Analysts said the deficit may continue for decades and will likely affect the state-owned enterprises behind the project. — The Jakarta Post
JAKARTA: The Jakarta-Bandung high-speed railway, dubbed Whoosh, is expected to face a deficit of 3.15 trillion rupiah (US$200mil) in its first year of operation, according to a December 2023 financial projection seen by The Jakarta Post.
The projection also shows that Kereta Cepat Indonesia China (KCIC), the consortium responsible for the project, is seeking to close the gap through what it calls cash deficiency support (CDS), which experts say will most likely come from bank loans.
Analysts said the deficit may continue for decades and will likely affect the state-owned enterprises (SOEs) behind the project, particularly national railway firm Kereta Api Indonesia (KAI), which holds the largest stake in the railway on the Indonesian side.
This year, KCIC expects to book two trillion rupiah in revenue, more than 95% of which it projects will come from ticket sales.
But it will need to spend 3.32 trillion rupiah to operate the service and another 1.84 trillion rupiah to pay down loan interest and meet its tax obligations, according to the financial document.
The railway hit the milestone of serving one million passengers late last year.
To ensure it has sufficient cashflow this year, KCIC will require 3.4 trillion rupiah in CDS, the document also shows.
Deputy SOEs Minister Kartika Wirjoatmodjo said in 2021 that the government had proposed bridging the cashflow gap with additional loans from Beijing-owned China Development Bank.
The loans would be guaranteed by the Indonesian government through KAI, a move made possible by a 2023 Finance Ministry regulation.
The project, which cost around US$7.3bil, is already liable for US$4.55bil in loans taken out since 2017 plus another US$560mil to cover a cost overrun last year, Reuters reported.
Siwage Dharma Negara, coordinator of the Indonesia Studies Programme at Singapore’s Iseas Yusof Ishak Institute, said the deficit was significant and was something to be worried about.
He added that it would likely become the burden of KAI and other SOEs in the high-speed train consortium.
“It depends on the ability of KAI to get more revenue this year. If the firm can generate a far larger amount, then it might be able to provide some of the CDS with its income,” Siwage told the Post.
Alternatively, Siwage said, the operators could step up non-fare income through advertising, property development and tenant agreements, among other options.
Centre of Economic and Law Studies or Celios executive director Bhima Yudhistira said the deficit and the proposed cashflow support could hamper KAI’s investment plan for railway expansion elsewhere, especially outside Java.
He said the additional loans needed to cover operational costs were more proof of the project’s bad planning and noted that KCIC had failed to take into account possible cost overruns during the initial phase of the project, which had resulted in additional loans.
“In the beginning, some people said that there would be properties being developed around the Whoosh stations and that they would provide additional income.
“It turns out that did not happen, pushing the operator to take out more loans,” he said. — The Jakarta Post/ANN
