TIM EJOURNAL Ketua Penyunting: Prof.Dr.Ir.Kusnan, S.E,M.M,M.T Penyunting: 1.Prof.Dr.E.Titiek Winanti, M.S. 2.Prof.Dr.Ir.Kusnan, S.E,M.M,M.T 3.Dr.Nurmi Frida DBP, MPd 4.Dr.Suparji, S.Pd,M.Pd 5.Dr.Naniek Esti Darsani, M.Pd 6.Dr.Erina,S.T,M.T.7.Drs.Suparno,M.T8.Drs.Bambang Sabariman,S.T,M.T 9.Dr.Dadang Supryatno, MT Mitra bestari: 1.Prof.Dr.Husaini Usman,M.T (UNJ)2.Prof.Dr.Ir.Indra Surya, M.Sc,Ph.D (ITS) 3.Dr. Achmad Dardiri (UM) 4.Prof. Dr. Mulyadi(UNM) 5.Dr. Abdul Muis Mapalotteng (UNM) 6.Dr. Akmad Jaedun (UNY) 7.Prof.Dr.Bambang Budi (UM) 8.Dr.Nurhasanyah (UP Padang) 9.Dr.Ir.Doedoeng, MT (ITS) 10.Ir.Achmad Wicaksono, M.Eng, PhD (Universitas Brawijaya) 11.Dr.Bambang Wijanarko, MSi (ITS) 12.Ari Wibowo, ST., MT., PhD. (Universitas Brawijaya) Penyunting Pelaksana: 1.Drs.Ir.Karyoto,M.S2.Krisna Dwi Handayani,S.T,M.T 3.Agus Wiyono,S.Pd,M.T4.Eko Heru Santoso, A.Md Redaksi: Jurusan Teknik Sipil (A4) FT UNESA Ketintang - Surabaya Website: tekniksipilunesa.org Email: REKATS DAFTAR ISI Halaman TIM EJOURNAL ............................................................................................................................. i DAFTAR ISI .................................................................................................................................... ii Vol 3 Nomer 3/rekat/15 (2015)PRECONDITION OF RAILWAY RESTRUCTURING IN DEVELOPING COUNTRIES: A CASE STUDY OF INDONESIA Purwo Mahardi, ......................................................................................................................... 20 - 28 Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 20 PRECONDITION OF RAILWAY RESTRUCTURING IN DEVELOPING COUNTRIES: A CASE STUDY OF INDONESIA Purwo Mahardi Civil Engineering Department State University of Surabaya purwomahardi@gmail.com Abstract TheestablishmentofLawNo.23/2007onRailwaysettoeliminatemonopolizationby incumbentoperatorsand giving opportunitytothe privatesectorand local governmentto jointherailwaysector.Ironically,thenewlawisnotcompletelyimplementeddueto budget constraints and weak basis of restructuring. Proper preconditions have to be created to ensure its success. The paper uses a literature review involving a material harmonization study.Basedontheresearch,legalframeworkamendment,assetsre-evaluation,human resourcesassessmentandobvioussupportfromthegovernmentcanbeconsideredasthe most essential preconditions, together with the existence of good governance. Keywords: Railway restructuring, Law No. 23/2007 on Railway, Indonesia. INTRODUCTION BackgroundIndonesian railway began the restructuring processon1998withhugeloanfrom WorldBankunderthenameofthe RailwayEfficiencyProject(REP).The mainobstaclebehindtherestructuring processisthehugecostshouldbe burdenedbythegovernmentof Indonesia. Thathugespendingcomesfromsubsidies andmaintenanceofrollingstock (Nikmah and Wijiati, 2008). Railwayrestructuringduringthatperiod was only carried out in the intern structure ofthecompanyitself.Railwaywasstill being monopolized by government. In this case,governmentplayedasowner, regulatorandoperator.Sourceof budgetingfordevelopmentwassolely fromIndonesianStateBudget,whichhas beenseteveryyear.Thisconditionwas agonizedbythelowsupportofthe government.Thegovernmenttendsto developroadtransportationratherthan railway.Astheneglectedsector, Indonesianrailwaywastryingtoimprove its performance by doing some betterment. Animportantreformwasinitiallystarted in2007bytheestablishmentofthenew railway law. LawNo.23/2007onRailwayisfulfilled withtheideaofrestructuring.The monopoly era of PT. Kereta Api Indonesia (IndonesianRailwaysCompany)hasbeen endedandprivatesectorsand/orlocal governmentsareallowedtoenterthe railway business not only for the provision oftrainservicebutalsointrack construction,maintenanceandoperation. Duringtheimplementationofthislaw,it hasbeenseenthatsomeapproacheswere notproperlyimplemented.Someconcepts areneededtoberevisedinordertobe moreapplicable.Preconditionssetforthe LawNo.23/2007onRailwayneedtobe formulatedtoensurethattherestructuring processrunningintheproperlyand achieving the objectives. Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 21 Main ObjectivesThe objectives of this paper are to:1.Investigatethecurrentdevelopmentof railway restructuring in Indonesia;2.InvestigatewhetherLawNo.23/2007 ofIndonesianRailwaycouldhaveany significantimpactinensuringthe successofrailwayrestructuring program; 3.Formulaterestructuringoptionfor Indonesia4.Set the preconditions or requirements as asolutionduringtheprocessof restructuring. THEORETICAL FRAMEWORK Characteristic of State Owned Railway Inmostlycountries,railwaysarebeing operatedunderonestateownedcompany whoareresponsibleformanagingthe railwayinfrastructureandprovidingtrain services(UNESCAP,2003).Monopoly practicesarebeginningtobecomevery popularasabasicsystemintherailway sectorandthisisgenerallyknownasthe traditionaltheoryofrailway.RichardT. Ely(1937)firstlymentionedthatdueto operationalproperty,railwayandother publicfacilitieshavenaturalmonopoly characteristicwhichisbelievedtodeliver highefficiencyandstability.UNESCAP (2003)alsostatesthat:State-owned railwayshavethereforeoftenbeen organizedas vertically-integratedpublicly owned monopolies. Efficiencyandstabilitydeliveredbystate ownedrailwayscanbeseenfromJapan NationalRailway(JNR)operation,which dominatedthemarketoffreightand passenger.Italsohadimportantrolein termofpost-wareconomicrecoveryuntil the1950swhenitstartedtolossits competitivenessagainstothertransport mode. (Aoki, E. et al, 2000). However, the circumstances of transport market in recent twentyyearscomesledtotheconclusion thatmonopolysystemsofstaterailways shouldbereformedinordertoensurethe service quality and performance of railway operation.Itishugelyacceptedthatstate-ownedmonopolisticrailwayswere generallyknowntobeinefficientand unworkable(KopickyandThompson, 1995;ECMT,2004,2005)and restructuring process should be carried out inordertoreclaimtheperformanceofthe system. RESEARCH METHODOLOGY Theprimarysourceofdatawillbefrom MinistryofTransportation.Themain sourcesofinformationhavebeenderived fromvariousbooksandjournalsatthe universityandfromtheinternet.Thedata relatedtorailwayrestructuringin Indonesiaisbeinggatheredand investigated to find the link to the research objective. Secondarydatahasbeenusedinthis research to describe the implementation of theapproachproposedintheIndonesian railwaynetworkasthecasestudy.Data aretakenfromtheDirectorateGeneralof Railways(DGR)astheregulatorybody andPT.KeretaApiIndonesia(PT.KAI) astheoperatoroftrainservices. Furthermore,thisresearchcanbe classifiedasdescriptiveresearch,sincea structureissetuptoanswerwho,what, whereandhowtypequestions. Informationrelatedtotheresearch willbe clearly defined. RESTRUCTURING RESULTS Ambiguity on the Way of Restructuring Inpresentcondition,PT.KAIhandlesthe infrastructure operations and train services. Theimpactofthisisthedifficultyin enteringtherailwaymarketsector,asPT. KAI are reluctant to release its former role. The problem related to competition will be elaboratedonthenextsection.Another problemisrelatedtotheobjectiveofPT. KAI,asanincumbentoperator,the governmentmandatesthatPT.KAI Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 22 providepublicservicetasks.Atthesame time, PT. KAI also has to gain profit from itsoperation.LawNo.23/2007on Railway clearly states that the government cannotdirectlyoperatetherail infrastructureandtrainservices,unlessin theabsenceofprivateoperator.Lubis (2007)considersthisphrasedilemmatic. Inpresent,PT.KAIisbeing acknowledgedastheincumbent infrastructureoperatorandservice provider,butthegovernmentcanforma newspecialcompanyforrestructuring withinthisthreeyearstransitionalperiod as stated on the law. AsstatedintheArticle214ofLawNo. 