Showing posts with label concession. Show all posts
Showing posts with label concession. Show all posts
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The new governor and Jakarta’s drinking water problem

Saturday, October 20, 2012

 

 

(Img credit: The Jakarta Globe)

 

Mohamad Mova Al’Afghani

 

The Jakarta Post, Paper Edition | Page: 7 Opinion | Sat, October 20 2012

 

During the recent Jakarta gubernatorial election, observers and opponents argued that the scale and complexities of the capital city’s urban problems were in no way equivalent to small cities such as Surakarta, where newly installed Governor Joko “Jokowi” Widodo used to serve as a mayor. When Jokowi later has to deal with Jakarta’s drinking water situation, he will realize that there is a grain of truth in this argument.

 

While his predecessor Fauzi Bowo seemed to be focused more on technocratic “grand strategies” to solve the overall water problem, to my knowledge, Jokowi does not have any sophisticated plan. From media interviews we can tell that Jokowi’s emphasis on Jakarta’s drinking water problem will be on quality and affordability i.e. a pro-poor approach. One of Jokowi’s promises during his campaign was to provide access to water for low-income citizens of North Jakarta, either at an affordable rate, or even for free.

But, how can he deliver on such a promise? I shall explain the complexities below.
First, water provision is a natural-legal-monopoly. What this means is that people cannot just extend pipes to a community outside the existing network because the cost of duplicating networks is high. As a result, there are usually only one or two companies serving a particular region. The monopoly is not only in terms of economics, but also a legal one. Every new entrant or operation may have to gain permission from incumbent companies.

Second, there is a trade-off between service levels and network expansion. Suppose that the companies agree to expand the network, with constraints on bulkwater sources, pressure and continuity of supply other areas might be affected. Thus, a part of Jakarta that is currently well-served might become compromised unless the government finds a new bulkwater source.

Third, there are significant costs associated with network expansion to the poor. In addition to capital expenditure on long-term assets, collection rates will become a major issue. Expanding services to low-income citizens means risking either non-payment or increased debt for suppliers. Various researches indicate that the poor have both the willingness and capacity to pay for water services. However, low-income consumers require flexibility in the form of payment-in-arrears or in installments.

Aside from the above points, unless appropriately addressed, the current governance structure of Jakarta’s water services could impede Jokowi’s pro-poor water plan. As we are aware, there are at least three main regulatory actors in Jakarta’s drinking water services: the city-owned waterworks company PAM Jaya, the concessionaires (Palyja and Aetra) and the governor.

The concession works in such a way that PAM Jaya must purchase the volume of water sold by the concessionaire to the consumer. Thus, from the concessionaire’s point of view, aside from constraints on bulkwater sources, they have no objection at all to serving the poor since they will be paid no matter what.
However, PAM Jaya may have objections to expanding the network to the poor, because if the revenue from tariff collection is not enough to cover the cost, then PAM Jaya will have to borrow money to pay the concessionaire. This means that if the poor cannot pay or can only pay in arrears, PAM Jaya will be in debt to the private sector. It is worth noting that at the moment, PAM Jaya already has huge debts with the private sector.

Another consequence of the above system is that PAM Jaya’s debt would reflect upon the concessionaire’s balance sheet and affect its overall financial health. Put simply: connecting to the poor may affect the collection rates, low collection rates means that PAM Jaya would be in debt to the concessionaire and in turn PAM Jaya’s debt to the concessionaire means higher account receivables in the concessionaire balance sheet. If the concessionaires only have high account receivables but lack cash, how can they have enough funds to invest in further network expansion and finance the existing operations and maintenance?

What the above shows is that there are structural disincentives in connecting to the poor. The concessionaire might be able to resort to outside financing for cash that would support a pro-poor program but for PAM Jaya this could be perceived as a liability that put strains on its balance sheet. A direct interventionist approach will also not work in Jakarta because it is legally impossible. Jokowi will soon find out that the governance of Jakarta water services is a complex web of various actors and interests, not only local and national, but also international. The nature of private sector participation with foreign investment means that the corporations investing in water services are backed by international treaties.

Any disputes could provoke intervention not only from the central government, but could also take place through diplomatic channels. This has already occurred in the past.

All of these challenges should not discourage Jokowi from his initial plan to provide services to the poor. There are several things that Jokowi could do to advance his water-for-the-poor program.


He should first address the lack of incentives from regulatory actors in connecting to the poor. Next, he should consult the poor on how they want to be connected to the network. The poor, together with companies and other actors should sit together to discuss the issue. Finally, Jokowi should try to reform the existing legislation which penalizes the poor for late payments.

