Beijing, Tokyo in tussle for Indonesia rail project

JAKARTA • 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 South-east 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.

Indonesia's President Joko Widodo stoked the rivalry between the two Asian powerhouses as he toured China and Japan in April to drum up much-needed investment for a multi-billion dollar overhaul of his country's ageing infrastructure.

In both Beijing and Tokyo, he boarded bullet trains 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 160km away. If it was a stunt to grab the attention of his hosts, it certainly worked.

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Let them race to invest in Indonesia. It is good for us... It is like a girl wanted by many guys, the girl then can pick whoever she likes.

MR LUHUT PANJAITAN, chief political minister in Indonesia, on the competition between China and Japan

A steady stream of envoys from Tokyo and Beijing has been pouring into Jakarta since April to pitch the administration.

"Let them race to invest in Indonesia. It is good for us," said chief political minister Luhut Panjaitan.

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

The schmoozing has been ratcheting up ahead of Aug 31, when Mr Joko 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 at an exhibition in a 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," Mr Xie Feng said, playing down hints that China's main motive in this project was profit.

Japan's proposal is slightly more expensive than its rival, 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 per cent, a fraction of the 2 per cent China has put forward.

Japan also has history on its side. It is famous for its legendary shinkansen, its high-speed network that for decades has whizzed commuters between cities at great speed without a single fatal accident on the rails.

China argues that it has built 17,000km of high-speed rails - or 55 per cent of the world total - in the 12 years since it began constructing bullet trains.

But 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.

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SEE OPINION: Ambivalence in Indonesia towards AEC

A version of this article appeared in the print edition of The Straits Times on August 27, 2015, with the headline 'Beijing, Tokyo in tussle for Indonesia rail project'. Print Edition | Subscribe