JAKARTA – Indonesian ministers assigned to evaluate feasibility studies of bids by Japan and China to build the nation’s first high-speed rail line on Wednesday prepared to submit recommendations to President Joko Widodo, Indonesia’s top economic minister said.
“We have already had the recommendations and we will submit the recommendations to the president tomorrow,” Coordinating Minister for the Economy Darmin Nasution told reporters Wednesday after a three-hour meeting of ministers dealing with the project.
The president is likely to make a decision on the rail link as early as Friday.
The high-speed railway would connect Jakarta with the West Java provincial capital of Bandung. The trains proposed by both countries would link the two cities, which are 145 km apart, in 36 minutes.
Nasution declined to say whether the recommendations name the country that should build the railway or whether it merely assesses the project’s feasibility.
He did say that the independent Boston Consulting Group, hired by the government to assess both feasibility studies, analyzed them with regard to four factors: the government’s risk and liability; technology; socioeconomic impact; and project planning.
“The consultant’s assessment stressed more on the track records, experiences and commitment the government has to carry,” Nasution said. “Based on that, Japan and China are indeed different. China is better in the aspect of socioeconomic impacts. Japan is better in track record, technology. From there, we made the recommendations,” he added.
Only Japan, with its shinkansen technology, and China, with its own high-speed railway system, made detailed, comprehensive feasibility studies for the line’s construction.
Both countries submitted proposals containing similar offers, and the two have offered loans to be paid back in 40 years with a 10-year grace period. The interest rate Japan offered is 0.1 percent, while China’s is 2 percent.
Japan’s feasibility study says construction could begin in 2016 and would take five years to complete, including a year to conduct trial operations.
China said it can start construction next month and complete construction within three years.
Hiroto Izumi, a special adviser to Prime Minister Shinzo Abe, last week submitted a new proposal, which was incorporated into Japan’s feasibility study, expanding the local portion of the project to 70 percent of the total, up from an earlier proportion of 51 percent. This would cover the period from the construction of infrastructure until the development of the train system.
Tokyo’s latest proposal exceeds China’s plan to achieve 58 percent of domestic content.
Japan also will open possibilities for Indonesia to buy back the shares initially owned by entities affiliated with the Japanese government such as Japan International Cooperation Agency and Japan Bank for International Cooperation. By contrast, China would maintain its stake in the Indonesian project.
Japan has also agreed to reduce the size of the cost guarantees it would require from the Indonesian government.
A source said the percentage is still being negotiated, but Nasution said last week that Japan has agreed to reduce the proportion to 50 percent, from 100 percent.
The Chinese side, meanwhile, said it needs no government guarantee.