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I I I I 1 I I I I I I I I I I I I I I ±1 I I 1 I ENVIRONMENTAL HEALTH PROJECT I I I I I I I I I I Picpnrcd [u:. ENVIRONMENTAL HEALTH DIVISION I OFFICE OF HEALTH AND NUTRITION USAit) CLTltL: ~~il [‘J~)LJ~I[iL’!), ~ C!!i~~T~i~[;iL: 1 I GLJ~LJL; L: G)ui~:!P:uq::n~s,FILM SL:upn: rUiL) I ~ tu. U S AL MC~F Ii ‘L t I Liut Ici! u’ \ L I t ~ii f 202.2_936U_13031 I - - -- - - ---I I ENVIRONMENTAL HEALTH PROJECT WASH Reprint: Field Report No. 387 Survey of Pnvate-Sector Participation in Selected Cities in Indonesia J. Woodcock M. Maulana LIBRA~Y R. Thabrani INTERNATIONAL RFFERENCE CfrNT~Ø FOR COMMUNITY WATER SUPPLY ANØ SANITATlONd~ber1993 Co-Sponsored by USAI D/Indonesia Office of Private Enterprise Development, Urban Policy Division (PED/UPD) and the PURSE Steering Committee, composed of BAPPENAS, the Ministry of Home Affairs and -t~~~f Public Works LIBRARYc ~WA~skî~to~ 39g CENTRE FOR OOMMUNI 1 y WA UE~ ~-L’~ AND SAM ATflN ~C) 1 PC U-3’~ ~ 2U.~09AD T;~ 1(~(070) 81 1911 ext. 1411142 1f~J ~ Environmental Health Project Contract No. HRN-5994-C-0O-3036-00, Project No 936-5994 is sponsored by the Bureau for Global Programs, Field Support and Research Office of Health and Nutntion U.S. Agency for International Development Washington, DC 20523 WASH and EHP With the launching of the United Nations International Drinking Water Supply and Sanitation Decade in 1979, the United States Agency for International Development (USAI D) decided to augment and streamline its technical assistance capability in water and sanitation and, in 1980, funded the Water and Sanitation for Health Project (WASH). The funding mechanism was a multiyear, multimillion-dollar contract, secured through competitive bidding. The first WASH contract was awarded to a consortium of organizations headed by Camp Dresser & McKee International Inc. (CDM), an international consulting firm specializing in environmental engineering services. Through two other bid proceedings, CDM continued as the prime contractor through 1994. Working underthe direction of USAID’s Bureau for Global Programs, Field Support and Research, Office of Health and Nutrition, the WASH Project provided technical assistance to USAID missions and bureaus, other U.S. agencies (such as the Peace Corps), host govemments, and nongovernmental organizations. WASH technical assistance was multidisciplinary, drawing on experts in environmental health, training, finance, epidemiology, anthropology, institutional development, engineering, community organization, environmental management, pollution control, and other specialties. At the end of December 1994, the WASH Project closed its doors. Work formerly carried Out by WASH is now subsumed within the broader Environmental Health Project (EHP), inaugurated in April 1994. The new project provides technical assistance to address a wide range of health problems brought about by environmental pollution and the negative effects of development. These are not restricted to the water-and-sanitation-related diseases of concern to WASH but include tropical diseases, respiratory diseases caused and aggravated by amblent and indoor air pollution, and a range of worsening health problems attributable to industrial and chemical wastes and pesticide residues. WASH reports and publications continue to be available through the Environmental Health Project. Direct all requests to the Environmental Health Project, 1611 North Kent Street, Suite 300, Arlington, Virginia 22209-2111, U.S.A. Telephone (703) 247-8730. Facsimile (703) 243-9004. Internet [email protected]. WASH Field Report No. 387 SURVEY OF PRIVATE-SECTOR PARTICIPATION IN SELECTED CITIES IN INDONESIA Co-Sponsored by USAID/Indonesia Office of Private Enterprise Development, Urban Policy Division (PEDTUPD) and the PURSE Steering Committee, composed of BAPPENAS, the Ministry of Home Affairs and the Ministry of Public Works WASH Task No. 399 J. Woodcock M. Maulana and R. Thabrani October 1993 Water and Sanitation for Health Project Contract No DPE-5973-Z-00-8081-00, Project No. 936-5973 is sponsored by the Office of Health, Bureau for Research and Development U S Agency for International Development Washington, DC 20523 RELATED WASH REPORTS Principles of Tarif Designfor Water and Wastewater Services. Field Report No. 348. Prepared by David Laredo. October 1991. Report of the Workshop on Private-Sector Participation in Urban Water Supply, Bali, indonesia, 16-18 May 1991. Field Report No. 346. Prepared by James Clarkson, James McCullough, and Rashid Thabrani. September 1991. Private-Sector Participation in Urban Water Supplies: Issues for Investment in Indonesia (Vol. I, Strategic Frameworir Vol.II, Administrative Guideline; Vol III, Working Papers). Field Report No. 330. May 1991. Preparing for Private-Sector Participation in t/ze Provision of Water Supply and Sanitation Services. Technical Report No. 84. Prepared by Jane Walker. August 1993. Financing Wastewater Services in Developing Countries. Technical Report No. 80. Prepared by James S. McCullough, David H. Moreau, and Brenda L. Linton. January 1993. Guidelinesfor Conducting a Finandal Management Assessment of Water Authorities. Technical Report No. 53. Prepared by Sally S. Johnson. October 1990. Guidelinesfor Cost Management in Water and Sanitation Institutions. Technical Report No. 54. Prepared by Ronald W. Johnson. June 1990. I CONTENTS EXECUTIVE SUMMARY y ACRONYMS ix 1. BACKGROUND 1 1.1 Origin of the Assignment 1 1.2 Purpose of the Survey 2 1.3 Definitions 2 1.4 Data Collection Methodology 5 1.5 Organization of the Report 6 2. INDONESIA’S EXPERIENCE WITH PRIVATE-SECTOR PARTICIPATION .... 