Transport policies in conflict: Deregulation, subsidies, and regional development in Indonesia

Dramatic economic growth in Indonesia over the past 20 years has been accompanied by a broad expansion in the transport sector. Priorities with respect to the sector have gradually changed but rehabilitation has been and continues to be very conspicuous. Several critical issues face the sector. Among these are the inefficiency of the railway, the continued deregulation of the port system and the matter of subsidies within the transport system. A dilemma in policy may be observed where the pursuit of the objectives of equity and income redistribution conflicts with efforts to improve the efficiency of investment alternatives. One of these areas of conflict is the Pioneer air and sea services which provide access to remote areas. The intent and impact of this program are examined. Observations on the current status of the sector and a complementary rationale for new directions in transport investment planning are examined.