Water investors threaten to quit agreement

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.