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The opinions expressed herein are those of the authors and do not necessarily represent the
official position of the World Bank Group. The data provided in the tables and figures are not
official Bank data. Permission is granted to reproduce this publication in whole or in part for
noncommercial purposes only and with proper attribution to the authors, the Directorate General of
Human Settlements of the Ministry of Public Works, the Water Partnership Program and the Bank.
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Mr. Franz Drees-Gross, Sector Manager, EASIS, World Bank Office, Jakarta
Since the economic crisis of 1998, the development of water
supply in Indonesia has been constrained by a number of factors
including limited funding and a lack of capacity in most local
water companies (Perusahaan Daerah Air Minum - PDAMs) and local
governments to support additional infrastructure and provide
new connections. Provision of water infrastructure has not kept
pace with population growth because rapid decentralization and
outstanding PDAM debt arrears resulted in an interruption of on-
lending for large scale water supply investments.
Between 1998 and 2008 the proportion of Indonesias urban
population served by piped water decreased from 36 percent to
only 31 percent. To reach the water Millennium Development Goal
(MDG) target, local governments have to increase piped water
coverage in urban areas to 55 percent of the urban population
by the end of 2014. The government has launched a national
program to add more than 10 million (mainly piped) new water
connections from 2010 to 2015. To achieve this ambitious
program in an orderly manner, an investment plan or roadmap
is required. For this reason, in mid 2010, the Directorate General
of Cipta Karya (DGCK), Ministry of Public Works, asked the World
Bank to provide technical assistance to prepare a national water
supply roadmap that will help guide the government in reaching
the MDG target. The objective of the assistance is to produce and
disseminate a national roadmap for investment from government
as well as multilateral, bilateral, and private sector institutions
in water supply projects during the period from 2011 to 2015.
A grant was provided by the Water Partnership Program (WPP)
to support this technical assistance including a (i) review of
data and documents on national policy statements; and (ii)
review of current and planned water supply investments in
the next 3-5 years. These tasks included interviewing officers
in concerned departments regarding issues, priorities, and
lessons learned to date. The findings were discussed in a
workshop held on June 1, 2011 and attended by stakeholders in
the water supply sector including Directorate General of Water
Resources (DGWR), DG Cipta Karya, Ministry of Finance (MOF)
(fiscal balance, treasury, debt management, budget), Sarana
Multi Infrastructure (SMI), Indonesia Infrastructure Guarantee
Fund (I IGF), Bappenas, Badan Pendukung Pengembangan Sarana
Air Minum (BPP SPAM), and the Ministry of Home Affairs.
The sector needs more than the current level of investments in
order to meet the Governments targets. The funding gap and
the annual sector investment from all resources have been
quantified in the Roadmap. The current GOI strategy to achieve
the water MDG target relies heavily on local government
investment, but the amount of the central governments
stimulus budget and its scope for intervention are limited.
The current strategy also relies heavily on other non-central
government sources such as Public Private Partnerships (PPP),
internal cash generation, and revolving funds.
Although there has been recent progress, much remains to
be done to address the investment absorption capacity of
the sector and the ability of service providers to sustain
and maintain the new and existing infrastructure. Estimates
of actual central government and local government/PDAM
expenditure for water in 2009 and 2010 were about Rp 2.5 trillion
(about USD280 million) per year, still a small fraction of the
investment levels needed to meet Indonesias water MDG target.
In addition, PDAMs and other service providers may not be able
to absorb and use increased funding without timely technical
assistance and the enabling activities described in this roadmap.
The World Bank is honored to work in partnership with the
Government of Indonesia as it confronts the formidable challenges
of increasing access to sustainable sources of safe water. We
hope that this Roadmap for Water Investments 2011-2014 will
prove useful to decision makers in the national government as
well as in local governments.
Jakarta, February 2012
SECTOR MANAGER
INFRASTRUCTURE, ENVIRONMENT, RURAl AND SOCIAl DEVElOPMENT
THE WORlD BANK OFFICE, JAKARTA
Franz Drees-Gross
FOREWORD I.
Ir. Budi Yuwono, Director General of Human Settlements, Ministry of Public Works
Indonesia continues to face the dual challenges of low water
supply coverage and low service quality. Nation-wide, in 2010,
only 47.71 percent of the total population had access to a
sustainable source of safe water, and only about 25.56 percent of
the population had access to piped water. An ambitious target of
access to safe water for 68.87 percent of the population in 2015
has been set. To reach the target, about 56 million new people
will need to gain access between 2011 and the end of 2014. In
addition, an instruction from the President calls fir provision of
water to prevent future water crises in remote, dry areas and
areas with water scarcity.
Under the Water Resources law 7 of 2004, the responsibility
for providing water services rests with the local government.
Considering the weak fiscal capacity of most local governments,
the central government needs to stimulate local governments
through targeted incentives to provide an adequate stock of
infrastructure to meet national development targets for urban
and rural areas. So ,far, there has been satisfactory progress in
rural areas, but in urban areas, policies must confront the weak
capacity of the PDAM and a low sense of responsibility for water
supply in most local governments.
The Government strategy for water supply development includes
central government support for raw water source development,
poverty alleviation, areas with water scarcity, remote and dry
areas, fishing villages and areas near borders with neighboring
countries. This strategy is translated into various programs such
as a program,for IKK (capital of subdistricts), raw water source
development, transmission pipeline, water treatment plants and main
distribution networks. For rural areas, central government support
includes continuation of projects for community-based water supply
and water supply for low-income communities such as WSSlIC/
PAMSIMAS. To reach the MDG water target, the Government estimates
that a total of Rp. 65.25 trillion will be needed between 2011 and 2014,
leaving a probable funding gap in the amount of Rp. 36.76 trillion.
The Directorate General Cipta Karya, working jointly with the World
Bank team, has prepared and developed this Roadmap for Water
Investment, 2011-2014. This important document proceeds from an
assessment of the problems and issues to identification of activities
and funding sources needed to reach the water MDG. This is the first
time such a document has been prepared. It will be used for policy
guidance by the government, particularly Directorate General of Cipta
Karya of the Ministry of Public Works, as well as by related ministries,
government agencies, and donor agencies.
Jakarta, February 2012
DIRECTOR GENERAl OF HUMAN SETTlEMENTS (CIPTA KARyA)
MINISTRy OF PUBlIC WORKS
Ir. Budi Yuwono, Dipl. SE
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The period 2009-2015 was intended to mark a transition
from predominantly centrally-funded to predominantly
locally-funded local water infrastructure programs. During
this period, the Government of Indonesia is undertaking
the largest investment program in water supply in the last
20 years to reach the Millennium Development Goal for
increasing access to a sustainable source of safe water
by 2015. But as of 2011, local government funding of
urban water infrastructure programs still lags well behind
annual targets (funding targets as well as coverage), and
recent investment in the urban water sector has not kept
pace with population growth or depreciation. There has
been more success in the rural water sector where central
government-stimulated community-based programs
continue to proliferate and reach more beneficiaries.
In addition to the lack of sufficient expenditure, mainly
in urban areas, water sector development is further
challenged by a lack of local government sense of
ownership and good governance, low level of access to
water on an equitable basis, lack of inter-departmental
coordination, weak PDAM management, and limited
availability and increased pollution of water resources.
Failure to increase water supply investment before 2015
may result in a failure to meet the MDG water target.
A new regulatory framework was put in place in 2009
and 2010 to provide access to new and large sources of
investment funds for local governments. Among the new
regulations are (i) MOF decree 120/2008 for PDAM debt
restructuring, (ii) Perpres 29/2009 for a partial guarantee
and interest subsidy for loans from commercial banks, (iii)
Perpres 13/2010 to strengthen partnerships with the private
sector, and (iv) Perpres 78/2010 to provide a guarantee fund
mechanism for viable PPP schemes. These new financing
instruments that have already been in place need to be
monitored closely if the combined impact of these measures
is yielding increase in investment. Otherwise, the strategy
needs to be re-analyzed and adjusted.
The Government has, under RPJMN or the Medium Term
National Development Plan, laid out policies to increase
water coverage and quality, and set the targets for the
2010-2014 planning period. In support of the RPJMN, the
EXECUTIVE SUMMARYIII.
Directorate General Cipta Karya has a strategy for enabling
access to water for 41 million additional people in urban
areas, and 15 million people in rural areas, totaling 56
million people. The total amount required for water supply
investment for the period 2011-1014 is estimated at Rp
65 trillion, and a scenario is proposed to fill the potential
central and local government investment gap of around Rp
36 trillion. With the total expenditure of only about Rp 2.5
trillion in 2008 and 2009, the investment levels need to
be substantially higher. Increased in investment requires
substantial increase in technical capacity, as to ensure
that higher absorption capacity will also be maintained.
