Output 1: country water assessment and strategic planning. Output 1 will have three activities. The primary activity will be to develop a CWA that aligns with the government's MP3EI to integrate water priorities more fully into development planning. The priorities of ADB's Water Operational Plan, 2011 2020 will also guide CWA development. The approach will use existing water sector information and analysis, where available, from the government, ADB, and other development partners and integrate them with the CWA's analytical framework. The CWA will address national water policy issues and include detailed water sector plans to support the specific MP3EI economic development strategies for the Java and the Sumatra regional corridors (which generate over 80% of Indonesia's GDP) and up to two other regional corridors. The CWA will synthesize sector and subsector issues using a holistic approach to evaluate trade-offs and issues across sectors. It will include analysis of the water food energy nexus to develop regional corridor water sector plans based on the MP3EI. The regional water plans for the economic corridors will include recommendations for investment, management, and institutional and policy reform to support specific regional growth strategies. Local governments will be involved in developing the regional water sector plans related to the MP3EI to ensure alignment with local initiatives.
The second activity responds to the government's request for assistance to develop water-related sections of the new RPJMN. The CWA will provide the analytical basis, and the TA will produce relevant sections of the RPJMN and support background studies and presentations. For both the CWA and RPJMN, the TA will support extensive consultations with national and local governments, development partners, civil society, the private sector, and other stakeholders. The third activity will prepare an ADB water operational plan for 2014 2020 for Indonesia, which will guide ADB water loans and grants program, ensuring that it aligns with the government's priorities and the ADB Water Operational Plan. The Indonesia water operational plan will integrate WSS and WRM perspectives and address interdependent issues that are becoming increasingly urgent and should be reflected under an integrated ADB approach. The plan will address both sovereign and nonsovereign programs and facilitate dialogue and the government's engagement with ADB's long-term water investment program.
Output 2: capacity development and knowledge transfer. An important priority to improve water planning, management, and development is strengthened capacity and knowledge transfer. The main activity under output 2 will be Indonesia Water Learning Week (WLW), which will accompany CWA development. WLW be an international event to bring together senior government policy makers, development partners, civil society, the private sector, and other stakeholders. It will be an opportunity to (i) develop a common perspective on water sector challenges; (ii) conduct policy dialogue on the government's priorities to improve water sector planning, management and development; (iii) validate the draft CWA; and (iv) transfer knowledge on key issues. Using national and international resource persons, WLW will raise awareness and develop commitment to support the CWA's reform recommendations. ADB has discussed WLW with development partners, which have indicated their support and intended participation.
The second activity under output 2 will develop capacity and transfer knowledge through existing training programs and domestic and international seminars for government counterparts on water issues addressed through the CWA. This output may include specialized in situ training and the development of training materials for needs identified in consultation with the government. The output will develop at least one knowledge product related to the CWA.
|Project Rationale and Linkage to Country/Regional Strategy
The well-being of the Indonesian people depends heavily on water. As Indonesia grows, enjoying annual economic expansion that averaged 5.7% in 2005 2010 and accelerated to 6.5% in 2011, water challenges intensify and jeopardize sustained development. To guide its economic development, Indonesia prepared the Acceleration and Expansion of Indonesia Economic Development, 2011 2025 (MP3EI) that is based on three pillars (i) developing the economic potential of six regional corridors; (ii) strengthening national connectivity locally and internationally; and (iii) strengthening human resource capacity, science, and technology. The MP3EI recognizes food security and improved water and energy policies as prerequisites for its implementation. In 2014, Indonesia will update its National Medium-Term Development Plan (RPJMN), 2015 2019, which guides planning within and across sectors. Together, the RPJMN and the MP3EI provide the economic and development planning framework for Indonesia, within which the government wants to prioritize water concerns to sustain economic growth.
The government's development agenda requires assistance to analyze the water concerns and priorities of the MP3EI. A country water assessment (CWA) will help provide the analytical foundation for water planning, management, and development, including investment to further economic development. The MP3EI can guide the priorities to be addressed under the CWA, and detailed water sector plans can support the economic development agendas of the regional corridors under the MP3EI. The CWA can advance water reform across Indonesia while providing guidance for planning, management, policy, and investment in the MP3EI economic corridors. Analysis for the CWA and its associated regional plans can support RPJMN development and ensure synergy with the MP3EI, but the CWA alone cannot overcome all challenges to effective water resources management (WRM) and reliable water service delivery in Indonesia.
