Access to Clean Water: A Problem for Indonesia

Access to clean water is one of Indonesia's biggest problem. According to the Millennium Development Goals (MDGs) Report 2007, published by the National Development Planning Board, piped water is accessible to 30.8 percent of households in the country's cities and 9 percent in its villages. Such figures show the limitations of the municipality's water service provider, PDAM.

Lack of investment in clean water is one reason PDAM gives for its limited outreach. Based on a government statement, to meet the MDGs target by 2015, Indonesia needs Rp43 trillion (US$4.6 billion) in clean water funding. The government currently provides Rp500 billion.

In order to close the funding gap, the government expects private investment in drinking water infrastructure.

The need for clean water funding is something that cannot be covered by private investment. In Indonesia, most PDAM utilities have small scales of economy and are therefore unattractive to investors.

There is no evidence to suggest private investors will improve the efficiency and effectiveness of water services, whereas the government has a duty to do so.

Increasing public funding for clean water infrastructure is the most rational approach for Indonesia. This effort should begin with an analysis of the needs of locals. This should be done through a democratic and participatory process.

There are resources and mechanisms the government could employ to increase clean water funding, such as state and local budgets, grants, government bonds and community-public partnership.

In order to use a grant system, the government should improve its proposal management and clearly focus on real needs in order to widen clean water services.

PDAM could use existing funds more efficiently. if it could reduce leakages from 40 per cent to 20 percent, it would have more disposable funds to invest in infrastructure. PDAM should use cost recovery principles, as long as costs are not passed on to consumers. Cost recovery principles should also be supported by a proper subsidy mechanism.

Bond investing is a traditional lending instrument for public services. The mechanism needs conditions, such as strong capital structure at local level.

A few of mechanisms in place now do help the poor access clean water at affordable prices. The most important thing is to make sure the mechanisms run properly and that the needs of people at the local level are met through appropriate funding.

Taken from The Jakarta Post, April 5, 2008