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Jakarta Post

Jokowi to cancel contracts with water firms

  • Sita W. Dewi and Tertiani ZB Simanjuntak

    The Jakarta Post

Jakarta | Thu, March 28 2013 | 09:21 am

In a surprising move, Jakarta Governor Joko “Jokowi” Widodo says he wants to cancel the city’s contracts with two private firms for water provision and distribution.

Meeting with representatives of the Coalition of Jakarta Residents Opposing Water Privatization ( KMMSAJ ) on Wednesday, Jokowi said that officials would audit contracts with PT PAM Lyonnaise Jaya ( Palyja ) and PT Aetra Air Jakarta and assess the city’s legal options should the decision to annul the contracts be challenged by courts or in arbitration.

KMMSAJ coordinator Muhammad Reza claimed that Jokowi had realized that the contracts were unfair and contained a double-financing scheme that kept the city deep in debt.

“The governor said that even should we [eventually] lose in international arbitration, it would have a different impact if we could win in the national courts,” Reza told The Jakarta Post.

The double-funding plan in the contract that Reza referred to was based on a full cost-recovery system, meaning that revenue from water bills must cover all operational costs, including investment.

City water operator PAM Jaya and the Jakarta administration would owe the firms a staggering Rp 18.2 trillion if the contracts continue until their scheduled expiration date in 2022, according to a report from PAM Jaya.

The water-privatization contracts were signed on June 6, 1997, under the administration of Soerjadi Soedirdja, and became effective in February 1998 under Sutiyoso’s administration.

Under the contracts, Palyja, which is owned by Suez and Astratel, manages the water for the city’s west, while the city’s east is managed by Aetra.

The contracts have allowed the firms to book huge profits by overcharging costumers. While Jakarta’s Financial Development Comptroller ( BPKP ) recommended in 2011 that the firms’ profits be set at 14.8 percent, the companies insisted on 22 percent.

The coalition filed a class-action lawsuit against the city at the Central Jakarta District Court over the policy that allowed water privatization, which they claimed violated a Constitutional requirement for the government to take control of the provision and distribution of vital natural resources for the people.

The coordinator of the lawsuit, Arif Maulana, said that the coalition had won another suit it had filed at the State Administrative Court that required PAM Jaya to make public the content of the contracts with the private firms.

“We have won the case, but the water operator filed an appeal, thus the legal process continues,” Arif told the Post. “We are now studying the possibility of penalties should the administration annul the contract at the request of a third party: The people.”

Deputy Governor Basuki “Ahok” Tjahaja Purnama said last week that the administration was determined to renegotiate the contracts and to include a city-owned enterprise in the water business.

“We haven’t decided on Manila Water,” Ahok said, referring to the Philippine-based company currently attempting to buy out Palyja, raising concerns on the contract renegotiations.

Ahok said that he preferred to award the contract to an experienced city-owned enterprise, such as PD Pembangunan Jaya. “We also want to renegotiate the unfair contract.”

Palyja spokeswoman Meyritha Maryanie said that the company would abide by the law and comply with its contract, declining to elaborate on what the firm would do if the contract was cancelled.

“The contract only stipulates consequences if there is a dispute between the two parties, because the contract was only between the two parties. The contract does not mention any third party,” she said, adding that all parties should comply with the contract.

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