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Abstract

China and Japan are intensively vying for high-speed rail markets in Southeast Asia. Focusing on the developments surrounding the bid for Indonesia's first high-speed rail project from Jakarta to Bandung, this paper investigates Japan and China's relative strategies, and considers the policy options available to ASEAN to manage the risks rooted in Sino-Japanese competition in the sector.
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Implications of Sino-
Japanese Rivalry in
High-Speed Railways
for Southeast Asia
Dragan PAVLIEVI and Agatha KRATZ*
China and Japan are intensively vying for high-speed rail markets
in Southeast Asia. Focusing on the developments surrounding the bid for
Indonesia’s rst high-speed rail project from Jakarta to Bandung, this paper
investigates Japan and China’s relative strategies, and considers the policy
options available to ASEAN to manage the risks rooted in Sino-Japanese
competition in the sector.
* Dragan PAVLICEVIC is Lecturer in China Studies at the Department of China Studies, Xi’an
Jiaotong – Liverpool University. Agatha KRATZ is an Associate Policy Fellow at the European
Council for Foreign Relations and PhD candidate at the Lau China Institute, King’s College
London.
RAILWAY EXPORTS, INCLUDING high speed railways (HSR), play an
important role in China’s and Japan’s agendas for sustained economic growth and
eective foreign policy, which is why the two countries have committed signicant
nancial and diplomatic resources to promoting these, particularly in Asia.
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On China’s part, HSR1 exports are important contributors to the country’s
reform agenda both domestically and internationally. Overseas HSR lines can
provide access to new markets for the manufacturing sector and open up new
transport options for Chinese goods. HSR projects are also expected to create new
markets and steady demand for China’s rail and related industries, such as steel
and cement, thus helping to ease existing overcapacity in these sectors.
At the same time, Chinese rail companies’ participation in global markets is
expected to contribute to the restructuring and upgrading of China’s economy.
Exposure to global best practices and competitive pressure are expected to boost
domestic innovation capabilities; and sales of HSR products and services will
contribute to a shift towards a greater role for high-end and higher value-added
products in China’s economy.
HSR projects also serve as catalysts for broader economic cooperation between
China and host countries. They create opportunities for Chinese policy banks,
state-owned enterprises (SOEs) and private sector companies to secure additional
projects and investments. As such, these projects increase economic integration
between China and host countries, and may have positive eects on the strength
of their overall relationship. HSRs are also promoted as developmental projects,
thus building China’s image as a responsible power while osetting some of
the costs incurred by assertive policies elsewhere, and hence t in with China’s
ambitious “One Belt, One Road” (OBOR) initiative.
In Japan’s case, HSR, railways and overall infrastructure exports are key
components of Prime Minister Abe’s policy agenda for reinvigorating Japan’s
economy and advancing Japanese interests in Southeast Asia. Since his election
in 2012, Abe has given his assurance to the export-seeking industrial sector that
his government will provide strong support in terms of policies and lobbying
eorts, which according to industry insiders, marked a clear departure from the
previous policy of leaving the identication and securing of projects to businesses
themselves. In June 2013, this policy was ocially formulated by Japan’s cabinet
as “Japan’s Revitalisation Strategy”, part of which is concerned with global
outreach and support for Japanese exports. Against this policy background,
the Japanese government has been of late increasingly involved in negotiating
international HSR projects at the state-to-state level.
HSR exports also build on Japan’s longer-term infrastructure engagement with
the Southeast Asian region. Japan has for decades been one of Southeast Asia’s
main economic partners and investors. Part of this engagement has taken the form
of sustained Japanese investment in all infrastructure sectors across Southeast Asia
(energy, transport, communication, etc.). Prime Minister Abe has reasserted this
engagement with Japan’s “Partnership for Quality Infrastructure” (PQI), launched
1 While some projects discussed here have been scaled down to medium-speed in the
process of negotiations with host countries, we refer to all of them as HSR projects. These
adjustments, as will be discussed later in the paper, are an important feature of China’s (high-
speed) railway diplomacy.
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on 21 May 2015. High-speed rail projects have an important place within this
initiative. As part of Japan’s “Abenomics” and as a response to China’s OBOR,
the Partnership aims to promote “quality infrastructure investment” in Asia in
collaboration with other countries and international organisations. At the time,
Tokyo committed US$110 billion in funding for Asian infrastructure development
over the next ve years.
