Newsletter No. 229
April 5, 2006

 

KALLA STRIKES AGAIN -- JAKARTA HOLDS TOUGH ON THE MRT PROJECT

Indonesian Vice-President Muhammad Jusuf Kalla is proving to be as good as his word. Shingetsu Newsletter Nos. 173 and 181 suggested a tougher and more skeptical approach from Jakarta. During his January visit to Tokyo, he made clear that he was dissatisfied with the terms of Japanese loans to Indonesia that had “high repayment rates [that] meant the loans had ended up benefiting the Japanese more than Indonesians.”

At issue currently is the new mass-rapid transit (MRT) system for the crowded city of Jakarta, the nation’s capital. The project is expected to cost about US$800 million to build, of which US$700 million was expected to come from Japanese loans. However, about two weeks ago the negotiations began to break down over the issue of which companies would be contracted to do the work. Jakarta wants at least 75% of the components to come from Indonesia.

Indonesia’s National Development Planning Minister Paskah Suzetta told the press that, “getting the loan is not only for the sake of getting the loan. If we already have the capability in providing the technology and materials, why then should we keep on depending on other people? …If Japan really refuses [Indonesia's demand], we may have to seek other sources.”

Tokyo’s position was expressed by Ambassador Yutaka Iimura: “We do not want to relive our bitter experience in Thailand. We financed the mass rapid transportation project there, but our companies were only allowed to dig the tunnel while the rolling stock was provided by Germany’s Siemens.”

When the negotiations continued to remain deadlocked, one Indonesian official, Syahrial Loethan, even started playing the China card: “The one that keeps pushing is China. So if it is not to be financed through multilateral financing, it will be financed by China and several other countries.”

At the end of March, Vice-President Kalla himself weighed in by asserting that the responsibility for the failure of the negotiations lay squarely with the Japanese side for trying to tie the loan to the use of Japanese components. He stated, “We reject such a condition. It would be better to put it on an international tender so that the project would be cheaper and better.”

The resolution of this MRT tussle has not yet appeared, but the Shingetsu Institute will keep an eye on what eventually becomes of this important trade dispute.