China ups ante in race with Japan for rail project

JAKARTA • China has sweetened its bid in a race with Japan to win the construction contract for a high-speed railway connecting Jakarta to the city of Bandung, Indonesia said yesterday.

President Joko Widodo yesterday told reporters the government had hired private consultants to consider the rival proposals for Indonesia's first bullet train link and would announce the winner at the end of the month.

The Jakarta Post reported that Japan, which began talks several years ago on building the 150km line, had estimated the cost to be at least US$4.4 billion (S$6 billion). Mr Oura Daisuke, a representative with Japan International Cooperation Agency in Indonesia, told Reuters that Japan had offered a 40-year loan at a 0.1 per cent interest rate and with a 10-year grace period. He declined to reveal the loan amount.

China has now improved its initial bid, offering a US$5.5 billion loan with a 50-year tenure, a 2 per cent interest rate and a grace period, Indonesian Development Planning Minister Andrinof Chaniago told reporters yesterday after meeting China's chairman of National Development and Reform Commission, Mr Xu Shaoshi.

China had initially proposed a US$4 billion loan with a lending period of 25 years and an annual interest rate of 2 per cent, the Jakarta Globe reported.

FIRST MOVER ADVANTAGE

It is likely that Japanese and Chinese companies will be bidding quite aggressively on the early projects so that they can secure a 'first mover' advantage in the market.

MR MARK GIBLETT, group head of Asia project finance for Sumitomo Mitsui Banking Corp, on upcoming rail projects

"There are a lot of changes making (the new proposal) better," Mr Chaniago said.

Mr Xu met Mr Joko on Monday and China Railway Corporation is due to hold a high-speed train exhibition in Jakarta tomorrow.

"Our proposal is better," Mr Xu said in a press conference after meeting Mr Joko. "We promise we can deliver this project in three years starting with groundbreaking (next) August... and it will be completed in 2018."

Mr Mark Giblett, group head of Asia project finance for Sumitomo Mitsui Banking Corp, said that several high-speed rail projects would be coming up in the years ahead, including one connecting Kuala Lumpur and Singapore.

"(So) it is likely that Japanese and Chinese companies will be bidding quite aggressively on the early projects so that they can secure a 'first mover' advantage in the market," he told Reuters by e-mail.

REUTERS

A version of this article appeared in the print edition of The Straits Times on August 12, 2015, with the headline 'China ups ante in race with Japan for rail project'. Print Edition | Subscribe