China’s and Japan’s High-Speed Rail Diplomacy to Date
Southeast Asia (SEA) is a particularly promising market for China and Japan.
According to the oft-cited Asian Development Bank estimates, developing Asia
will need to spend $1.7 trillion per year on infrastructure by 2020 to sustain its
current economic trajectory. Rail networks in SEA are often found to be worn-
down and under-utilised and using a mix of incompatible rail gauges, all of which
have a negative impact on trade ows and degree of economic exchange. Hence,
governments in the region are considering a number of rail development projects
that could form an integral part of the ASEAN Master Plan on Connectivity.
It is therefore expected that HSR and conventional railway projects will
represent an important part of development plans in SEA in the short to medium
term. Already, various HSR projects in Indonesia, Laos, Thailand, Vietnam,
Malaysia and Singapore have progressed from consideration towards preparations,
and, in some cases, early implementation. Lines through Myanmar and Cambodia
have also been touted. Both China and Japan have expressed interest in delivering
at least some of them.
Among these, China has succeeded in securing two projects already, in Laos
and Thailand, negotiating these agreements at the state-to-state level. Japan is also
in advanced discussion with the Thai government to build another HSR line from
Bangkok to Chiang Mai. In a key development for Sino-Japanese competition in
the region, both Japan and China bid to deliver the Jakarta–Bandung HSR project
in Indonesia. After intense competition, the project was awarded to China in
September 2015. In India, Japan won the contract to build the Mumbai-Ahmadabad
line while China is actively lobbying to take part in another HSR project. Over the
coming period, bidding for the HSR link between Singapore and Kuala Lumpur is
expected to further set the tone for Sino-Japanese competition in the region—not
just in HSR, but also more broadly in the eld of infrastructure exports.
Respective Advantages of China’s and Japan’s HSR
Diplomacy
Relying on a dierent set of competitive advantages, both Japan and China are
backing their interest in overseas HSR projects with attractive oers to potential
host countries.
China’s competitiveness is based on a coordinated and multi-faceted approach
that combines proven technological expertise and strong diplomatic and nancial
support. Having built the largest HSR network in the world and acquired
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technological and management expertise in the process, it is capable of delivering
high-speed rail projects of international standards and within a shorter time frame.
China’s eorts to export HSR have also been underpinned by exceptional
political and diplomatic support. Beijing eliminated counterproductive competition
between its rail companies that marked some of the earlier bids for overseas
projects by merging its two largest rolling-stock producers into one, China
Railway Rolling Stock Corporation (CRRC), in 2015. Chinese leaders and
ocials regularly promote HSR on their visits abroad, as well as during meetings
with foreign counterparts in China. Beijing also relies on multilateral platforms
to promote its HSR capabilities, such as its fora with ASEAN, and its agship
OBOR initiative, which puts emphasis on upgrading transportation networks.
China’s initial successes also relied in large part on enormous nancial resources
that allow her to package expertise and products together with nancial conditions
that competitors nd hard to match. These include a combination of lower overall
costs, low interest rates and long grace periods on loans provided from policy
banks, as well as, in some cases, fewer liabilities for the host government. In the
future, such support might also include nancing from OBOR dedicated nancial
institutions such as the Asian Infrastructure Investment Bank and the Silk Road
Fund.
China also oers a great deal of exibility to host countries regarding technology
type and operational models of the proposed HSR projects. It is able to scale up
or down proposed projects if necessary, readily shifting between higher and lower
speed railways to better t budgets and preferences of host countries. China has
also shown exibility in the ownership and nancing structure of the projects.
While it prefers the “loan and build” model, it has taken on projects nanced by
the host countries (Thailand), or where Chinese companies partake ownership of
the HSR line for a certain period (Indonesia and Russia), mitigating some of the
risks for the host country.
Moreover, promise of skill transfers is often used as part of the bids. For
example, China will train Laotian personnel on railway technologies and
management and has established special training programmes for Thai railway
sta in China. It is also willing to set up production sites in host countries, which
it already has in Malaysia.
Finally, Beijing tends to oer add-on projects in connection with HSR.
These include the establishment of manufacturing bases, business hubs and
real-estate development along the routes or in the vicinity of HSR lines. While
at times controversial when involving issues of land ownership, this integrated
approach aims to maximise the potential of HSR to contribute to local economic
development through further investment and employment. As such, add-on projects
aim to secure additional revenue streams for host countries that may oset the
costs of constructing and subsidising the HSR lines.
