Indonesia has unexpectedly dumped much-vaunted plans for its first high-speed railway in favour of a slower and cheaper rail option, in a blow to Japan and China who have been fiercely competing to win the construction job.

President Joko Widodo was expected to announce the winning bid for the multi-billion dollar infrastructure project this week, but instead his chief economics minister, Darmin Nasution, told the Japanese ambassador Friday that the hotly-contested project had been shelved.

The two Asian powerhouses had been locked in a contest for months to build the railway, a line connecting the sprawling capital Jakarta with the mountain-fringed city of Bandung about 160 kilometres (100 miles) away.

"Both proposals extended by our government and the Chinese government are not accepted," Japanese ambassador Tanizaki Yasuaki told reporters Friday.

Nasution said he would deliver the same news to Chinese ambassador Xie Feng later in the afternoon.

Widodo had commissioned an independent review into the high-speed rail line, which if completed would not only have slashed travel time between Jakarta and Bandung but paved the way for an expanded network linking the capital with Indonesia's second-largest city Surabaya in East Java.

Presidential chief of staff Teten Masduki told AFP that Widodo had concluded a medium-speed rail option was better value, saving 30 percent on costs.

"The president was very careful in deciding this, and has picked this one," he told AFP, referring to the slower, cheaper rail alternative.

The news is particularly bad news for Japan, a top-three investor in Indonesia with massive stakes in the automotive, mining and manufacturing sectors.

Tokyo, with its rail expertise and infrastructure record, seemed destined to build the high-speed rail line until Widodo announced in April that China had entered the race with a counter offer.

China and Japan had both intensified efforts to win the contract in recent months, dispatching lobbyists to Jakarta and sweetening deals to woo the administration.
Source: AFP