New railway routes are key to boosting efficiency and reducing distribution costs for local developing businesses, but progress has been hampered by land-clearance issues, business players say.
"With trains, we will know when our goods will arrive. By truck, there are a lot of uncertainties, such as traffic jams, so that the trips may take twice the time as planned," Chris Kanter, Indonesian Chamber of Commerce and Industry vice president overseeing transportation, told The Jakarta Post last week.
In 2005, more than 90 percent of goods transported in the country went by road, while only 0.6 was moved on trains, transportation ministry data shows.
However, a survey conducted by the Asia Foundation and the University of Indonesia in April shows truck operating costs are higher in Indonesia than in neighboring countries. The cost per load of operating a truck in Indonesia is US$0.34 per kilometer, compared to $0.22 in Vietnam, Thailand, Malaysia and China.
Indonesia has few other options than to develop and construct more railways by, among others, addressing land-clearance snags, Chris said.
A 2007 law on railway systems allows private and regional governments to build and manage railways, and has all but ended the monopoly of public-owned rail company PT Kereta Api Indonesia.
Managing director of United Arab Emirates-based RAK Minerals and Metals Investments (RMMI) Mahdu Koneru said land acquisition was a major hurdle.
"Our two previous rail-route plans were rejected because they passed through some plantations. We have submitted three more route options to the government that avoid such areas," Koneru said.
The country must address the issue as creeping fuel prices have increased rail's economic advantage in the country, he said.
"Trains can run on electricity, which can be derived from coal. And this country has plenty of coal to start with," he said.
RMMI has set aside US$1.5 billion for investment in the South Sumatra province, including between $400 million and $500 million for building a railway network connecting Palembang to Bagan Siapi-api.
"Building railway is the first step in our plan before starting other businesses, like mining and industrial parks," Koneru said.
RMMI plans to offer railway services to existing industry players in the area, especially small- and medium-sized coal companies, he said.
The central and regional governments need to issue clear regulations on land-clearance and rail routes to attract private investment, he said.
A number of Asian countries are co-building a trans-Asia rail link, known as the Pan-Asia railway network, to integrate their markets. The 5,500 kilometer-long railroad is expected to be completed by 2015. The participating countries include China, Malaysia, Thailand, Myanmar, Laos, Vietnam and Singapore.(mri)
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