Private sector participation in clean water management seems had to pass through a long and complicated way in Jakarta. The first private sector involvement into a public enterprise of clean water management was commenced in June 1991, when the World Bank provided a loan that was amounting to USD 92 million to PAM Jaya, , in order to improve water infrastructure of the city. another loan, which has been received from the Japanese Economic Cooperation Fund (JECF) supported the first one, and given for the the installation of entire water management in Pulogadung. These two organizations were the main sponsors of private party involvement into clean water management in Jakarta.
The first private actor, Thames Water Overseas Ltd. Was entered the scene in 1993, after joining the company of Sigit Harjojudanto, son of the then President Soeharto. Suez had already active role in clean water supply in Indonesia since the 1980s. After the entrance of the Thames into market Suez than joined with Anthony Salim, son of Indonesia biggest conglomerate – into partnership for ‘Jakarta water market”
Jakarta is separated into two areas by the nature of Ciliwung River. The western area is managed by a company that is now called as PT PAM Lyonnaise Jaya (Palyja), and the eastern area is managed by PT Thames PAM Jaya (TPJ – since 2008 become Aetra). Model of cooperation between PAM Jaya and its two private concessionaires is a modified concession which is named as Operate, Develop and Transfer. The cooperation agreement (CA) was enforced on February 1, 1998. Term of the agreement was set for twenty-fifth years. As the consequence of Indonesian economical and political crisis, the agreement has been amended in 1998, but in the new version which became effective on October 22, 2001, made no change on the agreement’s term period.
The process of involvement of the private into clean water management in Jakarta has been full of collusion, corruption and nepotism. Sense of economic interest by utilizing political power was very strong both before project implementation and during the share selling process that was happened recently.
In his presentation and explanation, Achmad Lanti, the Head Regulatory Body has described the role of the President Soehato in the process of private concessionaires’ participation into Jakarta clean water management. Indeed, the private participation has been started by the Republic Indonesia President; with his advice letter made on June 12, 1995 to the Minister of Public Work Affairs The advice might have given positive or neutral results, but in fact it brought the involvement of the President son and Anthony Salim, a son of his crony on the other. Sigit’s company PT Kekarpola Thames Airindo (KATI) joined with Thames Water Overseas Ltd. The Thames has given 20% of the company share to Sigit- Anthony Salim’s company, through PT Garuda Dipta Semesta (GDS) after joining with the Suez Lyonnaise des Eaux was the second private actor involving the process.
During the process the share ownerships of the two foreign private concessionaires was assigned several times. When the CA was signed on July 6 Juli, 1997, KATI shares were amounting to 20% -which was owned by Kekarpola Airindo- and the other 80% was owned by Thames Water Overseas Ltd. [7] Whereas GDS shares has been devided between PT Elang Sakti Prabawa and Suez Lyonnaise des Eaux as 60% to 40% respectively.
On July 17, 1998, GDS was renamed into PT PAM Lyonnaise Jaya (Palyja) with 100% shares owned by Suez Lyonnaise des Eaux. KATI then was renamed into PT Thames PAM Jaya (TPJ) with share composition of 5% owned by PT Kekarpola Airindo and 95% owned by PT Thames Water Overseas Ltd. which then was renamed into RWE Thames Water.
On October 22, 2001 when the new CA was signed, Article 7 states that the Second Party for Palyja is Ondeo Services (previously known as Suez Lyonnaise des Eaux) and PT Bangun Tjipta Sarana while the Second Party for TPJ is Thames Water Overseas Ltd. and PT Tera Meta Phora.
This process showed that clean water management has become an arena in which economic profit was exploited through the influence of political power. It is very interesting to observe the manner of private actors entering into Jakarta and how the shares of local partners could be assigned from one company to the other, and how at the end the foreign private concessionaires exchange their shares in large amount with the other company.
Economic interest gained by private corporations has been expressed in several articles of the CA and by those mechanisms created by it. One of these mechanisms is the mechanism of payment. The mechanism of payment for private concessionaires is in form of water charge: the remuneration to the operator for service and investment, it is based on value per volume (m3) sold and adjusted once every five years. If the water tariff set by government is cheaper than the water charge then there will be deficit borne to the PAM Jaya/local government known as shortfall. The payment made through the water charge and its escalation formula provides profit security for private concessionaires during the cooperation period. To other protection to secure concessionaire interest is a mechanism approved by City Council to automatically increase tariff in every semester. The formula of automatic tariff adjustment was agreed on July 2004 for the period ended in 2007. Since the CA was implemented, tariffs were increased on July 24, 1998, March 29, April 4, 2003, December 31, 2003, January 2005, July 1, 2005 and December 30, 2005.
Revenue obtained from water tariff is divided pursuant to provision set on Article 28. Revenue for PAM Jaya which is equal to monthly cost of the company, payment of loan to Financial Affairs Department, expense for Regulator Body and payment for Region Original Income to DKI Jakarta Provincial Government which values are on Attachment 6 of the CA. Nevertheless the revenue of PAM Jaya does not mean a profit for PAM Jaya because if all revenue obtained from the tariff is not sufficient for payment of water charge to private concessionaires, PAM Jaya have to be responsible on the loss in a form of shortfall.
Regulator Body was established on September 19, 2001. Its position is uncommon, due to its function and authority that is regulated on the CA Article 51.1.
The Parties agree that regulator body (Supervisory Body) to be established by Governor of DKI Jakarta shall have function and authority as regulated on the Letter of Decree of Governor of DKI Jakarta Province written on Attachment 20….
Usually Regulator Body is independent and should have been established prior to the CA is signed. In many states like England and Wales which Regulator Body could be a model for other states, their Regulator Body is even functioned nationally. Hopefully the Regulator Body should compare the performance and tariff charged to the costumers and costumers would not be encumbered with inefficiency caused by the private concessionaires. For such case in Jakarta, if Regulator Body is really independent and established prior to the CA made, then we will get a better CA which does not protect mostly the business interests of the private concessionaires.
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