As I have said, low-income citizens require flexibility in payments but the current legislation restricts this. In order to achieve all this, of course, he needs sufficient support from the Jakarta City Council.

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Protection of (Water) Consumer Rights in Indonesia (Online Discussion)

Saturday, May 29, 2010

Indonesia in Motion will hold an online discussion on how to protect water consumer’s rights in Indonesia. The discussion will be held in Bahasa Indonesia.

You can either register through event brite or follow the instructions below.  


Following is the announcement (in Bahasa Indonesia):

Serial diskusi 'Indonesia in Motion' Insya Allah akan mengudara lagi pada jumat pekan depan tanggal 2 Juni 2010. Dengan ini kami mengundang kembali Saudaraku semuanya untuk mengikuti seri diskusi online "Indonesia in Motion".
Waktu:  Rabu, 2 Juni 2010, pk. 19.00 - 20.30. (GMT + 0)

Pembicara: Mohamad Mova Al 'Afghani
(Ph.D Candidate, UNESCO Centre for Water Law, Policy and Science. University of Dundee, UK) 

Chair: Rizal Yaya
(PhD Student University of Aberdeen UK) 

Tema: "Perlindungan Hukum bagi Konsumen Air di Indonesia"

Diksusi tersebut sangat menarik mengingat belum lama ini Jakarta mengalami krisis air dan sangat mungkin kejadian serupa berulang kembali. Diskusi online akan dilakukan lewat fasilitas Yahoo Messenger. Untuk berpartisipasi, silakan add indonesiainmotion@yahoo.co.uk (Indonesia in Motion)

 
Tambahan informasi dari Indonesia Law Reporter:
Acara ini bisa juga diikuti dari twitter dengan menggunakan hashtag #lawtalk atau me reply ke @movanet atau mendengarkan broadcast di home page Web Conference Indonesia Law Report

Prosiding dari acara ini akan disiapkan oleh Indonesia in Motion. 

Bahan bahan diskusi.
Makalah diskusi dengan judul “Perlindungan Hukum Terhadap Konsumen Air di Indonesia” dapat di download di sini
Op-ed and blog posts:

Transparency in Water Services
Indonesian Water Services Suffering from a Lack of Governance
Supreme Court Decision on Water Monopoly in Batam
Missing water and shadow users
14 Disturbing Facts about Jakarta's Water
Tomorrow, the Freedom of Information Law is in force!
Three ways for your business to be implicated by the new Indonesian freedom of information law
Where to complain for bad water services – a comparison
Jakarta’s water crisis, whose fault?
Human Right  Aspects of Private Sector Participation in the Water Sector
Is water a commodity or human rights?
The human right to water is not a property right
Why busy with the right to water instead of governance
Consultation on the Human Right  Aspects of Private Sector Participation in the Water Sector: more responses from the private sector
The Economist and the human right to water
Transparency Agenda in Water Utilities Regulation
Hukum Air (Water Law) is not really a topic in Indonesia
Papers:
Safeguarding water contracts in Indonesia
Constitutional Court review and the future of water law in Indonesia
Presentation:
Anticipating water trade


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Jakarta’s water crisis, whose fault?

Sunday, May 16, 2010

 

The company refused to be blamed:

 

“The massive silting that broke the pump in Pulogadung was caused by the declining quality of water. We fixed the pump and parts of the pipeline network,” Yosua said. “This  shortage is not entirely our fault.”
He said it would take more time for water to reach areas located farther from the main pipelines, which had been empty for days.
“And there are people in several neighborhoods in North Jakarta who collect water from hydrants too, and this makes [the distribution of water] even worse,” Yosua added.
Aetra Air Jakarta said it was becoming increasingly difficult to provide millions of Jakartans with potable water.
“The city has become overpopulated, and the levels of pollution have increased exponentially,” Yosua said. “These two factors greatly contribute to water  shortages in the city.”


Consumers are entitled to water services based on the service level as determined by law (if there are components of the service levels which are based on contracts, then they will not apply, as the law automatically derogates them). In Indonesia, water quality level is determined by the decree of the ministry of health  907/MENKES/SK/VII/2002 and Government Regulation 16/2005 (GR 16/2005) Article 6.2. In Jakarta, the continuity of water services is guaranteed by Regional by Law 13/92 and 11/93.

