The Adverse Impact of Privatization on Jakarta Citizen and Water Sector Workers

Instead of giving good impact, privatization has adverse impacts on the workers and citizen. In the first five years of water privatization in Jakarta, the price of water increased by tenfold. The price of water in Jakarta, at that time, was the most expensive in Southeast Asia. On the other hand, during the same period, there was not any increase in the number of new consumers in Jakarta. Meanwhile, there have had been labor disputes in the company. The dispute was brought to the Industrial Relation Court. Both facts were revealed by the  reasearch on the potential adverse impacts of the termination of privatization agreement between PDAM and its partners on water sector workers in Jakarta.

As it is known, the water privatization agreement in Jakarta that was signed in 1998 will end on February 1, 2023. However, in practice, there are several problems arose from that agreement termination. Some problems were already there even before the termination.

Since the beginning, the privatization agreement bear so many questions. There are doubts that the privatization was actually the answers to different problems faced by water sector: the quality, effectivity, and efficiency. This is understandable as since the beginning, the water privatization agreement in Jakarta was dominated by global capitalism interest due to multi-dimensional crisis hit Indonesia at the end of the nineties. 

Jakarta water privatization is considered unprocedural. The process also did not meet the precondition for a privatization to succeed, i.e. to benefit from the market to resolve the efficiency problem in public service sector. The water privatization contract in Jakarta also did not go through open bidding (it was more like a direct appointment which is laden with nepotism and corruption) and was not preceded by a systematic due diligence process to determine rational target.

A number of critics and lawsuits accompanied the privatization project. The critics and mainly concerned with the low quality of the service delivered to the consumers and also the high price. The study conducted by Amrta Institute for Water found that the water tariff applicable in Jakarta has increased tenfold and became the highest in Southeast Asia. The high price is suspected to be the cause of no increase in the number of new consumer in Jakarta.

In addition to economic problem, water privatization in Jakarta also failed to improve the quality of service the company provided. For example, media reported that there has been a decline on water quality delivered to the consumers. It reported that in the mid 1999 to 2001 about 8.5% water provided by PAM di Jakarta and cities around Jakarta was not drinkable and did not meet the standard of physical and chemical quality.

This study shows that there has not been any significant change in terms of water quality compared to before the privatization. A statistical data supports the finding. Up to December 2013, PAM Jaya received more than 53,000 complaints related to service. Out of that number, 74% was related to the dysfunctional water tap. PAM Jaya alrs recorded that there have been high number of leaks, around 42% (from the target of 38% only). New service scope is 60% (from the target of 66%), and water pressure (the amount of water that is received by consumers) is also under 50% (from the target of 100%).

A number of labor disputes occured during the first four to five years of the contract. The most prominent case is the remuneration problem. The amount of retirement fund given by partner company to workers who worked directly to them is different from the one given to PAM Jaya’s wokers whose status was assigned to work at the partner company (seconded). There three cases which ended up in the Industrial Relation Court (PHI). Those are: Case of Maisril et. al. (4 persons) 2014-2016, Ponimin et. al. (1,055 persons) 2008-2009, and Dondi Syahtriandi (2011-2015).

On February 1, 2023, the agreement or contract of privatization will end. However, there is a scepticism about whether or not the termination of privatization agreement on February 1, 2023 means that PAM Jaya will be remunicipalized: the return of the control over management and service of water to the hands of the public via the regional/provincial government.

A number of newly found facts show the tendency of new privatization in the form of unbundling of water service supply chain in Jakarta. A series of MoUs have been signed by representatives of different ministries witht the Governor of Jakarta. In October 2022, the new agreement on water production management was signed.

Some big private companies including the private company that previously was in the contract with PAM Jaya, are in the offer exchange of water privatization bidding in Jakarta and cities around Jakarta. There have been some questions about the transition process. The company claims that it has established a transition team as mandated by a clause in the privatization agreement of 1998/2001. However, there is not any valid information related to the composition of the transition team.

