The Market Turn in Jakarta’s Water Supply: Vested Interests and Challenges of Realising the Regulatory State

Abstract

Market-building, particularly in network industries, has been a common practice in many developed economies over the last few decades. Following the abandonment of Keynesian interventionist state norms situated around the state provision of public services, especially in electricity, water, energy and transportation services, and the adoption of New Public Management (NPM) agendas predicated on the private provision of public goods, numerous countries adopted privatisation measures which effectively devolved state monopolies to private sector owners and operators. The United Kingdom, France, Germany, Canada, Australia, New Zealand, among others, led the way with reforms that unbundled network industries. While highly contentious, neo-liberal policy reforms gained a popular following and were often invoked as a means of correcting what were seen as “bloated” public sectors where unionised labour practices and poor customer service outcomes had led to sector inefficiencies and increasing fiscal burdens on state treasuries. Privatisation was thus seen as a means of reducing the fiscal burden on the state while, at the same time, introducing market rationality that would discipline network operators, incentivise the adoption of efficiency measures and the efficient utilisation of financial resources. At the same time, with the adoption of appropriately designed regulatory systems, these increased efficiencies could be mutually shared by operators and consumers alike, creating a “win-win” situation for all stakeholders. Much of the 1980s and 1990s thus witnessed the progressive adoption of neo-liberal privatisation measures with the aim of constructing markets to support private sector investment within the sector (see Carroll 2012a; Jarvis 2012).