If any of these service levels are violated, based on GR 16/2005, consumer shall have the right to compensation. Article  67.1.a and 68.2.e of GR 16/2005 stipulates (in Bahasa):


(1) Setiap pelanggan air minum berhak:
a. memperoleh pelayanan air minum yang memenuhi syarat kualitas, kuantitas, dan
kontinuitas sesuai dengan standar yang ditetapkan;
b. mendapatkan informasi tentang struktur dan besaran tarif serta tagihan;
c. mengajukan gugatan atas pelayanan yang merugikan dirinya ke pengadilan;
d. mendapatkan ganti rugi yang layak sebagai akibat kelalaian pelayanan; dan
e. memperoleh pelayanan pembuangan air limbah atau penyedotan lumpur tinja.

Hak dan Kewajiban Penyelenggara
Pasal 68
(1) Setiap penyelenggara berhak:
a. memperoleh lahan untuk membangun sarana sesuai dengan peraturan perundangundangan;
b. menerima pembayaran jasa pelayanan sesuai dengan tarif/retribusi jasa pelayanan;
c. menetapkan dan mengenakan denda terhadap keterlambatan pembayaran tagihan;
d. memperoleh kuantitas air baku secara kontinu sesuai dengan izin yang telah
didapat;
e. memutus sambungan langganan kepada para pemakai/pelanggan yang tidak
memenuhi kewajibannya; dan
f. menggugat masyarakat atau organisasi lainnya yang melakukan kegiatan dan
mengakibatkan kerusakan prasarana dan sarana pelayanan.


(2) Setiap penyelenggara berkewajiban untuk:
a. menjamin pelayanan yang memenuhi standar yang ditetapkan;
b. memberikan informasi yang diperlukan kepada semua pihak yang berkepentingan
atas kejadian atau keadaan yang bersifat khusus dan berpotensi akan
menyebabkan perubahan atas kualitas dan kuantitas pelayanan;
c. mengoperasikan sarana dan memberikan pelayanan kepada semua
pemakai/pelanggan yang telah memenuhi syarat, kecuali dalam keadaan memaksa
(force majeure);
d. memberikan informasi mengenai pelaksanaan pelayanan;
e. memberikan ganti rugi yang layak kepada pelanggan atas kerugian yang
dideritanya;
f. mengikuti dan mematuhi upaya penyelesaian secara hukum apabila terjadi
perselisihan; dan
g. berperanserta pada upaya perlindungan dan pelestarian sumber daya air dalam
rangka konservasi lingkungan.
(3) Pemberian ganti rugi sebagaiman dimaksud pada ayat (2) huruf e diupayakan
berdasarkan penyelesaian di luar pengadilan atau melalui pengadilan.
(4) Upaya penyelesaian di luar pengadilan sebagaimana dimaksud pada ayat (3)
dilakukan dengan arbitrase atau alternatif penyelesaian sengketa sesuai dengan
peraturan perundang-undangan.

From the legal point of view, consumer has the right to receive the continuity, quality and quantity of water as prescribed by law. They should be compensated if these rights are interrupted or not fulfilled due to the negligence committed by water undertakers. GR 16/2005 above also prescribes that water undertaker must pay a decent compensation to consumer for the loss they sustained. Although GR 16 is not particularly clear on what it means by ‘loss’ but this is likely to be a term for ‘violation of service levels’. 

Hence, under the law, ‘whose fault’ is not really the question for consumer. GR 16 does not differentiate whether the fault lies on the part of the bulk water supplier (in this case, PT Jasa Tirta) or the treatment and distribution facility (in this case, Palyja or Aetra). What the law require is for the consumer to be compensated, irrespective of whose fault it is.

'Whose fault’ is more a question for the government. The government is the one responsible to provide accountability mechanism in response to the complicated structural arrangement in the water sector. The government should determine where the liability lies and direct the compensation fund from the liable party to consumer.

More in this issue: my interview with Kompas (in Bahasa). 

 

Related Posts:
14 Disturbing Facts about Jakarta's Water
Supreme Court Decision on Water Monopoly in Batam
Water companies duty to satisfy reasonable demands



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Safeguarding Water Contracts (peer-reviewed version)

Saturday, December 8, 2007

Abstract:

The The provision of water and sewerage services has been in the public sector for thousands of years. However, the trend towards privatising these basic services has recently been growing. When dealing with Multinational Corporations (MNCs), governments face risks in the form of legal asymmetries.

This paper explains the theory and practice of water privatisation in Indonesia. It analyses the legal anatomy of privatisation, from the regulatory to the contractual levels. It attempts to highlight important issues and risks that governments and other stakeholders need to focus on when dealing with privatisation.

We've made some significant editing for this version. Download the full paper here.

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Concession markets in Indonesia

Monday, September 10, 2007

Here's a link to an OECD article on the role of KPPU in supervising concession markets in Indonesia and other set of regulatory framework. This article only discusses the peripherals, but is nevertheless not bad as a start.

Download here.