Indonesia government to take over state firm's stake in troubled China-funded high-speed railway

Indonesia's government is set to assume a controlling stake in PT KCIC, the operator of the US$7.3 billion China-funded high-speed railway, known commercially as "Whoosh." The move aims to address the project's financial challenges and ensure its operational stability.

Finance Minister Purbaya Yudhi Sadewa announced that an agency under his ministry will take over the 60 percent stake currently held by a consortium of Indonesian state companies. While the value of this stake was not disclosed, the appointed agency will be responsible for repaying the railway's outstanding loan. Crucially, Purbaya stated that the state budget will not be used for this repayment, indicating a plan to manage the debt through other financial mechanisms.

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The appointed agency will be responsible for repaying the project's outstanding loan, but will not use the state budget.

The 142-kilometer railway connects the capital city, Jakarta, with Bandung, a city located southeast of the capital. The transaction is expected to be finalized by mid-September, according to Dony Oskaria, chief operating officer of the sovereign wealth fund Danantara, which oversees the Indonesian state firms involved.

The "Whoosh" project has been plagued by various difficulties since its inception. These include challenges in land procurement, delays caused by the COVID-19 pandemic, and significant cost overruns. Chinese state firms will retain their 40 percent stake in PT KCIC, maintaining a partnership in the ambitious infrastructure project.

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The transaction will be completed at the latest by mid-September.