China, Indonesia sign high-speed rail deal-Beijing beat Tokyo to win $5.5 bln project

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JAKARTA, Oct 16, (Agencies): Chinese and Indonesian state-owned companies Friday signed a $5.5 billion deal to build the first high-speed railway in Southeast Asia’s top economy, after Beijing beat Tokyo to win the construction project. The line will connect the Indonesian capital Jakarta with the mountain-fringed city of Bandung, some 160 kilometres (100 miles) away, and is a key part of President Joko Widodo’s plans to overhaul the archipelago’s infrastructure and attract investors.

Japan was long expected to build the railway but China entered the contest earlier this year, and Tokyo’s bid was rejected last month after a chaotic bidding process that infuriated the Japanese.

On Friday the chairman of state-owned China Railway International, Yang Zhongmin, signed a deal with a consortium of Indonesian state companies to form a joint venture to build the railway, with construction set to start next year and the line to begin operating in 2019.

“This high-speed train will make it easier for the public to travel,” he told reporters in Jakarta, where the deal was inked. “This major project will also provide major employment opportunities and boost the economy.”

State-owned China Development Bank will provide 75 percent of the funding, with the rest coming from the Chinese railway company and Indonesian consortium.

The railway line will not need any financing from the Indonesian government, nor a government guarantee. One reason that Indonesian officials gave for rejecting the Japanese bid was that it would require government funding.

The high-speed train route will cover eight stations from Jakarta to Bandung, and the train will travel at around 250 kilometres (150 miles) an hour.

The Indonesian government repeatedly changed its mind about the railway project, before eventually agreeing to accept China’s bid for a high-speed line.

Chaotic

The chaotic bidding process and final decision angered Tokyo, which is increasingly competing with Beijing for influence in Asia, with chief government spokesman Yoshihide Suga slamming it as “extremely regrettable”.

Japan’s loss came despite its reputation as a world-class train maker, famed for its “shinkansen” bullet trains. China has built thousands of kilometres of high-speed railway in recent years, but its safety standards have come under scrutiny — a 2011 crash killed at least 40 people and injured about 200.

“We hope this new company will compete outside Indonesia for high-speed railway projects,” said the joint venture chairman Sahala Lumban Gaol at the signing ceremony.

He said the construction is expected to begin early next year and completed in 2018. The trains are to start operating in early 2019 with eight stops, speeds of 250 kilometers (155 miles) an hour, and a fare of about $16.

The existing regular trains to Bandung, the capital of West Java province, take about three hours and cost about $8. President Joko Widodo has ambitious plans to improve Indonesia’s infrastructure, which could boost manufacturing and create hundreds of thousands of new jobs.

The competition between China and Japan for the rail project has been accompanied by many twists and turns as Indonesia weighed proposals and counterproposals.

China won the rights to build the high-speed railway after standing firm on not using Indonesian government money or requiring a government guarantee for loans.

China will hold 40 percent of the venture and the state-owned China Development Bank is to finance 75 percent of the project.

“We stand ready to work with Indonesia to ensure the quality and safety of the project,” Yang told reporters, “We hold our commitment strongly since the beginning.”

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