China Railway High-speed Harmony bullet trains are seen at a high-speed train maintenance base in Wuhan, Hubei province, China in this December 25, 2012 file photo. (Reuters Photo)

Japan Sweetens Jakarta-Bandung Shinkansen Railway Offer


AUGUST 05, 2015

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 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," Yoichi Miyazawa, Japan's Minister for the Economy, Trade and Industry, told an Indonesian delegation  ̶  lead by Indonesian Trade Minister Rachmat Gobel  ̶  in Tokyo on Tuesday.

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

Japan, which has conducted a feasibility study for the project, estimates that it will cost a total of Rp 45 trillion ($3.3 billion).

The interest rate on the loan Japan is offering will be as low as 0.1 percent, and the Indonesian government will have 40 years to pay off the amount. And under the terms of the soft loan, the government will only start paying the installments 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 $4 billion, with a lending period of 25 years and an annual interest rate of 2 percent.

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

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

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, Izumi added.

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

Izumi envisions the main Shinkansen railway station in Jakarta and Bandung to resemble Tokyo Station, which has an integrated shopping mall and hosts 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.”

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.

Strict competition

Both China and Japan have been competing to woo Jakarta for the Jakarta-Bandung train project.

Both countries boast their own historic tracks as home to the most developed high-speed train networks in Asia.

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

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

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

International relations 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 told the Jakarta Globe on Wednesday. “A high-speed train is a big project. Although both countries have their own advantages, Indonesia will likely look to Japan for their train technology.

"Jakarta is obviously trying to tread carefully because it wants to stay neutral and  avoid triggering friction between China and Japan. 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.

Another 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. What about the feedback? What about the investment? We cannot forget about this. Indonesia must evaluate this first,” Dinna said.

“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, she said, it looks as though Indonesia could gain more advantage by partnering with China. However, Dinna added that she had 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,” 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 laborers to work on its overseas projects — which means locals are not likely to get their share of the project.

“In addition, China tends to have a lower commitment to partnering with other countries,” Dinna further added.

“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.”

Tourism partnership

A number of Japanese parliamentarians will join approximately 1,000 Japanese tourists touring Indonesia in November, according to a politician from Abe's Liberal Democratic Party.

"We initially planned to visit with 2,000 people. However, we're concerned that it may bring a burden to the areas we will visit,” Toshihiro Nikai, the chairman of the party's general council, said in Tokyo on Wednesday during a separate meeting with Rachmat.

He added the tour group would visit Jakarta and Bali.

Japan also has invited Indonesia to join an annual tourism event in Tokyo on Sept. 29-31.

An estimated 490,000 Japanese tourists visited Indonesia last year, compared to one million who traveled to Singapore.

“We will continue to encourage the Japanese people to visit Indonesia,” Nikai said.

Indonesia has implemented a visa-free policy for Japanese tourists visiting the archipelago. For Indonesians, only electronic passport holders can enjoy the same benefit to enter Japan.

Rachmat told Nikai that Indonesia is home to an array of tourism areas that offer both natural and cultural attractions.

"We have natural tourism sites such as Komodo National Park in East Nusa Tenggara and Raja Ampat in Papua, as well as cultural tourism sites like Borobudur Temple in Yogyakarta and plenty others," he said.