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.