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Massive Water Privatization Program to End in Jakarta After 18 Years

FILE - A street vendor holds drinking water as she walks near workers attending a May Day rally in front of presidential palace in Jakarta, Indonesia, May 1, 2016.

An Indonesian Supreme Court ruling has ordered Jakarta to end one of the world’s largest water privatization schemes, and the capital city is now scrambling to take control of its waterworks.

Last week the court ruled that two private water companies inadequately served the residents of the world’s second-largest metropolitan area.

Jakarta’s water utility was privatized 20 years ago in the last years of the Suharto military dictatorship, when the former president awarded contracts to two joint ventures, one of which included his son’s company.

A coalition of activists, trade unions and Jakarta residents filed a class-action lawsuit in 2012 claiming that the companies failed to guarantee people’s right to clean water. The companies both engaged in price differentiation that disproportionately taxed low-income residents and afforded them huge profits.

The coalition won its case in the Jakarta District Court in 2015, but it took two more years for the Supreme Court to uphold its constitutionality.

The defendants proved that the private companies’ “cooperation agreement has had a real and extraordinary impact on society,” the Supreme Court said in its decision. “These losses include: 1) Piped water services that can only be accessed by about half the population in Indonesia … and 2) Citizens must pay for clean water at very high rates but with poor water quality and quantity.”

It is consistent with an earlier 2004 Supreme Court ruling on water privatization, which posited that “water resources have to be controlled and allocated for the public benefit, thus private companies cannot monopolize rights over water sources.”

Agenda item for new government

Restoring water services to Jakarta residents will be another responsibility of Jakarta’s newly inaugurated governor, Anies Baswedan. Baswedan and Deputy Governor Sandiaga Uno campaigned heavily among some of the poor North Jakarta communities that were most affected by water insecurity, as they also suffered under the evictions scheme of Jakarta’s previous governor.

“I’ve seen many campaign promises from Anies and Sandi regarding people’s right of access to water,” said Martin Lenggu, a lawyer who led the class action lawsuit against the private water companies. “But do their plans conform to the U.N.’s guidelines on the right to water? We don’t know for sure yet. What is certain, at this time, is that the private companies’ contract will end.”

Water access threatens to become a major public health issue if it is not addressed promptly. North Jakarta residents described how they received “only sporadic water service, mostly limited to evening hours.” Others said they “were forced to buy expensive drinking water from street vendors and bathe in polluted public wells.”

Wealthier residents have long dug their own private wells because of the poor quality of water services in the city. The prevalence of such wells is one reason Jakarta is one of the fastest-sinking cities in the world.

A woman carrying a child walks along a garbage-strewn river at a slum in Jakarta, Indonesia, April 3, 2017. Most of Jakarta's waterways are polluted, contributing not only to a lack of clean water, but also making flooding more likely during the rainy season.
A woman carrying a child walks along a garbage-strewn river at a slum in Jakarta, Indonesia, April 3, 2017. Most of Jakarta's waterways are polluted, contributing not only to a lack of clean water, but also making flooding more likely during the rainy season.

Failure of privatization

When Jakarta’s water supply became privatized in 1997, there were both local and global factors in play. The immediate catalyst was Suharto. Observers say two multinational utility companies, Thames Water and Suez Lyonnaise des Eaux, benefited from the crony capitalism that was rampant in Suharto’s government to win favorable contracts that were not put up for competition. Thames Water partnered with Suharto’s son’s company. But when the regime rapidly collapsed in 1998, most of the companies’ leaders fled the country, leaving “no clear chain of command” that spiraled into present-day mismanagement.

“This is a dictator whose children and cronies have allegedly stolen about $15 billion when he stepped down in 1998. Their companies ranged from banks to water, from food to properties. It’s been 20 years and we still do not know the exact details of their looting of the country,” said Andreas Harsono, a senior Indonesia researcher with Human Rights Watch.

But Suharto did not award those contracts in a vacuum. The World Bank had been strongly encouraging the government to privatize its utilities at the time.

While water privatization has been hailed as a success in cities of Ecuador, Romania, Colombia, Morocco and Senegal, opponents describe the scheme as a “worldwide failure.” Many large cities, from Johannesburg to Buenos Aires, have re-municipalized their water supply in recent years, according to a 2014 report from the Transnational Institute, Public Services International Research Unit, and the Multinational Observatory.

The report suggests that, since the 1970s, international financial institutions like the World Bank and many national governments promoted private firms and public-private partnerships as a solution to public goods like water. But across the world, cities have kept running into the same problems: price discrimination, insufficient infrastructure investments, and environmental risks.

Jakarta’s experiment with private water began amid a global trend at the time, amid the exceptional circumstances afforded by the catalyst of Suharto-era corruption. Now, the city is once again going with the worldwide flow, this time away from privatization.