Jakarta, Indonesia

Actors

In June 1997, PAM Jaya (the public sector utility) signed co-operation agreements, comparable to concession contracts, with private foreign investors. The partner selected for East Jakarta included a local majority shareholder and Thames Water International (TWI). At the time of this project, PAM Jaya continued to own the assets, but the use of assets (and their management, improvement and expansion) has been licensed to the private partners for a period of 25 years. About 80% of PAM Jaya's staff were seconded to the private companies; the remainder continued to be employed by PAM Jaya. Other participants that played lesser roles specifically in the focus project area included: the Municipality of North Jakarta, the Ministry of Public Works, the trade unions, the Consumer Association and Marunda City Planning Council.

Project description

The focus project was for the expansion of piped water supply for household connections in Marunda District - a poor community of eastern Jakarta. At the time, Marunda was home to approximately 1,600 households (roughly 9,600 people). The infrastructure network served 1,540 houses with running water.

Context

The economic climate was unpredictable after Suharto stepped down (summer 1998). His replacement, Habibie, was put under pressure to terminate the water concessions, but officials allowed them to remain under joint public-private sector operation. At this point, PAM Jaya became the only local partner with a 10% share. The rupiah had been in a long downwards spiral and separatist movements continued to pose a threat. Political violence and unrest were commonplace (including in Jakarta), and opposition to foreign firms was strong. Staff security posed difficulties for the firm, particularly as it expanded networks into new areas. Such problems largely resulted from protests and obstacles put in place by the trade union and not from disputes between the community and the company.

The private concessionaires were operating largely under an unregulated policy environment. Pam Jaya was to be converted into a regulatory body, but after becoming a shareholder in the company, this was deemed inappropriate. The tariff structure provided a strong incentive to the private sector operator and a disincentive for the public sector to serve the poor.  

Project beneficiaries

Prior to the concession contract, households in Marunda District generally received their water from private vendors who purchased water from tankers. This was expensive. Connection charges, which were opaque prior to the concession, became transparent, and along with tariffs, were based on the size of the dwelling. The company had on occasion significantly reduced the connection charges for different target communities. Tariffs were cross-subsidised with most of Marunda District qualifying for the lowest band. Tariff rises were politically difficult, though a mechanism was meant to reflect exchange rate movements. Cost recovery however was extremely high, partly due to the vast difference between piped water and private vendor charges. The environmental situation in Jakarta was generally poor, especially in more marginalised quarters.

Objectives and structures of partnership

In broad terms, the partnership was aimed at providing water to the urban poor of Marunda District in Northern Jakarta. However, calling the relationship a tri-sector partnership perhaps stretches the definition of the term. The relationships lay primarily between TWI and Pam Jaya, but the project was also influenced by the Marunda City Planning Council, the municipality of North Jakarta, the Indonesian Consumer Association and the Ministry of Public Works. Though some of these relationships were formalised through the contract, there were no specific partnership structures - no formalised and regularised mechanism brought the public and private sector stakeholders together to raise and resolve issues. The relationship with the community was largely that of operator / client-customer. There were no civil society actors (NGOs, CBOs or otherwise) directly involved in the work in poor communities.

Roles and responsibilities

The responsibilities of Thames Pam Jaya were to meet the following targets: i) provide water supply with 100% coverage (including all expanded areas of the city) by 2023; ii) improve quality of the piped water supply to ensure it is potable by 2007; iii) increase the pressure in the system to ensure consistent supply; and iv) ensure that all debt used to finance the system or expansion of the system is repaid by 2023. There is no responsibility under the contract for the provision of infrastructure related to sanitation, which is the responsibility of the municipalities.

Community liaison

Significant efforts were made to reach out to the public via the media, through public forums, and in publishing the connection and tariff rates. As mentioned, the relationship between the company and the community was principally that of operator and client/customer.

Communications and feedback

Communications between the stakeholders were ad hoc and loosely structured. Relations between newly-hired staff and previous utility staff were tense, and this was reflected in the relationship between public and private sectors. Apart from directly to the company, The Consumer Association was one channel for the community to voice its needs/grievances. Communications between the Ministry of Public Works and the company also proved challenging.  

Evolution and institutionalisation

The principal development lay in Pam Jaya becoming a shareholder in the operating company. This altered the nature of the relationship between public and private sectors and created the need to address the regulatory framework. As mentioned, there were no CBO/NGO partners at the time.

Results

Given the various challenges that faced the company in the previous two years, their ability to supply nearly 1600 households in Marunda District with water was quite an achievement. 

Next steps and replicability

By the end of the project, the company was convinced of the benefits of exploring and developing more structured partnerships for future projects in poor neighbourhoods. They planned to explore possibilities with different local NGOs that might be willing to work with the company. The company sought to involve the municipalities and ministries in specific supplementary activities such as social, environmental and health-related education and awareness and co-ordinated infrastructure development.

Wider lessons

Wider lessons related to the:

• Difficulty of setting up partnerships in an unstable (and potentially hostile) political and economic environment
• Problems that can be faced where trade unions are virulently opposed to private sector participation and union buy-in remains elusive
• Important influence that macro-contract incentives have on the structure and viability of partnerships and the provision of service to the poor.