23/2007, PT. KAI was given three years to adaptwiththenewsystem.Relatedwith thattransitionaltime,thegovernmenthas instructedPT.KAItodothe organizationalrestructuring,whichisthe separation,basedonthelineofbusiness (softunbundling).Withthismechanism, PT. KAI has to separate the division on the specificdutysuchasrollingstock, ticketing and track maintenance. Thereissomeambiguityinwayof restructuringwhichdirectlyimpacttoPT. KAIastheincumbentoperator.The previousorganizationalreformcarriedout byPT.KAIbasedthegovernmentagenda isdifferentfromtheintentionofthelaw. Law No. 23/2007 indicates that the proper restructuringwayisverticalseparation whichmeansbothinfrastructureand servicesaremanagedbydifferentbodies (see Figure 1). Inotherwords,PT.KAIshouldbe prepared to compete with new company in railway sector. In the authors opinion, the previousrestructuringagendaofPT.KAI setbythegovernmentwasnotproperly matched withthelaw. Thiscondition may leadtoabigquestionrelatedtothe competitivenesslevelofPT.KAItoward the multi operator regime. Degree of Competition TheexpectedconceptofIndonesian railwayismultioperatorrailway.DGR (2010)describesthatinmultioperator railway; there will be competition between thetrainoperatorandtheinfrastructure provider.Recently,PT.KAIhasaroleas thetrainoperator,workingtogetherwith othertrainservicesoperatorfromprivate company.Thisoptionisamodificationof thepreviousframeworkbygivingmore opportunitiesfortheprivatesector.The opportunityforprivatesectorwasgiven onlyinprovidingtrainserviceasoperator whiletheinfrastructuremanagementand operationisstillfullymanagedbyPT. KAI.Infact,thereisonlyoneinvolved companynamedPT.KAICommuter Jabodetabek, which is responsible for train serviceoperatingintheJabodetabekarea. PT.KAICommuterJabodetabekis actuallythesubsidiaryofPT.KAI.Pure Figure 1 Ambiguity of Restructuring Agenda Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 23 privatecompanyinvolvementdoesnt exist. The author identifies that the problem may comefromthedualityroleofthe incumbentoperator.PT.KAIstill dominatestheoperationofinfrastructure. It owns station, signaling system and other facilities. The problem occurs when a new trainoperatorcompanywantstousethis facility.PermissionfromPT.KAI,asthe incumbentinfrastructureoperator,is needed.Ontheotherhand,PT.KAIalso acts as a train operator company using the samefacilitiesasthenewcandidatesof operatorcompaniesandcompeteswith them.WithrespecttoPT.KAI,the decisionrelatedtoinfrastructuretendsto benotfair.Itisstillarguable,butinthe authorsopinion,thisconditionmaylead intosomepartiallypolicywhichbrings lucrativesituationforonlyoneparty,PT. KAI itself. TheGovernmentInterventiononthe Infrastructure Providing Interventionofthegovernmentof Indonesia in the provision of infrastructure canbeseenfromthe2011Indonesian StateBudgetDraft.Itismentionedinthe documentthatthegovernmentof Indonesiaoverthebudgetingdraftfor infrastructureprovisionforfourtrillion rupiahs.TheMinistryofTransportation, particularlyDirectorateGeneralof Railwayisappointedtocarryoutthe provision program. Thisinterventionisclearlycontradictory withtherailwaylaw.Thepositionofthe governmentbased on the law is limited as aregulator.Joiningtheinfrastructure provisionisdefinitelyoutoftheir authority.Itwillbewiserifthe governmentappointsPT.KAIthanbeing directlyinvolvedintheinfrastructure provision.Forthefuture,asexpectedby therailwaylaw,infrastructurehastobe providedandmanagedbyindependent company,outofgovernmentintervention. Privatecompaniesarepermittedtobuilt thetrackandearnmoneyfromtheirtrack operation for some years. After theend of the permitted operation year, the track will be back and owned by the government. PublicChargingandFinancialSupport MechanismMuthohar(2010)explainsthatthe actualizationofPublicServiceObligation (PSO),InfrastructureMaintenance Operation(IMO)andTrackAccess Charge(TAC)schemewithinfiveyears aftertheREPwasnotyetcompleted. Differencesalwaysoccurredbetweenthe demandrequestedbyPT.KAIandthe realization from the government. Recently,theactualizationofthescheme