In order for the transition process to be smooth, there has to be improvement of inter-agency communication and between stakeholders. The problem with availability of communication media must also be handled seriously. The interviewed informan stated that there needs to be a responsive actions from the government side to ensure that the transition team is valid, representative, and work tranparently.

In addition to that, there are a number of potential labor problems arise during the transition period and before the end of the agreement on February 1, 2023. If the problems are left unattended and poorly handled, there is a possibility for legal disputes to emerge. The uncertainty will disrupt productivity and performance of water service in Jakarta which at the end, will violate the rights of the citizen overn quality public service.

There are at least four potential problems emerge during the transition period and after the the privatization agreement ends. First, a problem related to employment status. The termination of privatization agreement will have a concrete impact on the workers’ employment status in both partner companies. Although clause number 32.12 of the collective agreement  guarantees that workers in both partner companies can be recruited by PAM Jaya. Workers said that they had been asked to fill a questionaire and to sign a letter that they agreed to work in PAM Jaya. There are two clauses in the statement letter that workers find unclear. Those clauses are related to their employement status at PAM Jaya: first, a clause that said that workers are agree to be a permanent or contract workers at PAM Jaya; and second, workers must agree to participate in the recruitment process to able to work at PAM Jaya.

Both problems have raised a number of questions: for previously permanent workers at hired by a private companye, will they be contract workers in PAM Jaya later after the termination of privatization agreement? If workers must participate in the recritment process, does it mean that there are possibilities that they fail in the recruitment process? What will the consequence be?

The second problem is related to job loss compensation. The clause number 32.12 of the collective agreement implies that PAM Jaya has a prerogrative right to recruit workers and/or not after the collective agreement is no longer applicable. The question is what will happen to workers who are not recruited by PAM Jaya but already resign from the partner company?

A legal issue will arise, will workers be terminated/fired or considered as resignation? Who will be responsible to pay the compensation to the concerned workers; PAM Jaya or the partner company?

Third, the seconded workers. The seconded workers are in an uncertain situation. The Clause number 32.12 of the collective agreement says “All parties agreed that this the contact of Seconded Workers will end automatically with the change of employment status.”

Refering to that clause, the contract of seconded workers will automatically end exactly when the collective agreement expired. However, there is not any further explanation on how will the change of employement status for seconded workers be carried out: will they be automatically return to their original position at PAM Jaya just like before they were assigned to work at the partner company? Or, will they have new position and duties? How will the transition be? Those questions are left unanswered.

Next, the fourth, the deficit of human resources and its impact on the performance of public service. Based on BPS data in 2020, the number of water PAM Jaya workers is approximately 910,000,21, while the number of water sector workers in Jakarta up to 2020 is 2,200.

By assuming that the growth of water sector consumers is about 0.7%-0.9% per year, the ration of workers in Jakarta to the number of customers is 1: 410. That means each worker must provide a service to 410 customers (which mostly are households, companies, etc.).The deficit of human resources bears a big problem. Statistically, the number of workers in their retirement age is also significant. This matter must be handled seriously and must be included in the deliberation of transition team.

Unfortunately, although union existence in water sector in Jakarta is acknowledged by the company, however, workers are relatively excluded from the transition process. The communication with management were initiated by the union, not by the company. In the context of social dialogue, this situation hinders the possibilities of challenge solving in the win-win solution.

The explanation above is the summary of a research initiated by the Public Service International (PSI), a global union federation in public sector. The research was conducted to ensure the protection and fulfilment of water sector workers in Jakarta who are impacted by the remunicipalization process what will take place on February 1, 2023.

The reseach lasted for three months, from end of August to end of October 2022. The research objective is to support the struggle for equal rights to quality public service by fighting for the fundamental rights of the workers. Included in the research the socio-political context of Indonesia’s labor policies; identification of problems in fulfillment and protection of workers rights and union rights resulted from remunicipalization process of water company in Jakarta, and provided recommendations for PSI the take precautious steps in advocating the workers rights and union’s rights in the process of remunicipalization of water in Jakarta.

On 25 November 2022, 16 people representing SP PDAM Jakarta, Sekar Aetra and Sekar Palyja, gathered to launch the report and discuss further input for strategic actions.

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