will be tempted to use private vehicles, especially given a more flexible time. In fact, it is precisely this market share that the KCJB management should be aiming for.
In other words, KCJB will find it difficult to compete with alternative modes of transportation. Although the travel time is relatively short, the price factor can make people think twice and choose cheaper alternatives instead. If it loses the competition, it will suffer the same fate as other rail-based projects. Another white elephant in the birthing. (Nailul Huda)