Medan's water supply project questioned

Medan's water supply project questioned

Apriadi Gunawan, The Jakarta Post, Medan

A number of legislators have called on the Medan municipal
administration to review a controversial contract between state-
owned water company PT Tirtanadi and French investor Lyonnaise
des Eaux on the supply of tap water to the city.

Ibrahim Sakti Batubara, a member of the Medan legislative
council, questioned the contract, which he said had inflicted
financial losses on both Tirtanadi and consumers.

"The contract looks very strange in that Tirtanadi is obliged
to purchase its own water from the foreign investor and then turn
around and sell it to consumers at a higher price," he said in an
interview with The Jakarta Post on Friday.

According to the contract, Tirtanadi purchases drinking water
supplied by Lyonnaise at Rp 975 per cubic meter and then sells it
to consumers at Rp 1,150 per cubic meter. The deal, signed in
July 2000, was made on the basis of a build-operate-transfer
(BOT) agreement for 25 years.

The contract requires Tirtanadi to provide 7 hectares of land
in Limau Manis, Deli Serdang regency, North Sumatra, to own a 15
percent stake in the joint venture PT Tirta Lyonnaise, while
Lyonnaise is required to develop clean water processing and
piping facilities worth Rp 120 billion on the land to represent
85 percent of its share.

As of Oct. 8, 2001, a segment of the Medan population enjoyed
tap water supplied by PT Tirta Lyonnaise at a different rate. The
average person paid Rp 1,150 per cubic meter for clean tap water,
while residents living in upmarket housing complexes paid Rp
6,000 per cubic meter.

Lyonnaise has built a US$5 million water processing plant with
a capacity of 200 liters per second and is in the process of
building a similar one worth Rp 47 billion. The company will also
build a third plant with a capacity of 100 liters per second.

Erwan Daparlinda, a member of the North Sumatra provincial
legislative council, concurred and called on the legislature to
investigate the allegations of corruption and collusion behind
the deal.

"It would be better for the Medan legislature or the
provincial legislative council to carry out an investigation into
any alleged corruption or collusion behind the contract," he
said.

Erwan acknowledged that the contract raised the prolonged
debate among councillors from early this year but, so far, no
actions have been taken to follow up the issue.

He said the National Development Planning Board (Bappenas) had
warned Tirtanadi on the contract before it was signed with
Lyonnaise in July 2000, but Tirtanadi chose to ignore the warning
for unclear reasons.

"We are suspicious of corruption and collusion because
Tirtanadi ignored the planning board's warning," he added.

Banuaran Ritonga, the chairman of the provincial legislative
council's Commission III for state-owned companies, said he did
not see anything strange in the contract between Tirtanadi and
Lyonnaise because it would benefit both sides.

"It is normal that Lyonnaise sells its products because it has
spent a lot of money on investing in the project while Tirtanadi
has only come up with the land," he said, adding that the same
contract had been signed in other provinces and countries.

Asked to comment on the higher rates, Banuaran said they could
be renegotiated between those involved, the legislature and
Lyonnaise.

"The rates of clean tap water from Lyonnaise can be reviewed
if consumers consider it too costly," he said.

Darlan Hasibuan, the spokesman for PT Tirta Lyonnaise,
dismissed the allegations of corruption and collusion behind the
contract, saying that negotiations between the two sides went on
as normal.

"The two sides have nothing to hide from the negotiations and
they are open to any kind of investigation by the provincial
legislative council or prosecutor's office," he said.