Water rates issue

We would like to clarify some points relating to the water rates increase currently being discussed.

We at Thames PAM Jaya (TPJ) are very aware of our responsibility to the community of East Jakarta that we serve and are committed to consistently delivering service improvements.

We specifically understand that rate increases are never popular. However, on this occasion, the rate increase is required to address a shortfall in payment for services already delivered that has been accumulating for five years and is now estimated at US$58 million. This shortfall directly inhibits our capacity to make the investments essential to improving services. This increase has absolutely no relation to profit, as is so frequently misperceived.

It is important to note that the contractual agreement stated there would be an annual increase to keep rates in line with inflation and pay toward the investment required to upgrade the operation -- a further Rp 800 billion between now and 2007. However, we have had only two increases since 1998, compared with the five to which we were entitled, creating the debt of which we now seek a resolution.

The increase is also intended to gradually bring rates into line with costs, which have been severely impacted by inflation since 1998.

In the future, TPJ reasonably expects rate increases to be more consistent and of lower magnitude. We look forward to PAM Jaya and the Jakarta administration finalizing this mechanism soon to enable us to continue the investments required to improve services to customers.

Finally, TPJ understands that all customers merit the same level of service, no matter what their economic status. This is why TPJ continues to support cross-subsidy principles to ensure that customers at all levels may enjoy clean water at a cost affordable to them. However, please be clear that TPJ does not set rates, this being the responsibility of the regulator, with the approval of Jakarta City Council. TPJ only implements the rates on the instruction of these parties.

JOHN TREW President Director Thames PAM Jaya Jakarta