[MUSIC] I'm in Singapore today at the Lee Kuan Yew School of Public Policy at the National University of Singapore. Our guest is Leong Ching, a senior research fellow at the Institute of Water Policy. Dr. Leong is the author of a new paper, published in the Review of Policy Research, entitled, Persistently Biased, The Devil Shift in Water Privatization in Jakarta, and she's kindly agreed to talk with us today about her paper. Well first, it's great to be here in sunny Singapore here today, and thank you so much for agreeing to talk with us. Ching, maybe we could start and talk about privatization in Jakarta. What can you tell us about the sort of background to the initiative in Jakarta? >> It started off generally of course with the idea that the private sector had something to bring to the table to this whole equation. So, one of the things they were hoping for in the whole process was that, the private sector would bring capital, also, expertise. Because, at the time that they started in the late 1990s in Indonesia, there was high water leakage. Very few people, in fact, fewer than half the people in Jakarta were getting water. So they were hoping that all these things will be fixed, plus the money came in from external sources. >> So that was the big dream in the late 1990s that started this whole thing going. And of course at the time, the World Bank and many other international agencies thought, okay, why not try this? This is a good way to get started. So that [INAUDIBLE] at the start. >> And who were the private operators? >> Well, two of them at that time, attempts and then the British started first and then later, it was persuaded that the French to also getting in. It was sort of having a bench mark that they divided into half. And one would take- >> So, this following the Manila Concession. >> Yes that model. >> The Manila model was being followed in Jakarta. >> Was that a conscious decision? >> Yeah, I think, because, the international agencies, they had the same kind of frame. The benchmark competition was a pyridine very much in fashion at the time. Because, if you had one you really had monopoly and somehow they thought that duo poly was a better way to go. >> How did they divide Jakarta? >> Well, east and west. >> East and west. >> Yes. So, a butterfly, roughly. >> Yes. >> Yes, that's it. Both sides got 25 years concession and contract. That's a funny thing that the negotiation for the contract itself took a very long time. And it was intractable for a long time until the higher ups and ministers actually stepped in to do it. So you can already see before the whole process, before the contracts even got under way, that on the ground there was a lot of resistance for this process. >> What were the main issues that sort of prevented the negotiations from moving? >> Or, you said it went real slow. >> Yeah, well I mean, of course there's all the politics of it, right? And generally, when water is being essential to life, the idea of privatizing something like that already has it's own problems. But the contract itself, the terms that were demanded by the operators or for the operators were thought to be quite onerous. I mean the fact that they has a 22% internal rate of return that's one, and the second one was, this is kind of a real funny thing, there is a difference between a water tariff and a water charge. The water tariff being what the consumers will pay and the water charge being what the private operators would get. And in the middle, of course, is the government, so- >> Providing the difference. >> Yeah, assuming that there is a difference. Because, I mean, in the utopian state of mind, there wouldn't be a difference. And what people paid would be actually enough to cover the charge as well as all the other investments that you had to make for infrastructure of this sort. Yeah so that's one. The other one of course was that there was a hedge against currency fluctuations. And you would think that's kind of proforma, that was okay. It was something to negotiate but not something to break the contract. But, as it turned out, this so fairly innocuous term was what led to a very difficult implementation process. Well let's get into your Devil Shift, can you tell us about the Devil Shift and what kind of conceptual ends you've used to explain this narrative of privatization in Jakarta. >> So I was interested in the Devil Shift just because so little work has been done on this part, of a very well used framework. The ACF is the Advacocy Coalition Framework, it is very, very well used, and very well published. And, people often use that to say, okay here's one coalition, here's another one, and how they change, and basically to explore the whole policy reform process. But there's this little bit called the Devil Shift that nobody ever investigates, right? But the whole idea is very intriguing. It's like if two of us were on different sides, you would think I was the devil, I would think you were the devil. And there's three interlinked hypotheses, I would read into your motives. Something worse than what you really felt, and into your behavior, that I will construe your behavior as being worse than what it really is. And the last part, of course, and the part that is