June 17, 2017 12:25 pm JST

Indonesia wants investment, not loans, minister says

Jakarta now wants private-sector funding for Java rail project

SHIGERU SENO, Nikkei senior staff writer

JEJU, South Korea -- A planned cross-Java railway project in Indonesia should be funded via a public-private partnership rather than the loan aid Japan has offered, the Southeast Asian nation's minister of national development planning said Friday.

Bambang Brodjonegoro revealed the change of stance in an interview here with The Nikkei. He is attending the second annual meeting of the China-led Asian Infrastructure Investment Bank's board of governors. The three-day gathering began the day of the interview.

The Japanese government has been preparing to offer official development assistance for the railway, which would link Jakarta and eastern Java. Indonesia's about-face is certain to necessitate a big rethink on the project by Tokyo and could stir some controversy.

Bambang said it is time for Indonesia to start privately funding some infrastructure development, noting such economic advancements as a doubling of per capita income and economic growth of 5% a year. The project "does not have to create burdens to our budget," he said, adding that concessional loans and soft loans, such as Japanese ODA, "are still loans."

The minister also said Indonesia is mulling the use of a PPP for an expansion of the Jakarta mass rapid transit project, now under construction with Japanese loan aid and slated for completion in early 2019. He cited the success of such a scheme in developing Hong Kong's mass rapid transit system and said that "we hope to discuss with more potential Japanese investors."

Bambang declined to comment on whether Japan should join the AIIB, saying that "it's really up to your government." But Japanese investment in infrastructure is "very much welcome," and "Japanese companies are basically ready" for PPP schemes in Indonesia, he added.

Asked to assess the AIIB, he noted that it has been only a year and mentioned co-financing projects currently underway with such peers as the World Bank and the Japan-led Asian Development Bank. "We hope in one or two years" the AIIB "can come up with own financing," he said.

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