High speed train travel could link Jakarta and Bandung before the end of the decade under a joint venture between China and Indonesia, derailing Japan's hopes of landing the project.
Indonesia signed an agreement with Beijing yesterday for construction of a US$5.5 billion (S$7.6 billion) 150km railway that would accommodate trains travelling at speeds of more 250kmh. It will be built by a joint venture between four Indonesian state-owned companies and China Railway.
Indonesian parties will hold a 60 per cent stake in the venture, and the Chinese the remaining 40 percent. The China Development Bank will finance 75 per cent of the cost.
The project was once eyed by Japan, which had even conducted a US$6 million feasibility study, but President Joko Widodo rejected Tokyo's proposal because it involved financing from the Indonesian government.
The loan agreement itself is expected to be signed next month .
When completed in 2019, the railway would trim travel time between Jakarta and Bandung to 30 minutes from two hours by toll roads now.
Construction should begin early next year and be finished by the end of 2018, with trains operational by the first half of 2019, said Mr Bintang Perbowo, president director of Indonesian construction firm Wijaya Karya.
The price of a one-way ticket would be US$16, he added.
"This high-speed project is a business-to-business deal. The China side will give transfer of technology, will invest, train human resources," said Mr Yang Zhongmin, chairman of the board at China Railway International. "We are confident the project will be a success and we will build other high-speed rails elsewhere."
The Jakarta-Bandung railway is part of the planned Jakarta-Bandung-Cirebon-Surabaya project, stretching 750km and cutting across three provinces.
A high-speed railway is expected to boost Indonesia's manufacturing sector and create hundreds of thousands of jobs.
The project is as part of an ambitious push by President Joko to improve Indonesia's infrastructure.
"This will be the first of its kind in not just Indonesia, but in South-east Asia...As for China, this is its first overseas high-speed railway project that uses Chinese technology, standard and equipment," said Mr Xie Feng, Chinese ambassador to Indonesia.
Professor Ofyar Z. Tamin, a transportation expert from Bandung Institute of Technology, suggested the joint-venture reconsider building more than four stops between Jakarta and Bandung, because they could prohibit the trains from reaching speeds of 250kmh.
But Mr Bintang said the joint venture would develop the four stops into commercial areas that could generate revenue for them.
"We will rely on these commercial areas to help support our cash flow before we can really rely on the train passenger traffic," he said.