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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. Research Objectives. Assess and evaluate Public Private
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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
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
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
Methods Inductive methodology: • Collection of documents • Interview with the representatives of stakeholders (7 different groups) • Consumers survey (350 consumers)
Water Privatisation • What is Privatisation? ¤ • Why need Privatisation? ¤ • How Privatisation works? ¤ • Who advocate in Privatisation?¤
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
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
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
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
Findings and Results • The Stakeholders Interviews • The Consumers Survey • Supporting literatures
The Stakeholder Interviews • Stakeholder and Institutional Relationship • Jakarta Drinking Water System • Asset and operation • Tariff and Revenues • Technical Targets • Target achievements
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
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
The Consumers Survey • General Information • Responses to the Questionnaire
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 ¤
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
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 ¤
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
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
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
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.
5 Driving Forces of Privatisation (Gleick, 2002) • Ideological Pressure • Pragmatic Pressure • Societal Pressure • Financial Pressure • Commercial Pressure
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
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
Major Issues in Water Provision • Water tariff • Water quality, quantity, continuity and pressure • Billing collection • Meter reading • Technical problems • Management • Administration • Customer service • information
Water and Sanitation Facilities Low-Income Mid-Income High-Income Water Well Water Storage Water Tap Tap & Filter Water Meter Water Tank