top of page

Is Indonesia Ready To Be A Leader In Water Management

“When the well runs dry, we (shall) know the worth of water”,

Benjamin Franklin-(1706-1790).

Can we seriously consider Indonesia as a leader in term of commitment to water sustainability?

The True Cost of Water Is Overlooked

Most PDAM ( local public water utilities) are providing water to their clients at a rate below their cost recovery limit. Many PDAMs even decline serving big users despite attractive potential income. This situation forces water users to investigate alternative and unhealthy competition. While the average PDAM would charge around 14.000 Rp /M3, in Sumatra some industries are getting their water from rivers for a cost as low as 20 Rp/M3 (Yes, twenty); Some others in East Java would pay 200 Rp/M3 and in Lombok some “promoters” are charging as much as 45.000 Rp/M3.

Underground water extraction is sometimes costing dozen times below its real value due to the proliferation of illegal deep wells. In most cases, collateral financial impacts (Energy, chemical, social, environmental, reputational, legal, health) are neglected.

Indonesia water resources seem abundant but are not evenly distributed, 50% GDP is produced in regions that suffer severe stress in dry season;

Industrial, urban and household water demand is expected to double by 2045, meaning that 67% GDP will be generated in severely water stressed regions.

Access to water remains a major challenge and will soon trigger dramatic and irreversible impact. Today, about 30 million people still lack access to an improved water source and more than 70 million has no access to improved sanitation.

Water Risk represent a major component on Business risk for investors. Jakarta is rated as the 2nd city in the world in term of water risk for tourism, Bali and Surabaya are included in the top 10 (Source: International Tourism partnership - 2019).

The groundwater over-extraction contributes to Water Risk through its impact on land subsidence. Jakarta, shows the most rapid land subsidence rate across all Asian megacities and no improvement is expected. The uncontrollable rate of underground water extraction lead North Jakarta to 20 cm sinking in 2021. This trend will lead to a 1.42% negative impact on GDP by 2045. 65% of underground water in Bali is used for Tourism and led Bali’s water table to drop by 60%. Furthermore, it disturbs rice production and agriculture in general.

Over-Consumption and poor water efficiency are the main reasons. In the hospitality sector for instance, Indonesian hotels performances exceed by far the water efficiency benchmarks of 430 liters/guest/day set by the International Tourism Partnership (ITP) for a 4-star hotel in Tropical countries. Indonesia declares an average of 870 liters. Some hotels in Bali exceed 3.000 liters, while the World Academy of Science, published a report in Nov 2016, stating that water consumption in Phuket Thailand, ranged from 383 to 415 liters/guest/day. Industries or commercial centers are not better…

Pollutions of Rivers and Oceans is another burden. Coastal areas traditionally offer high economic potential anywhere else in the world but it is not the case in Indonesia. Only 4% of Indonesian wastewater is treated. Up to 97% (Jakarta, Semarang) of domestic wastewater is discharged to sea or rivers. Severe industrial and agricultural pollutions result in environmental degradation; Jakarta water only reaches 2 mg/liter dissolved oxygen concentrations, while it should reach between 6.5-8 mg/liter, to be considered as healthy.

PDAMs essentially depend on surface water for their resources, but most of 564 Indonesian rivers are polluted with only 9% rated as lightly polluted (Ministry of Forestry and Environment report July 2021), while remaining are considered very and severely polluted. These pollutions increase the cost of water treatment and discourages private investments as return on investment are not attractive.

National Storage Capacity did not follow population increase and remains very low. The present Indonesian storage capacity is insufficient to support country’s requirements

The Water Losses Rate (NRW) declared by Water Utilities is reaching an average of 33% and is considered amongst the highest in the world due to its “Non-Physical” component. Except very few cases, Indonesian PDAM are rated as bad performers.

What can be done?

Driven by population growth and industrial demand, Indonesia is expected to face severe water stress by the end of this decade. The need for improving water efficiency represents a time bomb, for “Business as Usual” practitioners but a fantastic window of opportunities for innovators and water stewards. The efforts could focus at the same time towards supply-side management (Government, Water Utilities, policy makers), water quality management (Government, private sector, Civil society) and demand-side management (Water Users) It should attract technological innovations instead of preserving “Business as usual”.

What about ESG FINANCE IN THE WATER SECTOR? Bankability and liquidity are missing. Under present conditions, investors consider that the risk often exceeds the benefits while bankability is determined by the risk profile and the return that debt investors are expected to generate by accepting this risk profile. For this reason, determining the TRUE COST OF WATER is essential to assess the actual impact of water on business risk.

Can we seriously rate Indonesia as a leader in term of commitment to water sustainability?

Indonesia has indeed a long way to go before the 10th World Water Forum (WWF), Bali 2024, to demonstrate its commitment and its achievements.

May the growing water stress compel policy makers to take actions to harmonize and legalize water management. Water efficiency and water stewardship initiatives can easily provide financially attractive solutions towards Circular Economy principles. But at same time, since regulations are not implemented, incentives should be deployed to attract law breakers towards the dramatically required water stewardship. Let’s hope that, while sincerely putting on the table a set of commitments, our policy makers drew a clear agenda to promote Indonesia to the world but also Water Stewardship to the Indonesian society.

2 views0 comments


Post: Blog2_Post
bottom of page