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Japan Confident in Indonesia’s Ability to Repay MRT Loans

Jakarta. Japan remains confident in Indonesia’s ability to repay the loans Tokyo had provided to fund the Jakarta Mass Rapid Transit (MRT) while saying that the latter had already returned some of the money.

The Japan International Cooperation Agency (JICA) — a governmental body in charge of administering the country’s official development assistance — has been lending Indonesia money to fund the Jakarta MRT project. JICA announced Monday that Indonesia would get another loan worth 140.699 billion yen or $903 million to build the route connecting West Jakarta’s Tomang and Bekasi’s Medansatria.

As the Japanese loans pile up, this brings the question of whether Indonesia can repay the money that it has borrowed.

According to JICA Indonesia’s chief representative Yasui Takehiro, Japan admits that money generated from the MRT ridership would not be able to cover the loans. However, having public transport can help spur the Indonesian economy, thus eventually increasing its ability to pay off its debts.

“The revenue from the MRT is not enough. The construction, including the underground stations, takes a lot of money. This happens across the globe that an MRT project cannot generate enough returns,” Yasui told a press briefing in Jakarta on Monday.

“But the construction of the MRT means that people’s lives are getting better. It will lead to more active industrial activities, which can lead to a bigger gross domestic product [GDP] for Indonesia. And Indonesia will have a better capacity to repay the Japanese loans,” Yasui said.

The first loan agreement related to the MRT with the JICA dates back to 2006. Japan and Indonesia at the time inked a loan worth approximately 1.9 billion Japanese yen for engineering services for the project’s basic design. Since then, Japan continued to roll out official development assistance loans. This includes a loan agreement worth 70.2 billion yen — signed in 2018 — to finance the transit system’s second-phase construction. The Indonesian government reported in February 2023 that JICA’s financing for the MRT project had reached 227 billion yen.

Yasui said Indonesia has begun returning the money it had borrowed. However, he did not go into detail on how much Jakarta had paid off.

Throughout 2023, the Jakarta MRT recorded almost 33.5 million passengers. In other words, over 91,000 people use the public transport system every day. The existing Jakarta MRT connects Lebak Bulus and the Hotel Indonesia Roundabout with further expansions in the works.

The Indonesian economy grew 5.11 percent year-on-year (yoy) in the first quarter of 2024. Bank Indonesia puts the country’s economic growth forecast within a range between 4.7 percent and 5.5 percent yoy for the entirety of this year. 

Source: Jakarta Globe