Racing to beat China, Abe sweetens bid for Indonesia rail project

Racing to beat China, Abe sweetens bid for Indonesia rail project

Japanese Prime Minister Shinzo Abe has sent an envoy to Indonesia to offer a sweeter deal to build a high-speed railway, a Japanese embassy official said on Thursday, highlighting the importance of the multi-billion dollar project that China also wants to win.

The two Asian giants are in a neck-and-neck contest to win a contract to build Indonesia’s first high-speed rail, between the capital Jakarta and textile hub Bandung, a project that would bolster their influence in Southeast Asia’s biggest economy.

Japan and China have until Aug 31 to submit their best offers to Jakarta.

“Prime Minister Abe decided this project is very politically important so he dispatched a special envoy to meet President Joko Widodo again,” Yoshiko Kijima, attache for economic affairs at the Japanese embassy in Jakarta, told Reuters.

Japanese envoy Izumi Hiroto submitted the fresh proposal to the president late on Wednesday, the second such revision since China sweetened its bid on Aug 11.

Japan is offering a 40-year loan at an interest rate of 0.1% with a 10-year grace period. The latest proposal also offers Japanese government guarantees on financing and increases the percentage of local content.

China has also mounted a high-profile campaign to win the deal, offering a loan of $5.5 billion with a 50-year tenure, an interest rate of 2% and a grace period, as of Aug 14.

Indonesia has hired Boston Consulting Group to evaluate the two proposals and is set to announce a winner soon.

The contest has put Indonesia in a diplomatic bind, a government official said.

“There is definitely a feeling in government that this is a tricky one because both China and Japan are important trading partners and they don’t want to upset one or the other,” said one government source with knowledge of the matter.

Kijima, who attended Wednesday’s meeting with the Indonesian president, said Hiroto had made an “emotional” presentation of the latest offer.

“The high-speed rail is a symbol of national pride and development in Japan and it will come as a shock to Japan and its people if the project goes to China,” Kijima said.

She said business relations between Japan and Indonesia were expected to be normal regardless of the outcome.

Japan competes with Singapore as Indonesia’s top investor in Indonesia, while China is the Southeast Asian nation’s biggest trading partner.

(c) Copyright Thomson Reuters 2015.

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