the most objective is I would think you were more bigger, more powerful, richer, than you really were. So this is biased, I mean, bias in the sense that, it's not true to fact, not true to reason. And I was intrigued by this, because, when something is as high cost as water infrastructure, why would you do that, why would you persist in being biased? Right? Knowing for example what the other side's resources were, knowing how you behaved and what your motivations were. Why would I consciously ascribe to you something more than you were. So this was so far, before this it was largely hypothesis, like this is what people were likely to do. This is what could have happened, I mean, in psychology of course, this could very well have happened. Tough war. Okay, lets find a way to test it, right? Because on such an emotional topic as was privatization, wanted the fantasy how the consumer see the operators and see the government. So that why I set out to do, the government as well as the private operator was taken to court for. Not providing water, the whole, they did not uphold the human right to want it together and they won. So basically, there was this whole contrite, this whole proverb translation as it was declared to be unconstitutional by the highest courts in Indonesia. And later, of course, enforced by the district court. There was, indeed, a double shift and people did, indeed See the other side as being more powerful, ascribe motivations to the other side. But it's not just one devil, it's not just like this is a really bad guy, and I am the good guy. But they saw three different kinds of devils, like this is a really bad guy in this way, and this way, and this way. So one of them was that the devil was a profiteer, that all he wanted was money and then he was just fleecing us. And another one was that he was just a Goliath, that we are the small guy and this is the big guy. And interestingly in this Goliath narrative Who is the bad guy? Is it the government who is the bad guy? Or the private operator who's the bad guy? It's not clear. But is the good guy. Which is the consumer. So that's the second devil. And the third one is, that this is sort of ineffectual governor. I mean the government is just, it's not that good. It's incompetent. They can't give us what we want. They can't run the water infrastructure. They don't have enough money. So is like, maybe not so evil. But he's just not, he's not >> Incompetent. >> Yeah, he's not up to the job. So this is what I found. And so it was interesting to me. Because it does show that It's not clear that there are two camps, pro- and anti-water-privatization. Which is how we usually conceive of things. I'm the good guy, you're the bad guy. But it's not that clear that, okay, there are some bad elements. But there are three different kinds of bad guys. And it's not clear they're all bad in the same way. >> Do you think that the double shift was a conscious tactic that different groups use, or is it unconscious? >> I think in this case, it's not conscious. The consumers don't deliberately like they do consciously work themselves up to say, you you know. I think in some it's belief genuinely held. And maybe fanned by some groups who are really anti privatization. But this is the reality of public life right. That people tend to frame things and try to mobilize people. I don't think that kind of cautiously, the consumers cautiously kind of work themselves up. But then, they could be the recipients of some framing old campaign, or things like that. Which is a feature of all puppet guide. >> You describe these three different devils. Were there different coalitions as part of the over-all anti-provilation? Grew up in Jakarta with it. How did the different subgroups in the public civil society break down according to different beliefs? >> Yeah, actually, it is a funny thing. There aren't civil society groups that go according to the history. One is anti-government, one is anti-operatives and on up. How these civil society group and NGO's. And probably the consumers themselves see themselves as being anti-privatization. And they are all kind of in the same coalition. And they see the other side as pro-privatization. I am betting, although I didn't do the research, that if I had interviewed the other side. Meaning, the government officials. And the private operators, that they don't see themselves as being pro-privatization as well. So I think the binary frame is a little bit collapse by this research. To say some people are pro and some people are anti. But it may not be something like that. I mean, the paradigm shift that we have to make when we talk about intractable policy change or some difficult policies like this one. There are people for it and people not for it. The irony is of course, even though it's called the double shift, right? It does show that the reality is not that there is a bad guy and there is a good guy. There are different reasons that we oppose this privatization. But it doesn't mean that elements of private operator participation will not be welcomed. And I'll show you what I mean. Because in the second narrative, the second devil, the goliath, right. That's real funny. Because they don't, this is like they are the big