China and Indonesia have signed an agreement to build a high-speed railway line between the capital Jakarta and the city of Bandung, state media reported.

China, Indonesia sign $5.5 billion high-speed rail deal

The joint venture agreement was signed in Jakarta on Friday, the state-run news agency Xinhua reported.

China Railway International and a consortium of Indonesian state companies will build the rail line and plan to compete for other projects in the region, Sahala Lumban Gaol, the chairman of the joint venture, said.

The project will be mostly funded by the China Development Bank and will not use the Indonesian government budget or have a state guarantee, he said.

Indonesia’s first high-speed train project comes after the government decided to scrap plans for a state-funded bullet train to Bandung after bidding by both China and Japan, leaving only China interested in a business-to-business deal.

The project is expected to take three years with trains to run at 250 km/h.

China will hold 40 per cent of the venture and it will be the first overseas high-speed railway using Chinese technology, according to Xie Feng, China’s ambassador to Indonesia.

Chinese Ambassador to Indonesia Xie Feng said the overseas high-speed railway project is China’s first and will be a new symbol for strategic bilateral ties.
Xie stressed that China hopes to boost its infrastructure exports to Indonesia.

Indonesian officials say the 5.5-billion-dollar project will be funded through loans from China and expenditures by the joint venture.

Construction is to start in November at the earliest. Indonesia aims to complete the work by 2018 and start operation the following year.

Japan and China competed fiercely to win the contract.

Indonesia’s government announced in early September that it would not adopt either country’s bid. But weeks later, it told Japan that it would adopt the Chinese plan because Beijing made a new offer to build the railway with no financial burden on Jakarta.