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Global Corruption Report 2008: Being Cautious about Corruption in the Water Sector

The Indonesian Government as it is expected needs to direct its attention to corruption in the water sector. Various kinds of misappropriations in the clean water management committed by PDAMs (Local Water Supply Company) have lead to inefficiency in the sector. Consequently, the community is burdened with a higher cost in obtaining clean water. In addition to the issue of PDAM, the government must be cautious about the potential for corruption in large dam projects and PLTAs (Hydroelectric Power Plant), such as the construction of Jatigede dam in Sumedang, West Java.

The water sector is susceptible to corruption. There are many corruption cases in the management of PDAMs. Recently, in early June 2008 there was a demand that the corruption in the provision of clean water worth Rp 1 billion in which members of DPRD in Riau are involved to be brought to trial immediately. In PDAM Kediri, it is pointed out that the mark up of fund has caused the state a financial loss of approximately Rp 119 million. Mark up also took place in the provision of water meter in PDAM Indramayu worth Rp 260.7 million. In addition, the misappropriation of paid up capital fund occured in PDAM Southeast Aceh, Aceh. Prior to that, based on BPKP audit of 1997-2004, officials of PDAM DKI were alleged to have caused the state a financial loss of Rp.800 million (US$ 90,000)

Ineffeciency also occurs in the financial management of PDAMs. It can be seen that PDAMs still owe enormous debts to numerous financial institutions, such as World Bank, and until today have not been able to pay. By 2001, almost all of PDAMs suffered a loss and were not able to pay the capital owed. All PDAMs were in debts worth Rp. 4.1 trillion. In 2006 the entire debts of PDAMs which were nonperforming reached more than Rp 3 trillion, and at the moment they are being restructured. The condition is exacerbated by the fact that PDAMs are often made a cash cow by local officials.

Privatization was then considered as a solution to tackle the problem, such as what PDAM DKI Jakarta (PT Palyja and PT Thames PAM Jaya) did — although this remedy has not yet proven to be working. Particularly, privatization which is carried out seems lacking transparency. The 22 PDAMs targetted for privatization do not really involve public participation or their customers. This has caused water which is the people’s basic need to shift and become a commodity. Access to clean water is mostly available in the elite settlements. Research of the PSI’s Research Unit, University of Greenwich (London) shows that water privatization by multinational companies in developing countries is not free from ”corruption” problem.

If KKN (Corruption Collusion Nepotism) practices are still widespread in the water sector, our community will find it difficult to obtain its basic right. In fact, they have to suffer the impacts of the poor services and the increasing water price. This situation is certainly worrisome, according to the result of a study the poor in a number of countries including Indonesia have to obtain clean water in a more expensive price than those who live in New York or London. Access to water becomes ‘cost of water’, which means that the poor must pay five times as many as the rich.

Apart from the cases in PDAMs, another problem which we need to be cautious about is the potential for corruption in dam projects. Currently the construction of Jatigede dam in Sumedang, has just been started by Chinese contractor Sinohydro Coop. Ltd, after the Chinese government granted US$ 250 million loans. The problem is the track record of SinoHydro as the contractor of Three Gorges Dam was very poor. That dam is suspected to be weak amid corruption endemic in the project. The construction suffered from crack of 1.25 mm long with 2.5 deep.

Learning from the past, corruption in dam projects have existed since the New Order Era. Corruption observer, George Junus Aditjondro suspected there was corruption in the construction of dam projects and PLTAs in Indonesia, such as Kedung Ombo dam project in Central Java. Likewise, irrigation projects in a number of regions seemed to be constructed just so that it got done, what matter was to receive new fund from foreign loan. If such a KKN model in dam construction which is capital intensive is not yet to be cleaned, it is likely that the construction of Jatigede dam will also suffer the same problem. That dam project is potential for the breeding ground for corruption.

The government needs to learn from experience. The target of the government to construct 11 dam within the coming 5 years, therefore, needs to be reviewed. It is true that for a short term, dams will overcome problems in energy and irrigation in agriculture, yet for a long term, it can bring a new disaster to our economic, socio-culture and environment – including corruption and accumulation of foreign debts.

Apart from the corruption issue in the water sector which becomes the main focus of the Global Corrution Report (GCR) 2008, another issue that is reported is some corruption eradication efforts in Indonesia, especially the formation of Corruption Court Bill. However, this Bill which is expected to be enacted in the coming December 2009 is likely to be neglected considering that there is going to be a big democracy event namely the General Election 2009. Therefore, the government needs to submit the Bill to DPR this week, and DPR needs to do the follow up by obtaining inputs from the community and discussing the Bill.

Based on the main points of Indonesian report in GCR 2008 which has just been released by Transparency International (TI) today, TI Indonesia expresses its viewpoint as follows:

  • Putting pressure on the government so that it prevents and finishes various corruption cases in the clean water management taking place in a number of PDAMs in the country, and demanding the government to improve clean water and sanitation services for the community.
  • Institutional reform is deemed necessary in the clean water management which employs the principles of transparency and public participation, as well as ensuring fair competition in water projects implementation
  • Reorganization of PDAM as a public company is deemed necessary. Even if privatization is considered as a solution, it has to be done in PPP (private-public-partnership) system and under a strict oversight to ensure that the principles of equality and fairness are maintained.
  • It is necessary to review large infrastructure projects which use a huge amount of fund from foreign debts, such as in dam constructions because it is susceptible to corruption.
  • The government and the project contractor of Jatigede dam should prioritize the principles of transparency and participation in the dam construction process in order that they can reduce the negative impacts.
  • Putting pressure on the government so that it must immediately submit the Corruption Court Bill to DPR, and DPR should immediately discuss and enact it as a law.


For any press enquiries please contact

Rizal Malik, General Secretary
T: 081510536355
E: rmalik@ti.or.id