Govt moves to help out debt-strapped water firms, initiates restructuring

The Jakarta Post, Jakarta

The Finance Ministry will restructure debt of close to Rp 4 trillion (around US$440 million) owed by 176 local-government water utilities so that they can focus more on improving their services.

The restructuring will mostly take the form of rescheduling of principal and interest payments, although a small part of the debt will also benefit from write-offs, said Herry Purnomo, the ministry's director general for the treasury.

The overall debt is made up of Rp 3.75 trillion, $940,000 and 300,000 deutsche marks.

"The debt originated from central government loans between 1971 and 2005," Herry said. The loans and interest reached a total of Rp 5.949 trillion by the end of September, with the utilities only managing to repay some 37 percent of the outstanding debt, or Rp 2.195 trillion.

The restructuring is expected to provide the utilities with breathing space and allow them to focus on improving their water supply capacities.

At present, the utilities are only able to supply water to 41 percent of the urban population, against a national target of 66 percent by 2009.

Ridwan Syahputra Musagani, chairman of Indonesian Water Utilities Association (Perpamsi), hailed the government's move, saying it would allow the companies to better manage their cash flows -- a plus factor as most of them are desperately trying to finding private investors as partners.

"There are actually investors, local and foreign, which have expressed interest in teaming up with local water utilities. But many are concerned about the huge debts they are laboring under.

"So, I think this will be good news for those investors," Ridwan said.

Currently, there are 318 water utilities throughout the country, with only 44 of them being deemed healthy. Some of the ailing water companies with the biggest debt burdens are found in major cities like Jakarta, Bandung, Palembang and Makassar.(07)
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