A recommended five programming principles underlie
the proposed Investment Roadmap, which also takes
into account the strategy of Directorate General Cipta
Karya (March and October 2011). It includes efficiency
improvements for the existing systems in the urban areas,
access to new funding sources, grants for increasing
access to new sources of finance, and scaling up of
community-based programs in rural areas, such as
PAMSIMAS (community-based water and sanitation). These
recommended programming principles are: (i) attracting
significant local government financing; (ii) funding the
most reliable and rapid access-enhancing activities;
(iii) use of idle capacity; (iv) open access to all funding
sources for all qualified local governments; and (v)
improved existing monitoring system.
The main sources of funds over the next three years are
also identified. These include the existing schemes from
central government funding support (APBN central
government funds), access to credit from commercial
banks and from the private sector (through the PPP).
New possible sources of funds have also been identified
which include the financing facilities such as Indonesia
Infrastructure Funding Facility (IIFF) and Indonesia
Investment Agency (PIP), Corporate Social Responsibility
(CSR) from the private sector as well as the Water and
Sanitation Funding Facility which is under preparation.
The latter is a Facility that will allow pooling of funds from
bilateral and multilateral agencies which could support
acceleration of water supply investments in both urban
and rural areas to expand coverage and improve services.
THIS REPORT WAS PREPARED By A TEAM CONSISTING OF IRMA MAGDAlENA SETIONO (WATER AND SANITATION SPECIAlIST), JAMES WOODCOCK (INTERNATIONAl WATER SPECIAlIST), BENNy DJUMHANA (FINANCIAl ANAlyST), AND RISyANA SUKARMA (WATER AND SANITATION ENGINEER). A SHORT-TERM INPUT WAS PROVIDED By BENNETT PARTON (WATER SUPPly FINANCE SPECIAlIST).
The team is grateful to all those in central government ministries and donor agencies who generously gave their time to meet with the team and provide essential data and information. Particular thanks are due to Mr. Danny Sutjiono and his staff of both the Directorate of Water Supply and Directorate of Program Development of the Directorate General of Cipta Karya, Ministry of Public Works for valuable information and advice provided to the team. Peer reviews are gratefully acknowledged from Sudipto Sarkar (Sector leader), Almud Weitz (Water and Sanitation Program Regional leader), David Michaud, Bill Kingdom and George Soraya of the World Bank. Valuable inputs were received from Franz R. Drees-Gross (Sector Manager).
The Team would like to thank the Water Partnership Program for its financial support in the preparation and completion of this report.
ACKNOWLEDGEMENTSII. VIV
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TABLE OF CONTENTS
TABLESFIGURES ACRONYMS AND ABBREVIATIONS
CHAPTER 1 > INTRODUCTION
CHAPTER 2 > EXISTING CONDITION2.1 CURRENT STATUS2.1.1 The Period of TransiTion2.1.2 access To WaTer suPPly for reaching Mdg2.1.3 insTiTuTional and oPeraTional asPecTs2.1.4 coMMuniTy-based WaTer suPPly sysTeM 2.2 GOVERNMENT POLICIES AND TARGETS IN THE WATER SECTOR2.2.1 PresenT Policies2.2.2 PresenT cenTral governMenT TargeTs2.2.3 Policy iMPleMenTaTion aT local governMenT level2.2.4 WaTer self-Provision
CHAPTER 3 > CHALLENGES
3.1 CHALLENGES AT THE CENTRAL GOVERNMENT LEVEL3.2 THE WATER GOVERNANCE CHALLENGE AT THE LOCAL LEVEL3.3 ENVIRONMENTAL CHALLENGES3.4 RISk OF NOT MEETING ACCESS TARGETS
CHAPTER 4 > ASSESSMENT OF ISSUES AND PROPOSED ACTIONS4.1 ISSUES ON SERVICE COVERAGE4.1.1 urban WaTer suPPly4.1.2 coMMuniTy-based WaTer suPPly4.2 ISSUES ON INSTITUTIONS AND GOVERNANCE4.3 ISSUES ON FUNDING4.3.1 funds MobilizaTion for PdaM4.3.2 cenTral governMenT funding suPPorT
CHAPTER 5 > PROPOSED PROGRAMS AND FUNDING SOURCES5.1 PROGRAMMING PRINCIPLES5.2 PROPOSED PROGRAMS AND ACTIVITIES5.3 IDENTIFICATION OF FUNDING SOURCES
CHAPTER 6 > ROADMAP FOR WATER SUPPLY INVESTMENT6.1 RECOMMENDED TECHNICAL ASSISTANCE AND INVESTMENT PACkAGES6.2 PROPOSED FLOW OF ACTIVITIES
VIIIIXX
01
0506060710141414161818
2526262728
3132323233343435
39404243
4950
52
IV. VIIVI
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Primary Sources of Drinking Water Nationwide (p. 8)Access to Sources of Safe Water 1993-2009 (p. 9)Households Primary Source of Drinking Water in Urban and Rural Areas (p. 10)Urban Population Access to Various Water Sources by Expenditure Decile (p. 11)Growth of Healthy PDAMs (p. 12)PDAMs by Number of Connections in 2010 (p. 13) Funding Gap for Water Investment by National and local Government (p. 29)Conservative and Best Case Scenario for Funds to Match Urban APBN (p. 44)Proposed Flow of loans, Grants and Key Monitoring/Evaluation Activities (p. 54)
FIGURE 1 >FIGURE 2 >FIGURE 3 >FIGURE 4 >FIGURE 5 >FIGURE 6 >FIGURE 7 >FIGURE 8 >FIGURE 9 >
FIGURESVI.
ANNEX 1 > PDAM Database (p. 56)ANNEX 2 > PDAM with Debt Restructuring Program, 2009 (p. 57)ANNEX 3 > PDAM Piped Connection, 2009 (p. 58)ANNEX 4 > Map Showing PDAM Pipe Connection Distribution by Region, 2009 (p. 62)
ANNEXESVII.
Breakdown of Percent of Population by Self-provision and Water Purchase (p. 7)Current Urban and Rural Water Program to 2014 (p. 20)Gap in Funding for Water Investment by Central and local Government,2011-2014 (p. 29)Proposed Program/Activities (p. 42)Conservative and Best Case Scenario for Augmenting lG Budget (p. 44)Challenges, Programming Principles and Proposed Programs/Activities (p. 47)Annual Gaps for Increased urban and Rural Investments (p. 51)Calculation of Estimated Beneficiaries (p. 53) Summary of Proposed Investment (to close funding gap) (p. 53)
TABLESV.
TABLE 1TABLE 2TABLE 3
TABLE 4TABLE 5TABLE 6TABLE 7TABLE 8TABLE 9
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LG local GovernmentMBR low Income CommunityMDG Millennium Development GoalNAWASIS National Water and Sanitation Information SystemNRW Non Revenue WaterOBA Output Based AidPAMSIMAS Water Supply and Sanitation for low Income Communities/WSSlICPERPAMSI Association of Indonesian Water UtilitiesPDAM local Government Owned Water UtilityPerpres Presidential decreePIP Indonesia Investment AgencyPMK Ministry of Finance decreePP Government RegulationPPP Public Private PartnershipPPSP Program for Accelerated Development of Sanitation in SettlementsRPJMN National Medium Term Development PlanSANIMAS Community Based Sanitation ProgramSIDA Swedish Development AssistanceSUSENAS National Social Economy SurveyUSAID United States Agency for International DevelopmentUWSSP Urban Water Supply and Sanitation ProjectWIRA Water Investment Roadmap AssistanceWSFF Water and Sanitation Funding Facility prepared through the Indonesia Water and
Sanitation Financing Program (IWSFP)
ADB Asian Development BankAPBD local Government BudgetAPBN National BudgetAusAID Australian Bilateral AssistanceBAPPENAS National Development Planning AgencyBPD Regional BankBPP SPAM Support Agency for Water Supply DevelopmentBPS Central Bureau of StatisticsBPSAB badan Pengelola sarana air bersih (Water Supply CBO)BPAM badan Pengelola air Minum (transitional body of water supply operator)CBO Community Based OrganizationCSR Corporate Social ResponsibilityDAK Special Allocation Funds DAU General Allocation FundsDDUB local Government Funds for Joint ProjectsDGCK Directorate General Cipta KaryaDGWR/SDA Directorate General Water Resources HWTS Household Water Treatment SystemIIGF Indonesia Infrastructure Guarantee FundIKK Capital of Sub DistrictIndII Indonesia Infrastructure Initiative (AusAID)JICA Japan International Cooperation AgencyKabupaten DistrictKota CityKeppres Presidential decree
ACRONYMS & ABBREVIATIONS VIII. X
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INTRODUCTION01:
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06. The flowchart below represents the organization of the water investments Roadmap in a simplified form.
