Indonesia has selected China over Japan to build its first high-speed rail link between Jakarta and the West Java provincial capital of Bandung.

China and Japan have been lobbying for the $5bn contract, the biggest infrastructure project started by Indonesian President Joko Widodo.

Earlier this month, Indonesia has dropped its plan to build a high-speed rail link and decided to go for a cheaper rail link with medium speeds of 200km/h.

"After Indonesia changed its plan, China and Japan were asked to submit their new proposals for the slower line."

After Indonesia changed its plan, China and Japan were asked to submit their new proposals for the slower line.

China has, thereafter, revised its proposal to finance the project through a Chinese loan, while Japan’s proposal were to be funded through the Indonesian budget and a low-interest loan from Japan. The Indonesian Government is reluctant to use the state budget for the train project.

Indonesia’s State-Owned Enterprises Minister Rini Soemarno said that the government stressed that the project should not include state funding or a guarantee.

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By GlobalData

Japan’s chief cabinet secretary Yoshihide Suga said that Indonesian National Development Planning Agency head Sofyan Djalil has conveyed it to him that their bid for the high-speed rail project has been rejected.

The decision for a medium-speed rail link was previously taken as high-speeds of 350km would not suit a short distance of 150km. In addition, eight stations on the route were considered to be a hinderance to the performance of a high-speed train.

A train ride from Jakarta to Bandung currently takes approximately three hours and the high-speed rail would have cut the journey time to 35min.

Compared with the high-speed rail project, a medium-speed train would cost between 30% and 40% less, but be slower by about 10min.