New water accord has 'drastic changes'<\/p>\n
JAKARTA (JP): The ongoing renegotiation of a cooperation
\nagreement between city-owned tap water company PDAM Jaya and its
\ntwo foreign partners -- PT Thames Pam Jaya (TPJ) and PT Pam
\nLyonnaise Jaya (Palyja) -- will include several drastic changes,
\na senior official said.<\/p>\n
The deputy governor of development affairs, Budihardjo, said
\non Wednesday the changes would include, among other things, a
\npossible reduction in revenue by the foreign partners for water
\nsold.<\/p>\n
"But this is not definite. This will be suggested to the
\nforeign partners... let's see how they react to it," Budihardjo
\nsaid.<\/p>\n
The static water rate, which will not change until next year
\ndespite skyrocketing operational costs, an increase in chemical
\nprices and inflation, is set at Rp 2,086 per cubic meter.<\/p>\n
According to the current agreement, TPJ earns an extra Rp 320
\nfor every cubic meter of water sold (Rp 2,406) and Palyja earns
\nan additional Rp 838 (Rp 2,924) for each cubic meter of water
\nsold.<\/p>\n
Budihardjo said a reduction in the extraction figure was
\nexpected to reduce the monthly deficit in two escrow accounts
\nopened by the administration, PDAM Jaya and its foreign partners.<\/p>\n
In January alone, the deficit in the two escrow accounts
\nreached over Rp 11 billion.<\/p>\n
Since opening the accounts on Feb. 1, 1998, deficits incurred
\nfrom supplying water at the static rate have amounted to Rp 234
\nbillion, according to the Central Bureau of Statistics.<\/p>\n
PDAM Jaya has asked the administration to provide it with
\nsubsidies equaling this amount.<\/p>\n
Another possible change to be introduced during the
\nrenegotiations is a revision of the indexation formula for
\ncalculating water rates, according to Budihardjo.<\/p>\n
City councilor Ali Wongso earlier said the formula, agreed
\nupon by the administration, PDAM Jaya and its two foreign
\npartners, did not include "any factors" which protected the
\ninterests of either PDAM Jaya or the administration.<\/p>\n
The current formula includes factors which compensate for
\nexchange rate variations, interest rate variations, adjustments
\nfor operational expenses and capital expenditures of the foreign
\npartners.<\/p>\n
"All these factors support the foreign partners, but not PDAM
\nJaya or the administration. This has to be changed," Ali said.<\/p>\n
Budihardjo said the new formula could include factors for the
\nadjustment of water tariff rates according to changes in the
\ninflation rate.<\/p>\n
He said the administration also would ask PDAM Jaya to reduce
\nits operational costs by operating as efficiently as possible and
\n"possibly" even renegotiating its loan arrangements with its
\nforeign partners.<\/p>\n
"This is another suggestion being considered... currently
\nit's a lose-lose situation for both parties," he said.<\/p>\n
A PDAM Jaya executive said on Tuesday the foreign partners
\nwere responsible for paying PDAM Jaya's loans to the World Bank
\nand the Overseas Economic Cooperation Fund.<\/p>\n
The loan repayments, to be made until 2017 and worth Rp 1.78
\ntrillion, were equal to between 9.5 percent and 11 percent of the
\nannual revenue of the foreign partners.<\/p>\n
Budihardjo hoped the renegotiation of the cooperation
\nagreement would be completed by August this year.<\/p>\n
Renegotiations were scheduled to end last November but the
\nadministration, PDAM Jaya and its foreign partners were unable to
\ncome to an agreement.<\/p>\n
Budihardjo earlier said a fact-finding team would be
\nestablished by the administration with the help of the World Bank
\nto "find out" the exact deficit amounts.<\/p>\n
He said the team would consist of law experts, financial
\nconsultants, representatives of non-governmental organizations
\nand students.<\/p>\n
Budihardjo added the team would investigate whether the
\ndeficit was "truly Rp 234 billion".<\/p>\n
Meanwhile, Governor Sutiyoso, who was asked about Law No.
\n1\/1967 which prohibits any foreign investors from investing in
\nPDAM Jaya, said he believed it was just a "legal matter".<\/p>\n
"We need those investors. If we cancel this agreement, the
\ninvestors could sue us and that would spoil our name."<\/p>\n
The partnership between PDAM Jaya, TPJ and Palyja, which began
\nlast year, was reportedly based on Presidential Decree No.
\n96\/1998 dealing with businesses which were closed to foreign
\ninvestment.<\/p>\n
City councilor Ali Imran Husein said the decree, which did not
\nspecify the tap water industry, did not overrule the earlier law.
\n(ylt)<\/p>",
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