ORGANIZ ATION ROADMAP FOR WATER SUPPLY
CURRENT CONDITION
EXISTING PLANS
CONSTRAINTS
ANALYSIS
OF
GOVERNANCE
ISSUES
RECOMMENDED
COURSE
OF ACTION
RECOMMENDED
COURSE
OF ACTION
ANALYSIS
OF POTENTIAL &
RISKS
PEMDA
PDAM
APBN/APBD
OTHERS
INSTITUTIONAL
CONCERNS
FUNDING
CONCERNS
MDG TARGET
7C
2015
INTRODUCTIONC H A P T E R o n e 01:
01. Subsequent to the Millennium Declaration at the General Assembly of the United Nations in 2000, the Government of Indonesia is undertaking the largest program of investment in water supply in the last decade, aimed at attainment of the Millennium Development Goals (MDGs) for access to a sustainable source of safe water by 2015 for about 68.8 percent of the population nationwide. The government of Indonesia classifies water sources as either improved or unimproved, which are equivalent to safe and not-safe drinking water for measurement of progress toward the MDG target. Access to safe water is measured by the number of people who can obtain an adequate amount of water for drinking and essential household activities on a continuing basis. There is no single test to determine "sustainable," but "access" is measured in numbers of people. It is easiest for national planners to use the number of connections as a target, based on an average number of people served by one connection, usually five people in urban areas and ten in rural areas.
02. In 2009 and 2010, the Government of Indonesia implemented a series of reforms intended to focus local government owners on their responsibility to provide convenient and affordable piped water service to all eligible citizens. The reforms included a program to reschedule massive debt owned by the water utilities to the Ministry of Finance and to turn them into cost-recovering enterprises. Another reform provided partial subsidies for house connections for the lowest income groups in urban centers.
03. In 2010, Indonesia began implementing a National Medium Term Development plan (RPJMN) that is expected by 2015 to halve the proportion of people who did not have access to a sustainable source of safe drinking water in 1993 when 62 percent of the population lacked a sustainable source. Thus, 69 percent (68.87 percent precisely) of the population will have access in 2015. This roadmap for attainment
of RPJMN and MDG goals through water sector investment is a part of the national effort to reach the goals in an orderly fashion.
04. In view of the new role of the central government as facilitator instead of implementer, water supply investments need a programming structure to draw out local government investment and to provide multiple funding sources to reach MDG targets. The overall plan involves funding from the private sector, corporations, other private sector participants, local governments, banks, and, in the case of community-based systems, households. local governments often face structural obstacles in accessing funds, and planning for MDG targets requires contingencies for local governments being unable to provide their share of project finance. Additionally, even if funding for new infrastructure is available, lack of good governance at the local government level and low capacity of most of the PDAMs, particularly in the managerial and operational aspects, casts doubt on sustainable good management and maintenance of new infrastructure.
05. This Roadmap supports and follows the strategy of the Directorate General Cipta Karya (DGCK), Ministry of Public Works, dated March 2011 and updated in October 2011, that quantifies the production capacities, kilometers of pipe, and house connections required to reach the MDG targets in urban and rural areas by the end of 2014. It is also based on an analysis of a data base of PDAMs provided by DGCK and shown in Annex 1. longer term and cross-cutting institutional and governance issues in the Indonesian water sector must be considered in planning for attainment of MDG targets. These will be addressed in the report, but they will be discussed in less detail. Sanitation is the other side of the water supply coin, but discussion of sanitation issues will be limited because GOI has already prepared a Sanitation Roadmap.
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EXISTING CONDITION02:
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1 There are two discrete systems tracking progress toward the MDGs in Indonesia. The first is the national system that is
coordinated by the National Development Planning Agency and based on the data of the National Bureau of Statistics. The national
system is used for five-year national medium range development plans and for evaluation of the national development program.
The second is the system used by the Joint Monitoring Program. This system is used for comparing progress in all participating
countries. The two systems use different data sources, different definitions of access, different methods of projection, and
different population estimates. Use of two different systems often leads to confusion as to what is the "right" measure of
progress toward the MDGs. This roadmap is intended to be a guide mainly to local governments and donors in Indonesia and thus it
uses the official Government of Indonesia national system.
2.1.2 Access to Water Supply for reaching MDG1
National access
11. Self provision is still the main mode of access to water for households throughout Indonesia. Nationwide, a little more than 30 percent of Indonesians obtain water from various external sources with piped water being generally the least expensive and water from vendors being the most expensive.
12. In urban areas, about 50 percent of urban dwellers buy water. Of those who buy water, about half buy from municipal water enterprises (as shown in figure 3), and the other half buy from bulk water vendors and neighbors. There is a gray area between piped water and water received from vendors because surveys indicate that most vendors obtain water from piped water taps and
carry it to areas that are beyond the piped network. In rural areas, about 15 percent of households buy water, generally from small scale community-based water supply organizations.
13. looking at Table 1, in 2009 about 70 percent of Indonesians obtained their primary source of water through self-provision, accessing groundwater, wells, streams, or other sources. About half of urban householders continue to use deep wells and shallow wells to access groundwater, and it is difficult for local governments to collect groundwater extraction fees when piped water coverage is not yet available. In many coastal cities such as Jakarta, the growing withdrawal of groundwater by households and industries is causing land subsidence and saltwater intrusion. As pollution of surface and groundwater increases in densely-populated areas, many urban self-providers are expected to turn to
SOURCE: SUSENAS CORE DATA 2009
TABlE 1: BREAKDOWN OF PERCENT OF POPUL ATION BY SELF-PROVISION AND WATER PURCHASE
PERSENTAGE OF HOUSEHOLD
Buy waterDo not buy waterTotal
URBAN
47.3552.65100
URBAN
47.3552.65100
NATIONAL
30.9069.10100
EXISTING CONDITIONC H A P T E R T W O 02:
2.1 CURRENT STATUS
7. Indonesia has registered impressive economic growth rates in the last few years as it moves toward inclusion in the group of medium- income countries. yet, the quality of public services has not grown appreciably. Urbanization has involved growth in a few large cities with crowding, land-scarcity, pollution, and growing low-income populations. In the water services sector, a decade without significant investment in urban water supply infrastructure has been a major factor in the decline in the proportion of urban dwellers that have piped water connections. lack of investment, insufficient PDAM revenue and other factors behind sluggish growth in access to water services will be discussed in more detail in this chapter.
2.1.1 The Period of Transition
8. The state of water supply in 2012 was shaped by a period of rapid central government-driven build-up of water supply infrastructure during the International Water Decade of the 1980s. Funds borrowed from international development banks were mostly passed on to PDAMs as grants for projects that were planned and implemented by central government agencies. In later years, loan funds were on-lent to PDAMs or the local governments for activities which were planned and implemented by the PDAM.
9. Following the Asian Financial Crisis of 1997-98, local governments were reluctant to raise tariffs, and loans were not repaid, triggering interest and penalty arrears. In 2007, outstanding principal, penalty and interest for loans for PDAMs amounted to Rp. 6.3 trillion ($700 million). Partly due to the PDAM/local government debt impasse and partly due to the reluctance of local governments to fund water infrastructure under decentralization, the period 1999-2010 saw no significant new investment in urban water supply infrastructure. There was, however, growing investment in rural community-managed water supply.
10. The period 2009-2015 is a time of transition from systems and procedures suited for centrally-funded and implemented activities to systems emphasizing stimulus for locally-funded infrastructure programs. Current programming constraints include rigidities in local government planning and budgeting, weak bottom-up pressure to replace central government pressure on local governments, incomplete regulations, and insufficient central government monitoring/sanctions to ensure compliance with mechanisms such as the central funding earmarks for the water special allocation fund (DAK). Under the decentralized environment, incentives are the central governments main mechanism to stimulate investment, but the effect of each incentive program cannot be known until it is actually put in place.
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15. Figure 2 shows that the nationwide percentage of access to safe water has declined steadily since 2001, while rural coverage increased during the same period. At the end of the medium range development program 2004-2009, 48 percent of Indonesia's population had sustainable access to sources of water that are protected from contamination, broken down into 49.8 percent of urban dwellers and 45.7 percent of the rural population. The Figure shows that between 2002 and 2009 urban coverage declined at a rate of about 2.2 percent per year. The urban poor are more vulnerable to a lack of access to safe water because of contamination of wells and groundwater by E. coli.
