Japan loses Indonesian high-speed rail link to China

JAKARTA--China outmaneuvered Japan in efforts to win a huge contract to build a high-speed rail link in Indonesia by offering to shoulder the entire financial burden of the project, sources said.

The decision, which is a major blow to the Abe administration's goal of pursuing overseas infrastructure projects for economic growth, came after Jakarta scrapped construction proposals earlier this month from both Japan and China due to cost considerations.

At the time, Indonesia said it would consider the cheaper option of a link that does not run as fast.

China responded with a modified proposal that did not require Indonesia to shoulder any financial burden, prompting Sofyan Djalil, head of the Indonesian National Development Planning Agency, to inform Tokyo of its decision on Sept. 29.

Sofyan, who serves as a special envoy of President Joko Widodo, conveyed the decision to Chief Cabinet Secretary Yoshihide Suga in Tokyo.

The Abe administration has promoted exports of Shinkansen bullet train technology as a key pillar of its economic growth strategy.

The project calls for a high-speed rail link between the capital of Jakarta and the West Java city of Bandung, which is 140 kilometers away. This could be extended to the East Java city of Surabaya, which is 700 km from Jakarta.

The Japanese government, which worked closely with the private sector, lobbied aggressively to win the contract for the Jakarta-Bandung service with trains running in excess of 300 kph.

But on Sept. 4, the Indonesian government scrapped the project, saying, "Both of the proposals by Japan and China place an intolerable financial burden on Indonesia."

It then started looking at constructing a rail link with trains running at slower speeds, in the range of 200 to 250 kph.

China came back with a modified proposal which did not require the Indonesian government to earmark funding.

For example, China did not require the Indonesian government to make debt guarantees for loans extended by China for the railway construction, which was warmly welcomed by Jakarta.

China's initial proposal was for a high-speed rail link with trains running at up to 350 kph by 2018. Its budget for the project was 74 trillion rupiah (about 600 billion yen, or $5 billion).

According to high-ranking Indonesian government officials, China's modified proposal means that the trains will run at slower speeds.

Source: Japan loses Indonesian high-speed rail link to China