Questioning ADBs Loan to PALYJA

In August 2007, the ADB‘s Board of Directors approved a loan facility to PALYJA (PT PAM Lyonnaise Jaya), a private water company in Jakarta, Indonesia. PALYJA has operated in Jakarta for more than ten years since they got sole concession right to manage the piped water supply in the western part of Jakarta. PALYJA shares are owned by some of the world-class companies such as SUEZ Environment and Citigroup.

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This is an updated article. The original can be found on BANKWATCH First Quarter 2009 www.forum-adb.org

In August 2007, the ADB‘s Board of Directors approved a loan facility to PALYJA (PT PAM Lyonnaise Jaya), a private water company in Jakarta, Indonesia. PALYJA has operated in Jakarta for more than ten years since they got sole concession right to manage the piped water supply in the western part of Jakarta. PALYJA shares are owned by some of the world-class companies such as SUEZ Environment and Citigroup.

Palyja’s loan of IDR 455 billion (approx. US$50 million) for the “West Jakarta Water Supply Development Project” is actually part of Palyja’s multiple financial engineering. This practice burdened the customers with higher tariffs as a result of the credit, bonds and loan charge interest were calculated as operational cost in the tariff structure formula. In addition, the project planning is not as perfect as its analysis of development impacts, where Palyja’s performance is over-estimated. ADB is also more concerned with financial returns rather than improving the water service for citizen of Jakarta. Furthermore, ADB is not transparent enough as some of the important aspects of the loan are not disclosed.