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Asia's Game of Thrones
In Rail Deal, Indonesia Snubs Japan for China

Indonesia has turned to China instead of Japan for its fancy new rail network, a move which surprised Japanese officials and comes as a blow to Prime Minister Shinzo Abe. The Japan Times has more:

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 [Djalil, an Indonesian official] told [Chief Cabinet Secretary Yoshihide] 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 […]

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.

Railway competition is part of a larger bidding war for major infrastructure development projects in Asia. After China announced it was establishing the Asian Infrastructure Investment Bank in 2013, Japan promised $110 billion for its own Asian Development Bank. In recent plans for a new fiscal stimulus, Beijing expressed high hopes for its rail technology, saying it thinks projects in southeast and central Asia can boost the struggling Chinese economy. Japan has similar aspirations.

From this story, it appears Beijing may simply wanted this deal more than Tokyo did. At the very least, China was more willing (and perhaps more able) to take on lots of risk. If that remains true in the future, Japan is going to have a hard time competing for business.

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