WATER Indonesia Water Investment Roadmap 2011 2014

I
INDONESIA WATER INVESTMENT ROADMAP | 2011-2014
DISCLAIMER
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.
III
FOREWORD
Ir. Budi Yuwono, Director General of Human Settlements, Ministry of Public Works
Mr. Franz Drees-Gross, Sector Manager, EASIS, World Bank Office, Jakarta
Indonesia continues to face the dual challenges of low water
The Government strategy for water supply development includes
Since the economic crisis of 1998, the development of water
the water supply sector including Directorate General of Water
supply coverage and low service quality. Nation-wide, in 2010,
central government support for raw water source development,
supply in Indonesia has been constrained by a number of factors
Resources (DGWR), DG Cipta Karya, Ministry of Finance (MOF)
only 47.71 percent of the total population had access to a
poverty alleviation, areas with water scarcity, remote and dry
including limited funding and a lack of capacity in most local
(fiscal balance, treasury, debt management, budget), Sarana
sustainable source of safe water, and only about 25.56 percent of
areas, fishing villages and areas near borders with neighboring
water companies (Perusahaan Daerah Air Minum - PDAMs) and local
Multi Infrastructure (SMI), Indonesia Infrastructure Guarantee
the population had access to piped water. An ambitious target of
countries. This strategy is translated into various programs such
governments to support additional infrastructure and provide
Fund (IIGF), Bappenas, Badan Pendukung Pengembangan Sarana
access to safe water for 68.87 percent of the population in 2015
as a program,for IKK (capital of subdistricts), raw water source
new connections. Provision of water infrastructure has not kept
Air Minum (BPP SPAM), and the Ministry of Home Affairs.
has been set. To reach the target, about 56 million new people
development, transmission pipeline, water treatment plants and main
pace with population growth because rapid decentralization and
will need to gain access between 2011 and the end of 2014. In
distribution networks. For rural areas, central government support
outstanding PDAM debt arrears resulted in an interruption of on-
The sector needs more than the current level of investments in
addition, an instruction from the President calls fir provision of
includes continuation of projects for community-based water supply
lending for large scale water supply investments.
order to meet the Governments targets. The funding gap and
water to prevent future water crises in remote, dry areas and
and water supply for low-income communities such as WSSLIC/
areas with water scarcity.
PAMSIMAS. To reach the MDG water target, the Government estimates
Between 1998 and 2008 the proportion of Indonesias urban
quantified in the Roadmap. The current GOI strategy to achieve
that a total of Rp. 65.25 trillion will be needed between 2011 and 2014,
population served by piped water decreased from 36 percent to
the water MDG target relies heavily on local government
leaving a probable funding gap in the amount of Rp. 36.76 trillion.
only 31 percent. To reach the water Millennium Development Goal
investment, but the amount of the central governments
(MDG) target, local governments have to increase piped water
stimulus budget and its scope for intervention are limited.
Under the Water Resources Law 7 of 2004, the responsibility

for providing water services rests with the local government.
the annual sector investment from all resources have been
Considering the weak fiscal capacity of most local governments,
The Directorate General Cipta Karya, working jointly with the World
coverage in urban areas to 55 percent of the urban population
The current strategy also relies heavily on other non-central
the central government needs to stimulate local governments
Bank team, has prepared and developed this Roadmap for Water
by the end of 2014. The government has launched a national
government sources such as Public Private Partnerships (PPP),
through targeted incentives to provide an adequate stock of
Investment, 2011-2014. This important document proceeds from an
program to add more than 10 million (mainly piped) new water
internal cash generation, and revolving funds.
infrastructure to meet national development targets for urban
assessment of the problems and issues to identification of activities
connections from 2010 to 2015. To achieve this ambitious
and rural areas. So ,far, there has been satisfactory progress in
and funding sources needed to reach the water MDG. This is the first
program in an orderly manner, an investment plan or roadmap
Although there has been recent progress, much remains to
rural areas, but in urban areas, policies must confront the weak
time such a document has been prepared. It will be used for policy
is required. For this reason, in mid 2010, the Directorate General
be done to address the investment absorption capacity of
capacity of the PDAM and a low sense of responsibility for water
guidance by the government, particularly Directorate General of Cipta
of Cipta Karya (DGCK), Ministry of Public Works, asked the World
the sector and the ability of service providers to sustain
supply in most local governments.
Karya of the Ministry of Public Works, as well as by related ministries,
Bank to provide technical assistance to prepare a national water
and maintain the new and existing infrastructure. Estimates
government agencies, and donor agencies.
supply roadmap that will help guide the government in reaching
of actual central government and local government/PDAM
the MDG target. The objective of the assistance is to produce and
expenditure for water in 2009 and 2010 were about Rp 2.5 trillion
disseminate a national roadmap for investment from government
(about USD280 million) per year, still a small fraction of the
as well as multilateral, bilateral, and private sector institutions
investment levels needed to meet Indonesias water MDG target.
in water supply projects during the period from 2011 to 2015.
In addition, PDAMs and other service providers may not be able

