RESEARCH DESIGN

A STUDY OF THE DYNAMICS OF

WATER GOVERNANCE

Case Study of Indonesian Jatiluhur Dam Water Allocation

Wijanto Hadipuro

CHAPTER I

INTRODUCTION

The rapid growth of Jakarta’s urban population is not only attracting multinational private sector participation in urban water supply service delivery, but also creating a problem of raw water supply for the two private partners of PAM Jaya: Palyja and Thames PAM Jaya. PAM Jaya is a water supply company which is responsible for delivering water supply services to Jakarta’s urban dwellers and has a monopolistic position in the delivery of these services.

Palyja is a subsidiary company of SUEZ Environment, part of the SUEZ Group (SUEZ) of France, and is one of the largest water supply providers in Indonesia. Thames PAM Jaya used to be owned by Thames Water of the UK before it was sold to RWE Germany. In January 2007 after a long controversy Thames PAM Jaya was sold to an Indonesian company named Aquatico[1].

Many Indonesian government officers including the former president of Indonesia, Soeharto, were involved in inviting the two private companies to join in a partnership with PAM Jaya (See the presentation by Achmad Lanti representing Regulator Body of DKI Jakarta Drinking Water Service in a discussion entitled ‘Breaking Down ComplicatedProblem on Water Privatization in Jakarta’ held by the People’s Coalitionfor the Right to Water and Working Group on Power Sector Restructuring on January 16, 2007; and the Explanation of the Joint Committee of Thames PAM Jaya Share Transfer to theLocal Parliament (DPRD) of Jakarta in a Joint Commission Meeting on January 15, 2007).

In August 2007, the Asian Development Bank entered the arena by approving a proposed loan denominated up to Rp. 455 billion with a maturity of up to 10 years without government guarantee to Palyja (See Report and Recommendation of the President to the Board of Directors ADB Project Number 41913 August 2007 Proposed Loan Republic of Indonesia: West Jakarta Water Supply Development Project).

Nowadays most of the raw water for Jakarta comes from Jatiluhur dam, which is located in WestJavaProvince. The dam was built in 1957 and officially began operating in 1967. Jatiluhur is a multi-purpose dam. Its water is used for many purposes: raw water for drinking, hydropower generation, irrigation, farming, fishery, industrial usages, etc. Most of the Jatiluhur water comes from Citarum river. Citarum is connected with 4 rivers to the west and 4 rivers to the east by manmade canals, namely West Tarum canal and East Tarum canal. West Tarum canal was built in the early 1970s. It is 70 kilometres long. Through this canal JakartaCity gets the water from Jatiluhur Dam.

The management of the dam has experienced many changes reflecting Indonesian macroeconomic changes and various interests in benefiting from water from the dam. Jatiluhur Authority was first established in 1967 as Public Utility Company (Perusahaan Umum)[2] whose main task was providing public services in the water resources sector. In 1999 a big change happened when Jatiluhur Authority was changed into Perum Jasa Tirta (PJT) II. According to the Government Act No. 42 of 1999 the main tasks of PJT II since 1999 have not only been providing public services, but also making profit.

The big financial and political crisis in 1998 when the New Order regime under Soeharto fell resulted in shrinking central government spending and a trend toward decentralizing many activities that were previously carried out by the central government authority. Due to budget constraints in central government, PJT II has been forced to think of how to cover its operation and maintenance costs. Charging more for water service delivery was a logical strategy to cope with the problem.

In 1999 the Government of Indonesia issued Law No. 22[3], popularly known as the regional autonomy or decentralization law. The law, which was officially effective on January 1, 2001, gave municipalities and cities the authority to manage their own areas in three aspects: financial, civil servants or personnel, and facilities. Since then neo-liberal paradigms, municipalities and cities have competed with one another to generate local incomes, a trend which has coloured Indonesian macro policy.

The decentralization era of course affects the management of Jatiluhur dam. Though the dam is located at PurwakartaMunicipality, it is managed under the jurisdiction of the central government. However, since the service area covers some municipalities in WestJavaProvince (Purwakarta, Karawang, Subang and Indramayu) and JakartaSpecialProvince, PJT II has dealt with some contradictory interests: making profit to cover its operation and maintenance costs on the one hand, and meeting public service demands.

