The $6 billion plan is not commercially viable, and Indonesia has asked bidders from China and Japan to resubmit bids for a slower train for the route between Jakarta and Indonesia's third biggest city, Bandung, Rizal Ramli, the minister coordinating transport policy told Bloomberg.
The new proposals, which he hopes will be 30% to 40% cheaper, will take several weeks, Ramli told Bloomberg.
Coordinating Minister for the Economy Darmin Nasution told the South China Morning Post that Indonesian president Joko Widodo has decided that the high-speed service is not needed. The 150km route is not long enough for the train to reach its top speed of 300km/h, Nasution told the newspaper.
Singapore-based infrastructure expert Nicholas Brown of Pinsent Masons, the law firm behind Out-Law.com said: "If these reports are to be taken at face value then the damaging signal that this change of heart sends to foreign infrastructure investors could unwind much of the PR gains that the central government had been seeking through its open-for-business campaign."
"What makes the volte-face so unexpected is that both the length of the link and the likely range of capex required for it were known from the start," Brown said.
The 'medium-speed' train is expected to travel at 200km/h and will only be 11 minutes slower, the South China Morning Post said.
The IMF said this week that transport infrastructure is vital to growth in Indonesia.