16. Government of Indonesia regulations state that water utilities should provide drinking quality water, although few PDAMs have achieved that target. Even in the areas where utilities are able to provide drinking quality water at the tap, the customers are still in the habit of boiling water prior to consumption. The government continues to conduct programs to accelerate access to sustainable sources of improved drinking water which includes water from piped systems, rainwater, springs, or wells that are protected from contamination. Sources that are not protected from contamination or water that is transported in jerry cans or drums by water vendors are termed unimproved or unprotected sources of water. As urbanization continues, water pollution raises the cost of production. Figure 3 shows households primary source of drinking water in urban and rural areas.
Urban access
17. Figure 3 shows that the primary source of drinking water in urban areas is PDAM piped water, followed by bottled water, pumped water, and wells. Conversely, consumers in increasingly lower expenditure deciles have difficulties assessing piped water, and their predominant source of drinking water is unprotected wells (see Figure 4). There are still many barriers to the urban poor gaining
URBAN DWEllERS OFTEN REly ON PUBlIC WATER SUPPlIES
WHICH ARE PRONE TO CONTAMINATION
SOURCE: ROADMAP TO ACCELERATE ACHIEVEMENT OF MDGS 2010, BAPPENAS
1993
10
20
30
40
50
60
70
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
FIGURE 2: ACCESS TO SOURCES OF SAFE WATER 1993-2009
PERCENT ACCESS
Percent with access to safe water
URBAN
RURAL
NATIONAL
piped water as the most economical alternative. Self-provision is most common in rural areas where about 85 percent of the people have limited availability of piped water schemes.
14. Most households obtain drinking water from more than one source, but the National Social Economy Survey (SUSENAS) measures only the primary source of water. Nevertheless, survey data regarding primary sources provides a reliable indicator of the trend in use of water sources nationwide. According to SUSENAS Core data obtained in July 2009, the primary source of water for more than half of all Indonesians was groundwater from wells (36 percent) or pumps (18 percent). Other primary sources include rainwater, rivers, streams, lakes (18 percent), municipal and other piped water (15 percent), and bottled water (13 percent). Although it is much more expensive, bottled water is becoming more popular because of the convenience of being able to drink it directly from the container. Indonesians are accustomed to boiling water from sources such as PDAM pipes or wells. The municipal water sector still provides the most cost-effective opportunity to increase access to clean water in urban areas because the municipal utility affords economy of scale, and water is most economically transported through pipes.
URBAN DWEllERS NOT CONNECTED TO P IPED SySTEM USUAlly
GET THEIR WATER FROM VENDORS WHO MUST TRANSPORT AND
SEll WATER AT A HIGHER UNIT PRICE
IN RURAl AREAS, STREAMS ARE COMMONly USED AS SOURCES
FOR DRINKING WATER, AND IN MANy AREAS THE WATER IS STIll
OF GOOD QUAlITy
SOURCE: SUSENAS CORE DATA JULY 2009
FIGURE 1: PRIMARY SOURCES OF DRINKING WATER NATIONWIDE
UNPROTECTED WEll 8%
OTHER 18% BOTTElED 13%
PIPED 15%
PUMP 18%
PROTECTED WEll 28%
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SOURCE: SUSENAS CORE DATA JULY 2009
FIGURE 4: URBAN POPUL ATION ACCESS TO VARIOUS WATER SOURCES BY EXPENDITURE DECILE
governments are both the owners of PDAMs and the regulators of tariffs in urban areas. Thus, central government strategic plans are aimed at enabling local governments to provide water services through technical assistance and access to capital through on-lending, private sector investment, or guarantee schemes. yet, the central government still invests more than local governments in their local water supply infrastructure. The central government is constructing water source infrastructure and water systems in remote areas and areas near international borders where water is scarce and problematic.
21. Many central government agencies play key roles in the water sector, but coordination among these agencies needs to be strengthened. There have been several recent improvements in the inter-ministerial coordination with the establishment of the water and sanitation working group (Pokja AMPl), whose membership includes ministries involved in the provision of water. The PDAM Debt Restructuring Program has required closer coordination among relevant ministries, but there is still room for improvement. For instance, there is a need for greater coordination between agencies involved in bulk water supply and those involved in provision of water services. Further, closer monitoring of Special Budget Allocation Funds for local governments (DAK) expenditures
for water could lead to reforms by the Ministry of Finance to ensure that all of the water DAK is spent for water development.
The role of local government
22. Attitudes adopted from the centralization years still hold sway among many local governments that the PDAMs, and not the local government, are responsible for provision of local water services, although many local governments realize that the PDAM belongs to them because it is their main source of locally-derived revenue. Most PDAMs were originally BPAMs, or transitional bodies funded by and managed from central government, and eventually they were turned over to local governments. Many urban water supply assets that are currently in use by the PDAMs have not been officially turned over to the PDAM by either local governments or the central government, causing uncertainty as to the true extent of PDAM assets.In the case of rural infrastructure, local governments generally invest in community-managed water infrastructure, and central government contributions are considered grants.
23. local government and PDAM funding is often not coordinated. local governments may operate small water supply facilities in areas that are not
Primary Source Urban Water by Expenditure Decile
PERCENT
POOREST 2
10
20
30
40
50
60
70
80
90
100
3 4 5 6 7 8 9 RICHEST
OTHER
UNPROTECTED WELL
PROTECTEDWELL
PUMP
PIPED
BOTTLED
access to comparatively lower-cost piped water, including outdated local regulations requiring house ownership, high up-front connection fees, local requirements that PDAMs sell water to the poor at subsidized rates, provision of water to the poor through public taps that often afford monopoly rent to water mafia, and a widespread myth that the poor cannot afford piped water. Studies by the World Bank2 have shown that poverty reduction increases growth in the national economy, yet there is a natural tendency for the higher decile expenditure groups to gain access to piped water first unless there is government intervention
Rural access
18. According to Figure 2, while urban coverage shows a declining trend, rural coverage steadily increased about 1.8 percent per year from 2001. Net rural-to-urban migration explains only a part of the trend. Estimates of urban growth from 2000-2015 vary between 1 and 3 percent per year and rural growth is expected to shrink at 0.7 percent per year. The steadily increasing trend in rural areas may be attributable to accelerated activity of government-driven community-based water
supply programs. The primary sources of water in rural areas are protected wells and rainwater, rivers, streams, and lakes, and piped water in rural areas may be provided by a small public utility or by community-managed piped water schemes.
2.1.3 Institutional and Operational Aspects
The key role of central government
19. The central government is mainly an enabler helping local governments fulfill their responsibility for provision of water services. Since the official onset of decentralization in January 2001, the central government has been excluded from implementing projects of water supply, except in unusual cases such as where local governments or populations are unable to help themselves. Most central government agencies are being transformed from service providers to enablers of service provision by local governments.
20. The issuance of law 7 in 2004 and Government Regulation No. 16 in 2005 emphasized the division of roles and responsibilities between the central and local governments in water supply provision. local
SOURCE: SUSENAS CORE DATA JULY 2009
FIGURE 3: HOUSEHOLDS PRIMARY SOURCE OF DRINKING WATER IN URBAN AND RURAL AREAS
Households' Primary Source of Water
Households
BOTTlED PIPED PUMP PROTECTED WEll UNPROTECTED WEll OTHER
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
URBAN
RURAL
2 World Bank, Off ice of the Chief Economist - Poverty Reduction and Growth: V i rtuous and Vicious Ci rc les. lat in America
Needs to Cut Poverty to Boost Growth, 2006
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SOURCE: MINISTRY OF PUBLIC WORKS DATA FROM PROVINCES 2009
FIGURE 6: PDAMS BY NUMBER OF CONNECTIONS IN 2009
27. The positive trend in recent years is expected to continue as PDAMs and local governments join the debt restructuring program that relieves PDAMs of a large portion of their arrears and requires them to adhere to business plans that include cost-recovering tariffs, conduct fit and proper tests for Managing Directors, and publish audited accounts. The Ministry of Public Works targets 240 PDAMs to be healthy by 2014. However, there has been an increase in the number of new PDAMs, most of which are not healthy. Furthermore, some PDAMs in the restructuring program are having difficulty adhering to targets in their business plan, so more work needs to be done to ensure that PDAMs stay healthy.
