Firms eye up 3 water-supply projects

Andi Haswidi, The Jakarta Post, Jakarta

Three private firms have expressed a keen interest in investing in three water-supply projects worth Rp 1 trillion (around US$109 million) that have been put on the table by the government at the Infrastructure Conference and Exhibition 2006.

"Many investors are interested in our water projects. At least three of them have directly approached me today and stated their intention of tendering for piped-water projects," Public Works Minister Joko Kirmanto said at the conference in Jakarta on Thursday.

Joko said the three companies were Tyco Water of the U.S., Ami Water from Singapore and a local firm from East Kalimantan.

During the three-day infrastructure forum, which will end Friday, the government is offering three water-supply projects that will serve as models for private-public partnership (PPP) projects in the water sector.

The three projects are the Bandung water-supply scheme, which is worth Rp 300 billion, the Tangerang water-supply scheme, worth Rp 300 billion, both of which are located in West Java, and the Dumai water-supply project in Riau province, which is worth Rp 400 billion.
Joko said that the three companies had already conducted studies at the project locations, which would give them an advantage in submitting unsolicited bids.

The tenders for the projects will be launched this month, while pre-feasibility studies will be conducted in November, prequalification in December and acceptance of the final bids by as early as January 2007.

The government is aiming to tackle the chronic underdevelopment of the country's water-supply sector. At present, about two-thirds of Indonesia's 220 million people do not have access to a clean-water supply.

In cities, piped-water coverage averages only about 39 percent, while in rural areas coverage averages less than eight percent.

Under a 2005 presidential regulation, PPP projects can be identified and initiated both by the government and the private sector, but the private-sector promoters must be selected through an open and transparent tender.

The regulation permits tariffs to be set so as to allow for full-cost recovery. Should full-cost recovery exceed the ability of consumers to pay, the government must make good the difference through the payment of a subvention to the operator.

One possible problem facing PPPs is resistance from regional governments in the form of bureaucratic, anti-private sector ordinances.

Aware of this possibility, Joko said that he had ordered the Water Supply System Development Supporting Agency to assist investors when dealing with local administrations.

"I am sure that every regional government wants to work for the benefit of its residents. Local administrations will be allowed to stipulate their own rules as long as these don't conflict with our national objectives," he said.

The minister also said there would be no restrictions on which parts of the country investors, whether local or foreign, would be allowed to develop projects.

"Any restrictions will be set by the market itself. I don't think that many big overseas companies will want to invest in rural areas that can only generate insignificant revenues. They will aim for the big cities and leave the rest to the local government water utilities," he said.