Rail transportation serves as the backbone of transport and logistics. Therefore, the government is committed to maintaining its crucial role, even during fiscal constraints, by seeking innovative financing solutions.
This was stated by the Minister of Transportation of the Republic of Indonesia, Budi Karya Sumadi, at the Seminar on Green Financing Strategy in the Transportation Sector for the Competitiveness of Equitable Railways.
“The green financing scheme holds promise, but its implementation in Indonesia needs to be well-measured to meet the existing criteria,” he said during the seminar in Jakarta on September 20.
According to the Minister, the overarching themes of green and equity simultaneously entail high ultimate costs with the hope of bringing ultimate benefits. These benefits include impacts on productivity and employment opportunities that are broader and fairer across generations.
“This is expected to pave the way for a new civilization,” added the minister.
Dr. Ikaputra, the UGM Center for Transportation and Logistics Studies head, explained that trains have a large carrying capacity, the lowest fuel consumption, and the lowest carbon emissions.
Citing a study by the Asian Development Bank (ADB), he mentioned that urban trains can transport 100,000 people per hour, far surpassing other modes of transportation.
“Trains also have the lowest fuel consumption, at 0.002 liters per km per person, significantly lower than motorcycles at 0.04 liters per km per person,” he added.
“The emissions they generate are also much lower, accounting for only 1 percent of the total emissions, far below other land-based transportation modes that dominate with 89 percent. This demonstrates that trains are an environmentally friendly and sustainable mode of transportation.”
The first seminar session organized by the Center for Transportation and Logistics Studies featured Mohamad Risal Wasal (Director General of Railways, Ministry of Transportation) and Dr. Arif Wismadi (Expert Team Member from the UGM Center for Transportation and Logistics Studies).
Other speakers included Sahli (Executive Vice President of New Business and Strategic Projects at PT Kereta Api Indonesia, representing the President Director) and Rustam Effendi (Policy Analyst and Expert Associate at the National Revenue Policy Center, Fiscal Policy Agency (BKF), representing the Head of BKF).
In the second session, speakers such as Ervan Maksum (Deputy for Infrastructure and Facilities, Ministry of National Development Planning/Bappenas), Hermanto Dwiatmoko (Chair of the Indonesian Railways Society), Professor Wihana Kirana Jaya (a UGM Faculty of Economics and Business lecturer and Special Staff for Economic and Investment Affairs in Transportation to the Minister of Transportation) addressed the audience.
Other speakers included Professor Sutanto Soehodho from the Department of Civil Engineering, University of Indonesia.
In the third session, Heri Siswanto (Director of Operations at PT KAI Logistics, representing the President Director of PT KAI Logistics), Ari Narsa (Head of the South Sumatra Provincial Transportation Office), Anderson Goh (Vice President of the Port Plus Business Division at PSA Southeast Asia), and Harry Sutanto (Vice Chair of the Central Board of the Indonesian Logistics and Forwarders Association) shared their insights, with Professor Agus Taufik Mulyono, from the UGM Civil Engineering, serving as the moderator.
Some important conclusions drawn from the seminar include efforts to attract investment in the railway sector, where significant investment decisions were found from financial and economic perspectives.
Furthermore, in order to enhance investment attractiveness, efforts to increase revenue from tariffs and reduce Operating Costs (OpEx) were considered challenging compared to road transport, a competing mode of transportation.
Railways have additional burdens, such as infrastructure maintenance, track access charges (TAC), fuel costs, and tax obligations.
On the other hand, railways contribute significantly to green transportation, potentially reducing carbon emissions by up to 84 percent compared to other modes of transport.
Considering the importance of emission control, which is currently a global movement, and the alignment of the railway mode with the global agenda, investment decision paradigms must shift from prioritizing financial aspects to environmental aspects in this new paradigm.
Social impacts, economic feasibility, and financial viability should follow environmental concerns.
Therefore, the government is inclined towards green infrastructure and considers green financing as one of the funding opportunities.
However, the existing green financing/green bond schemes often limit benefits for developing countries due to high transaction costs compared to carbon offset valuations.
Author: Agung Nugroho