to absorb and use increased funding without timely technical
A grant was provided by the Water Partnership Program (WPP)
assistance and the enabling activities described in this roadmap.
to support this technical assistance including a (i) review of

data and documents on national policy statements; and (ii)
The World Bank is honored to work in partnership with the
review of current and planned water supply investments in
Government of Indonesia as it confronts the formidable challenges
the next 3-5 years. These tasks included interviewing officers
of increasing access to sustainable sources of safe water. We
in concerned departments regarding issues, priorities, and
hope that this Roadmap for Water Investments 2011-2014 will
lessons learned to date. The findings were discussed in a
prove useful to decision makers in the national government as
workshop held on June 1, 2011 and attended by stakeholders in
well as in local governments.
Jakarta, February 2012
Jakarta, February 2012
Director General of human settlements (Cipta Karya)
Sector Manager
Ministry of Public Works
Infrastructure, Environment, Rural and Social Development

The World Bank Office, Jakarta
Ir. Budi Yuwono, Dipl. SE
Franz Drees-Gross
II
I.
ACKNOWLEDGEMENTS
III.
EXECUTIVE SUMMARY
The period 2009-2015 was intended to mark a transition
Directorate General Cipta Karya has a strategy for enabling
from predominantly centrally-funded to predominantly
access to water for 41 million additional people in urban
locally-funded local water infrastructure programs. During
areas, and 15 million people in rural areas, totaling 56
this period, the Government of Indonesia is undertaking
million people. The total amount required for water supply
the largest investment program in water supply in the last
investment for the period 2011-1014 is estimated at Rp
20 years to reach the Millennium Development Goal for
65 trillion, and a scenario is proposed to fill the potential
increasing access to a sustainable source of safe water
central and local government investment gap of around Rp
by 2015. But as of 2011, local government funding of
36 trillion. With the total expenditure of only about Rp 2.5
urban water infrastructure programs still lags well behind
trillion in 2008 and 2009, the investment levels need to
annual targets (funding targets as well as coverage), and
be substantially higher. Increased in investment requires
recent investment in the urban water sector has not kept
substantial increase in technical capacity, as to ensure
pace with population growth or depreciation. There has
that higher absorption capacity will also be maintained.
been more success in the rural water sector where central
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.

government-stimulated community-based programs
A recommended five programming principles underlie
continue to proliferate and reach more beneficiaries.
the proposed Investment Roadmap, which also takes

into account the strategy of Directorate General Cipta
In addition to the lack of sufficient expenditure, mainly
Karya (March and October 2011). It includes efficiency
in urban areas, water sector development is further
improvements for the existing systems in the urban areas,
challenged by a lack of local government sense of
access to new funding sources, grants for increasing
ownership and good governance, low level of access to
access to new sources of finance, and scaling up of
water on an equitable basis, lack of inter-departmental
community-based programs in rural areas, such as
coordination, weak PDAM management, and limited
PAMSIMAS (community-based water and sanitation). These
availability and increased pollution of water resources.
recommended programming principles are: (i) attracting
Failure to increase water supply investment before 2015
significant local government financing; (ii) funding the
may result in a failure to meet the MDG water target.
most reliable and rapid access-enhancing activities;

(iii) use of idle capacity; (iv) open access to all funding
A new regulatory framework was put in place in 2009
sources for all qualified local governments; and (v)
and 2010 to provide access to new and large sources of
improved existing monitoring system.
investment funds for local governments. Among the new

regulations are (i) MOF decree 120/2008 for PDAM debt
The main sources of funds over the next three years are
restructuring, (ii) Perpres 29/2009 for a partial guarantee
also identified. These include the existing schemes from
and interest subsidy for loans from commercial banks, (iii)
central government funding support (APBN central
Perpres 13/2010 to strengthen partnerships with the private
government funds), access to credit from commercial
sector, and (iv) Perpres 78/2010 to provide a guarantee fund
banks and from the private sector (through the PPP).
mechanism for viable PPP schemes. These new financing
New possible sources of funds have also been identified
instruments that have already been in place need to be
which include the financing facilities such as Indonesia
monitored closely if the combined impact of these measures
Infrastructure Funding Facility (IIFF) and Indonesia
is yielding increase in investment. Otherwise, the strategy
Investment Agency (PIP), Corporate Social Responsibility
needs to be re-analyzed and adjusted.
(CSR) from the private sector as well as the Water and