Japan also relies on substantial diplomacy to support its HSR exports. Prime
Minister Abe has discussed the issue at numerous meetings with foreign heads of
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state, especially since Indonesia picked China over Japan for the Jakarta-Bandung
project. From Japan’s perspective, this outcome underlined the importance of
strong political backing for securing overseas HSR projects.
In terms of nancial aspects, Japan also provides substantial nancial support
for its high-speed rail projects, through two main channels: Japan International
Cooperation Agency (JICA) and Japan Bank for International Cooperation (JIBC).
JICA provides direct support to host country governments mainly through grants,
small-sized loans and technical assistance, while JIBC provides larger, low-interest
rate loans to large infrastructure projects. Thanks to these two actors, Japan is
usually able to make attractive oers to potential host countries, with interest rates
lower than China’s (below 1%) and at times even longer grace and repayment
periods. The nancial terms of Japan’s oer are competitive with those oered by
Beijing and are understood to be one of the key reasons
why Japan obtained the Mumbai-Ahmadabad contract
at the expense of China.
On the other hand, Japan is constrained by the terms
of its OECD membership, and cannot cover as large
parts of a single project as China through preferential
loans. What is more, it has not yet been willing to scrap
government guarantee requirements, unlike China,
which has agreed to waive such requirements during
the bid for the Jakarta-Bandung HSR project.
Japan also nds it dicult to match China’s low
prices and its faster construction periods. Therefore, it
has focused instead on emphasising other advantages
of its high-speed rail ”package”. It has for example
put a strong emphasis on the quality and safety of its
Shinkansen. Wherever they go, Japanese delegations
remind their interlocutors that high-speed rail accidents
are potentially 10 times deadlier than normal rail ones,
but that Japan’s Shinkansen never had any derailment or fatal accident throughout
its history of more than half a century, contrary to China’s experience. What is
more, Shinkansen’s accident-free record proves its earthquake and natural disaster
resilience.
While the upfront cost of Japan’s high-speed rail technology is higher, Japanese
diplomats and experts underline that its life-cycle cost is lower: for example,
Shinkansen’s light body weight means lower energy costs and less stress on
infrastructure (rails and bridges). Better quality materials and manufacturing
also mean that Japanese trains need less maintenance, repair works and fewer
inspections. Given the country’s 50+ years of experience in operating high-speed
rail (compared to less than a decade for China), its high-speed rail operations
model has been optimised to minimise cost.
Finally, Japan emphasises skills transfer and local benet. It proposes for
... Japan is
constrained by the
terms of its OECD
membership, and
cannot cover as large
parts of a single
project as China
through preferential
loans.
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example long formation programmes in Japan to train local engineers to high-speed
rail operation. It also oers localised assistance for setting up of operation and
maintenance plans (dispatching technical advisers in host countries for as long as
two years) and human resources development (dispatching high-speed rail drivers
for example, for as long as one year). In its approach, Japan also underlines the
local benets of its investments: in terms of environment, social considerations
and emphasis on quality, rather than quantity infrastructure.
Adjustments in China’s and Japan’s Approach to
Promoting HSR Exports
Sino-Japanese HSR competition experienced a watershed moment in 2015
when Tokyo and Beijing competed to secure the right to build Indonesia’s rst
high-speed rail line from Jakarta to Bandung. China eventually “won” the project
because of its readiness to waive requirements of state guarantee and funding from
Indonesia. The event, however, made both countries reconsider their approach
to advocating and supporting HSR, and more broadly, infrastructure projects
overseas.
On Japan’s part, the outcome of the Indonesian bid exposed some structural
weaknesses of Tokyo’s approach to infrastructure exports compared to China’s.
As such, it prompted Japanese policymakers to adjust these policies in order to
increase Japanese competitiveness vis-a-vis China in future HSR project bids.
Immediately following the failed Indonesian bid, the Japanese government
issued “Follow up Measures on the Partnership for Quality Infrastructure”
(November 2015), which promoted changes in policy for increased support to
infrastructure exports. Japan’s PQI was further “upgraded” in May 2016 under
an “Expanded Partnership for Quality Infrastructure Programme”, including a
US$200 billion pledge made by Abe at the G7 Summit for global infrastructure
investment in the following ve years.2 Representing adjustments to the previous
PQI, the proposed policies were all direct responses to the advantages of China’s
approach to promoting HSR exports.
