When I got an assignment in late 2001 to report on the privatization of Jakarta's water company, I knew that it was going to be difficult, requiring a lot of research and interviews. But what I could not have imagined then is that I'd be witness to the deterioration of Indonesia's two largest companies, which were closely related to Indonesian strongman General Suharto.
As I began my reporting, Sigit Harjojudanto, Suharto's eldest son, who collaborated with the British-German firm RWE Thames Water to privatize Jakarta's PAM Jaya water company, declined to respond to my faxed messages and phone calls. It turned out that his office was almost deserted. Office workers told me that he rarely visited the office after his father's forced resignation from the presidency in May 1998.
Harjojudanto's advisor, Fachry Thaib, once a flamboyant businessman, suddenly shunned publicity. Harjojudanto's other business associates, once involved in many sport or social activities during the Suharto era, were willing to talk but for background only. "We have seen the turn of our fate, from the hunter to the hunted," said Iwa Kartiwa, an aide to Anthony Salim, the CEO of the then widely diversified Salim Group, which worked with the French Suez to privatize the other half of PAM Jaya.
At the same time I was witness to labor unions in the post-Suharto period transforming themselves quickly from lame ducks into effective if not rude organizations. They mobilized strikes and organized campaigns frequently to protest both RWE Thames Water and Suez. "It was unexpected during the Suharto period. Now we're being sought by many political parties," said Taufik Sandjaja, a leader of the Indonesian Drinking Water Labor Union.
They also actively contacted the media with press releases, documents or other statistical reports. Some unionists even took time to retrieve some original papers to help me understand the water privatization.
Jakarta's Water Story Begins
Jakarta's water privatization story began in June 1991, when the World Bank agreed to lend PAM Jaya $92 million (U.S. dollars) for infrastructure improvements. The loan was matched by one from the Japan-based Overseas Economic Cooperation Fund to build a water purification plant in Pulogadung, in eastern Jakarta. The loans were very much needed because PAM Jaya was practically managing a colonial-inherited water infrastructure that had been constructed in the 1920's.
The World Bank soon encouraged the Indonesian government to privatize its utilities, according to World Bank loan documents. The World Bank expected that the loans would facilitate privatization by bolstering the water and sewage infrastructure and making the waterworks a more attractive investment. Private companies accordingly made their moves to take control of PAM Jaya.
The London-based Thames Water Overseas Ltd. was first to act in 1993. It formed an alliance with Harjojudanto, a notorious gambler among Jakarta's elite circle with no experience in the water business. Thames set up an Indonesian subsidiary and gave him a 20 percent interest. For Thames, forging an alliance with a Suharto was a question of realpolitik. "At the time, any company dealing with Indonesia would have to deal with almost some element of the Suharto family because of the way the government was set up," said Peter Spillett, head of environment, quality and sustainability for Thames.
In Paris, Suez worried that Thames would snap up the entire water concession. To pave its inside track, Suez selected Salim Group, then the largest conglomeration in Indonesia whose founder, Sudono Salim, was a close associate to Suharto since the 1950's. "Access to politics is essential. The water business is always political," Bernard Lafrogne, a Suez representative in Jakarta, told me.
These strong partnerships soon produced results. In 1995, President Suharto ordered his public works minister, Radinal Moochtar, to privatize Jakarta's water. …