28. There are too many small PDAMs. The number of small PDAMs serving less than 10,000 connections has been growing, mainly due to the splitting of districts subsequent to decentralization.Annex 3 details the PDAMs and their reported number of connections. Almost all PDAMs lack a water supply master plan which, according to law 25/2007, must be included in a spatial master plan. Profitability of a PDAM depends on the source of water and other factors, but it is difficult for most PDAMs to achieve enough economy of scale to keep tariffs low when they have less than 10-15,000 customers. Figure 6 shows that more than half of all PDAMs have less than 10,000 connections. According to Association
of Water Utilities (PERPAMSI), one-quarter of its 402 member-PDAMs have less than 5,000 connections.
29. Water tariffs have been too low. In 2009, more than one-half of all PDAMs charged tariffs that were too low to recover costs. Without sufficient operating income, PDAMs were unable to invest in new facilities or maintain existing facilities. Current guidance from the Ministry of Home Affairs (MOHA regulation No. 23/2006) requires that PDAMs recover operating costs through tariffs while at the same time subsidizing lower income communities through higher tariffs to businesses and wealthier communities. Tariff should be at least high enough to recover operation costs. Entry of a PDAM into the debt restructuring program requires that tariffs recover costs, so the number of PDAMs charging cost-recovering tariffs is expected to grow.
30. Many local governments still take dividends from their PDAMs for which there is a provision in the local government enterprises law 5 of 1962 that local governments may recover their investment through profit-sharing dividends. In fact, many PDAMs were established with central government investment and handed over to local governments. Some local governments still pay out dividends, or contributions, whether or not their PDAM is making
PDAM by Number of Connections
123 3 2 4 7 6
1424
88
197
>100
,000
90,0
01-1
00,0
00
80,0
01-9
0,00
0
70,0
01-8
0,00
0
60,0
01-7
0,00
0
50,0
01-6
0,00
0
40,0
01-5
0,00
0
30,0
01-4
0,00
0
20,0
01-3
0,00
0
10,0
01-2
0,00
0
-
It will encourage public awareness of the need for a healthy way of life and the need for conservation of surface and groundwater resources by citizens. The Government advocates the creation by local governments of water master plans that cover provision of both community- and institutionally-based water in accordance with the Ministry of Public Works regulation 18 of 2007 regarding development of water supply systems. In addition, incentives may be provided for local governments that are willing to support cost-recovering tariffs and/or realize greater economy of scale through aggregation of PDAMs for mutual benefit.
Central government targets special communities
36. Special attention will be paid to increasing access to water for low income groups, water deficit areas, strategic areas, small islands and areas on national boundaries, as well as remote areas. In addition, special attention will be paid to target low income communities and those areas where the local governments cannot serve the population.
37. low income urban communities. Studies have shown that, because their monthly income is so low, poor urban households can save ten percent or more of their income if they have a house connection and pay the same tariffs as other income groups. Despite the responsibility of local governments for provision of water services to citizens, the central government has a special concern for increasing access to sustainable sources of safe water for low income urban communities. Strategic, isolated, and water-stressed areas will receive special priority in order to ensure balanced development.
38. A Water hibah Program for low income urban communities was made possible by the Ministry of Finance Regulations PMK 168 and 169/2008. The Water hibah program currently provides grants to 35 local governments to reimburse partial costs of new piped water connections for low income communities. The amount of grants to each local government is limited to Rp. 20-25 billion during the
period 2010 to 2014, making possible 5,000-6250 new connections at Rp. 4 million per connection. The possibility to adjust the limit should be assessed if the Water hibah program continues to prove popular among local governments.
39. areas unable to serve themselves. PP16 2005 provides for the central government to help PDAMs that are unable to serve a specific area, and the IKK (ibu Kota Kecamatan) program is aimed at providing financial assistance to local governments through the provincial governments for small water systems. Some IKK schemes are managed by the PDAMs and other IKKs by the local governments. The Ministry of Public Works is able to provide funds for the construction of new IKK water treatment plants and some portion of distribution pipes which are transferred to the local governments.
New central government initiatives on financing instruments
40. In 2008, the Ministry of Finance Decree (PMK) 120/2008 provided for write-off of PDAM arrears for interest and penalties and allowed local governments to borrow for water supply projects, providing local governments assumed the PDAM debt and local governments and PDAMs adhered to the PDAM business plan that included cost-recovering tariffs, governance targets, and a repayment schedule.
41. In 2009, presidential regulation (Perpres) 29/2009 provided for a loan Guarantee and Interest Subsidy program to help local governments arrange loans from commercial banks for healthy PDAMs that have cost-recovering tariffs. The central government will guarantee 70 percent of the amount of the loan, and the local government will guarantee 30 percent. The present uptake is still limited because the PDAM personnel require intensive technical assistance to comply with regulations. An umbrella agreement signed by the PDAM and the local government and the central government will allow the central government to deduct unpaid amounts from amounts owed to the local government. The central government
a profit. This practice is discouraged by central government guidance and central government programs, including the debt restructuring program because it leads to the false impression that the primary role of the PDAM is to earn income for the local government. A revision to the old law of 1962 is expected to repair this provision, and it is waiting for approval by the national parliament.
31. Many operational PDAM issues such as low billing efficiency, tacit approval of illegal connections, excess employees, lack of maintenance, and lack of customer orientation have been addressed, without success, by ad hoc training programs because they have been seen as symptoms of a general lack of knowledge and understanding. But there is growing evidence from recent projects that they are all symptoms of the endemic absence of good water governance, an issue that will be discussed in more detail in Chapter 3.
2.1.4 Community-based Water Supply System
32. Over the last ten years, the community-based water sector has progressed through national programs such as PAMSIMAS, PNPM and programs assisted by bilateral donors and NGOs. Since the approval of the National Community Based Water and Sanitation Policy in 2003, Government of Indonesia programs to stimulate local government investment in community-based water and sanitation projects have increased in number with impressive results.
2.2 Government Policies and Targets in the Water Sector
2.2.1 Present Policies
33. Present policies at both the central and local government levels are based on the Water Resources law number 7 of 2004, the umbrella water resources law that provides for decentralized development and management of water resources, generally-defined responsibilities of various levels of government, and private sector involvement. It states that water is both a social and an economic good, and it is the basis for implementing regulations of the ministries that are responsible for different aspects of water resources development. This law is further complemented with regulation PP 16 2005.
Secure and increase raw water availability
34. The Government will provide funding to secure and increase the availability of raw water services on a watershed basis in accordance with minimum service standards through provision for inter-basin transfer for raw water needs, construction of new transmission channels and storage and encouragement of private sector participation in financing. There has been increased coordination between DGWR/SDA and DGCK on water security issues, and the government is discussing the possibility of the establishment of a national entity for provision of bulk water supply in urban areas. Responsibility to increase production facilities in existing PDAMs and IKKs, as well as to expand distribution networks is expected to be borne by local governments, which can obtain funding from their own investment, banks, or through collaboration with the private sector.
Continued institutional/regulatory development
35. As many important regulations affecting PDAMs are outdated and contradictory, the central government plans to strengthen the regulatory system and encourage deregulation when necessary.
SECURING ClEAN WATER RESOURCES IS IMPORTANT IN PROVIDING
RAW WATER FOR GROWING URBAN WATER DEMANDS
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Central Government activities
47. As seen in Table 2, central government investment programs with 100 percent central funding in urban areas focus on raw water intake and transmission, and/or water production and main distribution for regional facilities. Raw water provision, funded through the budget of the Ministry of Public Works, Directorate General of Water Resources, should include construction of intakes and transmission lines to urban centers. The raw water target may be based on the expected number of beneficiaries because in 2010 self-reported data from 80 percent of local governments and PDAMs indicates a total installed capacity of 151,190 liters per second and production capacity of 124,289 liters per second, or an average idle capacity of only 17.8 percent.There is, however, a large variation in idle capacity among individual PDAMs, and idle capacity may be found to be higher than expected. large projects designed to bring raw water to cities take a long time to develop, and they often encounter unexpected delays. Many efforts are underway to strengthen private sector financing, but it is unlikely that there will be sufficient time to develop new large projects before 2014.
48. Central government investment programs with 100 percent central funding in rural areas focus on small projects of water supply construction for remote, water stressed, border and post-conflict areas. These programs ensure more balanced national development are mandated by the national medium term development strategy (RPJMN). The State Ministry of Research and Technology funds a program providing access to water for islands in areas near the border with neighboring countries, and the State Ministry for Research and Technology conducts a small program for waterstressed areas. The Ministry of Energy and Natural Resources and State Ministry for Acceleration of Development in Underdeveloped Regions provide programs to provide deep wells in rural areas.
