Water

Country Water Action: Indonesia
Changes Introduce Indonesia to New Remedies to Old Maladies
(March 2006)

Doing business in Indonesia's water sector today means doing business differently. Since the 1998 fall of former President Suharto's New Order government, few countries in the world have decentralized as fast as Indonesia, introducing democracy-styled reforms. As a result, one of the world's most centralized countries is becoming one of the most decentralized.

Part of the government's ambitious reform agenda includes the New Water Law (No. 7, 2004). It targets some of the country's chronic problems with pollution, water shortages and natural disasters-all of which are inflicting a high toll on urban and rural economies. River basin management, in particular, is a fast emerging strategy for addressing these problems at a fundamental level. In Indonesia, more strategic use of water through integrated river basin management is essential for maximizing agricultural outputs, ensuring safe, reliable domestic water supplies and expanding the productivity of thousands of high water-consuming industries, like textiles and garments.

Top

Although necessary for putting the country on a promising path, more is needed than decentralization and reforms to launch the country toward the Millenium Development Goals (MDGs)-the international pledge card and measuring stick for countries to significantly reduce poverty and in all its varied forms, such as hunger, gender inequality and environmental degradation.

If Indonesia's current progress toward MDG Target 10 is any indication, the country is unlikely to be successful in the race toward the 2015 MDG deadline. Target 10 calls for countries to reduce by half the proportion of its people living without sustainable access to safe water supplies and improved sanitation. Based on past rates of improved access, Indonesia will not meet this critical cross-cutting target in rural or urban areas.

The promises and pitfalls of these changes and challenges are highlighted in a new National Water Sector Profile study of Indonesia, commissioned by the Asian Development Bank (ADB). It's a telling study for any group interested in investing in the country's water sector. More than 400 local governments are tasked to deliver essential human services for both domestic and industrial consumers. To do the job right, though, local governments face two major problems: a lack of know-how and a lack of funds. They are also having to live with water resources that are heavily polluted and mismanaged, affecting the service-side.

Top

Getting at the problem has been difficult for development assistance groups. For several of the previous years, ADB was limited in the assistance loans it could offer Indonesia for a number of reasons-the political climate, a reluctance to borrow and incompatible business processes on ADB's part.

That is changing, though.

Indonesia has realized the need for foreign assistance, and is open to sector-wide loan programs, which tend to require more substantial levels of financing and a longer implementation period. ADB has also repackaged its assistance offers to Indonesia. Projects have been redesigned with a bottom-up approach to address decentralization, and ADB's new financing modalities will be considered for upcoming loans.

Top

ADB is preparing long-term investments in rural and urban water supply and sanitation, and integrated water management of a major river basin. Implementation is underway of a community-based rural water supply and sanitation project. The four largest efforts in these areas are:

• Community Water Services and Health Project - a US$64.7 million innovative loan-based investment that involves rural communities in the planning, financing, implementation and upkeep of new water supply and sanitation facilities. Out of a total 6 million people in the project area, 1.2 million (the entire population estimated to be living under or near the poverty line) are targeted for gaining access to the new facilities. To maximize the use of the new facilities and increase the chance of their continued use and upkeep, the project will implement education programs to change unhygienic behaviors that would impede the health benefits that clean water sources and sanitation facilities offer. The loan package also includes a separate US$16.5 million in emergency grant aid to rural tsunami affected areas. The grant aims at controlling water-born diseases by rehabilitating community water systems and training local governments and communities on how to prevent water born diseases by changing certain risky hygienic practices and keeping the community systems in good condition.



• Technical Assistance to Prepare the Water Supply and Sanitation Project - a US$900,000 grant-based technical assistance project has been completed, targeting rehabilitation and expansion of water supply and sanitation infrastructure in small to medium size urban areas, and the reform of water utilities. A follow up loan proposal will focus on infrastructure development and related capacity building for the urban water and sanitation services sector.



• Technical Assistance to Prepare the Metropolitan Sanitation Management and Health Project - a US$1,200,000 grant-based TA project will commence in mid 2006 that will help to improve public health and to reduce environmental pollution in selected large cities. The project will reduce exposure of urban communities, particularly the low-income groups, from health risks associated with the discharge of raw or partially treated sewage into city drains and rivers; and improve solid waste collection and treatment practices. It will contribute to improved local urban environments and address serious institutional constraints affecting the sector. The TA will prepare a loan project including city sanitation strategies, investment programs, and capacity building activities.



• Technical Assistance to Prepare the Integrated Citarum River Basin Project - a US$1.26 million grant-based project to help the Government of Indonesia create a strategic plan for managing the ever-increasing and competing demands for the vital Citarum River, which provides water for irrigation, industrial and domestic consumers throughout much of West Java, including 80% of Jakarta's water supplies. Pollution, deteriorating infrastructure and poorly regulated extraction are affecting the quality and volume of the basin waters. A significant long-term loan package is under discussion with the government and is designed to provide sustainable integrated solutions to Citarum River Basin management.

ADB is also currently financing or cofinancing three other grants. These grants focus on creating strategies for flood management in river basins across Java, which will be followed up with a more substantial loan proposal, supporting rural communities and local governments in water supply and sanitaiton projects and supporting the development of urban water infrastructure. ADB is also providing grant-based assistance to rehabilitate water supply, sanitation and irrigation infrastructure in Aceh and Northern Sumatra, where the December 2004 earthquake and tsunami caused extensive damage. ADB's assistance is addressing urgent needs to restore water supply and sanitation services, as people are facing increased vulnerabilities to waterborne and water-related diseases.

The projects in Indonesia respond to messages resounding from the international water agenda, and highlighted at the 4th World Water Forum in Mexico City 16-22 March 2006-water for growth and development, food and the environment and water managed in ways that are integrated and mindful of risks.

Top

Read the project proposal for the Technical Assistance to Prepare the Water Supply and Sanitation Project.

Read the project proposal for the Technical Assistance to Prepare the Integrated Citarum River Basin Project.

Read the project proposal for the Community Water Services and Health Project.