Mon, 10 Aug 2015

A competition has been sparked between two Asian giants as Japan and China both attempt to court Indonesia in an effort to boost their influence in the region.

Like a chess player, Japan appears to mirror any move made by China.

Last Wednesday, for example, the Japanese government offered visiting Indonesian Trade Minister Rachmat Gobel an attractive proposal to build a bullet railway system that will connect Jakarta and Bandung.

Of the total loans estimated to be worth 33.8 trillion rupiah (S$3.44 billion), Japan has also offered to cover 75 per cent of the construction costs and will charge Indonesia a 0.1 per cent bank interest with a payback period of 40 years.

To further sweeten the deal, Japan has committed to using 50 per cent of materials from local Indonesian producers in building the railways system and has also agreed to work with Indonesian engineers.

Going a step further, Japan has also expressed interest in maintaining future ties with Indonesia by expressing interest in the railway connecting Jakarta and Surabaya in East Java.

The bold proposal comes after China offered to provide Indonesia with a US$4 billion (S$5.53 billion) loan at an interest rate of 2 per cent with a payback period of 25 years.

The steps Japan has taken appear to have been fuelled by China’s recent success in attracting Asian countries, including Indonesia, to join its initiative in the Asian Infrastructure Investment Bank (AIIB).

The AIIB, which was proposed by Chinese President Xi Jinping less than two years ago, has become one of China’s biggest foreign policy successes.

Apart from supporting the AIIB, China has also pledged billions of dollars to the Silk Road fund and the One Belt, One Road initiative, which are also aimed at funding infrastructure projects in order to increase trade and connectivity between Europe and Asia.

Indonesia stands to prosper from the rivalry between China and Japan and capitalise on this geopolitical competition, so long as it stays true to its national interests, maintains its neutral status between the two giants and stands by its “free and active” policy.