For example, the documents include the decision that “the Government of Japan
will decide to exempt the government guarantee on a case-by-case basis”. JBIC is
also encouraged to support higher-risk projects, notably through “exempting the
requirement to ensure certainty of repayment for each project, while maintaining
the principle of securing sucient revenue to cover its expenses as a whole”.
A new trust fund was also established at the end of March 2016, combining
ADB and JICA investment. The fund will invest in and nance private quality
infrastructure projects through models such as Public Private Partnership. Models
2 “Follow-up Measures of “the Partnership for Quality Infrastructure”, Ministry of
Foreign Aairs of Japan, http://www.mofa.go.jp/les/000117999.pdfhttp://www.meti.go.jp/
english/press/2016/pdf/ 0523_01b.pdf; The G7 Ise-Shima Summit, “Expanded Partnership for
Quality Infrastructure” (outline), Ministry of Economy, Trade and Industry, http://www.meti.
go.jp/english/press/2016/pdf/0523_01b.pdf (all accessed 12 July 2016).
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of joint ownership and management, such as Special Purposes Vehicles, co-owned
by the host government (with the help of Japanese loans) and Japanese companies,
are encouraged.
New funds that mobilise government and private nancing are to be established
and utilised to nance infrastructure projects (including HSR). The revised policy
also made concessional loans available for private nancing of infrastructure
projects to smooth private sector participation in these projects.
Both the Measures and Expanded Partnership commit to streamlining
administrative processes so as to ensure swift response
to inquiries about projects and project applications
(at most one month), and shorter time for transition
from initiation of feasibility study and commencement
of works (within 1.5 years). The acceleration of
government-related procedures of Japanese Ocial
Development Assistance Loans has been another new
measure added to the original PQI.
Japan has also committed to expanding technical
assistance to countries hosting the projects and to
“[s]haring and introduce[ing] Japan’s advanced
technologies across the world”. HSR projects are
individually emphasised, as the document states that the
technical assistance is crucial to ensure the quality of
government loans projects that require high-precision
construction (e.g. construction of civil engineering
structures for HSR). All these measures can be seen
as responses to the key factors that led to China’s bid
prevailing over the Japan’s in the case of the Indonesian
HSR project.
China, however, also modied its approach. Since
launching “HSR diplomacy”, it has been exposed to growing criticism in host
countries and international media. The major objections to China’s HSR projects
relate to the quality of its HSR technology and products, and their safety. Chinese
projects have also been criticised for primarily beneting political and economic
elites in the host countries, rather than the local population and the broader
business community. Land acquisitions for China-backed developments have
been particularly lambasted. China’s preferred model of “loan and build” - where
it provides nancing, technology, rolling stock and know-how in the construction
period and then delivers the line to the host country - has also been perceived as
disproportionally placing the risks associated with the protability of HSR lines on
the host countries. The concerns about the degree to which HSR projects provide
China with leverage over the host countries, as well as the security implications
of uninterrupted railway connectivity between China and Southeast Asia, have
often been raised in the Southeast Asian region.
Chinese projects
have also been
criticised for
primarily benefiting
political and
economic elites in
the host countries,
rather than the local
population and the
broader business
community.
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Since the beginning of 2016, China has sought to address these concerns. The
visit of a delegation of rail sector representatives and experts from China headed
by Sheng Guangzu, head of China Railway Group, to Malaysia in late May 2016
to support China’s bid for Singapore–Kuala Lumpur HSR line is illustrative of
this shift. During the visit, the Chinese delegation repeatedly emphasised that
the quality of China’s HSR technology, products and system is second to none.
The experience of building, operating and maintaining the largest and busiest
HSR network in the world has been suggested as proof that China possesses the
technical know-how required for exporting HSR abroad. Sheng also claimed
that the safety of China’s HSR is outstanding, citing a report by the International
Union of Railways, an international rail transport body that develops and monitors
standards for international rail industry, and claiming that China’s accident per one
billion kilometre is the lowest in the world. He further emphasised the systematic
examination and inspection system employed to ensure the quality of the railway,
power supply, train controls and other parts of China’s HSR system.
Much emphasis was also put on the aordability of HSR for the common
people. During a media brieng in Malaysia, Sheng expected the ticket price for
HSR to be 50% cheaper than that for airplane, citing the costs in China where
HSR customers pay around RMB0.5 per km, compared to airfares around RMB1
per km.
