(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.

A paper titled “Perjanjian Badan Publik Dengan Pihak Ketiga: Anotasi Pasal 11 ayat (1) (e) Undang Undang Nomor 14 Tahun 2008” is available for download (only in Bahasa Indonesia). The paper annotates Article 11 (1) (e) of the Indonesian Freedom of Information Law which mandates the transparency of contract. Nevertheless, the paper conclude that Article 11 (1) e does not clearly mandates “active disclosure”. The article also discusses the problem of breach of contract which may arise due to a Public Body’s compliance with a disclosure request made under the FoI Law.

English version of the article will be available soon.

See also a related working paper:

“Does Regulation by Contract Decreases Transparency? - Evidence from Jakarta's Water Services Sector”.

The following is my op-ed piece in today’s Jakarta Post.

At the 67th session of the United Nations General Assembly, President Susilo Bambang Yudhoyono (SBY) called on world leaders to “enact an international instrument to effectively prevent incitement to hostility or violence based on religions or beliefs”. These words are a verbatim citation of SBY’s speech.

Thus, SBY – in his official United Nations General Assembly (UNGA) speech — did not state that he demanded the international community enforce an international blasphemy law. The term “blasphemy” is found nowhere in his speech. What he officially pushed for is the enactment of an international instrument that could prevent incitement to hostility or violence.

This is where the move constitutes a blunder. First, there is a big difference between a blasphemy law and a law that punishes incitement of hostility. Second, laws which restrict incitement and hate speech are actually part of international law and have been practiced in by international courts. Third, the Innocence of Muslims movie, which SBY also referred to in his speech, may not necessarily qualify as an “incitement to hostility or violence”.

Let us now discuss the first blunder. The media have quoted statements from ministers and other government officials who hinted at Indonesia’s quest for an international blasphemy law, which contradicts SBY’s remarks at the UNGA forum. So what exactly is Indonesia’s diplomatic position concerning blasphemy? Does it seek to restrict free speech which incites hostility or violence or does it aim to enact a blasphemy law?

A blasphemy law protects religion, although in practice this usually translates into the “dominant” religion and its symbols. Thus, irrespective of whether something is intended to provoke violence or not, to the extent that it is considered denigrating of religion and religious symbols it can be restricted and punished.

Such an international blasphemy law would be absurd and inconceivable. Every founder of a new religion has been accused of blasphemy by the society they served. Thus blasphemy is required for a religion to exist. The Indonesian Shiite cleric Tajul Muluk, for example, has been convicted of blasphemy and jailed for it.

It would thus be unthinkable for diplomats from predominantly Shiite Iran to sit together with their Indonesian counterparts and agree on an international blasphemy provision as it would mean that they approve of persecution of Shia followers.

The second blunder is that SBY’s call for a restriction of free speech that incites violence is already part of the existing international law. The Civil and Political Covenant provides clauses that restrict freedom of expression on the grounds of public health, public order and morality. Now, why would SBY say that we need such a law when we already have one?

Third, SBY relating the international uproar surrounding Innocence of Muslims to the requirement for “an international instrument” to effectively prevent incitement to hostility or violence based on religion shows a level of disconnect. The movie does not directly incite hostility or provoke violence. Rather, hostility and violence are an indirect result of the movie.

There is a clear line separating these concepts. In order for an act of expression to incite violence, it must provoke people to commit violence. In the famous case of Radio-Télévision Libre des Milles Collines (RTLM) in Rwanda, it is clear that the radio incited Hutus to kill the Tutsis. Thus, the RTLM was held responsible for its role in the genocide. The Tutsis were therefore the direct victims of RTLM hate speech.
The RTLM case is different from the Innocence of Muslims movie. The latter does not contain any incitement for people to physically hurt Muslims and indeed no Muslims have been killed or hurt as a result of the movie’s provocation. What happened is rather the contrary. Some people — who happen to be Muslims — got angry and then killed others or got themselves killed in the process.

Undoubtedly, the movie is indeed disparaging and could lead to wrong perceptions about Islam and Muslims. However, to argue that such incorrect perceptions cause physical violence to Muslims would be too far-fetched. Because of this, SBY’s argument linking the recent uproar caused by the movie to his proposal for an international instrument to prevent incitement to hostility is unsound. Recently reports have abounded that Indonesia will lead the formulation of a roadmap towards a so-called international anti-blasphemy protocol. Whosoever gets involved in the process of drafting such roadmap will have to deal with these blunders.

Perhaps Indonesia is trying to play its card as the world’s largest predominantly Muslim nation to gain sympathy from the Organization of Islamic Conference countries. Or perhaps, this is a maneuver to send a signal to the UN Human Rights Council that Indonesia’s bad marks on the freedom of religion have some “roots” in the international arena.

Nevertheless, this whole anti-blasphemy protocol, instruments and road map is a waste of Indonesia’s diplomatic resources. This manuevering does not present a good image to the world of Indonesia as a moderate Muslim nation that succeeds in reconciling democracy and human rights with Islam. It also does not send a good signal to the Organization of Islamic Cooperation (OIC) countries because there are inconsistencies in Indonesia’s diplomatic stance. It appears to me that Indonesia doesn’t really know what it wants.

Background reports which supports recent OECD’s review on Indonesia can be downloaded using the following links from OECD’s website.

• Government capacity to assure high quality regulation in Indonesia

• Competition law and policy in Indonesia

• Market openness in Indonesia

• Regulatory and competition issues in ports, rail and shipping in Indonesia

• Public-private partnership governance in Indonesia: Policy, process and structure

Mr. Al'Afghani has recently completed a review of a draft by-law on community-based watsan. The review is a collaboration between dropbydrop, Watsan Working Group of the East Nusa Tenggara Province, UNICEF and the Sikka Regency.