Japan loses Indonesian high-speed railway contract to China

Kyodo, AFP-JIJI

Japan has lost to China in bidding to build Indonesia’s first high-speed railway. It is seen as a heavy blow to Prime Minister Shinzo Abe’s goal of pursuing economic growth through infrastructure projects overseas.

Sofyan Djalil, head of the Indonesian National Development Planning Agency, told Chief Cabinet Secretary Yoshihide Suga in Tokyo on Tuesday that Indonesia planned to welcome the Chinese proposal, Suga said at a news conference.

Suga termed the Indonesian move “difficult to understand” and “extremely regrettable.”

Jakarta dropped both Chinese and Japanese high-speed railway construction proposals early this month, citing the high cost of each, and offered to consider instead a cheaper medium-speed railway.

But Sofyan told Suga that China recently submitted a new proposal to build the high-speed rail link between Jakarta and the West Java provincial capital of Bandung without requiring Indonesian fiscal spending or government debt guarantees.

Sofyan was visiting Japan as a special envoy of Indonesian President Joko Widodo.

In Jakarta, Presidential Chief of Staff Teten Masduki told a small group of reporters that Japan failed to win Indonesia’s heart because its proposal was more about government-to-government cooperation, while Jakarta preferred business-to-business cooperation.

Suga doubted the feasibility of the Chinese proposal to build the railway without Indonesian funding. It is estimated to cost 78 trillion rupiah ($5.3 billion).

“It defies common wisdom. I doubt if it would be successful,” Suga said.

In an apparent effort to soften the disappointment, Teten said there were still many opportunities for Japan to invest in Indonesia’s infrastructure sector.

“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 Surabaya,” he said, referring to the capital of East Java.

The rail project is a key part of Widodo’s drive to build more infrastructure. He pledged upon taking office in October to overhaul Indonesia’s aging roads, railways and ports but has struggled to get his agenda moving.

Japan, with its reputation as a world-class train-maker, seemed destined to win the contract until Jakarta announced in April that China had entered the race with a counter-offer.

The country is famous for its legendary shinkansen bullet trains which for decades have whizzed between cities without a single fatal accident.

China has countered this by arguing it has built thousands of kilometers of high-speed railway in the 12 years since it began constructing bullet trains. However, its safety standards have come under scrutiny: A 2011 crash killed at least 40 people and injured about 200.

  • Liars N. Fools

    Bad diplomacy and bad business practice by Suga. Don’t disparage your potential customer’s critical judgment skills. Just say, we appreciate the chance to bid on future projects. We have a great product and want to answer any questions you may have.

    • Johniton

      well, so much for japanese so called politeness. It is all pretences in real life. The japanese government has shown their true colour by being so rude to the host and a bad loser to the world.

    • Steve Jackman

      I completely agree, but you have to remember that humility and grace are not strong Japanese traits. The arrogance and hubris displayed by Suga in his comments is quite typical of Japanese politicians and businessmen. This is one of the reasons Japan will continue to lose bids for overseas projects.

    • Bernadette Soubirous

      A
      man may imagine things that are false, but he can only understand things that
      are true, for if the things be false, the apprehension of them is not
      understanding.

    • Bernadette Soubirous

      A
      man may imagine things that are false, but he can only understand things that
      are true, for if the things be false, the apprehension of them is not
      understanding.

    • Bernadette Soubirous

      A
      man may imagine things that are false, but he can only understand things that
      are true, for if the things be false, the apprehension of them is not
      understanding.

    • AmIJustAPessimistOrWhat?

      Whatever happened to good old “honne and tatemae”? This younger generation is too flip.

    • AmIJustAPessimistOrWhat?

      Whatever happened to good old “honne and tatemae”? This younger generation is too flip.

    • dollyramar_edux

      Japanese might appear cultured and friendly by appearance, but are very fake and ungracious within.

    • bridgebuilder78

      Exactly. There is always a next contract to fight for, so why sulk publicly and burn all the bridges?

    • Elbot

      India is open to Japanese investment with preferential treatment.
      Japan is trying to appease china as they are afraid of chinese military

  • Ahojanen

    Don’t have to sell cheap to win over China a contract.

    Note that Japan has already got ones in Thailand and UK. There are always demands.

  • Tachomanx

    Corruption was a likely player.

    Also, China has a need for it’s excess capacity to keep churning products and keep people employed now that several indexes within China point to a real 5% growth for the GDP.
    China most likely agreed to fund the whole thing as to avoid having it’s top train maker go the way of other zombie industries.

  • Johniton

    What a sour grape suga, haha. What a bad loser by badmouthing others. Typical japanese driven by intense jealousy and self interest. suga should go hara kiri.

  • Tangerine 18

    This is a Kyodo report, which means it’s biased and contains very little relevant information. I’m sure there are detailed independent analyses of the story available on the internet….

  • Bernadette Soubirous

    Enough with all the Japanese bashing. It is totally unfair. The Indonesians will learn just like the Africans pretty soon about Chinese quality. By the way do you really think the Chinese respect the Indonesians??? Just ask a Uyghur. I wonder what a Uyghur has in common with an Indonesian. Just wondering out loud.

