Privatization plan of city water firm hampered by talks

JAKARTA (JP): Negotiations on investment have hampered the planned privatization of city-owned water company PAM Jaya, deputy governor of economic and development affairs Tb. M. Rais said yesterday.

He said the negotiations had delayed the signing of a contract between PAM Jaya and private investors.

"We hope it (the cooperation's contract) can be signed in June," Rais said yesterday at City Hall.

He said the municipality was still reviewing the investment figures proposed by the investors.

"There is still a need to adjust the figures," Rais said. He would not elaborate.

The private investors are PT Garuda Dipta Semesta of the Salim Group, owned by tycoon Sudono Salim, and PT Kekarpola Airindo, owned by Sigit Hardjojudanto, President Soeharto's eldest son.

The investors had proposed an investment of Rp 2 trillion (US$823 million) for the first five years. The cooperation involves a 25-year profit sharing scheme.

The cooperation was expected to increase tap water production to 40,000 liters per second by 1998.

Initially, the contract's signing was scheduled last February and tap water production was expected to start in July this year. A memorandum of understanding was signed on Oct. 6, 1995 and another on April 6 last year.

Garuda Dipta and Kekarpola agreed to install water pipes, expand tap water distribution and build water processing centers.

The two private companies would cooperate with French firm Lyonnaise des Eaux and British firm Thames Water International.

Kekarpola's president director, Fachry Thaib, said the contract was expected to be signed in June because negotiations on privatization had reached the final stages.

"We expect to start production six months after signing the contract, or in January next year," Fachry told The Jakarta Post yesterday.

He said there was still a need to gain permission from the Ministry of Finance to reschedule PAM Jaya's debts.

"We hope to get the dispensation soon," Fachry said.

The water company has predicted that the cooperation with private companies would increase water quality and distribution services by up to 49 percent.

It also predicted that the city's tap water would be drinkable by 2006.

Currently, PAM Jaya produces 16,982 liters of water a second and serves only 417,215 of Jakarta's 1,640,380 families. In 2000 the firm is expected to boost production to 22,287 liters of water a second and serve 663,177 families. (ste)