Japan loses Indonesian train contract to China

It’s going to be hard for Japanese Prime Minister Shinzo Abe to stoke overseas growth if China keeps beating it out on infrastructure projects.

In another blow to Abe’s plans, Indonesia gave the highly coveted contract for developing its high-speed railway to China instead of Japan.

Chinese high-speed rail exhibit in Jakarta earlier this year

Chinese high-speed rail exhibit in Jakarta earlier this year

After Indonesia dropped both proposals earlier this month due to high financial costs, China came back with a new proposal. It offered to build the high-speed rail link between Jakarta and the West Java provincial capital of Bandung without Indonesian fiscal spending or debt guarantee.

Sofyan Djalil, head of the Indonesian National Development Planning Agency gave Japan’s Chief Cabinet Secretary Yoshihide Suga the bad news at a news conference in Tokyo on Tuesday.

A disappointed Suga termed the Indonesian about-face “difficult to understand” and “extremely regrettable.”

The project had seemed to be Japan’s until China made a counter-offer in April. Teten Masduki, the Indonesian president’s chief of staff, told reporters in Jakarta that Japan lost because its proposal was more about government-to-government cooperation, while Jakarta preferred business-to-business cooperation, reported the Japan Times.

Trying to soften the blow, Teten said Japan could get involved with another project.

“There are a lot of infrastructure projects that we have been offering, not only the Jakarta-Bandung high-speed railway project, but also the one connecting Jakarta and (the East Java provincial capital) Surabaya,” Teten said, according to the Japan Times.

The announcement was shocking in that Japan has a reputation for building world-class trains that have never had a fatal accident. China’s reputation is not quite as stellar. In 2011, one of its trains crashed, killing at least 40 people and injuring 200.

However, China seems to be making a big push in this industry. Last month, China won the contract to build the cooperative railway project with Thailand. This will be part of the “One Belt and One Road” initiative.



Categories: Asia Unhedged, China, Japan, Southeast Asia

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