In terms of commodification and private sector participation in water resources management, in 2004 the Government of Indonesia issued Law No 7 of 2004 on Water Resources which is more market friendly (see Chapter 38 to 40 of this law) compared to the old law: Law No. 11 of 1974. The new law was imposed by the World Bank through the Water Resources Sector Adjustment Loan of 1999, which amounted to USD 300 million. One of the requirements of the third disbursement of the loan is the replacement of the law and other regulations with others that are acceptable to the bank.[4]

The process the issuance of the new water law also shows the revival of NGO movement in the water sector, which was made possible after the fall of Soeharto. Since the year of 2000 discussions, seminars, demonstration, and public debate on the draft of the law have flowered in the public sphere. The Law No. 7 of 2004 was phenomenal in the sense that the draft and the law were published twice in Kompas, the biggest newspaper in Indonesia. The publications were in response to massive opposition from Indonesian civil society. In 2004 and 2005 three NGOs - Indonesian Forum for Environment, the People Coalition for the Right to Water, and the Jakarta Water Consumers Community – led the demand for the Law No. 7 of 2004 judicial review in the Indonesian Constitution Court. The judicial review was also phenomenal since this was the first time the Constitution Court gave an interpretation of the chapters in a law, and if the implementing regulations of the law are against the Constitution Court interpretation, people can demand another judicial review (which is actually against Chapter 60 of Law No. 24 of 2003 on the Constitution Court).

Besides the policy context mentioned above, the management of Jatiluhur dam also faces day to day technical and operational problems. Though according to the management, the supply will be adequate up to year 2020, lately the conflicts among water users have risen. Aside from the problems faced by industries that use water from the dam, in 2006 Jakarta faced a decrease of bulk water supply. The decrease of supply was mainly blamed on the farmers in the Telukjambe area who planted rice on 4,000 hectares of their own land during the drought season, which was actually against the West Java Governor Instruction No. 521/Kep.1065-Binprod/2005. The Governor Instruction states that during the drought season the people should only plant crops, instead of rice, that require less water.

Due to climate change (the intensity and frequency of rain fall)[5] and many problems in water conservation areas, there is no guarantee that the supply of water to the dam will meet the growth of the demand from users.

Thus the facts above make the research on water governance arrangements related to Jatiluhur water allocation both timely and interesting.

According to the literature review described in the chapter on the theoretical background, there are two tiers in water governance analysis: institutional and actor level. And it is quite interesting to apply the two tiers of governance analysis to the changes that happened in the management of Jatiluhur dam: which institutions and actors were influential in creating the changes in Jatiluhur dam management over time?

Institutions, according to Kooiman (2003, p. 155), can be formalized rules of the game or symbol systems, cognitive scripts and moral templates that provide “the frames of meaning” guiding human action.

Kooiman (2003, p. 156-165) differentiates institutions into state, market and civil society. One typical characteristic of state as institution is the hierarchical principle. For market as institution, there are several key words and phrases: buyers and sellers, division of labour, the enforcement of the rules can be left to members, and competition between number of actors (buyers and/or sellers) that ends in exchange for a few of the actors. The main characteristics of civil society as institution are that the interactions are somewhat spontaneous, semi-formalized, mainly horizontal, and non-interventionist.

Though it is debatable especially for civil society actors[6], non governmental actors include the private sector (with its profit motive), and civil society (with its voluntary and non-profit motive).

This research will interrogate the influential actors and institutions in Jatiluhur dam water allocation, the process of gaining that influence and the impacts on water users. The scope of the study includes water users along West Tarum canal from Jatiluhur dam to Buaran Water Treatment Plant. Buaran Water Treatment Plant is considered the starting point of Jakarta urban water users (see the map in the Appendix). West Tarum canal area coverage is chosen as the location of the study, and a variety of actors there are involved in water allocation both directly and indirectly, including: multinational financial institutions, multinational water supply companies, besides central and local governments institution, farmers and industries.

The main research question of this paper is, what have been the effects of the changing configurations of governance actors and institutions managing the use of water from of Jatiluhur Dam over time?

Sub-research questions are:

  1. What are the relationships between governance actors and institutions over time?
  2. How have these relationships developed and changed?
  3. What have been the effects of the changes on water users in terms of water access and distribution?
  4. How have actual and perceived water supplies affected users?

CHAPTER II

THEORETICAL BACKGROUND

Since the later 1980s the word governance has been a buzzword in most publications on development issues (de Alcántara 1998, p. 105; Goldsmith 2007, 166). The background of the emergence of governance is that, as society becomes more complex and differentiated, the traditional method of governing from above – government – becomes more difficult (Loughlin 2004, p. 11; Merrien 1998, pp. 57-58.). The term governance implies that the management of the public sector is not the exclusive responsibility of government, but involves relationships between government and non governmental actors (Rakodi 2003, pp. 523-524; Stoker 1998, p. 18). Though this is debatable, especially for civil society actors[7], non governmental actors include the private sector with its profit motive, and civil society with its voluntary and non-profit motive.

