Friday, November 10, 2006

Problems in water supply privatization

Ater 10 years of privatization, it seems that neither the government nor the private sector can deal with Jakarta water provision satisfactorily.

First off, government-owned Regional Water Corporations (PDAMs) are a mess. According to a Ministry of Public Works publication (Implementation of Safe Water Provision System 2005), PDAM's piped water system only serves 42% of the urban and 8% of the rural populations in Indoneisa. Out of 318 PDAMs nationwide, only 10% are "healthy". "Leakage" (both in the literal and connotative sense) reach 36%.

That's why in Jakarta PAM has joint contract agreements with PT PAM Lyonnaise Jaya (Palyja) and PT Thames PAM Jaya. However, after 10 years of privatization, Kompas reported that the tug-of-war between PAM and their private foreign counterparts are going strong.

Regarding privatization, a PAM representative said,
there's no benefit for PAM, only for the foreign counterparts. We're only sucked dry, and consumers are put at a loss.
The Amrta Institute of Water Literacy said that problems include high fee paid to the foreign companies for expatriats and loan guarantee. And,
Although Palyja claim deficit, in reality they received profits of Rp 115 billion in 2004 and Rp 58 billion in 2005. Meanwhile, PAM's debts keep increasing.
This is exacerbated by the fact that the National Audit Agency (BPK) can only audit the PAM, but not Palyja or Thames PAM Jaya.

There seems to be a growing movement to return PAM to being a national/government-run agency. This should be seen with caution: do we really want to return to the classic condition of PDAM "sickness" and water/money "leakages"? But if we hand everything over to the private sector, it seems that nothing much is changing, while profits are taken away.

Maybe the best way out is self/collective management, as we have in the villages.

1. See AMPL's workshop on water and sanitation regulatory framework.

2. See Walhi's take on Water Resource Law no. 7/2004
3. See Water Justice: resource center on alternatives to privatization

1. Enda said: "There's one great article (... on Fortune) about water privatization that says water will be the oil of 21st century...". I couldn't get access to the Magazine's special report in 2000, but found this, this, this, and this instead.

2. UNDP's Human Development Report for 2006 is titled Beyond Scarcity: Power, Poverty and the Global Water Crisis.

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  1. There's one great article (i don't remember where, i think it's on Fortune) about water privatization that says water will be the oil of 21st century, the big business will be in water.

    Reading your post remind me of one seminar that we organized back in campus. It was about water resource management and we received single sponsorship from an Australian joint venture company that has been in Bandung for several years, hiring senior official and retired pejabat from waterworks department as lobbyist. Its goal? To get full rights to West Java water privatization project.

    Last I heard, the company is still there, but I am not sure about the project.