Sanitation Funding Facility which is under preparation.
The Government has, under RPJMN or the Medium Term
The latter is a Facility that will allow pooling of funds from
National Development Plan, laid out policies to increase
bilateral and multilateral agencies which could support
water coverage and quality, and set the targets for the
acceleration of water supply investments in both urban
2010-2014 planning period. In support of the RPJMN, the
and rural areas to expand coverage and improve services.
IV
II.
VII
TABLE OF CONTENTS
TABLES
FIGURES
ACRONYMS AND ABBREVIATIONS
CHAPTER 1
> INTRODUCTION
VIII
IX
X
01
> EXISTING CONDITION

Current Status
2.1.1
The Period of Transition
2.1.2 Access to Water Supply for reaching MDG
2.1.3 Institutional and Operational Aspects
2.1.4 Community-based Water Supply System
2.2
Government Policies and Targets in the Water Sector
2.2.1
Present Policies
2.2.2
Present Central Government Targets
2.2.3
POLICY IMPLEMENTATION AT LOCAL GOVERNMENT LEVEL
2.2.4
WATER SELF-PROVISION
05
06
06
07
10
14
14
14
16
18
18
CHALLENGES
Challenges at the Central Government Level
3.2
The Water Governance Challenge at the Local Level
3.3
Environmental Challenges
3.4
Risk of Not Meeting Access Targets
25
26
26
27
28
ASSESSMENT OF ISSUES AND PROPOSED ACTIONS

Issues on Service Coverage
4.1.1 Urban Water Supply
4.1.2 Community-based Water Supply
4.2
Issues on Institutions and Governance
4.3
Issues on Funding
4.3.1 Funds Mobilization for PDAM
4.3.2 Central Government Funding Support
31
32
32
32
33
34
34
35
PROPOSED PROGRAMS AND FUNDING SOURCES

5.1
Programming Principles
5.2
Proposed programs and activities
5.3
Identification of Funding Sources
39
40
42
43
ROADMAP FOR WATER SUPPLY INVESTMENT

Recommended Technical Assistance and

Investment Packages
6.2
PROPOSED FLOW OF ACTIVITIES
49
50
CHAPTER 2
2.1

CHAPTER 3 >
3.1
CHAPTER 4 >
4.1
CHAPTER 5 >
CHAPTER 6 >
6.1
52
VI
IV.
TABLES
TABLE 1
TABLE 2
TABLE 3
TABLE
TABLE
TABLE
TABLE
TABLE
TABLE
4
5
6
7
8
9
IX
VI.
FIGURES
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)
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
FIGURE
1
2
3
4
5
6
7
8
9
>
>
>
>
>
>
>
>
>
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)
VII.
ANNEXES
ANNEX
ANNEX
ANNEX
ANNEX
1
2
3
4
>
>
>
>
PDAM Database (p. 56)

PDAM with Debt Restructuring Program, 2009 (p. 57)
PDAM Piped Connection, 2009 (p. 58)
Map Showing PDAM Pipe Connection Distribution by Region, 2009 (p. 62)
VIII
V.
XI
ACRONYMS & ABBREVIATIONS
ADB
Asian Development Bank
APBD Local Government Budget
APBN
National Budget
AusAID
Australian Bilateral Assistance
BAPPENAS
National Development Planning Agency
BPD
Regional Bank
BPP SPAM
Support Agency for Water Supply Development
BPS
Central Bureau of Statistics
BPSAB
Badan Pengelola Sarana Air Bersih (Water Supply CBO)
BPAM
Badan Pengelola Air Minum (transitional body of water supply operator)
CBO
Community Based Organization
CSR
Corporate Social Responsibility
DAK
Special Allocation Funds
DAU
General Allocation Funds
DDUB Local Government Funds for Joint Projects
DGCK
Directorate General Cipta Karya
DGWR/SDA
Directorate General Water Resources
HWTS
Household Water Treatment System
IIGF
Indonesia Infrastructure Guarantee Fund
IKK
Capital of Sub District
IndII
Indonesia Infrastructure Initiative (AusAID)
JICA
Japan International Cooperation Agency
Kabupaten District
Kota City
Keppres
Presidential decree
LG Local Government
MBR Low Income Community
MDG
Millennium Development Goal
NAWASIS
National Water and Sanitation Information System
NRW
Non Revenue Water
OBA
Output Based Aid
PAMSIMAS
Water Supply and Sanitation for Low Income Communities/WSSLIC
PERPAMSI
Association of Indonesian Water Utilities
PDAM Local Government Owned Water Utility
Perpres
Presidential decree
PIP
Indonesia Investment Agency
PMK
Ministry of Finance decree
PP
Government Regulation
PPP
Public Private Partnership
PPSP
Program for Accelerated Development of Sanitation in Settlements
RPJMN
National Medium Term Development Plan
SANIMAS
Community Based Sanitation Program
SIDA
Swedish Development Assistance
SUSENAS
National Social Economy Survey
USAID
United States Agency for International Development
UWSSP
Urban Water Supply and Sanitation Project
WIRA
Water Investment Roadmap Assistance
WSFF
Water and Sanitation Funding Facility prepared through the Indonesia Water and
Sanitation Financing Program (IWSFP)
VIII.
01:
INTRODUCTION
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
03
of RPJMN and MDG goals through water sector

