20 September 2019 (closed)
USD/IDR (14,085) -14.00 -0.10%
EUR/IDR (15,570) +14.13 +0.09%
Jakarta Composite Index (6,231.47) -13.00 -0.21%
According to the latest rumours, the government of Indonesia tends to favour China to build the nation's first high-speed railway that will connect the capital city of Jakarta and Bandung in West Java. Over the past weeks, the ‘battle’ between China and Japan over who will be awarded the contract to construct the high-speed and high-profile railway between both cities (worth approx. USD $5 billion) heightened.
Delegacies from Japan and China have visited Indonesia over the past couple of weeks to offer more competitive terms of their bids for the contract. Both Asian giants are eager to win the contract as, allegedly, both nations are competing for political and commercial influence in Southeast Asia's largest economy. Moreover, it is likely that the winner of this bid may also become the front runner for other high-speed rail projects that are expected to be built in Asia over the coming years (one example is the planned railway that is to connect Kuala Lumpur in Malaysia and Singapore).
Both Japan and China claim to have the globe’s most developed high-speed train networks: Japan is ready to export its Shinkansen technology (a network of high-speed railway lines in Japan used by the high-speed bullet trains) to Indonesia, while China has its own high-speed technology. Japan has ample experience in the high-speed train industry as it started to develop its famous bullet train 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).
Analysts assume that Indonesia tends to favour China for this project because China’s proposal is less burdensome (financially) on the Indonesian government. China offers an IDR 73.9 trillion (USD $5.3 billion) loan with a 50-year tenure and an interest rate of 2 percent in US dollars, while Japan offers an IDR 60.1 trillion loan with a 40-year tenure at an interest rate of 0.1 percent in yen (with a 10-year grace period). Both nations also offer to establish a local factory in Indonesia that will manufacture components for the trains (raising the input of local content for the project while generating more jobs).
It has also been speculated that Indonesia favours China for this project in order to maintain a balance between both nations with regard to the handing out of high profile infrastructure projects. Previously Japan had already been awarded contracts to construct Jakarta’s mass rapid transit (MRT) system as well as the nation’s largest (2,000 MW) coal-fired power plant in North Java (a joint venture between Indonesian coal miner Adaro Energy and Japan's Itochu Corporation and Electric Power Development Co Ltd).
Ties between Indonesia and the two Asian giants are close as China is Indonesia’s top trading partner, while Japan is Indonesia’s second-largest source of foreign investment.
The deadline of the bid submission is today (Monday 31 August 2015). Indonesian President Joko Widodo is expected to announce the winner of the bid to build the country’s first high-speed train project within a couple of days. Only Japan and China have conducted a feasibility study on the project.
The high-speed rail track between Jakarta and Bandung should cut travel time between both cities to about 30 minutes (from three hours currently) as the trains can reach speeds of over 300 km per hour. The Jakarta-Bandung line is part of Indonesia's 750-km high-speed train project that will connect Indonesia’s capital city of Jakarta and the nation's second largest city of Surabaya in East Java.
China proposes to build eight stations along its 150 km route Jakarta-Bandung. With trains reaching speeds of 350 km per hour travel time can be as little as 26 minutes. Provided that construction starts in September 2015, China believes that the project can be completed in 2018.
Japan proposes to build a 180 km line between both cities with trains reaching a maximum speed of 300 km per hour (implying travel time of about 36 minutes between Jakarta and Bandung). Japan estimates that the first test run can be conducted in 2019, while full operation of the line can start in 2021.