An Exploratory Study of the Water Standpipe-Vendor System in Jakarta

This report is based on exploratory field interviews and observations that took place in North and West Jakarta during a three-week period in June-July 1991.The study was carried out in response to two recent policy changes with regard to the way that water is supplied to poor households in Jakarta: first, a dramatic expansion in the number of standpipes under PAM Jaya's hidran contoh program; and second, the liberalization of water sales from household to household. In Jakarta, the price that the final consumer pays for water sold by vendors is extremely high compared with the price of water from a house tap. The average price of tap water for a household that consumes 1000 liters per day was Rp 270 per cubic meter in July 1991, the time of the present study. In contrast, water purchased from vendors in North Jakarta might well cost Rp 2000/m3 or in West Jakarta Rp 4000/m3. It is important to know whether this price can be lowered, or whether there is another, better way to deliver water to poor families. The study starts from the premise that policies can be formulated better if one has a clearer understanding of how the standpipe-vendor system functions. A crucial issue, for instance, is the degree to which standpipe and vendor prices are set in a competitive manner. The kinds of policies the government should adopt will depend to a large degree on the answer to this question. The studies conclude that the markup charged by vendors – ranging from Rp 1300/m3 to over Rp 3500/m3 – is due to their actual costs, and by far the predominant cost is their labor. The fixed cost, the rental (or equivalent) of a pushcart, is less important. This usually costs Rp 500-750 per day; spread over 1.5-3.0 cubic meters a day of water delivered, the cost per cubic meter is only Rp 170-500. The study of the standpipe-vendor system stresses the importance of competition as a way of making the system responsive to the varied needs of consumers and of ensuring that prices are kept at the lowest level possible. The main objective of government intervention in this case should be to set up the system in such a way that the beneficial effects of private ingenuity and competition are maximized.