investment is a part of the national effort to reach the
goals in an orderly fashion.
0 4.
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.
02
01:
INTRODUCTION
CHAPTER one
06.
The flowchart below represents the
organization of the water investments Roadmap in a
simplified form.
ORGANIZ ATION ROADMAP FOR WATER SUPPLY
PEMDA
ANALYSIS
OF
PDAM
GOVERNANCE
RECOMMENDED
COURSE
OF ACTION
ISSUES
INSTITUTIONAL
CONCERNS
MDG TARGET
CURRENT CONDITION
7C
EXISTING PLANS
CONSTRAINTS
2015
FUNDING
CONCERNS
APBN/APBD
ANALYSIS
OF POTENTIAL &
RISKS
OTHERS
RECOMMENDED
COURSE
OF ACTION
02:
EXISTING CONDITION
05
04
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.
07
9.
Following the Asian Financial Crisis of 199798, 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 communitymanaged water supply.
2.1.2 Access to Water Supply for reaching MDG 1
10.
National access
The period 2009-2015 is a time of transition

from systems and procedures suited for centrallyfunded 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.
TABLE 1: BREAKDOWN OF PERCENT OF POPUL ATION BY SELF-PROVISION AND WATER PURCHASE
PERSENTAGE OF HOUSEHOLD
URBAN
URBAN
NATIONAL
Buy water
Do not buy water
Total
47.35
52.65
100
47.35
52.65
100
30.90
69.10
100
SOURCE: SUSENAS CORE DATA 2009
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.
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.
11.
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
1 3 . 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
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.
06
02:
EXISTING CONDITION
CHAPTER TWO
09
Percent with access to safe water
70
URBAN
OTHER 18%
BOTTELED 13%
60
RURAL
UNPROTECTED WELL 8%
PIPED 15%
50
NATIONAL
40
PROTECTED WELL 28%

PUMP 18%
30
20
10
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
SE LL WATER AT A HIGHER UNIT PR ICE
I N RUR AL AR EAS , S TR EAMS AR E COMMONLY U SED AS SO U RCES

FO R D R INKING WATER , AND IN MANY AR EAS TH E WATER I S STI LL
O F GOOD QUALITY
2006
2007
2008
2009
PERCENT ACCESS
16.
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.
G E T THEIR WATER FR OM VEND OR S WHO M U ST T RA NSPO RT A ND
2005
SOURCE: ROADMAP TO ACCELERATE ACHIEVEMENT OF MDGS 2010, BAPPENAS
SOURCE: SUSENAS CORE DATA JULY 2009
U R B AN D WELLER S NOT CONNECTED TO PIPED SYSTEM U SU ALLY
2004
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.
U RBA N DW E LL E RS O F T E N RE LY O N P U BL I C WAT E R SU P P L I E S
W HI C H A RE P RO NE T O C O NTA M I NAT I O N
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.
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
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
17.
08
FIGURE 2: ACCESS TO SOURCES OF SAFE WATER 1993-2009
FIGURE 1: PRIMARY SOURCES OF DRINKING WATER NATIONWIDE
Households' Primary Source of Water
Primary Source Urban Water by Expenditure Decile

100
12,000,000
URBAN
10,000,000
RURAL
OTHER
90
80
UNPROTECTED
WELL
70
8,000,000
60
PROTECTED
WELL
50
6,000,000
PUMP
40
4,000,000
30
PIPED
20
2,000,000
10
BOTTLED
PIPED
PUMP
PROTECTED WELL
UNPROTECTED WELL
OTHER
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
Bank 2 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 20002015 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
BOTTLED
PERCENT
Households
RICHEST
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.
2 0.
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
Wo rl d B an k , Office of t h e Ch ief Econ omist - Pov e rty Re duction and G row th: Virtuous and Vicious Circle s. Lati n A m e ri c a
N e e d s t o Cut Povert y t o B oost Growt h , 2 00 6
POOREST
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.
2 3 . Local
government and PDAM funding is often

not coordinated. Local governments may operate
small water supply facilities in areas that are not
11
10
FIGURE 4: URBAN POPUL ATION ACCESS TO VARIOUS WATER SOURCES BY EXPENDITURE DECILE
FIGURE 3: HOUSEHOLDS PRIMARY SOURCE OF DRINKING WATER IN URBAN AND RURAL AREAS
13
FIGURE 6: PDAMS BY NUMBER OF CONNECTIONS IN 2009

