Privatization, clear rules key to getting railway on track
Abdul Khalik, The Jakarta Post, Jakarta
Due to the huge investment needed to build or upgrade railways and improve train services, experts have urged the government to speed up the involvement of the private sector in the railway business and revise current railway legislation.
Railway Society chairman Moch. Hendrowijono said that although Law No. 13/1992 stipulated that the government had the obligation to provide railway infrastructure, including tracks, stations and signaling, it had no money to do so.
"Railways need huge investments. The government simply has no money to improve the current railway system as it must also provide subsidies to PT KAI. Imagine, it takes between Rp 600 million and 700 million just to buy one railway car," he told The Jakarta Post.
Hendrowijono said that many firms were eager to invest in toll roads, which enabled them to obtain a return on investment within between eight and 10 years, but were reluctant to invest in the railways as they would need up to 75 years to reach break-even point.
"So, the government should make it clear that it will build and own the infrastructure, including tracks, stations, and signaling, while the private sector can buy the rolling stock and operate it on the railway system in return for a fee," he said.
Under such an arrangement, the government would be free to concentrate on maintaining and developing railway infrastructure, Hendrowijono said.
He expressed optimism that many private firms, both local and foreign, would be happy to invest in the railways as they would prove to be quite profitable.
A South Korean company, Sam An, has already expressed interest in investing in suburban rail routes. An official with the transportation ministry said on Wednesday that the company would invest around US$200 to become a part owner of the Greater Jakarta suburban rail system.
Despite the many advantages that trains offer to the traveling public and society in general, including reduced road congestion, greater energy efficiency and reduced pollution, Indonesia's railway system is in bad shape with frequent accidents and falling passenger numbers.
While agreeing that privatization was fundamental to a better railway system, a railway expert at the Indonesian Institute of Sciences (LIPI) said that the government should revise the legislation first to attract more investors.
"The government must decide on the role to be played by PT KAI -- whether the company is to be just the owner of the infrastructure or whether it will be one of the operators. If PT KAI is an operator, then it must be treated the same as new operators to avoid unfairness," he told the Post.
Currently, Taufik said, the government subsidized PT KAI's operating costs to the tune of Rp 1.7 trillion a year, but the company had to pay Rp 600 billion each year in track-leasing charges (TAC) to the government.
Taufik, who is also executive director of Indonesia Railway Watch (IRW), said that as long as Law No. 13/1992 remained unchanged, privatization would not work.
"Who is going to invest given the current lack of clarity? Look at PT KAI. Any foreign company would naturally be afraid of big losses if it invested in the railways given current conditions," Taufik said.