Japan sweetens bid for Jakarta to Bandung high-speed railway

TOKYO/JAKARTA — Japan is reiterating its intention to win over the Indonesian government in a bid to secure what will be the first high-speed railway project in the archipelago: By offering prices the Japanese claim to be lower than what the Chinese are offering.

“We are very serious about wanting to participate in Indonesia’s infrastructure development, especially when it comes to the construction of high-speed trains,” Mr Yoichi Miyazawa, Japan’s Minister for the Economy, Trade and Industry, told an Indonesian delegation in Tokyo. It was led by Indonesian Trade Minister Rachmat Gobel.

According to Mr Miyazawa, the Japanese government is willing to offer a soft loan to cover 75 per cent of the funding needed for the project, which will connect the capital, Jakarta, with the country’s third-largest city, Bandung, in West Java province.

Japan, which has conducted a feasibility study for the project, estimates that it will cost a total of 45 trillion rupiah (S$4.5 billion).

The interest rate on the loan Japan is offering will be as low as 0.1 per cent, and the Indonesian government will have 40 years to pay off the amount.

Under the terms of the soft loan, the government will only start paying the instalments 11 years after the project has started operation.

By comparison, China, which is competing head-on with Japan for the Jakarta-Bandung high-speed train project, is offering its product and services at a cost of S$5.5 billion, with a lending period of 25 years and an annual interest rate of 2 per cent.

Japan’s Shinkansen bullet trains will be able to travel the 180km route between Jakarta and Bandung in 36 minutes.

A one-way ticket will cost 200,000 rupiah a person, and Japan estimates the trains will service an average of 44,000 passengers a day. As a result, the government can earn up to 3.6 trillion rupiah in the first year of the railway’s operations.

Mr Hiroto Izumi, a special economic adviser to Japanese Prime Minister Shinzo Abe, added if Indonesia agreed to make Japan its main contractor, it would include Indonesian businesses in the procurement of half of the goods to support the railway construction.

Furthermore, if chosen, Japan promises to build a factory in Indonesia that will produce train components, Mr Izumi added.

Aside from the Jakarta-Bandung project, Japan is also eyeing a high-speed railway project that will connect Jakarta and Indonesia’s second-largest city, Surabaya, in East Java.

Mr Izumi envisions the main Shinkansen railway stations in Jakarta and Bandung to resemble Tokyo Station, which has an integrated shopping mall and an array of restaurants.

He added that Japan would train professionals from Indonesia to operate the trains as part of the country’s commitment to the transfer of technology.

“In the future, we want all the train components to be produced in Indonesia and all activities in relation to railway operations to be carried out by Indonesians,” said Mr Izumi.

If the Indonesian government approves the Japanese proposal, a groundbreaking ceremony for the Jakarta-Bandung project may take place as early as next year, and Indonesia’s first Shinkansen train will have a test run in 2019 — with full operations projected in 2021.

STIFF COMPETITION

China and Japan have been competing to woo Jakarta for the Jakarta-Bandung train project. Both countries boast their own tracks as home to the most developed high-speed train networks in Asia.

Japan, which rolled out its first Shinkansen bullet train in 1964, has a decades-long head start compared to China.

However, China, which launched its high-speed train service only in 2007, now claims more than half of the world’s 23,000km of high-speed railway tracks.

Indonesia announced in July that it would organise a “beauty contest” between Japan and China for the Jakarta-Bandung project.

International expert Bantarto Bandoro with the Indonesia Defense University said Japan’s latest financing offer might be more appealing to Jakarta.

“With its recent offer, Japan seems intent on winning Indonesia’s heart,” he said, noting that Indonesia will probably look to Japan for its train technology.

But Jakarta is intent on appearing neutral. “Indonesia always tries to be a country that is able to build good relations with any country. In regards to China and Japan, Indonesia tries to play neutral by not immediately showing a preference for either country,” he added.

International relations expert Dinna Wisnu, of Paramadina University, said the government should be very strict in selecting its economic partners by asking: Which country offers more benefits to Indonesia?

“Indonesia must look for the more promising and sustainable cooperation,” she noted.

“Regardless of who wins the electric train project, Indonesia must open itself to any economic cooperation that can bring positive and long-term bilateral relationships in the future.”

At first glance, it looks as though Indonesia could gain more advantage by partnering with China, she observed. But she also urged officials to consider the issue of China’s partnership commitments.

“China is a growing country with massive development. We will surely obtain profit if we partner with China,” Ms Dinna said.

“However, it’s an open secret that China can dominate its business partners,” she added, citing as an example China’s package system that includes the employment of Chinese labourers to work on its overseas projects — which means locals are not likely to get their share of the project.

“This is not about China or Japan. What Indonesia must consider is which country is the most reliable and sustainable partner for this project and other projects in the future,” she said. The JAKARTA GLOBE