  • Bernadette Soubirous

    Enough with all the Japanese bashing. It is totally unfair. The Indonesians will learn just like the Africans pretty soon about Chinese quality. By the way do you really think the Chinese respect the Indonesians??? Just ask a Uyghur. I wonder what a Uyghur has in common with an Indonesian. Just wondering out loud.

  • Osaka Maachan

    I thought that the zero-fatality Shinkansen record was scuppered by the arsonist this Summer who set himself onfire and killed another passenger, or does that stat relate to technical issues only?

  • AmIJustAPessimistOrWhat?

    Chinese government is, at least today, willing to take a huge financial risk on this, motivated by a sense of competition with Japan and strategic plans for the region. . How it pans out in the long run – a successful project creating a strong China-Indonesia bond, or a troubled project resulting from differing perceptions on the details and high cost to China, remains to be seen.

    I don’t disagree with what Suga said, just that he said it publicly.

  • Bernadette Soubirous

    Don’t worry about the Japanese.

    DETROIT – Mexico has become the most attractive place in North America to build new automobile factories, a shift that has siphoned jobs from the U.S. and Canada, yet helped keep car and truck prices in check for consumers.

    In the past two years, eight automakers have opened or announced new plants or expansions in Mexico. Just last week, Toyota announced a new plant in Guanajuato to build the Corolla, work now done in Canada, while Ford unveiled plans for Mexican engine and transmission factories.

    Low labor costs and fewer tariffs are the swing factors. A worker in Mexico costs car companies an average of $8 an hour, including wages and benefits. That compares with $58 in the U.S. for General Motors and $38 at Volkswagen’s factory in Tennessee, the lowest hourly cost in the U.S., according to the Center for Automotive Research, an industry think tank in Ann Arbor, Mich. German autoworkers cost about $52 an hour.

  • http://sunsetreflector.blogspot.com ObscenelyGreat

    I knew the victor for long ago.

    You “doubt”? The language of losers from USa to Japanned is amazing.

  • Gigabit_Internet

    It’s Indonesian’s lost, not Japan. Or if Indonesia can’t pay in the future, it’s China’s lost.

    China’s proposal for the project was less financially burdensome for Indonesia because it did not require a government guarantee or use the state budget. For Indonesia to choose China over Japan says nothing about Chinas skill in high speed railways SAFETY but it says more about people wanting cheap over quality and no burden of paying using government money.

    A business-to-business transaction involving a national infrastructure without Indonesian Government fiscal spending or debt guarantee is a sign of no business. But since it is still the President who finally chose, it was actually a government-to-government. Only that no compulsory government responsibility to pay.

    When disputes arise in the future, no international arbitration body will ever decide to who should pay for debt. GOOD LUCK for that.

    But anyway, Japan can still make it even.

    Indonesian society is hierarchical and CAR ownership (SUV) type is a status symbol. I think it’s time to make and sell more Toyota-Alphard, Nissan Serena, Mitsubishi Delica etc in Indonesia. Indonesians do not care much about traffic as long as they are inside their air-conditioned SUVs.

    Ridership to the HS Rail will be still light as long as SUV ownership is great. And as being said by the president himself two weeks ago, Indonesia need regular train system like MRT/LRT plus long-distance medium-speed railway like 140KPH speed.

  • graycoles50

    Corruption has been rife in China, especially at the high levels of business and government, for many years. However, Xi Jinping has been getting very severe toward people doing corrupt practices. He is cracking down on it, but it has been so rampant it will take time to eradicate it, if it happens at all. Of course, China is not the only country where this happens.

  • sdfqef

    China understands that winning this project could potentially increase its chances of winning future projects in Indonesia. Therefore, it is willing to win it at all costs. Japan and German companies could not afford this project without guarantees.

  • Osaka Maachan

    No. Irrelevant.

  • ch

    Sumitomo

  • ch

    I meant a part in the furnace. Russia was not in the picture. Japan had good trade relations with US. US firms were designing and building for China and South Koreans at that time.

  • ch

    I completely agree with you. One thing is for sure, Bernadette Soubirous will do all to malign China whether China is good or bad. Japan lost one project. So big deal. She will win more. It’s competition good for the consumers.

  • just_another_name

    every tender will always have a winner & loser. But the one happened in Indonesia, clearly reflect the unfavorable siding with one of the bidder. Japan has already doing feasibility study & blueprints since Susilo Bambang Yudhoyono presidential period.

    Then all of the sudden, China proposal coming in during Jokowi period. Long story short, the government decided to reject both countries proposal (September 9, 2015). But, behind the scene, Indonesian Minister, Mrs. Rini already establish consortium made from BUMN (State-Owned Enterprises) & Chinese Corporate for the High Speed Train on September 2, 2015. Which is 1 week BEFORE the announcement of Tender cancellation.

    I live on Indonesia by the way, and i assure you there were a lot of irregularities concerning the process of the tender by our media coverage & public opinion.