High-speed rail in Indonesia
The plan to build a high-speed rail in Indonesia was announced by Indonesian Government in July 2015. The Indonesia's first — and possibly also Southeast Asia's first high-speed rail project — is proposed to connect the national capital Jakarta with Bandung city in neighboring West Java province, covering the distance of 150 kilometres, and also expected to expand further to connect Indonesia's second largest city, Surabaya in East Java.
Japan and China have expressed their interest in the project, previously both nations have done comprehensive studies on the project. This Indonesian high-speed rail bid, marked the intense rivalry between Japan and China in their competition for lucrative Asian infrastructure projects.
On late September 2015, Indonesia awards this multibillion-dollar railway project to China, much to Japan's disappointment. It was said that China’s offer to build the Jakarta-Bandung line without requiring loan guarantee nor funding from Indonesia was the tipping point of Jakarta's decision.
The project's construction is planned to break ground in late 2015. The Jakarta-Bandung high-speed rail is planned to begin its operations to public in 2019.
History and development
Since 2008, Japan has been long-nurtured the plan to export their Shinkansen high-speed railway technology to Indonesia. During Indonesia-Japan Friendship Festival in November 2008, Japan has showcased their Shinkansen technology to impress Indonesian audiences. In 2009, a Japanese government-sponsored feasibility study was conducted for the planning of project — a high speed (300 km/hr) rail line extending 730 kilometers across the island of Java from Jakarta to Surabaya. The idea of high-speed rail backed by funding (soft loans) has been proposed by Japan International Cooperation Agency (JICA) for the Indonesian island of Java, linking up the densely populated corridor from the capital Jakarta to Surabaya (730 km). The island, like pre-HSR Honshu, suffers greatly from both freight and passenger congestion.
The idea has been around for some years, however, a new proposal to divide the project into stages has emerged, with the first stage from Jakarta to Bandung, 150 km to 35 minutes, from current conventional train time of 3 hours at a price of 50 trillion rupiah. The JICA detailed feasibility study was finished in 2014, following up on an initial study in 2012. By 2013 Indonesia has been undergoing a revival in railway expansion and upgrades in recent years. High-speed corridors have been proposed but not implemented.
Japan — with its reputation as a world-class train-maker — seemed destined to win the contract. However, in 2014 Indonesian government changes, as Joko Widodo swore as a new president in October 2014. In January 2015 the Joko administration essentially stopped preparations for the high-speed rail project, citing that the high-speed rail project is too costly and there are more pressing infrastructure needs in outlying underdeveloped islands outside of Java.
Japanese domination in high-speed rail project seems to be unchallenged. However, that was until April 2015 when China had entered the race with a counter-offer.
In March, Joko Widodo traveled to Tokyo and Beijing. In Tokyo March 22–25 Joko Widodo met Japanese Prime Minister Shinzo Abe, Joko got a commitment for Japanese loan support for improving Jakarta's municipal rail network, but no progress was made on resolving issues with the Jakarta-Bandung high-speed rail project.
In April 2015, China submitted a bid for the Indonesian high-speed rail project — much to Japan’s dismay.
On March 26, 2015, Joko Widodo visited Beijing and met Chinese president Xi Jinping. Xi publicly announced support for the Indonesian high-speed project and the two governments signed a memorandum specifying China's interest in the Jakarta-Bandung line.
In July 2015, Indonesian government exposed their plan to build the high-speed rail connecting Jakarta and Bandung, and arranged a contest between Japan and China train-makers as potential bidders. China responded by launching a Chinese High-speed Rail Technology exhibition in Senayan City shopping mall in Jakarta in August 2015.
Both China and Japan have engaged in a fierce competition through intense lobbying. It was said that the fundamental reason for the high level of assertiveness demonstrated by both Japan and China goes well beyond just economics — this contest is part of a much larger chess game the two Asian powerhouses are playing in pursuit of greater strategic influence within the Asia Pacific.
President Joko Widodo was expected to announce the winning bid of Indonesia's first high-speed rail project in early September 2015. However, to everyone's surprise, in 3 September 2015 Indonesian government announced that they had cancelled the high-speed rail project, citing that they are now looking to the slower and cheaper rail alternative. It was said that the government turns to semi-high-speed rail.
President Joko Widodo is wishing for a "business-to-business" approach, as opposed to "government-to-government" approach. Which signify government unwillingness to partially fund nor financially guarantee this costly project. After the cancellation, it seems that China secretly reapproaches Indonesia with a new offer, while Japan failed to do so.
In mid-September 2015, China said they would fully meet the Indonesian government's demands and offering new proposal that does not require Indonesia to assume any fiscal burden or debt guarantee in proceeding with the project. After months of bids, revisions and talks among presidents and prime ministers — even a short-lived cancellation of the project — in late September 2015 Indonesia picked China for the $5 billion project. It seems that Beijing has outmanoeuvred Tokyo on this bid as a result of a competitive financing package for Indonesia.
Japan's Chief Cabinet Secretary Yoshihide Suga termed the Indonesian move "difficult to understand" and "extremely regrettable". The situation "can only be described as extremely deplorable," Suga also said. According to Indonesia's State-Owned Enterprises Minister Rini Soemarno, Chinese bid was picked due to its financial structure — because the Chinese had not required any Indonesian government financing or a government guarantee, unlike the Japanese plan.
China's victory over Japan in this bid seems to owe mainly to Chinese willingness to accept the financial risk of the project. Which is to forego an Indonesian government guarantee and also, thereby, possibly to finesse international ODA norms, in contrast of Japan's inability or unwillingness to do so.
Chinese willingness to take the risk speaks volumes about how China views infrastructure projects in Asia. China is also sweetened its deal in other ways; including committing to establish a joint venture with Indonesian firms to produce rolling stock for high-speed rail, electric rail, light rail systems, not only for Indonesia, but also for export to other Asian countries — to transfer related technology — and also to renovate and rebuild train stations. It seems that Indonesia has benefitted immensely from Japan-China competition.
Funding and joint venture
The China Railway Construction Corporation Limited (CRCC) will form a joint venture with a consortium of Indonesia's state own enterprises (SOEs) led by PT Wijaya Karya Tbk (IDX: WIKA) in developing the first High Speed Train (HST) in the country.
On Friday, 16 October 2015, Chinese and Indonesian state-owned companies officially signed the deal to build the first high-speed railway in Indonesia. The project cost is estimated to reach US$5.5 billion (80 trillion rupiah). The deal is signed by China Railway International Co. Ltd. Chairman Yang Zhongmin and Dwi Windarto, the president director of a consortium of Indonesian state companies, PT Pilar Sinergi BUMN Indonesia. China Development Bank has given a commitment to fund 75 percent of the project costs with tenure of 40 years—with grace period of 10 years—with fixed coupon rate per cent. CRCC will hold majority shares in the planned JV company, while WIKA holds 30 percent and small portions for local toll operator PT Jasa Marga Tbk (IDX: JSMR), train operator PT Kereta Api Indonesia and plantation company PT Perkebunan Nusantara VIII.
- YouTube video NHK: China defeats Japan in high speed railway project in Indonesia
- YouTube video VOA News: Fast and Furious: China, Japan Battle for High-Speed Rail (On Assignment)
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