197
PDAM by Number of Connections
2 5 . Local
24 . Local
governments and PDAMs have invested in

water service provision to a modest extent, but their
investment has not kept pace with population growth
and depreciation. Before decentralization, most
HEALTHY
200
UNHEALTHY
150
SICK
100
50
SOURCE: BPP SPAM, MINISTRY OF PUBLIC WORKS
2006
0
<1
0,
00
0
01
-2
0,
00
0
,0
10
01
-3
0,
00
0
,0
20
01
-4
0,
00
0
,0
30
01
-5
0,
00
0
,0
40
01
-6
0,
00
0
,0
50
01
-7
0,
00
0
,0
,0
01
-8
60
80
,0
01
-9
0,
00
0
00
0,
,0
00
01
90
24
14
SOURCE: MINISTRY OF PUBLIC WORKS DATA FROM PROVINCES 2009
The proportion of healthy PDAMs has been

increasing. Every year, BPP SPAM monitors the
technical and financial health of about 350 PDAMs
based on the results of annual audit data. The
data is weighted with 55 percent for financial data
such as profitability, 30 percent for management
data such as number of employees per 1,000
connections, and 15 percent for technical indicators
such as the amount of non-revenue water. The
number of sick PDAMs has decreased steadily while
the number of healthy PDAMs has increased in
recent years as shown in Figure 5.
250
2005
26.
Reduction in Sick PDAMs
2004
,0
PDAMs operational and institutional aspects
FIGURE 5: GROWTH OF HEALTHY PDAMS
Numbers
of PDAMs
-1
>1
controlled by the PDAM, and if they provide funding for

the PDAM, they use their own budget funds, usually
through their city Public Works Department which
designs and procures infrastructure, often without
prior consultation with the PDAM that ultimately must
maintain and operate it. The local government budget
process does not accommodate multi-year projects,
and many local governments are still reluctant to
spend their funds on water projects.
00
00
70
12
00
M A I NTAIN THEIR AS S ETS PR OPER LY
88
,0
P R OPER TAR IFFS WILL ENAB LE THE PD AMS AT LEAST T O
governments are both the owners and

tariff regulators of PDAMs, and guidance from the
central government requires that tariffs should be
cost recovering. Yet, largely for political reasons,
many local governments are reluctant to approve
tariff increases or they tend to defer tariff decisions
until after an election year has passed.
2007
2008
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 costrecovering 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
12
investment in the municipal water sector originated

from the central budget and was programmed through
central government agencies. After decentralization,
local governments have accumulated substantial
savings on deposit with regional development banks
while investment remains low.
15
2.2.1 Present Policies

33.
SE CUR ING CLEAN WATER R ES OUR CES IS IMPO RTANT I N PRO VI DI NG

R AW WATER FOR GR OWING UR B AN WATER DEM A NDS
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.
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
3 4.
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.
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 institutionallybased 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 waterstressed areas will receive special priority in order
to ensure balanced development.
38.
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.
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
14
2.2 Government Policies and Targets in

the Water Sector
17
4 2.
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

4 3.
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.
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
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
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.
46 .
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.
16
will provide an interest rate subsidy of up to five

percentage points through a guarantee mechanism.
19
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
18
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.
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 householdlevel 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.
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.
NO
PROGRAM
FUNDING
SOURCE
PROGRAM
DESCRIPTION
TARGET
2011-2014
BUDGET
ESTIMATE
2011
TARGET
2012
EST'D
BUDGET
TARGET
2013
EST'D
BUDGET
TARGET
2014
EST'D
BUDGET
TARGET
EST'D
BUDGET
URBAN WATER SUPPLY

