Water investors threaten to quit agreement

Bambang Nurbianto, The Jakarta Post, Jakarta

The two private European tap water companies in Jakarta have threatened to pull out of their agreement with the City Administration and the city water company of Pam Jaya if their price increase proposal is rejected by the City Council.

Two executives from PT Thames Pam Jaya (TPJ) and PT PAM Lyonnaise Jaya (Palyja) said that without the price increase, the investors could no longer bear the financial losses suffered since 1999.

"If there is no signal from Indonesia, by increasing the price by 45 percent or whatever, it is better if we pull out (from the agreement)," Vice President for Business Development of ONDEO Services, Bernard Lafrogne, told The Jakarta Post on Monday.

PT TPJ, which is a subsidiary of Britain's Thames Water International, supplies customers in eastern Jakarta while PT Palyja, a subsidiary of France's ONDEO (formerly Lyonaisse des Eaux), serves customers in the west of the city.

PT TPJ's Communication & External Relations Director Rhamses Simanjuntak did not explicitly say that it would also do the same, but did say that any company operating water supply would collapse if there was no price adjustment.

"Charges to the customers are the only income for water supply operators, without any adjustment, even only to cover inflation, it will collapse," Rhamses told the Post.

City Governor Sutiyoso has agreed with the price increase proposed by the companies and he has proposed a 45 percent price increase to the City Council last week and the council planned to discuss the proposal on Thursday.

The price increase received strong opposition from non- governmental organizations and water consumer associations, saying that the increases were not acceptable as the companies "had done nothing to improve the quantity or quality of their service."

The strongest opposition came from the Jakarta Drinking Water Consumers Community (Komparta), stressing it would file a class action lawsuit against the city administration and city council if the water charges were increased.

On Monday Chairman of the Jakarta Chapter of the Indonesian Water Contractors Association (Akaindo) Poltak Situmorang criticized the threat from the foreign investors, saying that it indicated they were not professional.

According to Poltak, a water price increase is not necessary if the operators could reduce the water leakage and the number of thieves as well as its high administrative cost, which burdened water consumers.

Poltak referred to the high salary of the companies' expatriates claiming that each official received Rp 125 million per month (nearly US$ 14,000 per month) and that the offices of the two companies were in very expensive buildings: Wisma Danamon on Jl. Sudirman and Central Senayan Tower on Jl. Asia Afrika.

The cooperation was based on a contract, which was initially signed in early 1998 before the fall of president Soeharto. The agreement was revised in 2001 to adjust to the economic atmosphere, which drastically changed after the radical changes with the economy.

Although the foreign investors and Pam Jaya stated in the contract -- which has a 25-year term -- that all aspects would be conducted transparently, Lafrogne was reluctant to publicly disclose the documents of the revised agreement, saying it should be agreed by Pam Jaya.

"... If the document gets into the hands of the people who are unprofessional, it would only be used for polemics to say bad things about cooperation (between Pam Jaya) and the private sector," Lafrogne added.

Poltak also questioned the reluctance of the investors to publish the cooperation agreement, saying that it could spark suspicion amid the public. "If the agreement is fair why are they hiding it."

Under the contract agreement, signed in 1998, the investors would invest Rp 3 trillion during the first five years of the 25- year profit-sharing schemes. After the five years, they would also reduce water leakage to 35 percent.

However, from the data, jointly issued by TPJ and Palyja, showed that TPJ could only manage to bring water loss from 57.6 percent in 1998 to 43.5 percent in December 2002 and Palyja from 61 percent to 43.3 percent. In addition, the total joint investment of the companies through December 2002 reached only Rp 1.06 trillion.