TEMPO.CO, Jakarta - The director of the Center of Economics and Law Studies (Celios) Bhima Yudhistira on Thursday advised the government to continue intensifying negotiations with China in terms of the Jakarta-Bandung High-Speed Railway (KCJB) project.

"The government should negotiate with higher bargaining power than China," Bhima said in an interview with state-owned news agency Antaranews in Jakarta, Thursday, April 27.

According to Bhima, the KCJB project funding scheme needs to be restored to the original agreement, which was exclusively a business-to-business or B2B system. This means that the cost overrun of the KCJB project will be borne by the consortium and creditors, instead of Indonesia’s state budget (APBN) which China currently demands.

He advised the government to avert using the state budget from covering the high-speed railway project cost overrun.

The economist also disagrees if the KCJB project debt guarantee being carried out through PT Penjaminan Infrastruktur Indonesia (Persero) or PT PII as guarantees through state-owned enterprises or SOEs still carry risk contingency which may have implications for the state budget.

On the other hand, Bhima argues that the idea of guaranteeing debt through SOEs will not necessarily be approved by the Chinese Government reflecting on the experience of other countries involving state finances as debt guarantees, for example, Sri Lanka.

Bhima also hopes that the government will not agree to extend the project concession to 80 years to maintain the health of the country's finances in the future.

Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan previously revealed that the government was still negotiating with China regarding the railway project cost overrun scheme.

In a press conference, Luhut explained that the two countries had agreed on a project cost increase of US$1.2 billion or roughly Rp18.2 trillion.

China has offered additional billions of US dollars in loans at an interest rate of 3.4 percent. Even though the value of this interest rate is somewhat lower than in other countries that reach 6 percent, the government is still negotiating the deal to reduce loan interest rates to 2 percent.

ANTARA

Editor's Choice: Jakarta-Bandung High-Speed Rail Concession Extended

Click here to get the latest news updates from Tempo on Google News