guys and we are the little guys. And both the antipathies towards both the government and the private operators. So it's not per se the fact that is private that's making people opposed to privatization. It's the fact that they are the big guys and they don't listen to us. But there is no necessary connection between the two. So maybe there is some hint of how we can solve this problem. Because we think at the moment now the whole deal is declared to be legal, right? So the courts have ruled that it's unconstitutional to privatize water. That actually didn't get us anywhere. Because you can't just say, okay, it goes back to the government, now you pay up. And they owe the private operator something like one point something billion US dollars. And that's not going to get us anywhere either. So, breaking the contract, ending the privatization, actually doesn't solve anything. And the people know this. Because in the discourse, It's very clear. And government doesn't actually have the capacity to provide us with water. >> So what have you learned about overcoming the devil shift, from your research, I mean. Overcoming this hostility to water privatization, for, I mean for other cities in Asia, or even Jakarta? >> Right. Yeah, the temptation, really, is because it's biased. And because it's apparently irrational. There's this, if only they knew. If only they knew what the truth was. If only they knew we weren't as powerful as they think we were, also. So this is the more information hypothesis. The temptation to immediately say, well, so why don't you tell them? Why don't you tell them we're really poor. And we're a little diced too, or something like that, right? But I would say this temptation must be resisted. Because I don't think people need more information, right? I think, I mean or maybe it's just me. Because my studies are really perception studies. I really think that if you are to overcome this problem, the problem is one of framing. If, let's say, I do think among the three devils, the second one offers the most hope for change. If really the perception is the little guy against the big guy, right. Why not show what is the element that you need from the private operators? What are you most unhappy about and what. What can be done? So to reframe it as a sole partnership really, and to see what the coalition could come. I mean, within the ACF itself there is Coalition B, Coalition A, and the policy brokers. We kind of think that the policy brokers are the policy entrepreneurs. People who want to change and reform and bring the two groups together. But this research shows that maybe this policy broker is just a matter of framing, right? So what you need is a third side, as we say in negotiations, right? If you try to negotiate or mediate between the two sides, you actually have a third side. The south side is the side that reminds you what really matters. And the methodology, I mean, it's quite clear. People are pretty pragmatic about it. I really don't care whether you're private or whether you're the government. All I care is, just give me the clean water. And some of the discourses does show. The discourses are like, of course the first one saying the government doesn't have the capacity. The second one saying the private operators are after money. The third one is the coping costs to the failure of privatization that is not recorded yet. That people have to cope on their own and these costs are not recognized. That's one. And that people are having many water utilities within their own home just to cope with this whole process. We see this across Asia in Panam, Manilla, and Singapore. Different models of private operators, public operators. They have done well regardless of the pedigree, regardless of ownership. >> And your study at Jakarta, do you, in the sense of what really went wrong there, compared to. [CROSSTALK] >> I mean partly, is the whole political story of. Of the time, the last 20 years in Indonesia. The whole story of becoming more less totalitarian and descent relies power and things. And this is journey that Indonesia's trouble for 20 years and caught up to his whole journey of political forces. Was the worse story in 97 when they tried to privatize it, there was a whole connection with former President Suharto and one of the private operators. And the whole antipathy towards him at the time and his downfall after the Asian financial crisis. That led to one kind of whole set of momentum on its own. The second of course is that because of the riots in 97, 98, the private operators which are foreign private operators left the water utilities. And the old public sector operators, they just stepped in, right? And this whole thing of course, created another wave of dissatisfaction that people could not count, I mean water is something you have to count on. You can't have no water for days on end and it's like whoa, these guys, they left us to our own, could you count on them ever, right? >> When they left, did the old public officials they would come right back? >> Yeah. >> So the utility was there waiting to reestablish control in Jakarta. >> Well, I don't know. I mean that's one way to say reestablishing control. Another way is to say that they stepped in where