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Jakarta, Indonesia: Water supply improvements to Marunda District
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). PAM Jaya continues 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 percent of PAM Jayas staff were seconded to the private companies; the remainder continued to be employed by PAM Jaya. Other participants that play lesser roles specifically in the focus project area include: 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 is for the expansion of piped water supply for household connections in Marunda District - a poor community of eastern Jakarta. Marunda is home to approximately 1,600 households (or roughly 9,600 people). Currently the infrastructure network serves 1,540 houses with running water. Context
The economic climate has been unpredictable since Suharto stepped down (summer 1998). His replacement, Habibie, was put under pressure to terminate the water concessions but officials allowed the concessions to remain under joint public-private sector operation. At this point, PAM Jaya became the only local partner with a 10% share. The rupiah has been in a long downwards spiral and separatist movements continue to rumble. Political violence and unrest remain commonplace (including in Jakarta), and opposition to foreign firms is still strong. Staff security has posed difficulties for the firm, particularly as it expands networks into new areas. Such problems largely result from protests and obstacles put in place by the trade union and not from disputes between the community and the company.
The private concessionaires are 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 determined to be inappropriate. Efforts by the World Bank to assist in creating a regulatory body & framework have, to date, remained incomplete. The tariff structure provides 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, have become transparent, and along with tariffs, are based on the size of the dwelling. The company has on occasion significantly reduced the connection charges for different target communities. Tariffs are cross-subsidised with most of Marunda District qualifying for the lowest band. Tariff rises have been politically difficult, though a mechanism is meant to reflect exchange rate movements. Cost recovery though has been extremely high, partly due to the vast difference between piped water and private vendor charges. The environmental situation in Jakarta is generally poor, especially in more marginalised quarters. Objectives and Structures of Partnership
In broad terms, the partnership is 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 lie primarily between TWI and Pam Jaya, but the project is 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 are obviously formalised through the contract, they are not through specific partnership structures - no formalised and regularised mechanism brings the public and private sector stakeholders together to raise and resolve issues. The relationship with the community is largely that of operator / client-customer. There are 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 are set toward meeting the following targets: i) provide water supply with 100 percent 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 have been 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 is principally that of operator and client/customer. Communications and Feedback
Communications between the stakeholders are ad hoc and loosely structured. Relations between newly-hired staff and previous utility staff have been tense, and this is reflected in the relationship between public and private sectors. Apart from directly to the company, The Consumer Association is one channel for the community to voice its needs/grievances. Communications between the Ministry of Public Works and the company have also proven challenging. Evolution and Institutionalisation
The principal development lies in Pam Jaya becoming a shareholder in the operating company. This has altered the nature of the relationship between public and private sectors and led to the need to address the regulatory framework. As mentioned, there are currently no CBO/NGO partners, but proposals for the future are being developed to promote smooth replication of the Marunda project. Results
Given the various challenges that have faced the company in the past two years, their ability to supply nearly 1600 households in Marunda District with water has been quite an achievement. A partnership between the different stakeholder groups would provide many other advantages to the company and its customers, building on the project components for which the company is contractually responsible. Strengths
Given the weak structure of the partnership, commenting upon specific strengths of the partnership is inappropriate. Next Steps and Replicability
The company is convinced of the benefits of exploring and developing more structured partnerships for future projects in poor neighbourhoods. They will thus be exploring possibilities with different local NGOs that may be willing to work with the company The company seeks 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 relate 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.
Synopsis content update: 10 July 2001 |
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