In response to the criticisms of proposed land acquisitions and additional
projects attached to the plans for HSR lines, the Chinese delegation re-emphasised
the benets of such an approach for the local economy, as additional investments
and projects will facilitate economic growth by creating employment and overall
more attractive conditions for investment and trade, raising living standards in
the process.
This new emphasis put on certain aspects of China’s HSR capabilities is meant
to address the main concerns about Chinese projects and make Chinese bids more
attractive to a broader basis of stakeholders in potential host countries, including
the general public. With such adjustments, China is trying to change perceptions
of the deciencies of its HSR capabilities and turn these perceived weaknesses
into advantages.
Challenges for China and Japan: A Race to the Bottom?
The adjustment of policies and public diplomacy strategies of China and Japan
in the aftermath of the Indonesian bid suggests that competition is heating up and
that the two countries are determined to go an extra mile to secure HSR projects
in the region.
Not only are both Japan and China committing signicant nancial and
diplomatic resources to facilitate railway exports, but top ocials on both sides,
including Premier Abe and President Xi, are personally vested in promoting HSR
exports. Given the importance of HSR, and more broadly infrastructure, in Tokyo
and Beijing’s policies, these leaders’ credentials are to an extent tied to the success
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of HSR exports. As such, they might be tempted to maintain personal credibility
by pushing forward projects while disregarding ner analyses of nancial and
political risks involved.
The current trend of Sino-Japanese HSR competition creates signicant risk
for both China and Japan. If left unchecked, such competition may have adverse
side eects for the whole SEA region.
In order to export their respective HSR technologies and know-how China
and Japan have already pushed down project costs,
lowered nancial risk management standards, widened
the scope of technology transfer to host countries and
committed signicant funds with uncertain prospects
of a nancial return. While such an approach may
boost chances of securing initial projects, it threatens
to erode the profitability of enterprises involved
in the HSR projects and endangers their long-term
competitiveness. Technology and know-how transfers
will mean less demand for made-in-China or Japanese
HSR products and services in the longer term,
while lower costs and higher exposure to risk may
compromise the quality of the delivered projects, and
deter other potential customers from pursuing deals
with China and Japan on HSR in the future.
The two countries are also facing the prospects
of over-committing funds to projects that will incur
losses. Should China and Japan succeed in securing
several simultaneous HSR projects, it may pose risks
of negative spill-over eects on the railway industry
and the economy at large. Furthermore, competition
complicates an already problem-laden relationship
and adds fuel to the erce Sino-Japanese rivalry in
terms of economic presence and political inuence
in Southeast Asia.
Challenges for the Southeast Asian
Region: Managing Sino-Japanese Competition
China and Japan’s interest in supporting the development of transport
infrastructure, including high speed and conventional railways, is generally
welcomed in the Southeast Asian region. Despite concerns about the protability
of HSR services, there is a general consensus that infrastructure projects such as
HSR lines can improve the economic prospects of the region and of individual
SEA countries.
However, managing China and Japan’s pressing interest in delivering these
projects might prove challenging. This rivalry has the potential to negatively
The two countries
are also facing the
prospects of over-
committing funds to
projects that will incur
losses. Should China
and Japan succeed
in securing several
simultaneous HSR
projects, it may pose
risks of negative spill-
over effects on the
railway industry and
the economy at large.
24
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aect the region as Southeast Asian countries may nd it increasingly dicult
to balance between the interests of the two regional powers.
For Southeast Asian countries, both China and Japan are important sources of
investment, important markets and key trade partners. Most seek good relations
with both Beijing and Tokyo and some degree of balance between the two. Sino-
Japanese competition in infrastructure exports threatens to compromise such a
stance due to the zero-sum spirit in which it is framed. Indeed, a host country’s
awarding of a HSR project will inevitably be perceived as “choosing a side”.
What is more, the high cost of these projects, and related nancial arrangements,
might increase host countries exposure to the lender and provide some additional
leverage to the country delivering the project.
In such a context, Southeast Asian countries have several options when
responding to Sino-Japanese HSR competition. Firstly, host countries can let
Japan and China lock horns over the projects and enjoy the benets of ever-more
favourable conditions that such competition would yield for them. Developments
during the competition for the Jakarta-Bandung project in Indonesia, which
resulted in very favourable conditions for Indonesia and subsequent adjustments
in Chinese and Japanese policies, illustrate that there is much to be gained for
host countries from a Sino-Japanese “race to the bottom”. Awarding a project to
either China or Japan would be based on whoever is willing to provide the best
oer. However, this may endanger the delicate balancing act in which Southeast
Asian countries and ASEAN as a whole are engaged, and complicate relations
with the one that has not been chosen.
