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Purchase of Palyja shares 'may lead to corruption'
Less is more: A group of dancers perform the Saman traditional dance from Aceh during the celebration of World Water Day, which falls on March 22, at the Hotel Indonesia traffic circle in Central Jakarta, on Sunday
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span class="inline inline-center">Less is more: A group of dancers perform the Saman traditional dance from Aceh during the celebration of World Water Day, which falls on March 22, at the Hotel Indonesia traffic circle in Central Jakarta, on Sunday. The campaign, which lasts until March 29, is aimed at encouraging the conservation of water and electricity.
The public and experts have expressed their concerns over the city administration's plan to resolve the capital's water operation issue by buying shares of PT PAM Lyonnaise Jaya (Palyja), arguing that the action will create new problems, including the potential for corruption.
Indonesia Corruption Watch (ICW) activist Tama S. Langkun said that if the city administration bought the shares and the citizens' lawsuit won, the funds used to buy the shares could be considered illicit.
'If there is a tort that caused state losses, a corruption case could arise,' he said.
Tama said, however, that many other aspects should be considered when judging whether a corrupt act had taken place.
The city administration is looking to buy shares of Palyja from PT Astratel and France-based utility company Suez Environnement to improve water operation services in the city.
After 16 years of operation, Palyja, which manages the western part of the city, and PT Aetra Air Jakarta, which operates the eastern part, are thought as having failed to provide adequate service to the city and are alleged to have caused state losses of Rp 590 billion (US$51.64 million).
A coalition of experts and activists, called the Coalition of Jakarta Residents Opposing to Water Privatization (KMMSAJ), filed a lawsuit, demanding the court annul the contract in November 2012.
Meanwhile, the city administration has decided to buy the shares through its city-owned enterprises ' property developer PT Jakarta Propertindo (Jakpro) and Pembangunan Jaya. Jakpro recently received a capital injection of Rp 600 billion, which will be used to complete the acquisition.
Coordinator of the People's Coalition for the Right to Water (Kruha), Muhammad Reza, said in a discussion recently that buying Palyja's shares was a dangerous move as the cooperation agreement between city-owned water operator PAM Jaya with both the firm and Aetra was illegal.
'According to the audit conducted by the Supreme Audit Agency [BPK] in 2009, the contract is illegal because it did not have written approval from the governor to the board of directors of PAM Jaya to hand over the asset to other parties,' he said.
He added that the central government, however, did not take action after the audit.
Reza added that the city administration had planned a business-to-business scheme, meaning that the takeover of the shares would not make Palyja a public company. 'The shares are being bought by city-owned enterprises. Both of them are profit-oriented companies,' he said.
He emphasized that if the city administration insisted on buying the shares to take over Palyja, it would mean that the city administration had agreed to illegal contracts.
Expert on public services Emanuele Lobina said the city administration should consider many options and possibilities before deciding to buy the shares.
Lobina said that around 100 cities around the world had taken over the management of water operations from private entities in various ways.
'Besides buying the shares, the city could unilaterally terminate the contract or file a citizens lawsuit,' he said, adding that the way could be cheaper than buying the shares.
Commenting on the concern, Jakarta Deputy Governor Basuki 'Ahok' Tjahaja Purnama said the city chose Jakpro to acquire the shares because it would be more expensive if PAM Jaya did so.
'If PAM Jaya bought back the shares, it could cost around Rp 4 trillion, while if Jakpro bought them, it would cost only Rp 1 trillion,' he said.
Ahok said that after buying the shares, the city administration would possibly hand them over to PAM Jaya if its management improved.
'Don't worry about Jakpro as we own the majority of the shares, so we can control the company,' he said.