49. Central government incentive investment programs that share central/local government funding focus on urban areas on the local Government Funds for Joint Projects (DDUB)3 program for improvement and expansion of existing piped water systems and construction of new IKK facilities. The DDUB program is the main vehicle for central government incentive funding for urban water supply infrastructure through
3 The term, DDUB (dana daerah untuk urusan bersama), is commonly used to describe the Joint Funding Program for poverty alleviation,
based on the guidance of Ministry of Finance regulation 168/PMK.07/2009 and subsequent regulations. Technically, DDUB refers to the
local government (APBD) portion of the funding, and DUB refers to the national (APBN) portion. DDUB is a part of the Urban and Rural National
Poverty Alleviation Programs (PNPM, Program nasional untuk Penanggulangan Kemiskinan). Annual allocations for the program are based on
technical indicators developed by various ministries/institutions such as the Ministries of Health and Public Works, and a financial capacity
Fiscal (IFRD, indeks ruang fiskal daerah) and Regional Poverty Index (IPPMD, Indeks Persentase Penduduk Miskin Daerah) that are developed
by the Ministry of Finance by March of every year and sent to Bappenas and the ministries/institutions. The structure of the program
ensures that poverty alleviation funds will be allocated for community empowerment on a transparent, accountable, and proportional
basis without favor to any one region. The size of the overall program is determined each year by the TNPPK (Tim Nasional Percepatan
Penanggulangan Kemiskinan), the National Team for Acceleration of Poverty Alleviation. In June of each year, ministries/institutions/
mayors/regents prepare a joint program plan in cooperation with Bappenas based on a temporary program ceiling. local governments
and provincial governments must allocate additional operational costs, such as for transportation, running costs, and office space for
the work team. In December of each year, the ministers/mayors/regents sign joint funding agreements describing the activities, source
and amount of funds, construction period, responsibilities, and reporting requirements. At this point, the officer responsible for each
activity is designated. The central government portion (DUB) is channeled directly to the community, community groups and/or community
organizations in cash for implementation of projects. The community groups have to complete implementation of the projects within three
months after the end of the fiscal year, and reporting is made to the mayor/regent who sends financial reports to the local parliaments.
Reports are made also to the ministries/institutions and the National Team for Acceleration of Poverty Alleviation.
will provide an interest rate subsidy of up to five percentage points through a guarantee mechanism.
42. In 2010, the Government issued presidential regulation (Perpres) 13/2010 which replaces the earlier Keppres 67/2005 on the government partnership with the private sector on infrastructure PPP. To encourage private sector investment in infrastructure development, including the water sector, the government further issued Perpres 78/2010 on a guarantee fund mechanism. Accordingly, PT Penjaminan infrastruktur indonesia (Indonesia Infrastructure Guarantee Fund - IIGF), a state owned guarantee company, is ready to provide guarantee funds to any feasible PPP project. Despite this encouraging development, progress on PPP schemes remained slow. Only a few PDAMs have entered into a successful partnership with private sector partners, and only one PDAM is expected to have a PPP scheme with guarantee funds from the government. Nevertheless, these new regulations enable greater local government access to water investment funds. PPP is also envisaged to support development of raw water resources. However, private sector participants prefer to invest in provision of raw water at a stated price and quantity rather than depending on local government-mandated tariff increases for their profit.
2.2.2 Present Central Government Targets
43. Overall, macro targets are determined by the RPJMN, the National Medium Term Development Plan for 2010-2014, which includes Indonesias commitment to achievement of the Millennium Development Goals. The Government of Indonesia plans to reach MDG water supply target 7c by the end of calendar year 2014. Most of the new beneficiaries are expected to gain access through programs funded by sources outside of the central government budget. Self-provision should be expected to increase at the same annual rate as in previous years. Fifty-six million Indonesians must gain access to safe water between 2011 and 2014.
44. Central government programs are designed to stimulate investment from local government budgets, private sector participation, or borrowings from banks. About 68.8 percent of the population in 2015 is projected to get access to safe water, where about 41 million people (mainly in urban areas) will gain access through piped water, and 15 million (mainly in rural areas) through non-piped sources of water such as privately-owned shallow and deep wells. The projection is based on an urban growth rate of 1.36 percent per year, as shown in Table 2, conforming to BPS projections. (The table was derived from DGCK and does not necessarily represent the most current status as it is changing over time). DGCKs updated strategy of October 2011 plans for attaining the MDGs during the period 2011-2014.
45. The DGCK October 2011 strategy as shown in Table 2 is supported by the roadmap that appears in Chapter 6. It sets forth the physical targets and estimated costs to increase access to 56 million new people by the end of 2014. The updated strategy calculates a need for Rp. 65.3 trillion in total investment (including Rp. 7 trillion from Directorate General of Water Resources for water source development) for development of new water sources, processing, and distribution, consisting of about Rp. 24.6 trillion from the central government (excluding Rp 7 trillion from DGWR/SDA), Rp. 6 trillion from DAK, and Rp. 27.6 trillion from other sources such as local governments, banks, and the private sector.
46. Table 2 shows that the urban programs to be implemented over the next three years include raw water provision, improvement/expansion of existing installations, construction of new IKK installations, and water quality improvement. The principal rural program is the PAMSIMAS community-based water supply program. It is complemented by small rural projects to assist water-stressed and remote areas. The final rural program involves non-piped activities supported by the Ministry of Health and DAK.
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There is also an immediate need for expanded technical assistance to improve, and strengthen the monitoring and evaluation system and to enable increased access to sources such as PIP, CSR and the Water and Sanitation Financing Facility.
which central government investment funds are matched by local government/PDAM investments. local governments and PDAMs can draw on loans or grants for this part of the DDUB program. Expansion of existing PDAM and IKK production facilities is funded 100 percent by local governments/PDAMs while expansion of existing distribution infrastructure can be funded 40 percent by the central government and 60 percent by local governments and/or PDAMs. The central government will fund 100 percent of water production facilities and 40 percent of distribution infrastructure for new IKK. The main central government incentive program in rural areas is the PAMSIMAS community-based program.
50. local government supported investment programs with 100 percent local funding in urban areas are mainly maintenance and expansion of piped water supply. They are not specified in Table 2 because their extent has not been monitored. Since the advent of the DDUB program, most local government investment in urban water supply has been matched with central government funding. In rural areas, local governments use Water DAK funding to construct non-piped rural water supply. Central government advisory and monitoring activities in urban areas include water quality surveillance, guidance, and capacity building. In urban areas, they include surveillance of non-piped schemes and encouragement of healthy behavior.
2.2.3 Policy Implementation at Local Government Level
51. local governments vary widely in their implementation of the central government policies on the need to increase access to water supply. In general though, they respond to central government guidance and regulation. Most local governments
participate in the DDUB investment-sharing program, although the levels of contribution and amount of investment are far below the target. Response to the debt restructuring program has also been slow, mostly due to the lack of capacity of the local governments and PDAMs in preparing their debt restructuring proposal. Annex 2 shows the PDAMs in the program at the end of 2009. Most new local government policies to support access to water supply have been driven by the commitment of the regent or mayor, but these policies often change when there is a change of leadership.
2.2.4 Water self-provision
52. There is no central or local government cost associated with self provision in Table 2. Urban households without access to piped water supply have to rely on groundwater through deep wells and pumps. Appropriate technology for household-level water treatment systems (HWTS) needs to be introduced in both urban slums and rural areas to ensure that quality of drinking water is maintained. In rural areas, self-provision of water supply, mainly by shallow and deep wells, is expected to grow slightly faster than the rate of rural population growth. Self-provision is assisted by surveillance and behavior change programs conducted by the Ministry of Health, and rural self-provision is expected to be assisted and encouraged by local governments through DAK funds.
