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 Process of PPP Perception of different stakeholders Perception of different stakeholders Expectation of the consumers Expectation of the consumers Service quality during the last 5 years Service quality during the last 5 years

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

4. Methods Inductive methodology: Collection of documents Collection of documents Interview with the representatives of stakeholders (7 different groups) Interview with the representatives of stakeholders (7 different groups)7 different groups7 different groups Consumers survey (350 consumers) Consumers survey (350 consumers)350 consumers350 consumers

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

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

7. Population Indonesia: In 2000 203.5 millions (growth rate 1.35%) In 2000 203.5 millions (growth rate 1.35%) 59% reside in Java (7% of total area) 59% reside in Java (7% of total area) Population density 945 heads/km2 Population density 945 heads/km2Jakarta: In 2002 8.4 millions (growth rate 0.16%) In 2002 8.4 millions (growth rate 0.16%) Area 662km2 Area 662km2

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

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

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

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

12. Stakeholders and Institutional Relationship

13. Jakarta Drinking Water Supply System

14. Tariff and Revenue Water tariff and water charge ¤ Water tariff and water charge ¤¤ Tariff and charge adjustment: regularly Tariff and charge adjustment: regularly Revenue: from water tariff Revenue: from water tariff Revenue sharing mechanism: 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: Technical targets: –Volume of water billed –Water production –Unaccounted for water –Number of connection –Service coverage Service standard Service standard –Water quality –Water pressure –Consumer service

16. Target Achievement ¤ ¤ ¤

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

18. General Information Number of consumers: 348 760 (July 2003) Number of consumers: 348 760 (July 2003) Distribution of sex: F/M = 180/170 (100/105) Distribution of sex: F/M = 180/170 (100/105) Employment Status Employment Status Income per month Income per month Persons per house Persons per house Consumer Groups¤ 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 The operator Expenses for water Expenses for water Water tariff adjustment Water tariff adjustment Water continuity Water continuity Water quality problems¤ Water quality problems¤¤ Additional source of drinking water¤ Additional source of drinking water¤¤ Improvement in water service provision ¤ Improvement in water service provision ¤¤ Customer satisfaction¤ Customer satisfaction¤¤

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

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

23. Recommendation Establishment of appropriate regulatory framework Establishment of appropriate regulatory framework Increase institutional capacity Increase institutional capacity Establishment of independent regulatory body Establishment of independent regulatory body Regular classification of consumers group Regular classification of consumers group Delay tariff adjustment Delay tariff adjustment Water in public hand 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. 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 Ideological Pressure Pragmatic Pressure Pragmatic Pressure Societal Pressure Societal Pressure Financial Pressure Financial Pressure Commercial Pressure Commercial Pressure

27. Models of Privatisation (Blokland, 1999)

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

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

30. STAKEHOLDER GROUPS DESCRIPTION Government - Sub-directorate of clean water, National Development Planning Agency (BAPPENAS) - Sub-directorate of urban clean water, Ministry of Settlement and Regional Infrastructure (KIMPRASWIL) - Sub-directorate of technical advisory, Ministry of Settlement and Regional Infrastructure (KIMPRASWIL) - Investment and Construction Development Agency (BAPEKIN) Regional Water Authorities - Jakarta Municipal Waterworks (PAM Jaya) - The Regulatory Body InternationalAgencies - Urban Development Sector Unit, World Bank - Urban Development and Water Supply Sector, the Asian Development Bank (ADB) Private Company PT. Thames PAM Jaya (TPJ) a consortia of RWE Thames Water NGOs - Indonesian Consumers Organization (YLKI) - Indonesian Forum for Environment/Friends of Earth Indonesia (WALHI) - Indonesia Drinking Water Communication Forum (FORKAMI) - International NGO Forum on Indonesian Development (INFID) Association Indonesian Water Supply Association (PERPAMSI) Consumer Households, social and commercial

31. ZoneRayonConsumerPercentageRespondent II Zone II 139 029 40% 140 III Zone III 123 482 35%124 VI Zone VI 86 249 25%86 Total 348 760 100% 350 350

32. General Information (cont.)

33. Response to the Questionnaire (cont.)

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

36. Water and Sanitation Facilities Low-IncomeMid-IncomeHigh-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)