Reconstruction of Indonesia’s Drinking Water Utilities

1. Reconstruction of Indonesia’s Drinking Water Utilities Assessment and Stakeholders Perspectives on Private Sector Participation in the Capital Province of Jakarta Nur Endah Shofiani EESI 2002/2003

2. Research Objectives Assess and evaluate Public Private Partnership (PPP) in eastern half of Jakarta: • Process of PPP • Perception of different stakeholders • Expectation of the consumers • Service quality during the last 5 years

3. Study Area Jakarta Bay Zone 3 North Jakarta West Jakarta Zone 4 Central Jakarta Zone 2 Zone 1 East Jakarta Ciliwung River Ciliwung River Zone 5 South Jakarta Zone 6 The Province of West Java RWE Thames Water (Thames PAM Jaya) Suez-Lyonnaise (PAM Lyonnaise Jaya N The Province of West Java

4. Methods Inductive methodology: • Collection of documents • Interview with the representatives of stakeholders (7 different groups) • Consumers survey (350 consumers)

5. Water Privatisation • What is Privatisation? ¤ • Why need Privatisation? ¤ • How Privatisation works? ¤ • Who advocate in Privatisation?¤

6. Rationales of Water Privatisation in Indonesia • High population growth • High demand of infrastructure services • Only 36% of urban population (67 mil) have access to piped water Therefore: • investments is needed But: • The GoI could not provide the capitals

7. Population Indonesia: • In 2000 203.5 millions (growth rate 1.35%) • 59% reside in Java (7% of total area) • Population density 945 heads/km2 Jakarta: • In 2002 8.4 millions (growth rate 0.16%) • Area 662km2

8. Jakarta Water Supply Problems • Population of 8.4 millions (growth 0.16%) • Low service area coverage (48%) • High water losses (53% UFW) • Low population coverage (29.61%) • Excessive groundwater abstraction • Land subsidies and saltwater intrusion

9. Jakarta’s History of Privatisation • 5 June 1995: GOI invited private to participate • 6 Oct 1995: MoU agreed and signed with two appointed consortia ¤ • Jan 1996: Submission of Feasibility Study • 6 June 1997: Concession Agreements for 25 years were signed • 1 Feb 1998: The effective day of agreement • 1 June 1998: Renegotiation of partnership agreement • 19 Sept 2001: New agreements were signed

10. Findings and Results • The Stakeholders Interviews • The Consumers Survey • Supporting literatures

11. The Stakeholder Interviews • Stakeholder and Institutional Relationship • Jakarta Drinking Water System • Asset and operation • Tariff and Revenues • Technical Targets • Target achievements

12. Stakeholders and Institutional Relationship

13. Jakarta Drinking Water Supply System

14. Tariff and Revenue • Water tariff and water charge ¤ • Tariff and charge adjustment: regularly • Revenue: from water tariff • Revenue sharing mechanism: • Debt and operational cost of PAM Jaya • The cost of regulatory body • Local government income/revenue • Compensation to the private partner

15. Technical Targets and Service Standard • Technical targets: • Volume of water billed • Water production • Unaccounted for water • Number of connection • Service coverage • Service standard • Water quality • Water pressure • Consumer service

16. Target Achievement ¤¤

17. The Consumers Survey • General Information • Responses to the Questionnaire

18. General Information • Number of consumers: 348 760 (July 2003) • Distribution of sex: F/M = 180/170 (100/105) • Employment Status • Income per month • Persons per house • Consumer Groups ¤

19. The Consumer Groups Very poor households Group I Orphanage Group II Poor households Group IIIA Low-Income Group IIIB Middle Income Group IVA High-Income Group IVB Offices hotels etc

20. Responses to the Questionnaire • The operator • Expenses for water • Water tariff adjustment • Water continuity • Water quality problems ¤ • Additional source of drinking water ¤ • Improvement in water service provision ¤ • Customer satisfaction ¤

21. Discussion • Water as a fundamental need vs economic good • Role of International Financial Institutions • The absence of appropriate regulatory framework • Premature institutional transformation • Semi concession agreement • The government fully guarantee the loss of the private company

22. Discussion (cont.) • Bilateral cooperation between UK and Indonesia • Contract renegotiations • No performance bond • Limited access to water and low coverage ratio • Independent regulatory body • Lack of public participation • High water tariff and low service performance

23. Recommendation • Establishment of appropriate regulatory framework • Increase institutional capacity • Establishment of independent regulatory body • Regular classification of consumers group • Delay tariff adjustment • Water in public hand

25. Definition (Gleick, 2002) • Water Privatisation is a process of transferring some or all of the assets or operations of public water system into private hands.

26. 5 Driving Forces of Privatisation (Gleick, 2002) • Ideological Pressure • Pragmatic Pressure • Societal Pressure • Financial Pressure • Commercial Pressure

27. Models of Privatisation (Blokland, 1999)

28. Who’s Involved? • Private water companies, including Transnational Companies • International Financial Institutions (IFIs): World Bank, IMF, Asian Development Bank, etc. • International Trade Treaties: GATT, WTO, GATS, NAFTA, AFTA, etc. • Governments: institutions and policies

29. The Two Consortia • Eastern Jakarta (Zone II, III and VI): PT. Thames PAM Jaya (TPJ) • RWE Thames Water • PT. Kekarpola Airindo • Western Jakarta (Zone I, IV, and V): PT. PAM Lyonnaise Jaya (PALYJA) • Suez-Lyonnaise des Eaux • PT. Garuda Dipta Semesta

32. General Information (cont.)

33. Response to the Questionnaire (cont.)

34. Response to the Questionnaire (cont.)

35. Major Issues in Water Provision • Water tariff • Water quality, quantity, continuity and pressure • Billing collection • Meter reading • Technical problems • Management • Administration • Customer service • information

36. Water and Sanitation Facilities Low-Income Mid-Income High-Income Water Well Water Storage Water Tap Tap & Filter Water Meter Water Tank

37. Water Charge vs Water Tariff

38. Detailed Target Achievement (1)

39. Detailed Target Achievement (2)