1
WATER RESOURCE SUPPORT
APBN
Raw water needs
135 m 3/s
Construction of intake and raw
40 m 3/s
7.00
4.00 m 3/s
0.80
12.00 m 3/s
2.07
14.29 m 3/s
2.50
9.71 m 3/s
1.63
Additional production unit
45.33 m 3/s
5.47
4.53 m 3/s
1.22
13.6 m 3/s
1.64
13.6 m 3/s
1.64
13.6 m 3/s
0.97
13.50 m 3/s
40.5 m 3/s
40.5 m 3/s
40.5 m 3/s
water transmission
2
IMPROVEMENT OF EXISTING WS
APBD,PPP
SYSTEM IN URBAN/IKK
national banks
Large/metro cities, 75 cities
APBD/PDAM/banks/
Additional distribution network
81,300 km
Medium-size cities,288 cities
PPP (60%)
Additional HC
5.42 mln unit
24.00
0.34 mln unit
1.50
1.38 mln unit
6.10
1.63 mln unit
7.20
2.08 mln unit
9.20
Small cities, 156 cities
APBN (40%)
NEW IKK
APBN PU
New production unit
12.9 m 3/s
3.35
5.77
1.50
1.77
0.46
3.08
0.80
2.28
0.59
1136 IKK
APBN/PDAM/banks/
New distribution network
13,619 km
12.95
1,451 km
1.38
3,218 km
3.06
2,661 km
2.53
6,289 km
5.98
PPP (60%)
New HC
2.48 mln unit
Water quality surveillance
449 unit
5,081 km
20,664 km
0.26 mln unit
24,390 km
0.59 mln unit
31,165 km
0.48 mln unit
1.15 mln unit
APBN (40%)
4
IMPROVING QUALITY OF WATER
APBN MOH
0.104
0.387
449 unit
0.09
449 unit
0.094
449 unit
0.099
449 unit
APBD
0.001
APBN MOH
Support on water quality
APBD
improvement, cap bldg,
96 package
0.004
63 package
0.001
73 package
0.001
83 package
0.001
96 package
advocacy, socialization
5
NON PIPED SCHEME
Self-financing
Individual/commmunal
4 mln
4 mln
1.2 mln
1.2 mln
1.2 mln
non-piped scheme
families
families
families
families
families
(20%) of urban population
TOTAL URBAN AREAS
SOURCE: MINISTRY OF PUBLIC WORKS DATA
53.16
6.49
13.43
14.77
18.48
21
20
TABLE 2: CURRENT URBAN AND RURAL WATER PROGRAM TO 2014
23
22
TABLE 2: TABLE 2 CURRENT URBAN AND RURAL WATER PROGRAM TO 2014 (CONTINUED)
NO
PROGRAM
FUNDING
SOURCE
PROGRAM
DESCRIPTION
TARGET
2011-2014
BUDGET
ESTIMATE
2011
2012
2013
2014
TARGET
EST'D
BUDGET
TARGET
EST'D
BUDGET
TARGET
EST'D
BUDGET
TARGET
EST'D
BUDGET
1,250 village
0.30
1,250 village
0.60
1,250 village
0.60
1,250 village
0.60
RURAL WATER SUPPLY

1
PAMSIMAS
APBN PU
Construction of comm-based
5,000 village
rural WS (raw water
7,500 l/s
2.10
2,143 l/s
1,071 l/s
2,143 l/s
2,143 l/s
relatively easy)
2
WATER SCARCITY
Construction of rural WS with
1,303 village
water scarcity/need high-tech
1,303 l/s
Remote areas: construction of
78 village
0.12
13 village
0.08
17 village
0.01
21 village
0.01
27 village
0.02
304 village
0.31
68 village
0.07
77 village
0.08
79 village
0.08
80 village
0.08
50 village
0.04
17 village
0.02
10 village
0.01
10 village
0.01
13 village
0.01
Construction of rural WS with
15 village
0.075
1 village
0.005
4 village
0.02
5 village
0.025
5 village
0.025
difficult source/need high-tech
75,000 l/day
APBN ESDM
Pumping gound water
200 point
0.113
200 point
0.113
DAK WS/
Construction of non-piped rural
36,000 village
6.00
2,400 village
0.40
11,160 village
1.86
11,220 village
1.87
11,220 village
1.87
Self-financing
WS for individual/communal
APBN MOH
Improvement of quality of non-
36,000 village
2.00
2,400 village
0.139
1,160 village
0.65
11,220 village
0.65
11,220 village
0.65
DAK
piped scheme surveillance,
36,000 village
0.36
2,400 village
0.02
11,160 village
0.111
11,220 village
0.112
11,220 village
0.112
APBN PU
APBN PDT
0.98
186 village
0.14
186 l/s
372 village
0.28
372 village
0.28
372 l/s
372 l/s
372 village
0.28
372 l/s
rural WS with relatively easy

water source
APBN PDT
Border island, post conflicts:

construction of rural WS with
difficult source/need high-tech
APBN PDT
Remote areas: construction of

rural WS with relatively easy
water source
APBN RISTEK
NON PIPED SCHEME
point
25,000 l/day
25,000 l/day
20,000 l/day
5,000 l/day
point
point
HWTS stimulus
APBN MOH
Changing hygienic behavior
APBD
water scarcity and water-borne

disease areas
TOTAL RURAL AREAS
12.10
1.29
3.62
3.64
3.65
TOTAL urban and rural areas
65.26
7.78
17.05
18.41
22.12
**
31.62
4.43
8.05
9.06
10.17
DAK
6.00
0.40
1.86
1.87
1.87
APBD/pdam/banks/ppp
27.64
2.95
7.14
7.48
10.08
apbn urban and rural
NOTE: * the DGCK figure is 21.26

** the DGCK figure is 9.31
SOURCE: MINISTRY OF PUBLIC WORKS DATA
03:
CHALLENGES
25
24
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
27
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.
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, consumeroriented 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.
3.3 Environmental Challenges
higher tariffs linked to service improvements.

