Councilors may suggest water agreement cancellation

JAKARTA (JP): The City Council suggested it would call for the cancellation of the water management agreement between city water firm PDAM Jaya and its foreign partners after irregularities in the deal were uncovered.

"We'll complete our investigation by the end of next month. Most probably we'll suggest that Governor Sutiyoso cancel the deal," councilor Syamsuardi Botan, a member of the 11-member team studying the deal with the foreign firms, said on Monday.

Syamsuardi of the National Mandate Party (PAN) said the team found the agreement between PDAM Jaya and French firm PT Pam Lyonnaise Jaya (Palyja) and British firm PT Thames Pam Jaya (TPJ) was illegal.

He said the agreement, which was signed in June 1997, should be canceled because the two foreign firms failed to comply with several stipulations in the agreement.

Besides violating regulations on foreign ownership of vital installations, the agreement also is tainted by corruption and collusion, he said.

"So, the governor should not worry if the two foreign firms later protest the cancellation of the deal with an arbitration body in Singapore," Syamsuardi, who is secretary of the City Council's Commission A for Administrative Affairs, said.

He said canceling the agreement would not effect the volume or value of foreign investment in the country because the water deal was illegal and unethical.

Another member of the team, Tjuk Sudono, said the case could be brought to the World Trade Organization (WTO).

"WTO will rule in favor of canceling the agreement since the two foreign firms violated proper business ethics when they were appointed to the project," Tjuk, who is a member of the City Council's Commission D for Development Affairs, said.

He said the two foreign firms failed to implement standard working practices as laid down by the International Labor Union.

Since the management agreement was signed two years ago, the foreign firms have failed to complete their annual financial reports, he said.

"Many people believe the city administration has subsidized the firms in the amount of Rp 800 billion (US$114 million) a year," Tjuk said.

Executives of the foreign firms have repeatedly denied the accusations.

Palyja is wholly owned by Suez Lyonnaise des Eaux while TPJ is 95 percent owned by Thames Water Overseas, with the remaining 5 percent held by former president Soeharto's oldest son Sigit Hardjojudanto.

Governor Sutiyoso repeated on Monday the city administration's pledge not to cancel the agreements.

"The councilors who demanded the cancellation just do not know the management of the foreign firms," he said. (jun)