NEW PARADIGMS FOR HIGHLY EFFICIENT

URBAN WATER SERVICES IN INDONESIA

Dr. Riant Nugroho

Jakarta Water Supply Regulatory Body (Jakarta)

Steering Committee “1% for 7C” Global Movement (Geneva)

Steering Committee World Alignment Cities Against Poverty (WACAP) (Rotterdam)

Privatization: public

private participation

(PPP)

Poor service delivery

and business

performance

Ideas we have today

Government as

service provider –

Public Company

(PDAM)

Poor service delivery

and business

performance

About 5% of PDAMs

are performing

Start in Europe in

February 2011

1% of total sales of

water companies in

Europe will be

transferred to the

developing countries

Recent ideas: “1% for 7C Global Movement”

Water company Water company Water company

Water company Water company Water company

Water company Water company Water company

Netherland

France

Indonesia

1% for 7C

Committee

The global movement is being back

to back with WACAP movement

(World Align Cities Against Poverty).

Initiated by UNDP Geneva of

Innovative Partnerships Office

1% of total sales of Europe public water

companies will be transferred to the

public water companies in developing

countries to speed up the 7C of the

MDG. Initiated by UNDP Geneva of

Innovative Partnerships Office

It is about another “PPP”: public to public

partnership

Business model

1% for Goal 7C

Project Team

A bunch of strategies

Distributed among

actors and targets

Monitoring the

implementation

Evaluate the project

Reporting the project

Hub-Innovative

Partnership UNDP

Project Team & SC

Project Team

Project

implementationProject team & SC

Project Team & SC

Project Team

Project parties

MDG 7C

�Hub

�Exchange house

�Global administrator

Water and sanitation ���� income generating

Water and

sanitation

improvement Sickness,

unhealthy

Good for business and

therefore economic

development

Innovative funding for water, yesterday-today

Yesterday innovation Today innovation

“Privatization”

(PPP and the like) ?

Privatization (PPP) basic mistaken

assumption

Privatization (PPP) basic mistaken

assumption

Water main infrastructure

development (i.e. water

treatment plant)5 years 5 years 5 years 5 years 5 years

1st 2nd 3rd 4th 5th

Case A: 25 year of effective

investment period (or more) and

20-25 years of payback period

Case b: 25 year of effective

investment period (or more) and 5

years of payback period

Water tariff case A

YearTarget :

1998-2022

Revised target:

2003-2007

Revised target:

2008-2012

Actual

performance

1998 58,35 % 61,17 %

1999 54,79 % 57,94 %

2000 48,51 % 50,94 %

2001 47,15 % 50,78 %

2002 45,38 % 47,75 %

2003 43,50 % 44,65 % 45,26 %

2004 41,63 % 43,34 % 47,81 %

2005 39,76 % 41,75 % 50,36 %

2006 37,89 % 39,86 % 51,17 %

2007 36,02 % 37,99 % 51,01 %

2008 35,06 % 36,92 % 48,25 % 50,20 %

2009 34,11 % 35,56 % 47,15 % 46,85 %

2010 33,15 % 34,18 % 46,05 % 44%

2011 32,19 % 32,77 % 44,52 %

2012 31,23 % 31,21 % 43,25 %

2013 30,28 % 30,00 % 41,62 %

2014 29,32 % 28,68 % 40,00 %

2015 28,36 % 28,05 % 38,37 %

Water loss: “revise target to get the target”

It is not about “anti PPP”. It is just about sound performance or poor performance!

By today’s paradigm, it is almost impossible to

provide service for the poor in Jakarta

Water charge + IDR 7.000/m3

Water tariff + IDR 1.050/m3

Private

operators

Poor

people

Every additional of 100.000 new connection of poor/low income

household, which each of them consume 40m3/month, there is a shortfall

IDR 23,8 billion/month instantly –and about IDR 285,6 billion/year. Nobody

want to take the accountability

Key problem of the water companies in

the developing countries is not money…

Government

• Politics and bureaucracy intervention

• Water as political commodity

Management

• Undermanaged

• Lack of professionalism

Community (consumer)

• Over demanding

• Water crime (illegal connection and consumption)

MANAGEMENT TRANSFORMATION. Transforming the management of the water

enterprise first, then lend them (or grant them) with money. Make them competence to

manage the institution and therefore the loan (or grant)

1st proposal: innovative IPO, “go public” to the

customer

Water companies

Government

ownership

Customer

ownership

40-60%

In Jakarta, the capital injection of the “innovative IPO” generate money more than

enough to take over private ownership; or equal to a 10-12 years of new investment.