This common interest can be accommodated in
an activity to help communities establish a PDAMconsumer 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.
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.
57.
60.
Funding Challenges
55.
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
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.
In 2010 the Department of Public Works

planned that 60 million new people 4 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
56.
O f wh i c h , a bo u t 65 p e rc e n t a re l o c a t e d on t h e m a i n i s l a n d s o f J a v a a n d Ba l i , 24 pe r c e n t i n S u m a t e r a , 7 pe r c e n t i n Ka l i -
m a n t a n a n d Su l a we s i , a n d 4 p e rc e n t on t h e re m a i n i n g i s l a n d s . I n J a v a , 7 p e rc e n t l i ve i n Ja k a r t a a l o n e , a n d 2 2 pe r c e n t , 1 4
p e rc e n t a n d 13 p e rc e n t l i v e i n We s t J a v a / Ba n t e n , C e n t ra l J a v a a n d E a s t J a v a re s pe c t i ve l y . T h e di st r i b u t i o n o f pi pe d c o n n e c t i on s by p ro v i n c e i s s h o wn i n A n n e x 4. ( So u rc e : Te a m a s s e s s m e n t of P DA M d a ta b a se ) .
26
03:
CHALLENGES
CHAPTER THREE
29
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.
The Central Government incentive

programs must emphasize the
importance of good performance
to qualify for access to further
support in the next year.
3.4 Risk of Not Meeting Access Targets
TABLE 3: GAP IN FUNDING FOR WATER INVESTMENT BY CENTRAL AND LOCAL GOVERNMENT, 2011-2014

(IN RP TRILLION)
FUNDING
SOURCE
INVESTMENT
NEEDED*
FUNDING
CAPABILITY*
Potential
Gap
NOTES FOR
ACCELERATED PROGRAM
DG Cipta Karya
21.21
14.97
6.24
Must obtain from outside

funding sources
DG Water Resources
7.00
3.88
3.12
Increase allocation for SDA
Other central government
3.40
2.13
1.28
Potential to access health

funds for water
DAK (water)
6.00
2.15
3.85
Need to increase spending of

DAK water
LG/PDAM
27.64
5.37
22.27
Must find other outside

funding sources**
TOTAL
65.26
28.49
36.76
NOTE:

*BASED ON INFORMATION PROVIDED BY DGCK

**THIS POTENTIAL GAP WILL BE FURTHER DISCUSSED, AND RECOMMENDATIONS PROPOSED IN CHAPTER 5.
FIGURE 7: FUNDING GAP FOR WATER INVESTMENT BY NATIONAL AND LOCAL GOVERNMENT
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.
14.97
DGCK
REAL,
RP TRILLION
6.24
FUNDING GAP,
RP TRILLION
3.88
DGWR
3.12
2.13
Other Ministries
1.28
2.15
DAK
3.85
5.37
LG/PDAM
22.27
28.49
TOTAL
SOURCE: MINISTRY OF PUBLIC WORKS DATA FROM PROVINCES 2009
36.76
28
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).
04:
ASSESSMENT OF ISSUES & PROPOSED ACTIONS
31
30
33
PROPOSED ACTIONS
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.
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
U RBA N DW E LL E RS O F T E N RE LY O N P U BL I C WAT E R SU P P L I E S
68.
Regarding water quality, the Ministry of

Health conducts a program of water quality
capacity-building and monitoring in urban areas.
This program needs to be strengthened to ensure
that the drinking water quality at the consumers
tap is maintained. For urban self-provision,
assistance should be provided, mainly through
distribution of guidelines and practical handbooks
on appropriate, low-cost technology household
water treatment system (HWTS), where the
Ministry of Health takes the lead.
4.1.2 Community-based Water Supply

69.
Community-based water development
programs such as PAMSIMAS are based on the
national community-based strategy of 2003. The
development of a standard operating procedure
and almost a decade of work on these programs
reduce the risk that rural access targets will not
be met. The main source of funds for the largest
of these programs, PAMSIMAS, is the national
development budget (70 percent of costs), with
funding provided from the World Bank and AusAID.
PAMSIMAS needs to be expanded and modified to
attract more than the current local government
contribution (about 10 percent) and additional
W HI C H A RE P RO NE T O C O NTA M I NAT I O N
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-
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.
32
04:
ASSESSMENT OF ISSUES &
CHAPTER FOUR
35
Making use of new initiatives on funding

