Indonesia's 11th-hour decision to scrap plans for the nation's first high-speed railway has sown confusion among top investors China and Japan, potentially undermining the strong foreign investment that has been a rare economic bright spot.
China and Japan had been battling over the multi-billion dollar contract, until it was abruptly pulled in what appeared to be the latest in a series of regulatory flip-flops and erratic policy-making moves under President Joko Widodo.
Indonesia's chief economics minister was left to explain to the two Asian giants on Friday the reason why Jakarta decided at the last-minute that the bullet train project was the wrong option for Southeast Asia's largest economy.
"It looks like a sudden move because the recommendation was made after a review of both proposals," Teten Masduki, presidential chief of staff, told Reuters. "But the recommendation is in the best interest of the country."
Tokyo and Beijing had lobbied heavily for the $5 billion contract, each sweetening the terms of their bids up until Monday's deadline.
Analysts believed that whoever had won would likely have been the front-runner for future high-speed rail projects in Asia, including one linking Kuala Lumpur and Singapore.