INDONESIA TOOK a big and highly significant decision to award China rather than Japan the Jakarta-Bandung high-speed rail project. Jakarta was in dilemma to choose between a trusted old friend (Japan) and a new emerging power (China) as it prepares to start the project in early 2016. The two East Asian giants had presented very competitive deals, with each offering favourable terms to the Indonesian government.

Despite an attractive proposition from Japan, China eventually secured the project with terms that Jakarta found hard to refuse. The clincher for China was its willingness to forego a sovereign guarantee by the Indonesian government.

Japan criticised China’s proposal as unrealistic, especially without government funding and likely to end up making losses as it has to deal with a complex and corrupt bureaucracy in Indonesia. However China showed that it will not hesitate to use its greatest weapon to get what it wants: money and flexibility to adapt to the needs of the local government.

… Emirza Adi Syailendra is a research analyst with the Indonesia Programme at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore.