The World’s Fastest-Sinking Megacity Has One Last Chance to Save Itself
Parts of Jakarta are subsiding at unprecedented speed. The longshot fix rests with noodle billionaire Anthoni Salim.
Venice is sinking. So are Rotterdam, Bangkok and New York. But no place compares to Jakarta, the fastest-sinking megacity on the planet. Over the past 25 years, the hardest-hit areas of Indonesia’s capital have subsided more than 16 feet. The city has until 2030 to figure out a solution, experts say, or it will be too late to hold back the Java Sea.
Cue Anthoni Salim, the billionaire owner of PT Air Bersih Jakarta, the firm tapped by the government to expand piped water access to the city’s 11 million residents immediately, if not sooner. As of now, one in three Jakartans doesn’t have access to piped water, relying instead on the thousands of illegal wells that dot the city — and deplete the aquifers and weaken the ground, creating prime conditions for further sinking.
If Salim’s ABJ can help deliver on the plan to bring water to every Jakarta household, experts say the city has a chance — and the company will rake in billions of dollars. If it fails, it’s likely that chaos will reign in the world’s second-biggest metropolis. Unabated sinking, combined with intensifying storms and rising sea levels, will be more than Jakarta’s seawalls can withstand, said JanJaap Brinkman, a flood expert at Dutch water research institute Deltares: “There will be so much sea water rushing in, it will never stop. There will be no escape.”
For Salim, who didn’t respond to requests for comment for this story, it’s been a long time coming. He’s amassed more than $10 billion through a handful of industries, including one of the world’s biggest instant-noodle makers, but controlling the capital’s water supply has been a personal priority since a revolution almost dismantled his family’s conglomerate 25 years ago. When the government sought bids to revamp the city’s water infrastructure, Salim’s was one of two companies to raise its hand.
ABJ’s new contract includes rights to operate the city’s five biggest water treatment plants, and to sell more than half of its treated water supply through 2048. It’ll also build a new plant and pipelines, doubling the number of connections by the end of this decade. There’s no real downside for ABJ: the company stands to net around $4.8 billion in revenue from the deal, according to Lafrik Bano Rangkuty, president director at ABJ. Even in the worst-case scenario, ABJ won’t lose money, says Simon Melhem, a director at parent company Moya Holdings Asia Ltd, which is owned by Salim. “You just don’t make decent returns.”
Jakarta, however, would be doomed.
Jakarta’s maybe-savior was born in 1949, the youngest son of China-born tycoon Sudono Salim. Sudono was close with Indonesia’s ex-president Suharto, one of the most self-enriching dictators in history, according to the German nonprofit Transparency International. Under Suharto’s patronage, the elder Salim built a business empire. At his peak in the 1990s, Salim Group had hundreds of affiliated companies.
As a teenager, Anthoni Salim often accompanied his father on factory visits, according to a biography of the family. After two years studying in the UK, he returned to Jakarta to work with his father. By the time he was in his 30s, Anthoni was in line to take over.
Anthoni got involved in the local water supply as early as the 1990s. The World Bank had just given Jakarta a loan to bolster its water and sewage infrastructure and make its waterworks more attractive to investors. Suharto split Jakarta’s water system in two and gave the halves to two private operators, who were paired with people close to the dictator. The Salim Group and the French company Suez SA got one half, while Suharto’s son Sigit Harjojudanto and British company Thames Water Ltd got the other. There was no public bidding.
But soon after the contract was signed, Suharto’s presidency collapsed. In the summer of 1998, riots erupted across the country, fueled by complaints over corruption, high unemployment and food shortages. Protesters also targeted those close to the dictator. After rioters burned down the Salim family home, the elder Salim fled to Singapore and then Los Angeles, leaving Anthoni to save the family business. He began paring down his father’s companies, only keeping core assets.
Water fell by the wayside. Suez and Thames Water bought Salim and Suharto’s son out. The French and British companies never quite modernized or expanded the system as planned, and the number of illegal wells grew. In 2006, Thames Water sold its concession to another firm, Acuatico Pte Ltd. It said at the time it’d chalked up tens of millions of dollars in losses. Suez sold its stake to a private equity firm in 2017 after investing more than 2.2 trillion rupiah ($130 million) to improve Jakarta’s water infrastructure, according to a Suez spokesperson.
Meanwhile, Salim, having stabilized the conglomerate, began to build his empire of water assets. When Acuatico, ten times larger than Salim’s Moya, was put up for sale in 2017, Moya bought it — a shark swallowing a whale. It took 20 years, but Salim had regained control of half of Jakarta’s waterworks.
Under this latest deal, the company will spend some $1.7 billion to build a treatment plant, pipelines and connections, and maintain the existing plants. The state utility PAM Jaya will pay ABJ for the water, and infrastructure in installments as they are built.
Jakarta is one of few cities to embrace private sector involvement in its water systems. Some 90% of the world’s water is publicly owned. In the UK, one of the few countries with a private system, Thames Water is in crisis: It’s raised prices, amassed billions of pounds in debt and auditors have said its parent company, Kemble Water Holdings, may run out of money by April if shareholders don't inject more equity.
A Thames Water spokesperson said its financial position is “robust” and its shareholders are supportive.
But Jakarta doesn’t have enough money to manage the water system alone. The city needs a private partner, “Not only to help operate the water treatment plants, but more for the investment,” Yudi Irawan, senior manager for PAM Jaya, says.
With surface water largely contaminated by sewage, Jakarta buys most of its raw water from outside the city. It’s treated, then distributed through a network of pipes, some of which are more than 100 years old. It leaks — some 40% of the water is lost along the way — and much of what’s left is is re-contaminated as it flows through the system. Even those with access to piped water sometimes prefer tapping the illegal wells instead of paying PAM Jaya for water that isn’t drinkable anyway.
The Jakarta city government was going to invest 11 trillion rupiah into building new water distribution pipes, but that plan fell apart early on into the pandemic, when the city’s budget shrank by 28%.
The financial burden is an ongoing concern for PAM Jaya, which is pushing the government to raise rates, says Irawan. Because piped water isn’t universal and reliable, most buildings aren’t mandated to use it, and water tariffs haven’t been raised in more than 15 years.
Critics say the deal enriches Salim without solving Jakarta’s most pressing water problems. ABJ took the easier piece: water treatment; and saddled PAM Jaya with the difficult one: distribution and bill collection, according to Preeta Dhar, a doctoral candidate at SOAS University of London, who is studying the agreement. ABJ’s water will continue to run through leaky, contaminated pipes until the city overhauls its pipe network, which will take years. Then there’s still the hurdle of convincing households and developers to switch from groundwater to piped water, which they have to pay for.
Irawan says reducing water loss is a top priority, and it’s enlisted consultants for recommendations. If it doesn’t figure this out, “it’s just committing to buy water without knowing whether it can reach the customer,” Dhar says. “They’ve put the cart before the horse, and at least 40% of it will be wasted expenditure.”
On the city’s northern coast, not far from the shiny new luxury developments along Jakarta Bay, sits the neighborhood Muara Baru. Thousands of families are crammed into homes with metal roofs and concrete walls, separated by alleyways just wide enough for the motorbikes that snake through. As in many other poor neighborhoods of Jakarta, few households here have access to piped water or the money to dig deep enough for groundwater.
On a sweltering Thursday, Sugiarti, a 40-year-old mother of two who, like many Indonesians, uses only one name, is drawing water from a hole in the ground. She uses her hands to scoop a handful of brown water from her bucket, splashes it on her face, shakes her head and sighs. “It stinks.”
For the last couple of decades, Sugiarti and her neighbors have been pleading with PAM Jaya to build water connections directly to their houses. In Muara Baru, sellers offer water by the barrel and each cubic meter can go for 200,000 rupiah —30 times the price of piped water. During drought season, PAM Jaya sends water trucks to dispense emergency water to residents in the area. Sugiarti supplements the contaminated groundwater from her shallow well with piped water from a neighbor, spending a quarter of her 2 million rupiah monthly cleaner’s salary on water for her family of four.
As Sugiarti sees it, piping water to communities like hers makes good business sense. The utility’s ability to provide higher quality piped water at a far cheaper rate would all but guarantee millions of new customers once they’re connected. “We just want to have clean water to flow in our homes,” Sugiarti says. “We have been waiting and voicing it for too long. We deserve it now.”
Until then, Sugiarti and others like her will manage as best they can. If nothing changes, the land she’s standing on now could be underwater by 2030. —With Harry Suhartono, Pui Gwen Yeung and Anders Melin
(Updates 14th paragraph to add information from auditor and adds statement from Thames Water in 15th.)