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2011 2012 2013 2014
TARGET TARGET TARGET TARGETEST'DBUDGET
EST'DBUDGET
EST'DBUDGET
EST'DBUDGET
13.50 m3/s
4.00 m3/s
4.53 m3/s
5,081 km
0.34 mln unit
5.77
1,451 km
0.26 mln unit
449 unit
63 package
4 mln
families
40.5 m3/s
12.00 m3/s
13.6 m3/s
20,664 km
1.38 mln unit
1.77
3,218 km
0.59 mln unit
449 unit
73 package
1.2 mln
families
40.5 m3/s
14.29 m3/s
13.6 m3/s
24,390 km
1.63 mln unit
3.08
2,661 km
0.48 mln unit
449 unit
83 package
1.2 mln
families
40.5 m3/s
9.71 m3/s
13.6 m3/s
31,165 km
2.08 mln unit
2.28
6,289 km
1.15 mln unit
449 unit
96 package
1.2 mln
families
0.80
1.22
1.50
1.50
1.38
0.09
0.001
2.07
1.64
6.10
0.46
3.06
0.094
0.001
2.50
1.64
7.20
0.80
2.53
0.099
0.001
1.63
0.97
9.20
0.59
5.98
0.104
0.001
6.49 13.43 14.77 18.48
SOURCE: MINISTRY OF PUBLIC WORKS DATA
TABlE 2: CURRENT URBAN AND RURAL WATER PROGRAM TO 2014
NO PROGRAM FUNDING SOURCE
PROGRAM DESCRIPTION
TARGET 2011-2014
BUDGET ESTIMATE
1
2
3
4
5
WATER RESOURCE SUPPORT
IMPROVEMENT OF EXISTING WS
SySTEM IN URBAN/IKK
large/metro cities, 75 cities
Medium-size cities,288 cities
Small cities, 156 cities
NEW IKK
1136 IKK
IMPROVING QUAlITy OF WATER
NON PIPED SCHEME
APBN
APBD,PPP
national banks
APBD/PDAM/banks/
PPP (60%)
APBN (40%)
APBN PU
APBN/PDAM/banks/
PPP (60%)
APBN (40%)
APBN MOH
APBD
APBN MOH
APBD
Self-financing
135 m3/s
40 m3/s
45.33 m3/s
81,300 km
5.42 mln unit
12.9 m3/s
13,619 km
2.48 mln unit
449 unit
96 package
4 mln
families
7.00
5.47
24.00
3.35
12.95
0.387
0.004
Raw water needs
Construction of intake and raw
water transmission
Additional production unit
Additional distribution network
Additional HC
New production unit
New distribution network
New HC
Water quality surveillance
Support on water quality
improvement, cap bldg,
advocacy, socialization
Individual/commmunal
non-piped scheme
(20%) of urban population
URBAN WATER SUPPLY
TOTAL URBAN AREAS 53.16
2120
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2011 2012 2013 2014
TARGET TARGET TARGET TARGETEST'DBUDGET
EST'DBUDGET
EST'DBUDGET
EST'DBUDGET
1,250 village
1,071 l/s
186 village
186 l/s
13 village
68 village
17 village
1 village
5,000 l/day
200 point
2,400 village
2,400 village
2,400 village
1,250 village
2,143 l/s
372 village
372 l/s
17 village
77 village
10 village
4 village
20,000 l/day
point
11,160 village
1,160 village
11,160 village
1,250 village
2,143 l/s
372 village
372 l/s
21 village
79 village
10 village
5 village
25,000 l/day
point
11,220 village
11,220 village
11,220 village
1,250 village
2,143 l/s
372 village
372 l/s
27 village
80 village
13 village
5 village
25,000 l/day
point
11,220 village
11,220 village
11,220 village
0.30
0.14
0.08
0.07
0.02
0.005
0.113
0.40
0.139
0.02
0.60
0.28
0.01
0.08
0.01
0.02
0
1.86
0.65
0.111
0.60
0.28
0.01
0.08
0.01
0.025
0
1.87
0.65
0.112
0.60
0.28
0.02
0.08
0.01
0.025
0
1.87
0.65
0.112
1.29
7.78
4.43
0.40
2.95
3.62
17.05
8.05
1.86
7.14
3.64
18.41
9.06
1.87
7.48
3.65
22.12
10.17
1.87
10.08
*
**
SOURCE: MINISTRY OF PUBLIC WORKS DATA
TABlE 2: TABLE 2 CURRENT URBAN AND RURAL WATER PROGRAM TO 2014 (CONTINUED)
NOTE: * the DGCK figure is 21.26
** the DGCK figure is 9.31
NO PROGRAM FUNDING SOURCE
PROGRAM DESCRIPTION
TARGET 2011-2014
BUDGET ESTIMATE
1
2
3
PAMSIMAS
WATER SCARCITy
NON PIPED SCHEME
APBN PU
APBN PU
APBN PDT
APBN PDT
APBN PDT
APBN RISTEK
APBN ESDM
DAK WS/
Self-financing
APBN MOH
DAK
APBN MOH
APBD
5,000 village
7,500 l/s
1,303 village
1,303 l/s
78 village
304 village
50 village
15 village
75,000 l/day
200 point
36,000 village
36,000 village
36,000 village
2.10
0.98
0.12
0.31
0.04
0.075
0.113
6.00
2.00
0.36
Construction of comm-based
rural WS (raw water
relatively easy)
Construction of rural WS with
water scarcity/need high-tech
Remote areas: construction of
rural WS with relatively easy
water source
Border island, post conflicts:
construction of rural WS with
difficult source/need high-tech
Remote areas: construction of
rural WS with relatively easy
water source
Construction of rural WS with
difficult source/need high-tech
Pumping gound water
Construction of non-piped rural
WS for individual/communal
Improvement of quality of non-
piped scheme surveillance,
HWTS stimulus
Changing hygienic behavior
water scarcity and water-borne
disease areas
RURAL WATER SUPPLY
TOTAL RURAL AREAS
TOTAL urban and rural areas
apbn urban and rural
DAk
APBD/pdam/banks/ppp
12.10
65.26
31.62
6.00
27.64
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CHALLENGES03:
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higher tariffs linked to service improvements. This common interest can be accommodated in an activity to help communities establish a PDAM-consumer link that is beneficial both to PDAMs and to local governments that want to demonstrate their concern to voters for water issues. Eventually a PDAM-consumer link can help establish a strong link between communities and their local governments, including local parliaments, through availability of data on water governance performance. In the short-run, a first step toward better governance will be better monitoring and assistance based on NRW or other indicators of performance, rather than pro-rated-rewards-to-all.
57. Bulk water supply leads to economy-of-scale, but often a local government that controls water sources is not always willing to cooperate with its neighbors, and the national apex body that should resolve this problem has not met for many years.
58. Insufficient operation and maintenance (O/M) results in rapid deterioration of plant and equipment. One symptom of sub-optimal management is the water loss statistic that measures the difference between water that is produced and water that is sold. In some PDAMs the level of NRW persists at a constant level over decades, while in other PDAMs NRW may drop dramatically during a given year. This indicates that the high level of NRW is not merely due to technical deficiencies of the network, but in many cases due to lack of good management, including weak PDAM Supervisory Board and staff capability.
3.3 Environmental Challenges
59. Densely populated areas must cope with increased pollution and often dependency on water sources that lie in other jurisdictions. As towns grow into cities, the water source moves farther away, and cities often rely on neighboring jurisdictions for their source of water. Water sources are not equally distributed over the region. In some areas water sources are abundant, but it is expensive to transport water to settlements.
Funding Challenges
60. In 2010 the Department of Public Works planned that 60 million new people4 would gain access to a sustainable source of safe water between 2010 and 2015. Increased access was to be made possible largely with local government financing, but a shortfall in local government financing resulted in an updated program in 2011 emphasizing increased national budget allocations and incentives to local governments, including access to alternative sources of finance.
61. There is a significant gap between the current levels of funding by the central and local government and the needs shown in Table 2 to meet MDG targets, mainly for piped water supply. The gap has been calculated by subtracting probable funding scenarios from calculated needs. The potential gap of Rp 36.4 trillion is
4 Of which, about 65 percent are located on the main is lands of Java and Bal i , 24 percent in Sumatera, 7 percent in Kal i-
mantan and Sulawesi , and 4 percent on the remaining is lands. In Java, 7 percent l ive in Jakarta alone, and 22 percent, 14
percent and 13 percent l ive in West Java/Banten, Central Java and East Java respectively . The distr ibut ion of p iped con-
nections by province is shown in Annex 4. (Source: Team assessment of PDAM database) .
CHALLENGESC H A P T E R T H R E E 03:
3.1 Challenges at the Central Government Level
53. Implementation of present government policies to reach MDG targets must employ a program approach that addresses, but does not necessarily solve, fundamental and endemic challenges in the water sector. At the central government level, these challenges include the need for greater capacity in development, planning and monitoring and prompt feedback of evaluation into central government programs. There is also a need for greater coordination among the ministries that share responsibility for stimulation of local governments to provide access to water. For example, since enactment of the Water Resources law of 2004, there is still a need to establish a functioning apex water body that will make politically difficult national decisions regarding inter-jurisdictional environmental protection and sharing of water resources. Closer coordination between departments can ensure enhanced local government access to available financing, simultaneous completion of both upstream and downstream civil works, closer monitoring of implementation, and legal foundations for urgently needed reforms. Better monitoring and evaluation are needed, and incorporation of a simplified and improved National Water and Sanitation Information System (NAWASIS) monitoring and evaluation system should be investigated. NAWASIS monitoring is presently integrated with the Accelerated Sanitation Development Program for Settlements (PPSP) monitoring system.