there was a vacuum. But whichever the way to frame it, the fact is that it does influence thereafter the view of the people's views on the power operators. They work for themselves really. I mean having said that and to be fair to the both operators or it was very messy and destructive time. I mean thousands of people were killed in the riots in 97. The Asian financial crisis was generally a very troubling time for all of Asia. Many, many countries in Southeast Asia suffered because of that. So that was the one side of politics. The second of course, is the real financial cost of this. The currency hedge was something that was pulled to breaking point really. It made it completely unsustainable, the [INAUDIBLE]. You couldn't pay the private operators in the currency that they were exporting home. And the second one of course, is inflation just went up 120% in Jakarta and there's no way you can sustain this without raising the tariffs. But you can't raise the tariff when people were under such great hardships, so what are you going to do? And in fact, the government told Jakarta that hold the tariff steady and for a few years they did. But then they couldn't in the end and so they raised it three times successively. >> When was that? >> In the late 1990s and then in 2001 they raised it three times. And like for 30, 40% big raises. So today we see the water tariffs in Jakarta are 2.7 times that of Surabaya, which is comparable to Jakarta right next to it, right? So the second largest city has this kind of water rates. So of course, when you compare this, it becomes like okay, our service is so poor but we pay so much and it becomes even more. So everything kind of adds up, right, the money, the politics, the emotions and the foreign local [INAUDIBLE]. Kind of recipe for disaster really, so that accounts for. >> I want to come back to this idea of the devil shift again. And I just remember that Ek Sonn Chan in Phnom Penh was also called a water devil. Now we think of Phnom Penh as a success story in the water business. But where does this devil idea come from? >> Yeah, no, so this is interesting, right? I researched at Phnom Penh water authority, but I didn't do the same research on the devil shift. But I'm betting that he would be the bad guy in the story, because he did several unpopular things from the start. He was part of the government water utility at the start. But he ran it with a very private sector of discipline. He charged water quality use, in part it was a flattery and he charged a fairly high level of water tariff. Which of course, made people terribly unhappy. And he of course, was the bad guy, the water devil. But he then used the money and this presents an interesting point, because he didn't use the money to improve the service. And people thought okay, this is something that I could pay for. Because it's cheaper than buying bottled water and big water trucks, which were actually illegal water vendors. But they paid a lot more for that than they did for the tap water. Even though they paid more for the tap water than they had in the past. So this was unfortunately not the case in Jakarta, where people paid more and they didn't perceive themselves to be getting better service. So Ek Sonn Chan was kind of a devil at the start, but because he was able to deliver, he had some legitimacy and slowly over the years he gained the respect. And all the people at Phnom Penh, because it made a great deal of difference that you could drink the water from the tap. And that you didn't have to buy bottled water, because bottled water costs hundreds of times more than tap water. >> Was there a comparable leader in the Jakarta privatization, someone like Ek Sonn Chan in Phnom Penh are on either side of the debate. >> Unfortunately, and so this is the local versus the foreign private operators, that part of the story. There wasn't really a local hero that came up in the Jakarta side. Because I think also because Ek Sonn Chan, the perception was that even though he was the bad guy at the start, but he wasn't a private operator. He wasn't a profiteer. Neither was he a Goliath. He wasn't some big guy, right? Maybe that part played a little bit in the narrative. There wasn't a corresponding part in the Jakarta story. But remember I think the 98 riots and the fact that they ran away, I think that kind of lived on forever in the psyche. >> Well, this has been great. Do you have any recommendations for things our students could read about the devil shift or this controversy over water privatization? Besides your own paper [LAUGH]. >> Well, I think now is really interesting time, because a lot of these reports are coming out about the law case, the lawsuit and what could be done? I think students, if they have time, just read the news reports online because it does show that NGOs and the rest of the people who are campaigning against the private operators, they count as victory. Maybe one thing about it is what makes, so if you take this private operator down, do you necessarily get better water or do you get water at all? >> Well, [INAUDIBLE], thank you so much for doing this today, I really appreciate it. And we will get everyone a copy of the paper, so you can read it yourselves. [SOUND].
