China won the rights to build a $5.5 billion railway line in Indonesia as the Southeast Asian nation tries to upgrade its infrastructure to drive economic growth.
Advertisement
President Joko Widodo has ambitious plans to improve Indonesia’s infrastructure, which could boost manufacturing and create hundreds of thousands of new jobs.
The joint venture agreement was signed in Jakarta on Friday, the state-run news agency Xinhua reported.
State lenders China Development Bank has give a commitment to finance 75 per cent of the project cost with a tenure of 40 years-extendable by 10 years-at a fixed coupon rate 2 per cent.
Xie Feng, China’s ambassador to Indonesia, said the joint venture will try its best to source most products locally, including raw materials, equipment and facilities and also hire local talent for management and technical positions. The trains are to start operating in early 2019 with eight stops, speeds of 250 kilometers (155 miles) an hour, and a fare of about $16.
The Indonesian side will control 60 percent of the joint venture.
Indonesia’s presidential chief of staff Teten Masduki said that Japan lost out because its proposal was more about government-to-government cooperation.
Mr Sahala reiterated the government’s line that the project would not rely on any state funding, with financing already agreed on under a business-to-business scheme.
But with China entering the race with a counter offer in April, and Japan refusing to accept the Indonesian government’s demands that the project is constructed without any state financial assistance or guarantees, China was left as the sole viable bidder.
He said the construction is expected to begin early next year and completed in 2018.
Three quarters of the funding will come from China Development Bank, said Sahala.
Advertisement
The railway is the first transportation project in the country conducted without any government funds.
