Structure of the Water Industry

These are managed by the Directorate General of Water Resources (DGWR), with a main emphasis on the distribution of water for agricultural production. About a third of the 90 major river basins in Indonesia are in a critical state with respect to watershed degradation, pollution, flooding and droughts.
With up to 90% of the population in these basins (outside the metropolitan areas) depending on subsistence agriculture, significant efficiency gains are unlikely to occur without a more integrated approach to poverty reduction, environmental conservation, and infrastructure asset management.
There is also a general lack of institutional capacity to deliver services and manage water resources efficiently. Legislation, holistic and integrated resource management, and community involvement are prerequisites to a renewed process for improved resource use. The government promulgated the Water Resource Law 7/2004 providing more clarity of roles and responsibilities, and establishing the legal framework for use of water and also for resource protection.
Watershed management is the responsibility of two key government agencies – the Ministry for Environment, and the Ministry of Energy and Mineral Resources (mainly responsible for surface mining). There are strong technical relationships with the Directorate General of Water Resources within MPW that is responsible for the planning, investment, and maintenance of natural watercourses and irrigation canals. These systems traditionally serve agricultural areas, but priority is now also given to allocation of raw water sources for urban water supply whether by public or private providers.
In the 1970s and 1980s, management of water resources was strengthened considerably through numerous investment programs financed principally by ADB, World Bank, and OECF for upgrading irrigation canals and constructing new storage reservoirs (often multipurpose dams that include hydro-power generation). These programs led to a significant improvement in agricultural production, but current high urban water demands are now beyond that planned horizon with consequential water shortages anticipated in critical regions.
A difficulty that continually plagues the planning of some new or expanded water supply systems is the lack of water in one local government region while there are adequate resources in a neighboring region. Despite establishing the principles of regional cooperation under government regulation, many areas have yet to implement the policy.
However, many secondary cities have access to sufficient raw water in their region to serve existing and expanded water supply systems. The situation with most metropolitan areas is different, with many already at a critical point due to a lack of investment and inadequate overall sector management. It is a key area for the government to address, probably through enabling regulation to allocate responsibilities for policy-making and sector management under the new Water Resources Law and by ensuring that sufficient funds are available to finance the required investments in dams, canals and other infrastructure requirements.
Action to protect watershed management and conservation is considered to be high priority. This would support the water supply sector in the medium-to long-term. Water resources development features in the future program to respond to issues such as increasing competition for water, degradation of watersheds, and a more effective approach to water basin management.

Source: KKPPI, Sector Review 2006