State-owned water companies (PDAMs) need to improve their overall competency if they wish to meet a government target of one million new pipeline connections by 2011 or want any external funding for projects, the World Bank said Thursday in Jakarta.

During the second day of the Nusantara Water national assembly of water companies Aldo Baietti, senior water management specialist from the World Bank Institute, said local water companies should be striving to finance their projects autonomously.

Companies would have to prove they were financially capable in order to receive external funding, he said.

When companies cannot cover their project costs and taxes, the government is forced to back them financially. Due to a limited government budget this year, the water sector is suffering from cutbacks.

The World Bank said investment in water and sanitation had declined from US$400 million in 1999 to around US$45 million in 2005. More than 200 PDAMs allegedly owe the Finance Ministry Rp 4 trillion ($3.4 million) in debt, which the government will clear if companies show they can meet tax requirements.

PDAMs, now operating debt free, are being urged to revamp their infrastructure projects and invest in the extension of the pipeline system to meet government targets.

"How do we fund investments in the new pipeline connections? Most PDAMs do not have the capability to financially organize these massive projects, so we must work with the private sector. Also, we are finding the regulations very limiting," a seminar participant said.

A representative from Surabaya PDAM said the company, which has won five awards for their performance from Business Review magazine, had only managed to extend the network by 18,000 connections a year, compared to the target of 20,000. This same target also requires the company to connect an additional 60,000 households to the water system every year.

"This target is extremely high and we are struggling to come even close to meeting it," she said.

An expert in water provision in East Java, Hariwiko Indarjanto, said historically the target was high considering only 7.3 million connections had been made in the last 30 years. Through better technical knowledge, he said, massive savings could be achieved and the extra funding channeled into the pipeline expansion project.

"My team found many technical errors, such as the overuse of chemicals and electricity, but since the corrections were made, the companies have enjoyed greater savings," he said.

Atem Ramsundersingh, a senior water management and institution specialist at the World Bank, said the target was attainable if water companies, local governments and local councils improved their competency and supported each other. He said the Bank was ready to assist companies that required support.

The World Bank last loaned money to Indonesian water company PAM Jaya in 1991.

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