JAKARTA (Reuters) – Indonesia will award a hotly contested, multi-billion-dollar railway project to China, a Japanese embassy official said on Tuesday, citing remarks by an Indonesian minister.
The two Asian giants had been vying for the project to build a rail line linking the Indonesian capital, Jakarta, with the textile hub of Bandung. Indonesia initially envisaged a high-speed service on the 150 km (100 mile) journey but this month, it changed the plan, opting instead for a medium-speed train.
Analysts have said whoever won the bid could be a front runner for future rail projects in the region, including one linking Kuala Lumpur and Singapore.
“Minister Sofyan Djalil informed our chief cabinet secretary that Indonesia welcomes the Chinese proposal and we see this as the final decision of the Indonesian government,” Yoshiko Kijima, the economic affairs attache at the Japanese embassy in Jakarta, told Reuters.
Djalil was on a special visit to Japan this week, presidential chief of staff Teten Masduki told reporters. “There are many infrastructure projects, not just trains, and many opportunities for the Japanese government to build infrastructure in Indonesia,” Masduki said when asked what Djalil would convey to Japan.
Indonesia’s minister responsible for state-owned enterprises, Rini Soemarno, has said China’s proposal for the project was less financially burdensome for Indonesia because it did not require a government guarantee or use the state budget.
Japan slammed the decision as "extremely regrettable".
"Japan offered the best possible proposal," top Japanese government spokesman Yoshihide Suga told reporters. "The envoy came here to explain that the Indonesian government has welcomed the Chinese proposal. I can't understand that at all. I frankly told the envoy that it was extremely regrettable."
He said China's new proposal did not involve the Indonesian government taking on any financial burden, or guaranteeing the project, adding: "It is an unthinkable proposal for our country."
The rail project is a key part of President Joko Widodo's drive to build more infrastructure. He pledged upon taking office in October to overhaul Indonesia's ageing roads, railways and ports but has struggled to get his agenda moving.
Tokyo seemed destined to build the high-speed rail line until Jakarta announced in April that China had entered the race with a counter-offer.
Japan's loss came despite its reputation as a world-class train maker.
The country is famous for its legendary shinkansen bullet trains which for decades have whizzed between cities without a single fatal accident.
China has countered this by arguing it has built thousands of kilometres of high-speed railway in the 12 years since it began constructing bullet trains. But its safety standards have come under scrutiny - a 2011 crash killed at least 40 people and injured about 200.