Water and Sanitation Sector Review, Indonesia

Water is a finite and vulnerable resource, essential to sustain life, development and the environment. One of The United Nations Millennium Development Goals is a target of reducing by half the number of people who do not have access to clean water and sanitation by 2015. However, Indonesia-wide the water and sanitation sector faces the prospect of having to make large investments in water provision, primarily because coverage of water and sanitation services is presently much lower than envisaged by the MDGs, and secondly because of an increase in the scope and stringency of water and sanitation quality standards.
The water and sanitation sector (WSS) in Indonesia was in crisis even before the 1997/1978 Asian crisis. Because many regional water enterprises (PDAMs) are financially unsound and because of uncertainty in the legal framework during the early stages of decentralization, there has been no significant investment in the sector in recent years. Only 8 percent of the water supply system in Indonesia is currently under public-private partnership. Aging infrastructure, budget constraints (central and local government), and escalating demand have shifted policy towards private sector involvement in water service provision.
The absence of high-quality and universally accessible water and sanitation sector (WSS) services have significant environmental, economic, and social implications. Environmental concerns include the need for resource conservation, ecosystem impacts from water extraction, allotment and conveyance, and downstream effects from pollution and wastewater disposal. Economic concerns include efficiency, principle-agent conflicts, and externality considerations. Social implications include human health and water quality concerns, resource control issues, and distributional effects of water management decisions.

Source: KKPPI, Sector Review 2006