A passenger train crosses the Chikubang bridge on the Bandung to Jakarta line

Japan sweetens high-speed rail offer to Indonesia

Japan has sent an envoy to persuade Indonesia to choose its own proposal for a high-speed railway, rather than a rival deal from China.

Indonesia wants to build the country's first high-speed rail between the capital Jakarta and textile hub Bandung and has hired Boston Consulting Group to evaluate the two proposals, with a winner set to be announced soon.

The two countries have until August 31 to submit their best offers to Jakarta. Late yesterday, Japanese Prime Minister Shinzo Abe sent envoy Izumi Hiroto to submit a fresh proposal to the president, the second such revision since China sweetened its bid on August 11.

"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.

The deal offered previously by Japan included a 40-year loan at an interest rate of 0.1 percent, with a 10-year grace period. The latest proposal increases the percentage of local content and added Japanese government guarantees on financing.

China, by contrast, is offering a loan with a 50-year tenure, an interest rate of two per cent and a grace period for the sum of $5.5bn as of August 14. The bidding contest has put Indonesia in diplomatic difficulties, 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 the official, who declined to be named.

China is the Southeast Asian nation's biggest trading partner, but Japan competes with Singapore as the country's top investor and 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.

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