isonthesimilartrendwiththeprevious years.Budgetconstraintisbelievedtobe themainreasonbetweenthelackofPSO andIMOpaymentbythegovernment. Lubis (2007) records that during the period of2007;theTACoffsetstheIMOonthe amountofaroundRp700billionor equivalentto50millions.Thiscondition directlyaffectsPT.KAIasthesole operatorinIndonesiasincethebudgetfor maintenancewasalwaysundertheactual need.Then,Lubis(2007)alsoaddsthat thereisanaccumulatedbackloginthe amountofRp6.5billionortheequivalent of 465k plus another 300k for the rolling stock backlog. The impact of this accumulated backlog as mentionedinMuthohar(2010)andisthe decreaseoftrackinyearafteryear.In present, 59 per cent (2.716 km) of the total length track is qualified as good condition. Therestcanbequalifiedasfaircondition (494 km or 11 per cent) and bad condition (1.391kmor30percent).Thiscondition isindicatedtobethereasonbehindthe6 highnumberofderailmentcases. Restructuringofmaintenancefunding should be carried out for the betterment of bothinfrastructureandrollingstock,and improvement of safety level. Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 24 AsstatedinMuthohar(2010),another problem is the implementation of IMO and TAC.Inpractice,theschemeofIMOand TACwasnotappliedproperly.Now,the maintenance of infrastructure is carried out by PT. KAI by using its own money. As a response,thegovernmentdoesnotcollect theTACfromPT.KAI.Inotherwords, the government presumes that the value of TACisequaltoIMO.Thereisnoreal transferfromthegovernmenttoPT.KAI whichhassubstitutedthedutyof infrastructure maintenance . During the three years of transition period, it can be seen that PT. KAI is the sole PSO and IMO receiver and TAC payer. There is ariskwiththefundflowunderone organisation related to its initial objectives anditsimplementation,whichmaylead intoineffectiveness.Therefore,Nashetal (2002)explainsthatsubsidyofthetrain operationwhichisappropriateonsocial considerationswillbemoreeffectiveifit isdirectedatparticularservicesandpaid tothetrainoperatorratherthanthe infrastructureprovider.Infact,thetrain operatorandinfrastructureprovideristhe same company. Lubis(2007)pointsoutthatalthoughthe contractswereseparated,fundsthatare supposedtobeutilisedforinfrastructure maintenance (IMO) or as subsidises for the economyclasstrain(PSO)wereactually usedbyPT.KAItopaywagesorfor locomotiveandotherrollingstock procurement.Thisisbecausethefunds neededtomaintainthetrackisusedfor otherpurposes,thetrackhavenotbeen fullymaintained.Therefore,aclear separationofinfrastructureproviderand operatorandtrainserviceprovidershould beestablishedsothattheamountofthe PSOgrantbythegovernmenttothetrain operatorisfullyusedtooperateand managenon-commercialtrains.LawNo. 23/2007implicitlyinstructtoreformthe railway in this way. Anotherproblemarisesfromthe calculationofTAC.Santoso(2010) mentionsthatthebasiccalculationsused intheTACcontractarestillquestionable sinceitdoesnotreflectafairand transparentsystemintheimplementation ofrailwayreform.Muthohar(2010)adds thatTACiscalculatedbasedonthe infrastructuremaintenanceandoperation (IMO) paid by the government added with theinfrastructuredepreciation(d) multiplieditwithanintermodalorinter-servicesbalancingpolicyfactors(f).The intermodalbalancingpolicyfactor(f)has not attributed with a standard formulation; itisonlyusedasaliabilityfactorthat balances the net of PSO, IMO and TAC. Since the new law has set that in the future of Indonesian railway is multi operational, theTACcalculationmustberevised.Fair TACcanbebeneficialinencouragingthe newcompanytoentertherailwaymarket sector.Privatesectorsabsolutelyneed clear, transparent and rationale fare as their financialexpectationbeforeenteringthe market. Private Sector ParticipationAnother new reform stated on the Law No. 23/2007isthechanceforopenaccessin therailwaysector.Inthefuture,itwillbe possibletoundertakerailwayinvestment andfundingusingPublicPrivate Partnership(PPP),privatefinancingor localpublicfunding.Theamendedlaw alsoaddressesauthority,service standardization, certification, licensing and protectionofcustomersrights.Thelaw recognizes that the railway is an economic sectortobeorganizedbysector participantsinmannersthatareefficient, professionalandsupportivetonational economy.Railwayinfrastructuresand servicebusinesses,whichwerepreviously bureaucratic in nature, are to be changed to acorporatefocusthatemphasizesservice reliability, efficiency and direct interaction with economy and industry. Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 25 Privatesectorparticipationcanbe arrangedinaformofpartnershipwiththe relatedgovernmentbody.Various potentialtypesofprivatesector participationcanbeshownonthetable5 onAppendix.AccordingtoDGR(2010), theinterestofprivatesectortojointhe railways business is mostly focused in coal mining.DGR(2010)recordsthatinthe period of 2010 until 2014; there are several projectsoftrackconstructionforcoal mining.Theprojectswillbecarriedout undertheschemeofPublicPrivate Partnership (PPP). InSouthSumateraproject,PT.KAI arrangesJointVentureCorporation (JVCo) with PT. Bukit Asam (coal mining company).ThetotalcapitalofJVCois 1.55billionrupiah,30percentsupported by PT. Bukit Asam and 70 per cent by PT. KAI.Anotherpotentialprojectwhich attractprivatesectorisraillinkin Soekarno Hatta international airport.DGR (2010)mentionsthatatleastthereare sevenprivatecompanieswhichare interested to join this project. COMPARATIVESTUDIESWITH OTHER COUNTRIES 1. Britain Railways case studyInBritain,trainoperationwasunderthe responsibilityofTrainOperating Companies (TOCs) while the management ofinfrastructurewasheldbyRailtrack namelyNetworkRail.Thistermexisted aftertheestablishmentofRailwayAct 1993(KopickiandThompson,1995). Basically,thestructureofprivatized railwayinBritaincanbedescribedas follows: Figure 2 Structure of Britain RailwaySource: Kopicki and Thompson, 1995 2. Swedish Railways case studyTheSwedish1988reformpioneered railwayrestructuringforallofEurope (KopickiandThompson,1995).The processwasinitiallystartedin1988when theSwedishstaterailway,Statens Jrnvgarwassplitintotwocompanies, StatensJrnvgar(SJ)andBanverket (BV).Banverket(BV)isresponsibleto control the track network. The second one, StatensJrnvgar(SJ),isresponsibleto operatethetrain.So,itisbasicallya verticalrestructuringorhardunbundling bytheseparationofinfrastructureand trainoperationmanagement.The interesting approach learned from Swedish restructuringprogramistheinvolvement ofLocalCountytofulfilltheirlocal passenger services. RESTRUCTURINGOPTIONFOR INDONESIAN RAILWAYSTherestructuringoptionforIndonesian Railwaysbasicallycanbedividedinto three main proposals. The basic concept of restructuringisverticalrestructuringor hardunbundling.Withinthisoption,the separation between infrastructure and train operationmustbecarriedout.Actually, theLawNo.23/2007hassetthat Indonesianrailwayshouldberestructured withthisoptionbutunfortunatelythe implementation was still far from its initial pattern. Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 26 PrivatizationofBritishRailwayscanbe consideredasafailure(Joy,1997; Thompson,2004),thereforethissystem willnotbechosen.TheSwedishsystem givesmorebeneficialimpactthanthe Britishone.Separationbetween infrastructureandtrainoperationisstill being regarded as the first option. TherestructuringoptionforIndonesian Railwaysbasicallycanbedividedinto three main proposals. The basic concept of restructuringisverticalrestructuringor hardunbundling.Withinthisoption,the separation between infrastructure and train operationmustbecarriedout.Actually, theLawNo.23/2007hassetthat Indonesianrailwayshouldberestructured withthisoptionbutunfortunatelythe implementation was still far from its initial pattern.SincetheprivatizationonBritish Railwaywasacknowledgeasafailure,it willbebetterifIndonesiaadopttheway from Sweden. In this case PT. KAI as state