Water cooperation pact with private firms signed

Water cooperation pact with private firms signed

JAKARTA (JP): City-owned water company PDAM Jaya signed a 25-
year cooperation agreement with private investors to manage city
water treatment and distribution yesterday.

The agreement, the first of its kind ever held in the city,
was signed by PDAM Jaya director Rama Boedi, and Fachry Thaib and
Iwa Kartiwa in their capacity as representatives of private
investors. The ceremony was witnessed by Governor Surjadi
Soedirdja at City Hall.

Surjadi said that under the accord, the private investors have
the authority to operate, maintain and expand the water
distribution system in the city, including in the management of
PDAM Jaya's customers.

Private investors involved in the agreement were 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.

Other guests at the ceremony were City Council Speaker M.H.
Ritonga, Secretary for Development Supervision and Operation Lt.
Gen. A.M. Hendropriyono, as well as French Ambassador Thierry
Martin de Beauce, Anthony Salim of the Salim Group, Sigit
Hardjojudanto and representatives of Lyonnaise des Eaux and
Thames Water International firms.

PT Garuda will be in charge of water treatment and
distribution in western parts of Jakarta, while PT Kekarpola will
operate in the eastern part of the city.

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

The tap water treatment is expected to start six months after
the signing of the contract.

The agreement was expected to boost distribution services,
which cover only 40 percent of the city's population at present,
up to 70 percent by the year 2001, according to PDAM Jaya's data.

The data show that by 2001, the city's population is projected
to substantially increase from 9.2 million people now to 9.8
million, while the number of customers is expected to jump from
417,215 families this year to about 765,400 in 2001.

Governor Surjadi said the cooperation was badly needed given
PDAM Jaya's limited funds to finance more area coverage of water
distribution or other repair works.

He expected the cooperation to help PDAM Jaya pay its debt to
the government and enable the company to profit.

Complicated

"I realize that the risks in managing the city water are very
complicated because water has a social function in that its
tariffs should be affordable," Surjadi said.

Under the agreement the investors proposed an investment of Rp
3 trillion (US$1.2 billion) for the first five years of the 25-
year profit sharing scheme.

After five years, the cooperation was expected to reduce water
leakage from the current 54 percent to 35 percent.

Surjadi also urged the Ministry of Finance to approve the
city's request to reschedule the payment of PDAM Jaya's debt.

"It's not because PDAM Jaya refuses to pay the debt, but the
rescheduling of the payment will give the firm enough time to
improve its performance," Surjadi said.

Under the agreement, private investors are also responsible
for the payment of PDAM Jaya's credit.

Deputy Governor of Economic and Development Affairs Tb.M. Rais
supported Surjadi's request, saying that the rescheduling was
necessary. "However, it's up to the government. The most
important thing here is that the debt will be paid," he said.

Initially, the cooperation agreement was scheduled to be
signed last February. A memorandum of understanding was signed on
Oct. 6, 1995, and another one on April 6 last year.

In response to the planned increase in tap water tariffs next
January, Rama said that PDAM Jaya was currently in the process of
evaluating classification of water tariffs.

"We're going to simplify classifications, which currently
classify customers into 48 groups. If the tariffs increase in
early 1998, it won't apply to all customers, especially those of
the middle and low-income brackets," Rama said.

It was also predicted that the city's tap water will be
drinkable within the next 10 years, he said. (ste)