E19: Who Controls Water in Indonesia?

On this episode of Indonesia In-depth Podcast, I discussed the hugely important Water Resource Bill with Dr. Mohammad Mova Al’Afghani from the Center for Regulation, Policy, and Governance (CRPG). This bill is being deliberated in parliament and will define how water as a resource is managed in Indonesia and will have a wide impact on businesses and local communities. Parliament is aiming to pass this bill in November 2018. Here are the key takeaways:

Privatization of Water Utility (05:58 on episode)

  • The Water Resource Bill is a Parliament initiative because the Constitutional Court struck down the previous law (Law No. 7 of 2004) in 2015. The main focus of this decision was the privatization of water utility provision.

  • The current bill remains to have problematic contents. One of the most problematic points is about the obligation to prioritize state-owned enterprise (Badan Usaha Milik Negara/ BUMN) and regional-owned enterprise (Badan Usaha Milik Daerah/ BUMD) in providing water utility to the people before private entities can exploit the resource. However, it is unclear as to what “private entities” encompass and with the advent of corporatization of state and regional-owned companies, there’s no guarantee that they will in fact elevate the people’s welfare.

  • Additionally, businesses will be subject to several strict terms and conditions: providing 10% of their profit for water conservationbank guarantees, and must be in a form of a cooperation, investment, or joint venture with the BUMN and BUMD. All are burdensome, increases uncertainty for investors and possibly unfeasible in practice. 

  • In reality, approximately 60% of the water utility in Indonesia is managed and provided by community-based associations or cooperations, which will fall into the private entity group.

  • The responses from the Government and the Parliament vary on this issue. While the Government of Indonesia appears to be reluctant to accept these terms for business entities in the bill, the Parliament seems to remain firm in support of strict terms and conditions for the private sectors.

Drinking Water v. Bottled Drinking Water (16:00 on episode)

  • Although the 2015 Constitutional Court decision did not focus on “bottled water”, it remains an important issue. The current bill conflates the definition of drinking water and bottled drinking water. Bottled drinking water should not be equated with drinking water because it does not meet the human right standard for the provision of drinking water (which is piped water), says Dr. Mova. Bottled water is not continuously accessible, it is a consumer good, and may lead to local pipeline drinking water company, such as PDAM (Perusahaan Daerah Air Minum), to invest on bottled-drinking water instead of expanding pipeline networks. This would make clean water out of reach of many Indonesians.

  • Aside from the above issues, there are the problems of allocation and access to water sources. There’s no clear explanation on the allocation of water and access to water sources remains unclear. On the one hand, landowners would be required to provide public access to water sources and be prohibited from building fences or other structures that would restrict access. Industry experts worry that this would make it difficult to maintain water standards. Parliament appears to understand this dilemma but it remains unclear whether they will make change to the bill to accommodate this concern. Deliberations continue.

Sanitation (24:15 on episode)

  • The sanitation issue receives very little attention in the bill, despite its importance and relevance in Indonesia. The approach of sanitation in the current bill remains only focused on how to improve water quality and not focus on sanitation as services (e.g. accessibility, how to handle leakage, septic tank issue, and sewage).

  • The bill should incorporate more articles on sanitation because it might take years to complete a separate law on sanitation while the cost out of treating diseases and growth issues that stem out from poor sanitation is on the rise. 

Water Privatization Case in Jakarta (28:45 on episode)

  • In a 2017 citizen lawsuit, agreements between PT PAM Jaya (Jakarta provincially-owned water utility company) and several private companies to manage Jakarta water utilities was rendered unlawful and the management should be returned to PT PAM Jaya by the State Court. However, at the Supreme Court level, it did not render the agreement null and void, but only order the private companies to return the water utility management to PT PAM Jaya.

  • Currently, a court review is submitted by the Ministry of Finance to revisit the case, but it appears that due to technicalities it will be difficult to revoke the current decision.

  • An additional problem involving water is the sinking of the capital city of Jakarta caused by illegal wells, mismanagement and lack of a water networks. Dr. Mova suggests that we must first try to expand the network of pipes that reach difficult and densely populated areas to stop using ground water, as it is usually can also be contaminated by septic tanks. However, expanding the network is in itself a difficult task due to the current bureaucracy. 

Other Bills to Watch

Another big draft bill to watch is the upcoming Chemicals Bill. With the wide usage of chemicals in our daily lives, this bill should be followed closely. It is still in the early stages and not at the bill stage just yet but stakeholders and business leaders should provide input to both the government and parliament now before House deliberations begin.

Hosts: Shawn Corrigan & Tanita
Email us! info@indonesiaindepth.com
Twitter: https://twitter.com/IndoIndepth
We are also available on Spotify and on Amazon’s Alexa!

This podcast is brought to you by LEXICO Indonesia, a political risk advisory in Jakarta. https://www.lexicoindonesia.com  https://twitter.com/LEXICOIndonesia