Indonesia's economic growth spurs urbanization, with the percentage of Indonesians living in urban areas expected to grow from 53% in 2010 to 65% by 2025. Government decentralization has tasked local governments with managing water supply agencies (PDAMs), 70% of which are heavily indebted and have extremely high nonrevenue water losses, some exceeding 50%. Rates of access to water supply and sanitation (WSS) have been declining, with piped water supply reaching only about 31% of urban residents and 12% of rural. PDAMs supply water to only 18% of all Indonesians. Sewage treatment coverage is very low, serving less than 1% of the urban population.
Significant WRM challenges exist. Sediment caused by watershed degradation damages water infrastructure and raises water treatment costs. On Java alone from 2003 to 2009, flooding annually took an average of 140 lives, 20,000 homes, and 100,000 hectares (ha) of crops. Both land-use changes and excessive groundwater extraction that causes land subsidence have worsened flooding, which is now an annual occurrence throughout much of Indonesia. It is estimated that 70% of groundwater sources and 75% of rivers are polluted, limiting water resource sustainability and posing risks to public health. In 2005, 5.2 million ha of the total irrigated area of 6.7 million ha, or 78%, was served by infrastructure considered in good condition. As the irrigated area expanded to 7.2 million ha in 2010, the area in good condition shrank to only 3.5 million ha, or 48%. Climate change will further challenge Indonesia's WRM as water scarcity worsens in some areas, extreme weather events become more frequent, and rainfall patterns become less favorable for agriculture.
Many of the same problems affect both WSS and WRM as water challenges become increasingly interdependent and confront policy makers with trade-offs. Institutional arrangements and fiscal options for water operations, maintenance, and management need to be strengthened. The regulatory framework for WSS is inadequate to support sector development. WSS operations generally fail to recover operation and maintenance costs, and farmers pay no irrigation service fees. Technical and administrative capacity constraints hamper effective planning, management, and development as Indonesia's decentralized government structure heightens capacity challenges. District, provincial, and central government roles and fund flows need to be clearer and better coordinated, and different agencies' program, policy, and management responsibilities harmonized. Although economic growth has been robust, planning and infrastructure investment have been inadequate to meet rising water sector demands. Importantly, the private sector has been underutilized and should play a larger role not only for WSS but increasingly for WRM.
Improved WRM is vital for WSS and economic growth. Increased bulk water supply is needed to (i) support WSS expansion as PDAMs restructure; (ii) meet growing municipal, industrial, and agricultural service demand; and (iii) ease overreliance on groundwater. An urgent concern is to enhance the policy framework and capacity toward facilitating the development of new bulk water sources and improving water allocation among competing demands. The water food energy nexus provides an important paradigm to assess the economic trade-offs in sound water policy and planning decisions. Agriculture currently uses 88% of the developed water supply in Indonesia, and food security is a growing government priority. In 2011, the government called for rice production to increase by 10 million tons, or 15%, to address food insecurity, and the MP3EI prioritizes (i) security in both the production and consumption of food and (ii) developing new food-production areas, in particular outside of Java. Energy demand is increasing at twice the rate of GDP growth, and water is critical to develop hydropower and service thermal energy production, which is expanding rapidly. Energy typically comprises 50% of the cost of urban water supply. The water food energy nexus provides an informed and transparent framework for determining and resolving trade-offs to meet rising demand while addressing sustainability. This type of analysis is needed to support the CWA and ensure sound water planning that will achieve the goals of Indonesia's MP3EI and the next RPJMN.
ADB has a broad water program, with both sovereign and private sector operations. The TA project Water Supply and Sanitation Sector Development is helping BAPPENAS to assess WSS and develop a policy road map. ADB supports sanitation with the ongoing Metropolitan Sanitation Management and Health Project and a new sanitation project under preparation. The TA project Institutional Strengthening for the Water Resources Sector is reviewing role-sharing by national, provincial, and district governments for irrigation and river basin management to improve coordination. The Directorate General of Water Resources under the Ministry of Public Works is adopting irrigation reforms based on experience from the Participatory Irrigation Sector Project. The Integrated Citarum Water Resources Management Investment Program provides comprehensive support to the government to advance river basin planning and management through a 15-year commitment. Capacity building is an important part of ADB's program, and ADB TA for Supporting Water Operators' Partnerships facilitates water practitioner exchange to develop PDAM capacity. ADB's Private Sector Operations Department has invested in Jakarta's water supply concessionaires and has other water-related proposals pending. ADB directly supports the MP3EI through 3-year policy-based lending for the Inclusive Growth through Improved Connectivity Program. ADB has a