From The Jakarta Post

Dodgy water business

Do Jakartans care about World Habitat Day which falls on the first Monday of October? Should they do so when their wells are running out of water in this dry season? The answers to these questions will be "No".

Water scarcities during the dry season are inevitable in many areas of the country. Jakarta is no exception.

In several kampongs in the capital city, families have been forced to share wells to get clean water for washing and bathing.

Groundwater conservation campaigns have never been successful here, with uncontrolled population increase being the most serious constraint. Green spaces have been converted into residential areas, and office and business estates, leading to shrinking groundwater deposits over time. No doubt, many artesian wells in Jakarta now become dry sooner than they used to do in previous years.

In a dense kampong in South Jakarta bordering on Tangerang, the absence of empty spaces has forced locals to drill into the roads outside their homes in order to find new water sources.

Meanwhile, the subscribers of water companies PT Thames PAM Jaya (TPJ) and PT PAM Lyonnaise Jaya are worried about the water shortage too. Water supplies have decreased due to the dry season. In some areas, families have given up subscribing to the tap water companies due to supply problems.

Besides uncertainty over the raw water supply, various technical problems have burdened city-owned PAM Jaya in the past. This encouraged the private sector to get involved in the tap water business.

In 1996, PAM Jaya signed agreements with Thames Water and Lyonnaise. Strangely, the two companies were given favorable water concessions without a tender or public consultation. Thames was at that time reportedly aligned with PT Kekar Pola Airindo, which belonged to then President Soeharto's eldest son Sigit Harjojudanto, while Lyonnaise was affiliated to PT Garuda Dipta Semesta, a subsidiary of the Salim group, which was owned by tycoon Soedono Salim, alias Liem Sioe Liong, a well-known crony of Soeharto.

Despite the involvement of the two private firms, the Jakarta administration's hope of improving the mains water supply to customers has not been fulfilled. In fact, there have been disimprovements, according to the Indonesian Forum for the Environment (Walhi)

Before the two foreign companies joined the business, 52 percent of Jakartans enjoyed access to tap water. That figure has dropped to only 50 percent since the introduction of private sector involvement.

The rate of leakage from pipes remains high. Currently, the leakage rate stands at 48 percent, or only a 5 percent improvement over the previous situation when PAM Jaya was solely responsible for the tap water supply. It is apparent that the two firms, PT Thames Pam Jaya (TPJ) and PT Pam Lyonnaise Jaya (Palyja), have not complied with the terms of their contracts.

Ironically, the two companies appear to be more interested in selling their shares than in seeking ways to improve public services. This move might reflect their frustration following their failure to address the continuing water problems in Jakarta.

On July 25, Palyja sold 49 percent of its city-granted shares to PT Astratel Nusantara and Citigroup Financial Products Inc.

Under the 25-year agreement, the sale of more than a 50 percent stake must be approved by the Jakarta administration and be informed to the city council.

While the controversy over Palyja's maneuver continues, Thames Water will likely sell all its shares in PT Thames Pam Jaya to Aquatico, a consortium consisting of Indonesia's ReCapital Advisors and Glendale Partners.

Sayogo Hendrosubroto, the chairman of the Jakarta Council's infrastructure commission, is against the sale of the companies' shares, branding the move a robbery. He accused the companies of taking advantage of "loopholes" in their contract, which will come up for review by the Jakarta administration in 2007.

What has really made the companies decide to get out of the water business in Jakarta?

Before signing their deals in 1996, the two foreign firms must have studied all the possibilities, including the benefits of retaining the existing PAM Jaya employees, who had been adamantly opposed to the privatization for fear of being laid off or dismissed.

No doubt, both TPJ and Palyja's moves to sell their shares are business-motivated decisions.

Therefore, it is apparent that the history of the private sector's involvement in the water business in Jakarta is something that the next city administration will need to study. Lamentations, criticism and even condemnation will not stop the two companies from pushing ahead with their plans, which the administration had clearly failed to anticipate.

According to the 1945 Constitution, water is a basic human need that should be controlled by the state to ensure the maximum well-being and welfare of the people. It is, therefore, the duty of the Jakarta administration and central government to be more circumspect in determining which firms will be allowed to purchase TPJ's and Palyja's shares. Whoever wins must be firmly committed to a social function and mission.
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