Waiting for regulation

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The regulator has to win more confidence if it wants to fulfill its role.

The concept of an independent regulator to monitor the private companies is new in Jakarta. Although the idea did get a mention in the original concession contract, no action was taken.

It was not until the Restated Cooperation Agreement of 2001 that it was again given some attention and a Regulatory Office, chaired by four experienced individuals from the water sector, was set up.

But like many new regulators, the staff may have plenty of knowledge of the sector but no expertise in economic regulation.

The regulator is struggling to make a place for itself in an already crowded environment. Its main problem is that the former public utility, PAM Jaya, still covets its monitoring role.

In theory, PAM Jaya does the micro-monitoring while the regulator looks at the big picture. But the regulator is vastly outweighed by PAM Jaya, which has a staff of 120 compared with the regulator’s 25.

The regulator was envisaged as a mediator between the operators and PAM Jaya in their frequent disagreements, but without the confidence of either side, the parties have ended up trying to solve their problems themselves.

Nevertheless, it did manage to play a positive role in the later stages of the rate-rebasing, supporting the role of the consultants and chairing the subsequent round of discussions.

Even this recent experience does not seem to have raised the status of the regulator in relation to PAM Jaya.

However, the situation may improve after a new board is appointed later this year through a public recruitment process, giving more legitimacy to the appointments.