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China, Japan Battle to Build Indonesia's First Bullet Train

Aug. 26, 2015
The Asian powers have battled for months for the contract to build the Indonesian train, and the result should come soon: Indonesian president Joko Widodo is expected to announced the decision August 31.

JAKARTA, Indonesia — China and Japan are locked in an increasingly heated contest to build Indonesia’s first high-speed railway, with the Asian giants sweetening deals and turning up the charm as time runs out to woo Jakarta.

The rivalry over this major project is just the latest to flare up as China challenges Japan’s long-standing dominance in Southeast Asia as a key source of infrastructure funding.

Japan, a top-three investor in Indonesia with huge stakes in the automotive and mining sectors, seemed destined to build the high-speed railway until China muscled in with a counter offer earlier this year.

President Joko Widodo stoked the competitive spirit of the two powerhouses as he toured China and Japan in April trying to drum up much-needed investment for a multi-billion dollar overhaul of Indonesia’s aging infrastructure.

He boarded bullet trains in both Beijing and Tokyo, and declared his vision for high-speed rail in Indonesia: a line connecting the sprawling capital Jakarta with Bandung, a mountain-fringed city famed for its universities and IT expertise about 100 miles away.

If it was a stunt to grab the attention of his hosts, it certainly worked. A steady stream of diplomats and envoys from Tokyo and Beijing has been pouring in since April to pitch the Widodo administration, and Jakarta is enjoying the limelight.

“Let them race to invest in Indonesia. It’s good for us,” Luhut Panjaitan, chief political minister and a close aide to Widodo, told AFP. “It’s like a girl wanted by many guys, the girl then can pick whoever she likes.”

The line, if completed, will not only slash travel time between Jakarta and Bandung but pave the way for an expanded network linking the capital with Indonesia’s second-largest city Surabaya in East Java.

Upping the Railway Ante

The schmoozing has been ratcheting up ahead of August 31, when Widodo is expected to announce the successful bidder.

China is not seeking any funding guarantees from the Indonesian government and has promised construction would begin this year, with the network up and running no later than 2019. Beijing recently showcased its high-speed rail prowess in an exhibition at a plush Jakarta mall, where China’s ambassador to Indonesia likened the project to a child reared by Jakarta and Beijing.

“Our No. 1 priority is to ensure the baby’s health and growth, rather than to rush him to make money to support the family,” Xie Feng said, playing down suggestions China’s main motive in this project was profit.

Japan’s proposal is slightly more expensive than its rival’s, and it is only promising trains will hit the tracks in 2021. On the plus side, it has offered a lower interest rate of 0.1%, a sliver of the 2.0% China has put forward. Japan also has history on its side. The country is famous for its legendary shinkansen, its impressive high-speed network that for decades has whizzed commuters between cities at great speed without a single fatal accident on the rails.

China has countered this by arguing it has built more than 10,500 miles of high-speed railway – or 55% of the world’s total – in the 12 years since it began constructing bullet trains. However, a 2011 crash that killed at least 40 people and injured 200 more highlighted what critics say is a tendency to overlook safety in the rush to lay track.

Indonesian officials are aware of Japan’s glowing record in this space, and are wary of elements of Beijing’s pitch.

A government source tasked with assessing the two proposals told AFP that China’s slowing economy had fostered doubt about whether Beijing could deliver on its ambitious promises. China’s economy expanded 7.4% last year, the weakest pace since 1990, and slowed further to 7.0% in the first two quarters of this year.

Indonesia had also “learned the lessons” of dealing with China, the source said, with past investment pledges failing to materialize and newly-constructed power plants lacking the capacity promised on paper.

Indonesia has hired the Boston Consulting Group as a third party to assess the bids, but in the end the decision falls to Widodo.

A senior official described the matter as “sensitive,” acknowledging the importance of both China and Japan to Indonesia, while other voices are also urging the president to tread carefully.

Makmur Keliat, an international relations expert from the University of Indonesia, said deft diplomacy would be required to keep China and Japan happy.

“Indonesia should be able to explain to both parties that the process to reach a decision was transparent, and that this is not the only battlefield,” he said. “We still have a lot of infrastructure projects to offer.”

By Olivia Rondonuwu

Copyright Agence France-Presse, 2015

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