As in other Southeast Asian coutries, the Indonesian rail sector is a colonial legacy established with some dependence on external technologies. However, Indonesia has moved on to an independent approach, with the intent of developing its indigenous rail industry. To be fair, other regional countries, such as Thailand and Vietnam, have a certain level of industrial capacity for maintaining their rail networks and building coaches, but none of them has stepped into manufacturing locomotives or diesel and electric multiple units (DMUs and EMUs), not to mention handling rail projects overseas.
Based on a railway workshop from the Dutch colonial era, Jakarta established PT Industri Kereta Api (Railway Industry Limited Stock Company, known as PT INKA) in 1981 for building rolling stock. Since then, the company has gradually expanded its list of products from passenger and freight carriages to diesel-electric and diesel-hydraulic locomotives as well as EMUs and DMUs. Due to the 1.067 meter narrow gauge used in Indonesia, the company has focused on building narrow gauged trains. PT INKA is also attempting to increase the top speed of trains on the narrow gauge from the current 120 km/h to 160 km/h, which will be valuable for the upcoming Jakarta-Surabaya upgrade.
Understandably, PT INKA has technological cooperation with several foreign rail companies, such as Canada’s Bombardier for EMUs, the United States’ General Electric for diesel locomotives, and Switzerland’s Stadler for passenger coaches. In the last cooperation, the factory is located in Banyuwangi, East Java, for the adjacent port facility with an aim at export.
Besides domestic demand from the Indonesian Railway Company (PT Kereta Api Indonesia), PT INKA has exported freight wagons to Australia, Malaysia, and Thailand; passenger coaches to Bangladesh; and locomotives and DMUs to the Philippines — all mostly narrow gauged customers. The latest overseas deal, comprised of 34 DMUs and three diesel-hydraulic locomotives, will become the backbone fleet of the Philippine National Railway until larger upgrades are completed.
In 2019, the Indonesia Railway Development Consortium (IRDC), a joint venture invested by PT INKA and other Indonesian national companies, was formed to provide overall planning, construction, and operation of rail projects overseas. Although the IRDC is planning for some African projects, it has already obtained one contract for a railway between Laos and Vietnam. As a landlocked country, improving land transportation is crucial for Laos’ economy. Most media attention is on the high-speed rail (HSR) between China and Thailand, running via Laos. However, the HSR does not directly lead to any port according to the current project form. The only available rail link is the freight services operated by the State Railway of Thailand (SRT) from Vientiane to the Thai ports. In contrast, the conventional line from Thakhaek in Laos to Vung Ang port in middle Vietnam – to be undertaken by the IRDC — would create a shortcut to the Pacific, serving as an alternative route to the Mekong River. This line could further pave the way for an east-west corridor mentioned in several plans of Mekong regional development.
For Hanoi, a major concern is that such a project could result in security concerns if a Chinese contractor won the bid given obvious geopolitical potential. In particular, if a Chinese company was involved, there would inevitably be linkage with the Belt and Road Initiative (BRI). The IRDC represents an alternative, regional option. Certainly, Indonesia’s influence on mainland Southeast Asia would subsequently increase through the new railway, but Jakarta has not shown any ambition of challenging or reshaping the status quo in the Mekong basin. Since all three countries involved in the the project are members of the Association of Southeast Nations (ASEAN), they have embraced the ASEAN way of respecting the sovereignty of all others.
In other words, amid the furor over the BRI, Southeast Asian countries now have a regional alternative to improve their rail connections in the form of the IRDC. For Jakarta, this project would be a milestone for its transformation from a receiver to a provider in terms of railways. Furthermore, conducting such a project would strengthen Indonesia’s bilateral and multilateral relations with the host countries of Laos and Vietnam, indirectly promoting the Jakarta’s goal of being a regional leader.
Before the bright future of the Indonesian rail sector is realized, however, several challenges are waiting ahead. The Lao-Vietnam rail project, with a length of 400 km, would be a huge, if not unprecedented, task for the Indonesian engineers. The major domestic projects of the conventional railway are mainly upgrading from a single track to double tracks rather than building new lines. In addition, building this 400 km line passing through the Annamite Range dividing Laos and Vietnam is likely to face some technological challenges, given the expected high numbers of bridges and tunnels. Next, working in two foreign countries may result in some coordination problems. For example, the HSR project between Jakarta and Bandung was delayed over difficult land acquisition, which was not considered in the Chinese contractor’s plan. Therefore, how to plan and execute the project without major flaws or delays will be a severe test for the IRDC’s capability.
Regarding further deals in Southeast Asia, whether the export of rolling stock or handling whole projects, the Indonesian rail sector will face serious international competition. On the one hand, PT INKA lacks advanced technologies such as HSR and it thus will not compete for those customers at the high end. Although international cooperation may lead to access to rail technologies, it takes years or even decades for such progress to mature. On the other hand, the China Railway Rolling Stock Corporation (CRRC), thanks to its massive scale, supplies various cheap products that present stiff competition even in the Indonesian domestic market, as evidenced in the recent deal with the CRRC on wagons. More than trains and tracks, Beijing’s rail diplomacy is also about financial affairs that Jakarta cannot match. Undeniably, PT INKA, being a governmental company, will still enjoy some advantages along with the growth of domestic rail demand, but it would need some time to find a niche to allow it to survive in the international market.
All in all, the conditions for Indonesian railway diplomacy are available. If the Laos-Vietnam project goes well, along with additional projects and more trains exports, the role of the rail sector in Jakarta’s foreign policy will become more substantial.
Shang-su Wu is a research fellow of the Regional Security Architecture Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University in Singapore.