(Tempo) After revoked the 2004 Water Resources Law: Ripple Effect

12/12/2018

The decision of the Constitutional Court last week clearly shows that the state cannot allow some sectors to be implemented outside of the constitutional mandate. Eleven years after then-President Megawati Soekarnoputri signed Law No. 7/2004 on allowing the private sector to manage the distribution of potable water, the Constitutional Court has restored the rights and responsibilities of managing this sector back in the hands of the state.

It is a correction of an erroneous and misguided policy. With the court annulling the legislation, the government must now cease its policy of legitimizing the management of potable water system by the private sector. As such, the applicable regulation should revert to Law No. 11/1974 on Water Distribution. But since this law lacks the relevant clauses on the right of the private sector to manage potable water distribution, the government must immediately revise Government Regulation No. 16/2005, which gives companies the right to supply and sell potable water.

Distinct from the privatization of other state-owned companies which could be done by selling the company shares, privatization of potable water was done in stages by changing the sectoral policies and adjusting the rules of the game. The problem therefore is not merely one of foreign versus non-foreign companies. It is also about more complicated issues, like the shirking of responsibility by the state and allowing basic public services like the supply of drinking water, to be implemented by the private sector.

Eventually, the state could only function as a regulator. The biggest concern was that the private sector would focus on gaining a profit, not improving the quality of public services, particularly towards low-income people. As stated by Constitutional Court Deputy Chief Justice Anwar Usman in reading the verdict, the state was mandated by the 1945 Constitution to create a policy, be responsible for its organization, its regulation, its management and its oversight.

In this way, the state would still hold the right to manage the potable water system and guarantee that consumers are provided their basic daily supply and farmers would not be burdened by the cost, so long as it's obtained directly from the source.

So far, there are more than 30 projects privatizing the business of supplying potable water in Indonesia. This is not a great number given the 300 province-owned drinking water supply companies in operation. This privatization process is only taking place in big cities, at industrial areas or luxury housing estates. This proves that rural and remote areas where poor people live, are unattractive targets of private companies investing in this sector.

Article 13 of the 1945 Constitution stresses that all natural resources which are important to people's lives must mainly be controlled by the state and fully be utilized for public interest. Considering this important mandate, privatization may not be the right solution for Indonesia. Like it or not, the state must take a big step in investing more in the development of the potable water sector and refrain from attempting to attract any more private investment.

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(Tempo) After revoked the 2004 Water Resources Law: Ripple Effect