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State firm
Russian Railways plans a $2.4 billion train line on Indonesia’s Borneo island
that will initially be used to transport coal, an Indonesian government
official said on Tuesday.
The line in
East Kalimantan province is expected to start operating by the first quarter of
2017, and will help improve the decrepit infrastructure on the island that has
hampered exports of key commodities and put a strain on economic growth.
“The first stage
of the railway will be meant for coal, but hopefully we can also use it for
crude palm oil, plantation harvests, rubber and people,” Awang Faroek, the
governor of East Kalimantan, told a news conference in Jakarta.
The first
phase of development, which will cost $1.7 billion, will be for 185 kilometers
of railway, with another 60 kilometers added during a second phase.
The
railway’s capacity is expected to be 20 million metric tons of coal per year
for the first phase, added Andrey Shigaev, a director at the project, which
will be funded by both private investors and Russia’s state development bank
Vnesheconombank.
Southeast
Asia’s largest economy is the world’s top producer of palm oil, the biggest
exporter of refined tin and thermal coal, a major nickel miner and home to the
world’s second-largest copper mine and largest gold mine. The country’s coal
and palm oil assets are mostly located in Kalimantan.
The railway
will connect an area close to the Balikpapan port through the Kutai Barat
regency to the border to Central Kalimantan province, where the railway is
expected to be expanded in the second phase of the project.
“The
Russians have expertise in heavy haul rail lines,” said an Australia-based
analyst. “Russian Railways are a pretty big operator of rail infrastructure, so
I would guess it’s the rail company looking to expand.
“Russia
itself doesn’t need to buy coal from anyone, they have a lot of coal of their
own so from a strategic point of view, they don’t need to do it.”
Indonesia’s
thermal coal output is seen at 350 million metric tons this year, according to
industry estimates, fueled in large part by power demand in China and India.
The UAE’s
MEC Holdings is currently building a railway to export coal from its Kalimantan
mine project, and leading Indian conglomerate Reliance ADA Group is set to
invest between $5 billion and $10 billion in mining infrastructure.
“Traditionally,
coal in Indonesia has been transported by pretty fragmented means — trucks,
small private short railways, barges,” the analyst added.
“It does
signal that the producers there and the government is getting a bit more
serious in terms of their commitment to scale infrastructure.”
Infrastructure
development in Indonesia has been slowed in the last decade because of
uncertainties in acquiring land.
However, in
December the parliament passed a land bill designed to speed up land
acquisition for state projects deemed in the public interest as a way to
address the problem.
Economic
growth in Indonesia was 6.5 percent last year — it’s highest level since 1996 —
while the country attracted record foreign direct investment of close to $20
billion.
Reuters
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