Secondly, host countries can employ a balancing strategy by awarding China
and Japan a HSR project each, or compensating the “losing side” with other
big-ticket infrastructure projects. Indonesia and Thailand appear to have chosen
this strategy: Jakarta’s favouring of Japan for the Jakarta-Surabaya mid-speed
line might be a way to balance its choice to grant China the Jakarta-Bandung
project, while Thailand is currently in discussion with both Japan and China for
two separate lines.
While politically sound this option might be harmful in economic terms.
Concomitantly building two projects entails signicant nancial risks for host
countries, particularly given the uncertainties surrounding the protability of
HSR projects (and rail in general). Some Southeast Asian countries may not have
the capacity to eectively absorb a few simultaneous loans for such big-ticket
projects, even if these are received under the most favourable terms. There are
also concerns that as dierent countries’ HSR systems are made with dierent
specications, these lines may not be able to connect to each other, impeding their
potential to contribute to the domestic economy.
Thirdly, to avoid big power competition and “depoliticise” the process, host
countries may opt to award the HSR project to a third country. Such an approach
has the advantage of maintaining cordial relations with both China and Japan,
while avoiding the risks of taking on two projects with all associated budgetary
east asian policy
25
risks. However, there is a danger that this would adversely aect the relationship
with both China and Japan, whose enthusiasm for extending other beneciary
policies and initiatives to these countries – whether directed via bilateral channels
or multilateral organisations such as AIIB or ADB - might be aected by such
an outcome.
Therefore, the best option for host countries may be to consider structuring
these projects in a way that would involve and satisfy both Japan and China. This
could either mean awarding dierent parts of a single HSR project to Tokyo and
Beijing, or encouraging Sino-Japanese (or wider) cooperation to deliver a project.
The rst approach can be achieved through the insistence on a transparent and
open tender process for delivery of these projects. While this is unlikely to erode
China’s and Japan’s interest in delivering these projects, such structured bidding
procedure would allow host countries to break up projects in lots. This would in
turn open the door to involve both Japan and China and avoid exclusively granting
the whole project to any of the two; parts of the projects can also go to local or
other international companies.
The second approach may take the shape of Sino-Japanese consortiums or
joint ventures, or looser forms of Sino-Japanese cooperation. While signicant
eorts would need to be invested in order to nd the right modality for such a
joint approach, some successful precedents do exist in the region, such as Sino-
Japanese cooperation in the provision of subway vehicles to Singapore.
In addition to decreasing the risks of a political fallout with either or both China
and Japan, these two approaches may de-escalate tensions incited by their rivalry.
These would send a strong symbolic message and create a model for the future
involvement of China and Japan in the region, in infrastructure development and
beyond. It would also appeal to calculations of China and Japan that in advancing
the relationship with Southeast Asian countries, their regional policies must
consider the interests of the region.
Bringing the planning and delivery of regional railway networks back to
ASEAN and in connection with the Master Plan on ASEAN Connectivity could
represent another step in that direction. Instead of a project-by-project approach,
a comprehensive approach would ensure that the sum of individual projects
would amount to a compatible, sustainable and eective railway network that can
facilitate trade and people-to-people exchanges in an optimal way. The multilateral
framework would be much better positioned to contain and absorb eects of
Sino-Japanese rivalry as the prospects of gaining access to the ASEAN market
– as opposed to the markets of individual countries where projects are discussed
separately – would inevitably incentivise them and other potential bidders to
seek and accept compromises. Within such an approach, the region would be
much better placed to manage Sino-Japanese rivalry and enjoy the benets of a
cooperative relationship with both of these regional powers.3
... To fill the financial gap, the company would connect the railway project to 'add-on projects' of four integrated transit-oriented development (TOD) stations along the route. They will build new economic growth centres in the forms of new towns, industrial parks, logistics centres, and tourist destinations around the TOD stations to serve as an alternative source of revenue (Pavlicevic & Kratz, 2017;PT. Kereta Cepat Indonesia China, 2016). ...
