Russian Railways to build rail line in Indonesia

Russian Railways has prepared a project for the construction of a railway and its associated infrastructure in Kalimantan, the Indonesian part of the island of Borneo.

This may become one of the company’s largest foreign contracts.

The project was presented in September in Moscow as part of a business forum on investing, organised by the Indonesia Investment Coordinating Board.

The initial planning of the project started in mid-2010. It involves the construction of a railway that will connect the northern areas of the province of Central Kalimantan with the east coast of Borneo.

The length of the route will be about 300 km. At present, the transport system in Kalimantan is ‘weak’ and consists mainly of river and road-based transportation.

Russian Railways’ specialists have developed a preliminary feasibility study, and have identified the key indicators that demonstrate the project’s economic viability and marketability.

The project is being implemented in accordance with the so-called ‘Equator Principles’: these hold that clearly defined social and environmental criteria must be met by international investment banks operating in the area of project financing.

The Indonesians have underscored the following mandates for the project:

  • That it pay special attention to circumventing “protected” tropical forests;
  • That emphasis must be placed on meeting social obligations, and that the project must involve local residents through hiring and training.

The outcome of the meeting was that the Indonesian side expressed their readiness to support and cooperate fully in the project.

According to current plans, funding for the project shall consist of investments of up to $2 million, which will be organized in the form of loans from major international banks.

An additional $500 million will be raised from private investors, including institutional investors who have a strategic and/or financial interest in the project.

At present, Russian Railways preparing a draft of the agreement at the intergovernmental level and is completing work on its feasibility study.

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