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Jakarta Post

Workers sue water operators over contract

  • Fikri Zaki Muhammadi

    The Jakarta Post

Jakarta   /   Fri, May 31, 2013   /  03:01 pm

Jakarta Water Workers Union (SPAJ) has reported the city administration and private water operators to the Central Jakarta Court over a contract that the former said hampered the clean water provision for low-income households and burdened the city with debts.

Workers also said that the private operators, PT PAM Lyonnaise Jaya (Palyja) and PT Aetra Air Jakarta, did not pay its second-level employees '€” city-owned water company PAM Jaya workers that were assigned to work with the operators '€” properly and had suspended wage increases for the last 10 years.

Union chairman Zaenal Abidin said that water operators had only provided water to high-income families, violating the 1993 bylaw on drinking water service and the 1992 bylaw on PAM Jaya.

He added that his side reported potential corrupt practices to the Corruption Eradication Commission (KPK) three years ago, but that there had been no follow-ups.

'€œWe hope the court clears this matter up soon,'€ he told The Jakarta Post on Thursday.

He said the union had recommended for the administration to select a new board of directors for PAM Jaya to prevent the same issue from reoccurring in the future.

The union'€™s attorney, Hermawanto, said that three points in the contract were problematic.

He said that the contract was void as it went against the 1992 and 1993 bylaws. Further, Hermawanto said that the contract would hamper the state budget if it were to continue.

'€œThe state will have to bear Rp 18 trillion (US$1.83 billion) if we don'€™t change the contract, resulting from debts,'€ he said. '€œWe also potentially corrupt acts.'€

Deputy Governor Basuki Tjahaja Purnama has stated his support for the legal proceedings and said that the city administration would take its own steps too to cancel the contract.

The contract, which was signed on June 6, 1997 and took effect in February 1998, contained a double financing scheme that critics have said hampered the clean water provision for low-income households. The scheme differentiates between water charges, which is the price PAM pays operators to supply water to households, and water tariffs, which is the charge levied on customers.

Problems occurred when the water charges were higher than the revenue from water tariffs, which used a cross-subsidy system. The gap forced PAM to borrow from the private operators.

In 2011, PAM asked the Attorney General'€™s Office to review the contract and represent PAM in a contract renegotiation. PAM have also considered bringing the dispute to the Civil Court, claiming that a number of agencies, including the Indonesian Investment Coordinating Board (BKPM) and the Jakarta Water Regulatory Body, had started throwing their weight behind PAM.

After years of rigorous talks, PAM Jaya and Aetra reached an agreement in negotiations to renew their contract last year, the terms of which are expected to improve services.

In the supposed new agreement, Aetra has agreed to not increase water tariffs until the end of the contract term in 2022, while both have agreed to set the internal rate of return (IRR) at 15.82 percent, from the previous 22 percent. The IRR is a rate used to measure the profitability of investments. The Finance and Development Comptroller (BPKP) had previously recommended for the city to set the IRR at 14.16 percent.

Last month, Aetra said it would finish the contract renegotiation by June. Until now, however, the city and Palyja have yet to make any progress in their contract renegotiations.

Ahok has also repeatedly expressed the city'€™s intention to take a majority stake in the water firm and to include a city-owned enterprise in the business.

Palya spokesperson Meyritha Maryanie said she had not heard about the lawsuit.

However, she acknowledged a different scheme for PAM workers in Palyja. '€œThe amount workers get is still all based on performance and education levels,'€ she told the Post.

Meyritha also pointed out that Palyja had increased its employees wages every year, mentioning July 2011 and 2012 as the last times.

'€œJust sue us, we will face all proceedings because we did what we had to do,'€ she said.