China in $5.5bn rail deal with Indonesia

Chinese and Indonesian state-owned companies yesterday signed a $5.5 billion deal to build the first high-speed railway in Southeast Asia's top economy, after Beijing beat Tokyo to win the construction project.

The line will connect the Indonesian capital Jakarta with the mountain-fringed city of Bandung, some 160 kilometres (100 miles) away, and is a key part of President Joko Widodo's plans to overhaul the archipelago's infrastructure and attract investors.

Japan was long expected to build the railway but China entered the contest earlier this year, and Tokyo's bid was rejected last month after a chaotic bidding process that infuriated the Japanese.

On Friday the chairman of state-owned China Railway International, Yang Zhongmin, signed a deal with a consortium of Indonesian state companies to form a joint venture to build the railway, with construction set to start next year and the line to begin operating in 2019. 

State-owned China Development Bank will provide 75 percent of the funding, with the rest coming from the Chinese railway company and Indonesian consortium.

The railway line will not need any financing from the Indonesian government, nor a government guarantee. One reason that Indonesian officials gave for rejecting the Japanese bid was that it would require government funding. 

The high-speed train route will cover eight stations from Jakarta to Bandung, and the train will travel at around 250 kilometres (150 miles) an hour.