Jakarta – Since the outset, simple business calculations have shown that the Whoosh high-speed rail service will never break even, yet alone make a profit. Last year, with monthly revenues of Rp133 billion, Indonesian railroad company Kereta Api Indonesia (KAI), had to cover the operational costs of Kereta Cepat Indonesia China (KCIC) and repay Rp179 billion of project debt.

This debt interest is from the investment to build the fast rail link totaling Rp116 trillion, 76 percent of which came from the China Development Bank. According to Danantara, KAI's parent company, the revenue from Whoosh will not be able to pay off the debt before 2061, when the first project concession with China comes to an end.

The problem is that if this is allowed to continue, the Whoosh debt will become a time bomb for the state-owned company. Not only will Whoosh collapse, but KAI could go bankrupt even sooner. KAI is a state-owned enterprise that has managed to improve transportation services. Unlike other state companies, it is still profitable.

The burden of the Whoosh high-speed train was predicted when President Joko Widodo expressed his desire to construct it in 2016. During the era of President Susilo Bambang Yudhoyono, a fast rail route from Jakarta to Surabaya was designed by a Japanese consortium. Jokowi changed this to Jakarta-Bandung and selected a Chinese company to build it. The shorter route means less income for KCIC, which manages Whoosh.

Jokowi's promise that the fast rail project would not burden the state finances does not appear to have been kept. Not only is it impossible, in fact, the project's design contradicted the basic logic of public infrastructure financing. Everywhere else, the infrastructure and the planning of public transport are always funded by the state. The private sector is only involved in the operation of the facility once the infrastructure is complete.

But it is too late now. The fast rail project is now in operation and has become a burden for everyone. What is needed now is a way of preventing it from becoming a protracted burden. One way would be to increase the services, so the number of passengers reaches an economic level. Whoosh is not very popular because it is less convenient to access it from the center of Bandung and Jakarta than other means of transport.

Now the price of Whoosh tickets is between Rp250,000 and Rp650,000. These non-subsidized prices are reasonable. But with the number of passengers still below 250,000 per day – half of the ideal economic figure – Whoosh is running at a loss.

As a result of high operational costs and the debt burden of the fast rail, KCIC made a loss in the first half of this year alone of Rp1.2 trillion. This huge loss has reduced KAI's profit. This could have an impact on train services on all lines.

Negotiations with China, which has a 40 percent shareholding in KCIC, to persuade it to share responsibility for the defusing of this project time bomb is probably the best way to reduce the debt burden. But these negotiations will not be easy because Whoosh is making a loss. China will certainly be reluctant to take on a larger share of the burden.

As a result of Jokowi's actions, we are stuck in a Chinese debt trap. If the state takes over the Whoosh debt, it will be robbing Peter to pay Paul. The government must not take this easy way out by taking out fresh and even more expensive debt. Jokowi has created a dead end for any efforts to fix the mess he left behind.

– Read the complete story in Tempo English Magazine

Source: https://en.tempo.co/read/2046470/the-fast-rail-dead-en