In recent years, China has been the go-to builder of Asia's high-speed-rail networks, but Japan is proving a competitive rival in the bidding for several of the region's high-profile projects.
China has built roughly 60% of the world's high-speed railways, but it is now being challenged by Japan for major jobs in Indonesia, Thailand, Cambodia, India and the Philippines. Japan also has begun offering soft loans for high-speed-rail projects, a tactic previously used extensively by China.
This railroad rivalry was seen most recently in the bidding for a $5-billion high-speed project in Indonesia. China and Japan were in fierce competition for the 150-kilometer-long Jakarta-Bandung railway, until the Indonesian government on Sept. 4 announced that the high-speed-rail component would be dropped from the project.
It was an unexpected end to a long and contentious bidding war. There had been intense lobbying at the political and diplomatic levels in addition to the normal haggling on cost and financing, engineering standards and delivery dates. Two Indonesian government ministers had publicly backed the Chinese proposal—a rare move during a secret bidding process.
It was a bit of a shock when Japan submitted a $4.25 billion bid, well under China’s quote of $5.08 billion. Both bidders offered to finance the project, but China proposed a higher level of financing. China said it could complete the project by 2018, three years earlier than Japan's proposal.
To further sweeten the deal, China said it would use Indonesian-made products and employ up to 40,000 local workers on the project. This gesture was in response to a common criticism that Chinese companies tend to import materials and workers from China when performing overseas projects.
Indonesian president Joko Widodo seemed to waver. On Sept. 3 he said the final decision would be left to the relevant government ministry. "High-speed train is badly needed in Indonesia, but we will not burden the state budget, and there will be no guarantee from the government," he said. "So, I defer to the Ministry of State Enterprises to undertake it, business to business."
The next day, Widodo announced that the high-speed component of the project would be scrapped. "The president has decided a high-speed train is not needed. It is enough to have a medium-speed train of 200 to 250 kilometers per hour," Coordinating Economic Minister Darmin Nasution announced.
The two bidders now have the opportunity to compete for the slower-speed rail contract. But it is possible that Japan might sit this one out, sources said.
Sweating It Out in Thailand and the Philippines
Still, Japanese rail makers have their own reason to celebrate as the first set of rolling stock for a rail project in Bangkok, Thailand, was shipped on Sept. 7.
The subway project, backed by a Japanese ODA loan, is due to start operation by August 2016. The Purple Line, as it is called, will run 23 km between Bang Yai and Bang Sue in Bangkok.