Development of Railway Regulatory Scheme in Central Java Region of Indonesia

Although the current business environment for railway transportation in the Central Java region of Indonesia is not promising, it is essential to revitalize the railway transport sector to support and sustain the social and economic needs and activities of the region. In the recent past, the wholly state-owned company, PT Kereta Api, was the only organization authorized for the operation and administration of railway services in Indonesia. To some extent because of this monopoly, the railway system currently confronts a variety of facility and operational problems caused by regulatory issues (or lack of regulation), such as an insufficient and unreliable subsidy system from the central government, poorly defined terms of shared responsibility between the government and the railway operator, and the absence of regulations for a new railway law. The new railway law allows for local government and private-sector participation in the railway industry. The regional railway regulatory scheme, which is composed of an infrastructure manager, a rail regulator, and a new railway operator, was formulated to take advantage of the opportunity provided under the new law. This regulatory scheme may encourage the private sector to participate in the railway business and stimulate the existing state-owned company through competition. From a case study of the Semarang–Solo–Yogyakarta freight railway, this paper presents an overall picture of how the regional railway system may materialize and how efficient railway operation could be achieved.