The railways industry will be opened up to limited competition but not fully privatised.

Hatta Rajasa, the minister for Communications, announced that the government will shortly allow both Indonesian companies and foreign concerns to invest in the railways sector, on a limited basis, but that the monopoly of the state railways company, PT Kereta Api Indonesia, would largely be maintained. Agreement had been reached, he said, between the government and the Communications Commission of the House of Representative to pass the necessary changes in the Railways Law, UU Perkeretaan, in this session of parliament.

In the new rules private companies and regional governments will be able to compete in train services.
(Dalam aturan baru nanti swasta dan pemerintah daerah bisa bermain di jasa perkeretaan.)

The minister said that private companies would be strongly encouraged to become involved in the railways industry but that on the passenger side of the business this would be limited to the owning of shares. Private concerns would not be allowed to operate their own fleets of trains, but would be restricted to owning a maximum of 49% of shares in the national railways company. Private concerns, both domestic and foreign, could however become directly involved in the building and owning of railway lines, and in the operating of train services such as monorails.

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March 28th 2007.

The House of Representatives approved the rail transportation bill on the 27th, allowing the private sector to take part in the rail industry. All 10 parties in the House gave their support to the bill in a plenary session in an effort to reform the much-criticized public transportation system in the country.

The bill stipulates the private sector, including multinational corporations, is allowed to take part, along with the state-owned PT Kereta Api Indonesia (KAI), in providing rail transportation and the manufacture of support facilities.

In terms of the implementation a regulation has to be later issued detailing how exactly the private sector may participate in the rail industry.

Putra Jaya Husein, spokesman for the National Mandate Party, said that despite the private sector’s participation, the government remained the only authority in setting train fares to ensure a cheap service.

PT KAI and private providers must make a profit to let them survive, but the government is required to give subsidies to ensure cheap rail transportation for the public.

The Indonesian Democratic Party of Struggle (PDI-P) asked the government to issue regulations to govern the involvement of the private sector in public and special rail transportation. Rendi Affandi, spokesman for the PDI-P, said:

Private corporations should be encouraged to provide rail transportation for destinations with a high load factor and to invest in special rail transportation to create a healthy competition with PT KAI.

Special rail transportation systems carry cargo and raw materials in industrial zones in Java, Sumatra and Kalimantan.

The National Awakening Party (PKB) said the private sector should be allowed to operate in Greater Jakarta to help solve the chronic public transportation problem in the capital city. Abdullah Azwar Anas of the PKB said:

In fact, PT KAI has been found to be unable to serve the densely populated region with its residents, most of whom work in Jakarta.

The bill carries a maximum 15-year jail sentence and a maximum fine of 5 billion rupiah ($548,967) for train operators found guilty of ignoring safety regulations and companies or individuals who damage rail facilities.

It also mandates the government to audit assets used by PT KA and the company’s assets in the coming three years to make the company liquid.