ownedrailwayshouldbesplitintotwo companieswithdifferentresponsibility, oneforinfrastructure,otherfortrain operation. Anotherconsiderationisthegeographical conditionofIndonesia.Coordinationcan beaobviousprobleminarchipelagic country.Inordertominimizetheimpact ofgeographicalconstraint,thehorizontal separationcanbeagoodsolution.This approachhasbeenimplementedinJapan since Japan is archipelagic country as well. Thequestionwillariserelatedtothe restructuringprogramwhichhasbeen carriedoutbyPT.KAI,softunbundling. Intheauthoropinion,thisoptionisan initiallygoodforfurtherprocess,hard unbundling.Developmentofsoft unbundlingisasubsidiarywhichlatterly canstanditself,separatedfromPT.KAI. Theexistenceofsomecompanieswith differentbusinesscanbeagood foundationfortheprocessofvertical separation. SETTING THE PRECONDITION Figure 3 Staggered Precondition Process Fromthefigureabove,theroleof governmentbecomeveryessentialsince the restructuring process can be considered asitsinitiative.Aspecialbodyshouldbe createdtoformulatethescenarioof restructuring.Thisbodycanbeconsisted ofMinistryofTransportation,Ministryof State Enterprises, and Ministry of Finance. But,beforethatprocessisbeingcarried out,anassessmentofasset,market,and humanresourcesisabsolutelyneededto measurethepotentialandreadinessof railway to be restructured. CONCLUSION1.TheestablishmentofLawNo.23/2007 onRailwayisapartofthe governmentsrailwayreformagenda. Despitethenewrailwaylawdelivering somenewvisionsrelatingtothe restructuringprogram,several preconditionsneedtobeenvisaged carefully.2.Railway reform in Indonesia was driven by coercive process by the involvement ofWorldBankthroughRailway EfficiencyProject(REP).Sincethe stagnantrailwayperformanceafterthe government initiative- asset evaluation- market evaluation- human resources managementestablish Restructuring Planner set the legal framework contains detail "rule of game" Rekayasa Teknik Sipil Vol 3 Nomer 3/rekat/15 (2015), 20 - 28 27 project,theideaofrestructuringwas repeatedlyraised.Theresultwasthe establishmentofLawNo.23/2007on Railway.3.LawNo.23/2007onRailwaybrings twoimportantchangesbyendingthe monopolisticrightofPT.KAIasthe soleandincumbentoperatorand permitting open access to private sector andlocalgovernmenttoenterthe railway sector. Now, the years after the establishmentofthenewrailwaylaw, thereisnosignificantchangeonthe Indonesianrailway.Thegovernment budgetconstraintscanberegardedas themainbarrier,aswellastheweak basisofrestructuringprogram.The reluctanceof theincumbentoperatorto enforcethelaw,inefficientfunding schemethroughPSO,IMOandTAC, absenceofprivatesectorparticipation are the impact of this weak foundation.4.TherestructuringoptionforIndonesia canbeacombinationbetweenthree approaches,horizontalseparation, functionalseparation,andvertical separation. At least there are four things canberegardedasthemostimportant precondition,namelylegalframework, assetassessment,humanresources evaluation, and good governance and its support. RECOMMENDATION Forfurtherimprovementsofrailway restructuringprocessinIndonesia,the followingrecommendationsaresuggested bytheauthorbasedontheresultsofthe study.1.The bundling mechanism in the funding ofPSO,IMOandTACinIndonesia indicatesaninefficientimplementation in railway development.2.MinistryofTransportation,particularly DirectorateGeneralofRailwayshould createaspecialagencywhichonly concerningwithinassessingthe bankablerailwayprojectsand promoting them to private sector.3.Further studies related the most suitable optionofrailwayrestructuringby investigatingthemethodsfromother countryanddoingsomemodification based on actual condition in Indonesia;4.Thelawneedsworkingdetailinthe definition of and boundaries between5.PT.KAIisexpectedtoremainbroadly involvedinallrailwaybusinessesdue toitsextensivemanagerialand technicalexperiencesthathavebeen developed over many years. REFERENCES Aoki, E. et al. 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