... However, later, China was invited to submit an alternative proposal considering that since the early 2010s, China had become a rising global power whose investment has increased significantly in financing the Global South's infrastructure development. For China, winning this bidding could be critical, as high-speed railway construction is a key developmental project within their ambitious Belt and Road Initiative (BRI), and this could be the first of its kind in Southeast Asia (Bhargava, 2018;Pavlicevic & Kratz, 2017;Salleh, 2019). As for Jokowi, such a move must not be seen as a fundamental shift in the country's geopolitical orientation but rather illustrates his pragmatic developmentalist approach: '. ...
Article
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In the past decade, Indonesia has become one of the Asian countries that massively promote large-scale infrastructure development to stimulate economic growth and improve the nation's competitiveness. Using the theoretical perspective of state rescaling, we explore how megaproject complexity defines the scope and process of state involvement in Indonesia's regional infrastructure planning, development, and governance. Aided by a typology of state rescaling, we compare two megaproject case studies: the Jakarta-Bandung High-Speed Train (JBHST) and the Kertajati International Airport and Aerocity (KIAA). It reveals that the dynamics of political culture, governance style, and policy domain shed light on the pragmatic rediscovering of state activism to manage risk and uncertainty in Indonesia’s multi-actor and multi-scale megaproject decision-making environment.
... Sementara itu, dalam konteks kereta api, beberapa penelitian menunjukkan bahwa Jepang memiliki keunggulan teknologi perkeretaapian (Hook & Replogle, 1996;Kato, 2010;Soejima, 2003;Terada, 2001;Wu, 2015;Zhou & Shen, 2013). Adapun rivalitas Jepang dan Tiongkok dalam industri kereta api dan juga menjadi perdebatan penting pada beberapa penelitian sebelumnya (Kurniawati, 2018;Pavlićević & Kratz, 2017). Meskipun demikian, Indonesia memutuskan untuk menjalin kerja sama dengan Tiongkok maupun Jepang dalam proyek kereta cepat karena tuntutan kebutuhan Indonesia terhadap tersedianya kereta cepat (Salim & Negara, 2016). ...
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In 2015, Japan had to step down when Indonesia chose China in the 142.3 km Jakarta-Bandung fast train project. In 2016, the Government of Indonesia held a meeting with the Government of Japan, to discuss a project to continue the fast train, with the Jakarta-Surabaya route. Interestingly, the Jakarta-Surabaya fast train project was carried out directly without going through a tender process like the Jakarta-Bandung fast train project. Using an empirical rationality theory approach, this paper seeks to look at several factors behind the Indonesian government's policy of choosing Japan in the Jakarta-Surabaya semi-fast train project. Several aspects that will be examined in this research are, first, conditions and situations in Indonesia that require decision making. Second, Japan's commitment to Indonesia and the capacity and capability of Japan's fast train technology. Third, the various benefits obtained by Indonesia from the cooperation of the semi-fast train with Japan.
... Third, Japan cannot match China's low prices and shorter construction periods. 42 In response, Japan started to include HSR export as a part of the government's greater push for 'highquality infrastructure' and 'quality infrastructure investment'. Japan has since been emphasizing the quality, safety, lower life-cycle cost and technology transfer of its Shinkansen exports, which also benefit the local population. ...
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... Scholars also situated the project in the broader context of Sino-Japanese competition in Southeast Asia. Although such competition could benefit recipient countries (Jiang, 2019;Zhao, 2018), unchecked competition might lead to a race to the bottom (Pavlicevic and Kratz, 2017). In light of geopolitical and geoeconomic rivalry, there could be space for co-operation between China and Japan (Yoshimatsu, 2018). ...
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... Since the 1990s, however, the 'Going Out' strategy encouraged Chinese SOEs to look beyond their borders and construction enterprises such as China Road and Bridge Corporation (CRBC) were among the first licensed to seek business outside China (Rogelja 2018: 40). Yet for all their successful work in developing countries, Chinese SOEs face severe difficulties in bidding for projects in developed markets, with the possible exception of high-speed rail (Pavlićević and Kratz, 2016). They lack the necessary references to clear the pre-tender selection as, for example, they have not built infrastructure to exacting European standards or managed more complex procurement formats (Lu et al, 2009: 171). ...
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... For instance, Oh (2019) looks at how host states acquire leverage over their Chinese financiers, using the categories of "high," "medium," and "low" to explain outcomes (Oh 2018). Most other works do not conceptualize the railway situation as a two-stage game but examines the interplay of geopolitics and domestic situations (Pavlićević & Kratz 2017;, Zhao 2019. These works examine the rail projects where the Chinese and host state governments takes precedence. ...
