Monday, January 17, 2005

Taps drying up because of lack of investment

Source: The Jakarta Post

Aside from traffic congestion, annual flooding and garbage disposal problems, poor tap water supply is another common complaint of Jakartans.

Sari, a resident of Kelapa Gading in North Jakarta, complains that she does not get proper service although she pays her bills punctually.

"I thought when the tap water supply was handled by a private operator, the service would improve. So far, I am still unsatisfied," the housewife in her 50s told The Jakarta Post.

As water only runs at noon and late at night, residents are forced to store water for use other times.

Sari is not alone. An expatriate living in Central Jakarta has to buy gallons of mineral water for bathing whenever the flow stops.

The privatization of tap water service still fails to satisfy customers although the original idea was to improve services and efficiency.

The two foreign partners of city-run tap water company PD PAM Jaya, namely Thames PAM Jaya (TPJ) and PAM Lyonnaise Jaya (Palyja), have yet to meet customers' expectations due to problems of having to overcome historical losses and debt as well as difficulties in determining adequate water rates.

Moreover, tap water in the country is still strongly perceived as a social service, while the water rate is determined by a political decision. This has kept it at a lower rate than the average operating cost.

With more private players in the sector, customers would enjoy better services and cheaper prices amid increased competition.

Tap water operators have to deal with the decreasing availability of "raw" water in quality and quantity.

The development of the tap water sector in Indonesia commenced in 1970. Although still unable to cope with the population growth, which increases at an average of 4 percent per year, the production capacity of tap water has rapidly increased from 9,000 liters per second in 1970 to 94,000 liters per second in 1997.

But the monetary crisis hit Asia in mid 1997, including Indonesia, thus making it hard to maintain the average annual growth of around 3,100 liters per second.

Following the implementation of regional autonomy, local administrations now have the authority to determine tap water piping system.

At the moment, there are 316 regional administration-owned tap water companies (PDAM) nationwide. Most of the companies are technically bankrupt due to historical debts, lack of investment, rundown assets and poor management.

The situation has been worsened with the regional administration's lack of knowledge and experience to draw up contracts with private sectors and most development projects are too small for major global utility companies.

The political-based rates has made it hard for the companies to get fresh investment as several billion dollars are needed for the capital alone.

Investment required for water supply in Indonesia until 2009 is projected at Rp 16 trillion (US$1.74 billion), or approximately Rp 3.2 trillion per year.

To improve the condition, the government will offer 24 tap water projects worth $372 million during the Infrastructure Summit on Monday and Tuesday.

The Office of the Coordinating Minister for the Economy had issued a decree in 2002, stipulating the establishment of a sub-committee for the improvement of PDAM. The purpose of the sub-committee, among others, is to formulate the policy and strategy on the improvement of PDAM.

In 2003, six main policies to improve PDAM were formulated. The first three policies were redefining tap water institution, the implementation of professional tap water management based on entrepreneurship principles and improving the quality of tap water services in accordance with the full cost recovery principle without ignoring the interest of low-income people.

The rest included accelerating PDAM debt settlement by observing the company's capability and the regional administration, establishing and improving the coverage of drink water services for the community and increasing government support on the aspects of management, technical-technology, funding system and adequate supply of water.

The government and the Association of Tap Water in Indonesia (Perpamsi) have discussed this with various bodies, including the House of Representatives, in an effort to reduce PDAMs debt that reaches more than Rp 4 trillion.

The government has to move fast in fixing regulations to lure more investors into the country, considering the majority of Indonesia's 220 million population consume water from unprotected water sources, as only 39 percent of the urban population and 6 percent of the rural population have access to piped clean water.

However, even those who have access to piped clean water occasionally hardly receive a drip at the end of the pipe, as Sari illustrated.