KPPU seeks an end to railway sector monopoly

Leony Aurora, The Jakarta Post, Jakarta

The brakes screeched, the train slowed and finally came to a halt. Nadya, 26, got up and tried to open the window nearest her. Two fans near her seat did not work and the people packed into the aisle only made the car hotter.

"I take the train because they don't get stuck in traffic and it's easy to get home from the station," she said. "I hate it when they stop everywhere though," she sighed, glancing at her watch.

Four hours after the train left Gambir railway station, it arrived in Bandung -- almost one hour behind schedule.

Nadya's train is operated by state railway company PT Kereta Api Indonesia (KAI), the sole operator of locomotives and cars for passengers and goods in the country.

The Business Competition Supervisory Commission (KPPU) has suggested that the government open the railway sector to private players to boost the efficiency and quality of the country's train service.

"Without competition a monopoly mentality prevails, resulting in a decreasing quality of service and high prices," said KPPU member Mohammad Iqbal during a discussion on Thursday.

Currently, the entire railway network is owned by the government. The maintenance and operation of this network has been contracted to KAI.

"One way to introduce competition is by having separate operators (of the network and rolling stocks)," said Iqbal. "KAI should choose its focus."

The United Kingdom took such a measure when it privatized its railway company into Railtrack, which manages the infrastructure, and introduced 25 Rolling Stock Companies, or Rosco, as service providers.

Japan also operates a similar system, with six operators of passenger trains and one of cargo trains on its network.

Law No. 13/1992 on the railway network allows for private companies to be involved in the sector. However, supporting regulations for the law were never drafted.

The Ministry of Transportation had prepared a revision of the law, which would specify the role of the private sector, said the director of railways at the ministry, Harris Fabillah.

"The private sector can be network or train operators," he said.

Despite the revision, however, Harris questioned whether private companies would be interested in investing in the railway sector.

"The railway business is capital intensive and it can take up to 60 years to break even," he said.

KAI president Omar Berto agreed, saying that companies that had shown interest in investing backed away after further study.

"Once an investment in the railway business is made, it cannot be transferred to other sector," he said. "And the infrastructure is very expensive."

According to Harris, one kilometer of railway track costs between US$2.5 million and $5 million to develop. Because of the expense of laying track, the government has relied on the railway network built by the Dutch during the colonial era.

The network has shrunk to 4,030 kilometers from 6,811 km in 1939, due to a number of routes being halted after airlines began offering more competitive prices four years ago following industry liberalization. The number of locomotives has also decreased, from 1,314 in 1939 to 530 at present.

Iqbal firmly believes that competition will bring investment. "Our experience with telecommunications and airlines shows that competition boosts investment and the economy."

Because the government subsidizes economy class train seats and determines their fares, another kind of competition could take place.

The government could tender out routes whose ticket prices were already determined, said Iqbal.

"Let's say a commuter route from Bekasi to Jakarta. The company that offers the lowest subsidy wins," he said.