A study of water management shows that even when water is managed by private actors with profit motives, it does not necessarily mean that water is managed as a commodity based on market mechanisms. Water can be managed by private companies very hierarchically where private actors meet all the regulations issued by government. When water is managed by public actors, it cannot be assumed that it is managed without any profit motive.

This article will try to differentiate two levels of analysis in water governance: the actor level and the ideological level, or in Kooiman’s terms, the institutional level (2003, p. 155-156). Co-governance, (Kooiman 2003, p. 96) which is what occurs when the interacting parties – such as in public-private partnerships – have something ‘in common’ to pursue together, is possible at the actor level. But is it possible that co-governance can be achieved at institutional level?

The first part of the paper will try to give an overview of the governance concept: the meaning of the term governance, the concept of institutions in governance, multi-level governance, and modes of governance. The second part will deal with the institution and the impacts of adapting certain institutions to the water resources sector. The third part will give a picture of the roles of higher-level governance actors (such as the World Bank, EU, IMF, WTO and the like) and what institutions undergird their policies. The fourth part consists of the findings of the literature review of the articles published in scientific journals related to the influential positions, strategies and circumstances that support the certain actors.

Governance: Actors and Institutions

Kooiman (2003, p. 4) differentiates governing from governance by arguing that governance deals with theoretical concepts, while governing is a set of actions. Governing can be considered as the totality of interactions, in which public as well as private actors participate, aimed at solving societal problems or creating societal opportunities; attending to the institutions as contexts for these governing interactions; and establishing a normative foundation for all those activities.

Societal fields or sectors are such institutional arrangements, and their influence on organizations may be great, resulting in ‘isomorphism’, the tendency for likeness: banks, as part of a banking sector will tend to look organizationally alike, hospitals will tend to look the same organization-wise after a while, and government departments will display isomorphism because parts of public sector tend to have the same traits (Kooiman 2003, p. 53).

According to Saleth and Dinar (2005, p. 2), water institutions can be defined as rules that together describe action situations, delineate action sets, provide incentives and determine outcomes both in individual and collective decisions related to water development, allocation, use, and management. Like all institutions, water institutions are subjective. Saleth and Dinar then explain that their subjective nature is recognized as either ‘belief system’ (Veblen 1919), ‘behavioural habits (Commons 1934), ‘mental construct’ or the ‘subjective model’ of individuals (North 1990a) and ‘artifacts’ that think and act through the human medium (Douglas 1986; Stein 1997; Ostrom 1999).

Is it true that actors in each category will tend to behave alike?

Friedman (1970) as he quoted his book Capitalism and Freedom said, ‘there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.’ The quotation from Friedman shows that the nature of private actors is making profit. Then Friedman wrote ‘The whole justification for permitting the corporate executive to be selected by the stockholders is that the executive is an agent serving the interests of his principal. This justification disappears when the corporate executive imposes taxes and spends the proceeds for “social” purposes. He becomes in effect a public employee, a civil servant, even though he remains in name an employee of a private enterprise.’

The quotation from Friedman shows the phenomenon of isomorphism. All private sectors will tend to behave alike and the only institution that guides private actors is the market.

John Mackey, the founder and CEO of Whole Foods, is one businessman who disagrees with Friedman. In the debate that follows, Mackey laid out his personal vision of the social responsibility of business. ‘At Whole Foods, we measure our success by how much value we can create for all six of our most important stakeholders: customers, team members (employees), investors, vendors, communities, and the environment,’ he argued. (see down-loaded on October 19, 2007).

The debate between Friedman and Mackay shows that they are discussing the same actor: the private actor, but because the institutional contexts for these governing interactions are different, the aims and behavior of private actors are also different one from another.

The idea of isomorphism which is not true leads to the importance of a two tiers of governance analysis: actor level and institutional level. If the idea of isomorphism is true then there is no need to make governance analysis at institutional level. It is the institution that makes the behavior of a certain actor different. For example, a public water supply company will stress on giving public service in state institution, but the same company will push itself in making money and profit when it works under market institution.

The quotation above also shows that isomorphism as described by Kooiman is not as simple as it looks like to be. It is even more complicated since there is a growing interconnection of interventions by law and administration on, and between, levels of governance actors at sub-national, national and supranational level which is described by Swyngedouw (2005) as governance-beyond-the-state. Governance-beyond-the-state is marked by a three-fold reorganization (Swyngedouw 2005, p. 1998). Firstis the externalization of state function through privatization and deregulation (and decentralization). Second is the up-scaling of governance whereby the national state increasingly delegates regulatory and other tasks to other and higher scales or levels of governance (such as the EU, IMF, WTO and the like), and, third is the down-scaling of governanceto ‘local’ practices and arrangements thatcreate greater local differentiation combinedwith a desire to incorporate new socialactors in the arena of governing.