Financial exercise

� Jakarta is having 800.000 customers: 40% is the low-income customer, 20% is the middle-income customer, 20% is the high-income customer, and 10% is the highest income customer.

� There are 30% of customer that “have money” to funding the water service.

� In 2006, Thames PAM Jaya (one of the concessionaire) was sold to a Singapore based enterprise. There was no formal announcement of the selling price, but a source noted that the price was about USD 15,000,000. In 2006, it was about IDR 150,000,000,000. It means that the “market price” of the water service in Jakarta was about USD 30,000,000, or IDR 300,000,000,000. It could mean that Jakarta needs money that much to funding their business”.

� Assumed, 30% of the number of the Jakarta water customer means 240,000. Assumed, 49% of the stock of the Jakarta water enterprise is sold to them with price IDR 10,000,000 (about USD 1,000) per customer, it would be IDR 2,400,000,000,000. It is more than enough to take over and finance water services.

� Assumed, the two private operators invest about IDR 240,000,000,000 per year. It is only 10% from total money that could generated from “innovative IPO”.

Lesson learned

• Take care and exploit

the gigantic “hidden

capital” before we

conclude that “we

need a help from

private”

2nd proposal: community water enterprise (CWE)

Water

enterprise

Low income customer in the dense population that unable to be served conventionally

CWE

manager

technical finance

Community Community

representatives

2nd proposal: community water enterprise

(CWE)

1. to develop a “people-owned small enterprise” at the grass-root level

2. the enterprise owned by all the customer in those poor communities of the dense area

3. the enterprise business is to distribute water to their communities

4. the enterprise managed by local people

5. the enterprise buy water from city Water enterprise with price of “N”, and sell to their customer with price “(N) + (N x 30%)”

6. the business profit is for:� management fee (10%)

� operation and maintenance cost (10%)

� Dividend (10%)

7. the “dividend” can be managed as “local saving” that might be managed as “local banking system” (versus shark loan) for local people. It will be a “banking operation” with a new profit to generate local financial system.

Additional value: injecting management competence and then culture of managing

Innovative funding for sanitation, yesterday-

today

Yesterday innovation Today innovation

“sanitarization”* (toilets) ?

* From the word of “sanitary”

Sanitation issue, Indonesia case

• Poor sanitation cost Indonesia over IDR 58 Trillion (USD 6.8

billion) per year (WB, 2007)

• Over 94 million Indonesians do not have sanitary toilets; 43%

of total population; …and only 2% of urban population served

by integrated sewerage system.

Water and sanitation ���� income generating

Water and

sanitation

improvement

Sanitation, two proposals

Government, donors, CSR Government investment

1 2

1st proposal: Public sewerage plant (PSP)

� Government invests sewerage treatment plant (STP).

� Public enterprise (government owned) managed the STP

� Private sector manage in a clusters methods; arranged by

housing complex

� Sanitation billing system earmarked with electric bill.

2nd proposal : community-based independent

sanitation system (CISS)

Public

sewerage

enterprise

Low income customer in the dense population that unable to be served conventionally

CISS

manager

technical finance

Community Community

representatives

2nd proposal : community-based

independent sanitation system (CISS)

1. Jakarta most dense population is grouping into 500 clusters of 100 households. Each cluster is having a single common closed septic tank as CISS

2. Government and/or donor provide limited funding for developing the sanitation system

3. The CISS infrastructure is located in under the kampong street, which is accessible, by mobile-septic-collection.

4. Septic tank managed by local communities; following the micro funding for water service (1.a.)� the enterprises owned by all the customer in the community

� the enterprise management do manage billing system of the sanitation service

� the enterprise managed by local people

� the enterprise charge at “N” per household (according to the number of the people)

� the business profit is for: operation and maintenance cost (60%), management fee (20%), Dividend (20%)

� the “dividend” can be managed as “local saving” that might be managed as “local banking system” for local people. It will be a “banking operation” with a new profit to generate local financial system.

5. Periodically, there is service from mobile-septic-collection. Periodically, there is government conduct inspection the CISS

Thank you