People Have Started Digging Their Own Wells

Since the water supply system in Jakarta has been privatized and turned over to western companies, prices have risen considerably as have complaints about regular interruptions in supply and poor water quality, as Gerhard Klas reports.

"Whosoever builds a well, shall reap a reward on Judgment Day for every 'Jinn', man, and bird who drank from it," said the Prophet Mohammed once.

Today, most inhabitants of the mega-cities in the Islamic world get their water from the tap. That is, of course, if it runs and if it is drinkable. Otherwise, the only other choice is to buy expensive bottled drinking water from such companies as Nestlé from Switzerland, the French multinational Danone, or American subsidiaries of Coca-Cola and Pepsi.

Veronica, a 19-year-old law student from Jakarta, regularly buys bottled water from Danone, although she finds it very expensive. The tap water is just unpalatable, she says. "Every time I drink it, I get worried, even if I boil it. Why is it that we can't simply get drinkable water from the tap?"

Privatization with support from the West

Currently, the private companies Suez and Thames Water, a subsidiary of RWE, are responsible for the water supply in many districts of Jakarta. With some 125 million customers globally, Suez is the largest company in this sector. RWE is ranked at third place worldwide.

In 1995, Suharto decided to privatize the Pam Jaya public water utility. At the time, the agreement with Thames Water received support from the World Bank and the British Department for International Development.

Companies without government control

The contract, however, didn't provide government regulatory agencies with the right to inspect the files and finance reports of foreign investors, although, in principle, these agencies were supposed to supervise the privatized water business.

In 1997, at a time when Suharto was still in power, the RWE subsidiary Thames Water and the French multinational Suez, which was then named Lyonnaise des Eaux, were given the concession to supply water to the eastern and western parts of Jakarta, a metropolis teaming with millions.

The companies were also supposed to overhaul the city's water supply system, which had been laid during the period of Dutch colonization. Both companies cooperated with Indonesian businessmen, who formed a close circle of friends around President Suharto.

After Suharto's fall from power, the new government charged that the business deal with the two multinationals was corrupt and handed the water supply back to the public sector. This state of affairs did not last long. The corporations demanded renewed contract negotiations.

With the free market came the monopoly

This was met with stiff opposition, including strikes against the corporations' planned dismissal of staff and price rises. Nonetheless, in 2001, the government signed a deal with the multinationals. Thames Water was thereby given a guaranteed 25-year monopoly to supply water to the eastern part of the city.

During this time, no other company can enjoy the right to engage in the business of supplying tap water to the area's more than two million inhabitants. The new franchise agreement also muzzled the city. Its terms state that should the city end the contract early, it would have to reimburse the corporation for the full sum that it had invested up until that point, as well as paying the agreed upon rate of profit for the total contract period of 25 years.

Although a further article in the contract defines the responsibilities of the private company in terms of technology and supply goals, of course, set at the very lowest levels, it nonetheless states that prices can be raised every six months, regardless of whether the agreed upon goals are met or not.

Heavy metals and cleaning agent residues

The corporations have not fulfilled their responsibilities under the contract. Thames Water and Suez-Lyonnaise are supplying fewer households than promised.

To this day, the people of Jakarta complain of regular interruptions in supply and poor water quality. Experts have detected a high concentration of heavy metals and cleaning agent residues in the water.

A representative from Suez excused the poor performance of his company, blaming it on the "carelessness of local workers", who, he claimed, are not prepared "to cooperate with foreign employers".

At the same time, the water corporations have constantly demanded new price rises, which, in turn, have been approved by the regulatory authorities several times.

The public covers the companies' costs

Recently, conflicts have been on the increase between the private partners and the Pam Jaya public water utility, which should actually have the power to control the corporations. Now, Pam Jaya is not only expected to fulfill its administrative duties, but – within the framework of a public-private partnership – to pay the corporations the difference when the income from water fees doesn't cover the costs of the private investors.

They claim that the business is still far from profitable, even though the water rates have risen almost 100 percent from their 1998 levels.

Thames Water and Suez expect contributions from Pam Jaya to reach 116 million dollars. In order to pay this debt, Pam Jaya has been attempting to raise the price of tap water.

In April 2003, the cubic meter price for water rose by 40 percent to 49 cents. On January 1 of this year, the city administration raised water prices by another 30 percent, expressly hitting the poorer households and districts. A public outcry ensued.

In Jakarta, where the vast majority of city dwellers have to get by on less than two dollars a day, such a reaction is hardly surprising. According to the regulatory authorities, more than half of the additional water fees will be aimed at repaying Pam Jaya's debt.

Despite the bad experiences in Jakarta and the numerous protests against water supply privatization, Indonesian legislation forsees the transfer of water supply services to private companies all over the country.

The World Bank's condition: continued privatization

The new law enabling this step has been forced upon the country by the World Bank – the 300,000 American dollars worth of credit for improving water supply, offered to the Indonesian government in 1999, was conditional upon continued privatization.

Nahdlatul Ulma (NU), the largest Muslim organization in Indonesia, has opposed these plans, which it sees as conflicting with "the right to clean and affordable water".

On the other hand, both of Indonesia's largest political parties, the Democratic Party of President Megawati Sukarnoputri and the Golkar Party of Akbar Tandjung, support the countrywide privatization plan, which won't necessarily deliver clean water, but will certainly be expensive.

Digging one's own well

Bottled water from the French multinational Danone and other corporations provides a solution for only a tiny minority of Jakarta's population.

The Jakarta Post has reported that many of the country's wells are now controlled by these corporations and, in 2003 alone, they provided more than four billion cubic meters of bottled water, which was then sold at a high price to city dwellers.

Jakarta is seeing a growing number of people digging their own wells. The trouble is, they have to dig down at least 15 meters in order to find any clean ground water.

Gerhard Klas

Translation from German: John Bergeron