The Indonesian government has entered into debt-restructuring negotiations with China over its high-speed rail project with losses mounting and little prospect of a turnaround after 2 years in service.
The country's Whoosh high-speed railway, the first in Southeast Asia, began commercial operation in Oct 2023. It connects the capital, Jakarta, to Bandung, the main city in West Java, over a distance of 140km at up to 350 km/hour.
The cumulative number of passengers exceeded 10 million as of the end of June. But usage has been sluggish because of inconvenient station locations far from city centers and the short operating distance.
According to operator Kereta Cepat Indonesia China (KCIC), daily passenger traffic is between 16,000 and 18,000 on weekdays, and between 18,000 and 21,000 on weekends. This is less than half of the initial target of 50,000 to 76,000 passengers per day.
KCIC is 60%-owned by a consortium of Indonesian state-owned enterprises led by railway company Kereta Api Indonesia (KAI) and 40%-owned by a consortium of 
companies.
The consortium of state-owned enterprises posted a net loss of 4.2 trillion rupiah ($253 million) for 2024. It reported a 1.63 trillion rupiah loss for the January-June half of 2025. Liabilities had ballooned to 18.93 trillion rupiah as of the end of June. Looking at KCIC as a whole, the losses and liabilities are even larger.
The high-speed rail project's financial issues are a “ticking time bomb”.
China provided financial and technical support for the construction of the high-speed railway as part of its Belt & Road infrastructure initiative. Of the total project cost of $7.2 billion, $5.4 billion was lent by China Development Bank.
The Indonesian government originally planned to introduce Japan's shinkansen bullet train system but switched to the Chinese proposal in 2015. Then-President Joko Widodo's administration noted that the Chinese proposal would not strain the government's finances or require government guarantees for debt.
The project's crisis stems from an overly optimistic outlook. The total project cost was initially estimated at around $6 billion, but construction delays and other factors caused it to balloon by $1.2 billion. According to local reports, interest payments alone amount to around $120 million per year.
The plan was for the operating company to use profits from the high-speed rail service to repay the debt after the line opened. But sluggish passenger numbers made this plan go awry.
Based on ticket prices for premium economy seats, which account for the majority, and the average daily passenger count, annual revenue is around $110 million. When such expenses as personnel costs and vehicle maintenance and inspections are included, ticket revenue alone does not even cover interest payments.
The government has used public funds as the project's total costs have grown. Negotiations with China over debt restructuring may force the government to tap even more public funds.
The government is considering injecting capital into the operating company or managing the railway infrastructure. To increase passenger numbers, the government had proposed extending the high-speed railway — by more than 500km — to Surabaya, the country's second-largest city. But the project's debt problems have cast a shadow of uncertainty.
"A debt restructuring could mean the government and its sovereign wealth fund bear more burdens and risks. The previous government needs to be held accountable."
asia.nikkei.com/spotlight/belt
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Byron Wan
@Byron_Wan
Cost overruns of Indonesia’s Jakarta-Bandung high-speed rail project — a Belt & Road project — have far exceeded the initial target, now swelling to US$1.2B and forcing Jakarta into negotiations with China Development Bank to fund the extra costs. asiasentinel.com/p/indonesia-st
Belt & Road project — have far exceeded the initial target, now swelling to US$1.2B and forcing Jakarta into negotiations with China Development Bank to fund the extra costs. asiasentinel.com/p/indonesia-st