24 January 2020 (closed)
USD/IDR (13,647) +35.01 +0.26%
EUR/IDR (15,037) +20.88 +0.14%
Jakarta Composite Index (6,244.11) -5.10 -0.08%
China has won a contract to build a high-speed railway between Indonesia's capital city of Jakarta and Bandung (West Java), beating Japan along the way. Earlier this month, the Indonesian government unexpectedly decided to decline proposals from Japan and China for the construction of a multi-billion high-speed railway between both cities as these proposals included financial assistance or a guarantee from the Indonesian government. Moreover, Indonesia considered a super-fast train unnecessary on the relatively short route (150 km).
Instead, the government of Indonesia requested Japan and China, who had been in fierce competition for the project, to send new proposals for the construction of a medium-speed link between both cities as such a link was regarded commercially more viable because travel costs could be cut by up to 30 percent. Indonesia's decision to cancel the high-speed railway was a blow to Japanese and Chinese investors who had already invested in costly feasibility studies for the project.
However, China came back with a new proposal for the high-speed link and this time without requesting guarantees or financial assistance from the Indonesian government. The new proposal was accepted by Indonesia. On Tuesday (29/09), Indonesian National Development Planning Minister Sofyan Djalil visited Japan's Chief Cabinet Secretary Yoshihide Suga to inform that Indonesia had accepted China's proposal. For Japan this news was a setback as the world's third-largest economy is eager to pursue overseas infrastructure projects to boost its sluggishly growing economy. Suga told reporters that he doubts the feasibility of China's proposal without including Indonesian funding or guaranteeing as the track would cost up to IDR 78 trillion (approx. USD $5.3 billion).
Both Japan and China claim to have the world’s most developed high-speed train networks: Japan has its Shinkansen technology (a network of high-speed railway lines used by the high-speed bullet trains), while China has its own high-speed technology. Japan has ample experience in the high-speed train industry as it has been developing its bullet trains in the 1960s. China has less experience (it started to develop its first high-speed train service in the late 2000s) but has shown remarkable growth in recent years (the country now claims that over half of the world’s current 23,000 km of high-speed railway tracks is made by China). However, its safety standards are questioned since the 2011 Wenzhou train collision (in which 40 people were killed).
For Indonesia, infrastructure development is highly needed in order to reduce logistics costs hence making Indonesia more competitive and business-friendly. Currently, Southeast Asia's largest economy is plagued by a lack of quality and quantity of infrastructure. The planned train track between Jakarta and Bandung would be Indonesia's first ever high-speed railway.