3.2 The Water Governance Challenge at the Local Level
54. The principal obstacles to full implementation of central government incentive programs at the local level have been (i) lack of local government
sense of ownership of responsibility for water service; (ii) tendency of local governments to rely on central government funding for local water supply projects; and (iii) non-optimal management of water infrastructure. As mentioned in Chapter 2, the basic challenge underlying all of these obstacles has been identified as the need for better water governance at the local government level. A 2009 report for the World Bank, Policies for Better Water Supply and Sanitation in Indonesia, found that good governance is the critical missing factor in good water service and that local governments with good governance have seen improved water services.
55. Good water governance can be defined as a local government fulfilling its duties to provide adequate water services as laid down in the Water Resources law of 2004, by listening to the needs of voters, providing investment and support for a responsible water service provider, and monitoring the result. Improved water governance leads to more efficient use of resources, consumer-oriented service, and adequate maintenance of infrastructure. The water governance challenge is essentially a long-term political one that until now has not been addressed substantially, despite a number of technical assistance efforts in various aspects that have been provided by the central government. But a programming approach over the next three years can enhance responsiveness of local governments to consumer needs, either directly or through forging stronger links between PDAMs and consumers.
56. Recent small water governance projects have identified and tested approaches to strengthen water governance at the local government level. There is empirical evidence that well-run PDAMs and their consumers have a common interest in increased investment, better service, and even
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NOTE: *BASED ON INFORMATION PROVIDED BY DGCK
**THIS POTENTIAL GAP WILL BE FURTHER DISCUSSED, AND RECOMMENDATIONS PROPOSED IN CHAPTER 5.
SOURCE: MINISTRY OF PUBLIC WORKS DATA FROM PROVINCES 2009
TABlE 3: GAP IN FUNDING FOR WATER INVESTMENT BY CENTRAL AND LOCAL GOVERNMENT, 2011-2014 (in rP Trillion)
FIGURE 7: FUNDING GAP FOR WATER INVESTMENT BY NATIONAL AND LOCAL GOVERNMENT
FUNDINGSOURCE
DG Cipta Karya
DG Water Resources
Other central government
DAK (water)
lG/PDAM
TOTAL
INVESTMENTNEEDED*
21.21
7.00
3.40
6.00
27.64
65.26
FUNDING CAPABILITY*
14.97
3.88
2.13
2.15
5.37
28.49
PotentialGap
6.24
3.12
1.28
3.85
22.27
36.76
NOTES FORACCELERATED PROGRAM
Must obtain from outside funding sources
Increase allocation for SDA
Potential to access health funds for water
Need to increase spending of DAK water
Must find other outside funding sources**
REAL,RP TRILLION
FUNDING GAP,RP TRILLION
DGCK
DGWR
Other Ministries
DAK
lG/PDAM
TOTAL
14.97
28.49
3.88
2.13
1.28
3.12
6.24
3.85
22.27
36.76
2.15
5.37
shown in Table 3. Figure 7 shows the funding gap in graphical presentation. For local Government (lG)/PDAM, the potential gap of Rp 22.27 trillion is a special challenge that will be further discussed in Chapter 5 (5.3 Identification of Funding Sources).
62. In addition to funding requirements for investment, there is a need to seek funds for technical assistance. Table 2 indicates that there is already a budget allocation for soft component (non construction) activities. This should be targeted for providing technical assistance that will encourage and facilitate local governments and PDAMs to participate in the Debt Restructuring program and to help eligible local governments and PDAMs to access existing funding mechanisms such as loans from Perpres 29, SlAs, and Water hibah grants. There is also an immediate need for expanded technical assistance to improve and strengthen the monitoring and evaluation system, and to enable increased access to sources such as PIP, CSR and the Water and Sanitation Financing Facility.
3.4 Risk of Not Meeting Access Targets
63. The discussion of the existing situation, targets, and challenges indicates that there is a very high risk that water supply access and investment targets may not be achieved by the end of 2014. local governments must increase investments, largely through access to funding sources that must be brought on line and facilitated by technical assistance within the next two years. Central government incentive programs must emphasize the importance of good performance to qualify for access to further support in the next year. Thus, ministries must find consensus on establishment and optimum use of an upgraded monitoring and evaluation system.
The Central Government incentive programs must emphasize the importance of good performance to qualify for access to further support in the next year.
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ASSESSMENT OF ISSUES & PROPOSED ACTIONS04:
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contribution from the provincial government. Plans are underway to adjust local government contribution to future PAMSIMAS activities to match local government fiscal capacity.
70. Facilitation of water Community-based Organizations (CBOs or BPSAB) for access to bank credit can increase rural access. The World Banks Water and Sanitation Program estimates there are 10,000 CBOs throughout Indonesia that have been formed by projects such as WSlIC and PAMSIMAS. IndII is assisting and providing partial subsidies to a number of CBOs (which is called BPSAB--badan Pengelola sarana air bersih) in registering and borrowing funds. Planned borrowings for 25 CBOs in 6 districts presently amount to about Rp 4.6 trillion. This credit program for CBOs needs to be continued to enhance and increase the effectiveness of PAMSIMAS.
71. One of the key lessons learned over the last couple of decades is that plant and equipment are better maintained when the beneficiaries are involved in their planning, construction, and operation. Most rural-based water supply projects involve community-
based planning and operation. Community-based solutions, such as master meter programs, are being implemented in urban areas where physical or regulatory barriers prevent the PDAM distribution network from reaching beneficiaries. Therefore, involvement of communities in urban and rural water supply planning needs to be continued.
4.2 Issues on Institutions and Governance
72. Poor water governance in water supply can be rectified when consumer needs are received and acted upon by local government owners of PDAMs. In a democratic environment, this mechanism is normally found in periodic elections where the electorate chooses individuals who have made a campaign to represent the people's interests and cares. Although capacity building and training are important for the technical and management improvement of PDAMs, improvement of the overall local governments responsiveness to the needs of the community is often the key behind the well performing PDAMs. Therefore, apart from addressing the technical and management aspects at the water sector level, it is also important to improve the link between the community and local government, which requires a longer-term political solution at the local government level.
73. A long-term water governance improvement activity can demonstrate the advantages to local government leaders of better water governance, to measure and recognize outstanding local government owner performance, and instill sustainable habits such as the annual public review of a business plan and local government rewards and sanctions for not adhering to agreed annual targets. A technical assistance activity on water governance may be needed in this respect.
URBAN DWEllERS OFTEN REly ON PUBlIC WATER SUPPlIES
WHICH ARE PRONE TO CONTAMINATION
ASSESSMENT OF ISSUES & PROPOSED ACTIONS
C H A P T E R F O U R 04:4.1 Issues on Service Coverage
4.1.1 Urban Water Supply
64. Depletion of groundwater, urban crowding, and water pollution prevent many citizens from drawing on alternatives to piped water supply. A Water hibah program has the advantage of serving low income families in densely-populated areas while reducing a PDAMs idle capacity. Scaling up of the Water hibah program is one of the fastest ways to increase urban piped water coverage. Until all the urban poor are served, the limiting factor for scaling up appears to be the ability of local governments to provide equity investment in their PDAMs. The first Water hibah program defined poor households as those having electrical power connections of 1300 KVA or less.
65. The results of the first Water hibah program, assisted by AusAID, showed that 70,000 low income families consumed more than the minimum amount of water per month, demonstrating to PDAMs that low income does not mean low consumption or lower revenues. Scaling up the program by opening it to the larger PDAMs (shown in Annex 3) where there are larger urban poor populations. Also, the possibility of raising the funding ceiling per city may be assessed. Another way to serve the urban poor is through master meter programs to sell water in bulk to a CBO that will distribute the water to its members, collect the tariff, maintain the distribution system, and pay the PDAM every month.
66. Increased effectiveness of production and distribution works in existing PDAM/IKK is a high priority and is recommended. This will increase revenue and provide more water for PDAMs to increase coverage.
67. In many urban areas, households that cannot access piped water systems tend to access groundwater through deep wells and pumps, although in many densely-populated areas groundwater quality has been deteriorating due to contamination from domestic waste. To avoid over-exploitation, the use of groundwater, especially from deep wells, should be closely monitored and strictly regulated. In practice though, most local governments are reluctant to charge groundwater withdrawal fees.
68. Regarding water quality, the Ministry of Health conducts a program of water quality capaci