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Working paper written at Boston University's GDPC, explaining the sources of delays in three major Chinese railroad projects in Southeast Asia
... As for the land-linked strategy, advertised by the Laotian government for more than two decades, Chinese visions of Southeast Asian infrastructural connectivity, particularly the Kunming-Singapore Rail Link as part of the Pan-Asia Railway Network, build on long-established plans of integrating the region by the Association of Southeast Asian Nations (ASEAN) and the Asian Development Bank's (ADB) Greater Mekong Subregion (GMS) initiative (Li 2014;Pavlićević and Kratz 2016). The continuity of ADB's neoliberal recipe of integrating infrastructure, Economic Corridors and Special Economic Zones (SEZ) prompts the question to which extent China's BRI will be capable of "introducing reforms to overcome the limitations of the neo-liberal model" Gao 2018, 1208). ...
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Previously articulated within several regional multilateral frameworks, the “China-Laos Railway” eventually turned into a flagship project of China’s Belt and Road Initiative (BRI). Started in 2016 and planned to be completed in late 2021, this project will provide Laos with unprecedented railway infrastructure, linking its capital Vientiane with China through the northern border town of Boten. This paper critically scrutinizes the underlying geo-economic win-win rhetoric of coupling China’s regional BRI ambitions with Laos’ national vision of transforming into a land-linked country. Understanding the newest BRI labeling of infrastructural connectivity against the backdrop of Laos’ and the region’s longer-lasting neoliberal developmental trajectory, I examine the financial mechanism of the railway project and the different temporal and spatial scales of Laos’ and China’s calculation of potential benefits. These are juxtaposed with the empirical reality of already visible dynamics and impacts of Chinese investment alongside the railway. Together, they tend to paint a future of Chinese profits at the expense of Laos’ sustainable long-term development. Contributing to much-needed grounded accounts of local unfoldings of China-backed megaprojects, I pay particular attention to vernacular discourse and experience to fully understand the nature, processes and impacts of BRI financing.
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The rise of China and the introduction of the Belt and Road Initiative have intensified regional great power competition. Seemingly, China and Japan have been competing over the export of infrastructure projects and access to the Southeast Asian market. Against this backdrop, this paper sheds light on recipient states’ agency. Specifically, this paper explores how Indonesia has responded to Sino-Japanese competition through the perspective of economic hedging. In the realm of domestic railway development and the need to establish connectivity on Java, why did the Indonesian government decide to work with China to develop the Jakarta-Bandung High-speed Rail project and Japan on the North Java Upgrading Line, as the two lines are not interoperable? Railway policy in Indonesia is strategic and pragmatic. On the one hand, Sino-Japanese competition diversifies Indonesia’s options as it continues striving to strengthen infrastructure development. On the other hand, the need continually to strike a balance between the two great powers requires skill and flexibility. Therefore, maintaining policy autonomy and accepting economic costs make-up secondary states’ responses to great power competition in turbulent times.
Book
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The aim of the book is to critically review the processes of integration and region-building in Greater Eurasia. Integration is a broad term that covers any rise in economic and social interconnections, whether driven by top-down state policies (regionalism) or by the bottom-up activities of companies, individuals, and business networks (regionalization). Alexander Libman and Evgeny Vinokurov focus on regionalism, i.e., institutional arrangements and frameworks created by Eurasian countries. Thus, the authors are interested not in surveying the bottom-up interconnections that are flourishing across Eurasia (i.e., trade networks or pipeline routes), but rather in analyzing the projects promoted by individual countries (or groups of countries) to foster economic integration in Eurasia. The book therefore focuses on the emerging intergovernmental institutional structure of Eurasian connectivity: it aims to discuss the existing projects, their ideational foundation, and their potential.
Chapter
The development of infrastructure has strong connections to a country’s economic growth as it offers the foundation for social and industrial upgrading. Infrastructure investment also contributes to expanding business activities in various fields from transport and energy to information and communications technology (ICT). At the same time, infrastructure investment is related to international relations as cross-border support for infrastructure development creates a diplomatic partnership between a country that offers funds for infrastructure investment and a country that receives them. This is a main reason why infrastructure development is examined from the foreign policy perspective as well as the economic one.
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