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In race with Japan, China sweetens bid for Indonesia railway

Tuesday, August 11, 2015 - 20:41

[JAKARTA] China has sweetened its bid in a race with Japan to win the construction contract for a high-speed railway connecting Jakarta to the city of Bandung, Indonesia said on Tuesday.

President Joko Widodo told reporters on Tuesday the government had hired private consultants to consider the rival proposals for Indonesia's first bullet-train connection and would announce the winner at the end of the month.

The Jakarta Post reported that Japan, which began talks several years ago on building the 150-km line, had estimated the cost at at least US$4.4 billion.

Oura Daisuke, a representative with Japan International Cooperation Agency in Indonesia, told Reuters that Japan had offered a 40-year loan at a 0.1 per cent interest rate and with a 10-year grace period. He declined to reveal the loan amount.

China has now improved its initial bid, offering a US$5.5 billion loan with a 50-year tenure, a 2 per cent interest rate and a grace period, Indonesian Development Planning Minister Andrinof Chaniago told reporters on Tuesday after meeting China's Minister of the National Development and Reform Commission, Xu Shaoshi.

China had initially proposed a US$4 billion loan with a lending period of 25 years and an annual interest rate of 2 per cent, the Jakarta Globe reported.

"There are a lot of changes making (the new proposal) better," Mr Chaniago said.

Mr Xu met Mr Joko on Monday and China Railway Corporation is due to hold a high-speed train exhibition in Jakarta on Thursday. "Our proposal is better," Mr Xu said in a press conference after meeting Mr Joko.

"We promise we can deliver this project in three years starting with groundbreaking in August ... and it will be completed in 2018."

Mark Giblett, Group Head of Asia Project Finance for Sumitomo Mitsui Banking Corp, said several high-speed rail projects would be coming up in the years ahead, including one connecting Kuala Lumpur and Singapore.

"As such, it is likely that Japanese and Chinese companies will be bidding quite aggressively on the early projects so that they can secure a 'first mover' advantage in the market," he told Reuters by email.

REUTERS