9 2.1 Overview of Private Sector Activities 9 2.1.1 Locally Versus Centrally Dominated Activities 9 2.1.2 Sectors and Subsectors Covered in the Survey 10 ~2. 1.3 Investment Versus Service Subsectors 10 .—~ 2.1.4 Reasons for Private-Sector Participation 12 2.1.5 Characteristics of Cities with Significant Private-Sector Activities 13 2.2 Basic Findings of the Survey 15 2.3 Water Supply 19 2.3.1 Raw Water SupplylPiping/Treatment 19 .3.2 Meter Reading, Bill Collecting, and Other Service Contracts . 22 2. Wastewater and Sanitation 23 2.5 Solid Waste 24 2.5.1 Investment Subsectors 24 Service Subsectors 25 2.5.3 Miscellaneous Subsectors 26 2.6 Integrated Area Development 26 2.6.1 Real Estate Developments 26 2.6.2 Industrial Estates 27 2.6.3 Other Developments 27 2.7 Single Function Commercial 27 2.7.1 Markets 27 2.7.2 Slaughterhouses 30 1 2.7.3 Parking 30 2.7.4 Passenger Terminals 31 3. OPPORTUNTFIES 33 3.1 General Opportunities 33 3.2 Potential Pilot Project and Investment Areas 33 3.3 Opportunities in Water-Related Sectors 34 3.4 Opportunities for Single-Function Commercial Activities 37 3.5 Opportunities in Integrated Area Development 37 4. CONSTRAINTS 39 4.1 The Need for Risk Sharing Arrangements 39 4.2 Guarantees 39 4.3 Financing 40 4.4 Setting Tariffs 40 4.5 Institutional Arrangements 41 4.6 Legal Constraints 41 4.7 Lack of Openness to Priyate-Sector Participation 42 4.8 Competition from Multilateral Funds 43 4.9 Lack of Strong Local Institutions 44 4.10 Conclusion 44 5. INDICATORS FOR MONITORING PIUVATE-SECrOR PARTICIPATION 45 1 5.1 Monitoring Indicators 45 5.2 Baseline Data 49 I 5.2.1 Semarang 49 5.2.2 Yogyakarta 57 5.2.3 Medan . 58 I 5.2.4 Bandung 58 5.2.5 Sumniary and Conclusions 59 I 6. CONCLUSIONS AND RECOMMENDATIONS 63 I 6.1 Conclusions 63 6.2 Recommendations 64 I I APPENDIX A. Team Planning Meeting Notes B. ScopeofWork C. Persons Interviewed D. City Profiles E. Types of Private-Sector Participation Experiences Worldwide F. List of Private Companies G. Supplementary Survey TABLES 1. General Definitions 3 2. Types of Private-Sector Institutions 4 3. Types of Private-Sector Participation in the Water Sector . 8 4. Sectors and Subsectors Surveyed in Eight Cities 11 5. Towns, General Physical Overview 14 6. Existing Sectoral Private-Sector Participation Contracts by City . 16 7. Potential Investment Activities Roughly Ranked by Size of Investment 18 8. Present Status of BOT Schemes for Water Supply Sector 20 9. Recommended Physical and Financial Indicators for Private-Sector Participation in the Water Sector 47 10. Recommended Physical and Financial Indicators for Private-Sector Participation in the Solid Waste Sector 48 11. Recommended Physical and Financial Indicators for Private-Sector Participation in the Sanitation Sector 48 12. Baseline Levels of Private-Sector Participation: Physical Indicators 50 13. Baseline Levels of Private-Sector Participation in Semarang: Financial Indicators 51 14. Baseline Levels of Private-Sector Participation in Yogyakarata: Financial Indicators 52 15. Baseline Levels of Private-Sector Participation in Medan: Financial Indicators 53 16. Baseline Levels of Private-Sector Participation in Bandung: Financial Indicators 54 17. Baseline Levels of Private-Sector Participation in Surabaya: Financial Indicators 55 18. Annual Value of Services Provided through Private-Sector Participation, 1992 56 111 EXECUTIVE SUMMARY A team of consultants conducted a survey of eight cities in Indonesia to ascertain the level of private-sector participation with local governments in water supply, sanitation, solid waste, and several commercial activities, such as market place construction and renovation, slaughterhouses, and parking faciities. Private-sector participation includes long-term investments in infrastructure and services delivered for immediate payment under contract. The cities surveyed were Bekasi, Surabaya, Semarang, Yogyakarta, Ujung Pandang, Bandung, Medan, and Pontianak. The team interviewed scores of local officials, entrepreneurs, investors, and business association representatives over a six-week period. The intent was to take a “snap shot” of private-sector participation at the local-government level as it existed in late 1992. Principal Findings There is a great deal of private-sector participation at the local government level, mast of it in the commercial activities sector. Private companies are involved in market construction and renovation in seven of the eight cities surveyed, and in slaughterhouses and parking in five of the eight chies.
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