instruments
4.3.1 Funds Mobilization for PDAM

77.
Improving PDAM financial management

74 .
Improving PDAM financial management has
been the governments concern for decades.
The debt rescheduling program was introduced
after the 1998 financial crisis. Some PDAMs
are having difficulty adhering to the terms of
debt rescheduling. In order to qualify for debt
rescheduling, PDAMs must have business plans
with NRW targets, fit and proper test provisions,
greater local government support, and cost
recovering tariffs. Debt rescheduling requires that
the amount of interest and penalties that have
been waived must be spent by the local government
on improvement of piped water services. Technical
assistance will be needed to help them return
to the development path laid down by the debt
rescheduling plan.
75.
One of the easiest first steps to increase PDAM
profitability is to sell more water and reduce idle
capacity. The Directorate General Cipta Karya and
BPP SPAM should maintain and continue programs of
training and capacity-building for PDAMs.
76.
In early 2009 the Ministry of Home Affairs

released a circular letter specifying that PDAMs
that had not yet covered 80 percent of the
population with piped water should not pay out
dividends to the government as the owner, and
they announced their intention to send letters to
mayors of cities that did not follow this advice.
Letters and follow-up enforcement should be
continued to ensure that local governments
fulfill their responsibility to provide adequate
and affordable water services. Government of
Indonesia policies must provide incentives without
encouraging local governments to wait for central
government handouts.
Some existing and new mechanisms are

expected to draw out greater local government
investment. Some PDAMs have qualified for
Perpres 29 funding, and continuation of technical
assistance should result in the initiation of more
PDAMs to private bank financing. To date, only the
most creditworthy PDAMs with strong institutional
capacity can apply for Perpres 29 commercial credit
support, and applications still require considerable
high-level consultant input.
78.
Subsidiary loan agreements (SLA) were the
predominate form of water supply investment
financing in the 1980s and 1990s, and they still
provide the lowest interest rate with a long
grace period and the longest tenor of all existing
instruments. Preparation requires a long lead time
but the ongoing UWSSP project is available for local
governments and PDAMs that want to fund large
infrastructure projects that are beyond the scope
or capability of commercial banks.
79.
Other forms of financing that have been

explored, and worth further assessment, are
water funds, corporate social responsibility
funds, municipal bonds, and financing through
insurance companies and pension funds. Existing
funds include the Ministry of Finance and SMI
(persero)-owned non-bank intermediary Indonesia
Infrastructure Finance Facility for long-term
lending to individual projects. IIFF is just now being
staffed, and the PIP, the longer term investment
fund, is operated by the Ministry of Finance. Other
initiatives include provision of guarantee funds
for feasible PPP schemes from IIGF. A Water and
Sanitation Financing Facility (WSFF) that would
pool multilateral and other funds for water and
sanitation financing is under preparation by the
World Bank and the Government of Indonesia. It is
expected to be operational in early 2013.
80.
It may be possible to quickly pool corporate
social responsibility funds together with small
grant funds from bilateral donors to channel
corporate contributions to increase access to water,
especially to the poor, in ways that are attractive to
the donors. Such a pooling operation would have to
be created quickly and efficiently, probably following
the model of an existing organization.
81.
The Government of Indonesia is committed

to improving the investment climate to enable
increased participation of the private sector and
the community through public private partnerships
and cooperation with the private sector. The
Ministry of Public Works and Ministry of Home
Affairs provide supervision and support to local
governments who are responsible for arrangement
of private sector participation in water supply.
Support is needed because most local governments
do not have previous experience in creating,
negotiating, and managing bank loans and private
sector contracts, and many potential private
sector partners will not accept local government
guarantees. The Ministry of Finance regulations
for private bank funding are aimed at opening the
door for private bank financing when PDAMs have
developed a credible financial record.
Readiness for implementation
82.
Readiness criteria are to be applied before

the central government will provide co-funding
through the DDUB program. The readiness criteria
require (i) there is a detailed activity plan, (ii)
performance criteria is commensurate with the
master plan, (iii) land is available, (iv) social
and environmental issues are addressed, (v)
well-developed detailed engineering design is
completed, (vi) financial evaluation of the viability
of investments, (vii) availability of local government
contribution, (viii) readiness of an activity
implementation unit, and (ix) readiness to set a
reasonable water tariff. Implementation of minimum
service (investment) standards as part of the

local action plan will help ensure adequate local
government investment.
4.3.2 Central Government Funding Support

83.
The rate of expansion of access to water in

urban areas depends largely on increased provision
of local government funds. However, central
government still can provide funding for specific
communities such as those in low-income areas,
new un-served areas, water-stressed areas, and
strategic areas, in addition to supporting rural
water supply schemes through community-based
approach. Although many local governments are
reported to have substantial savings in regional
development banks 5, local governments have
spent a limited amount on water infrastructure,
particularly in urban areas, further constraining
progress toward the urban piped water target.
84.
The implementation of ongoing programs

is progressing but at a rather slow pace. Central
governments commitment to support expansion of
access to water for the poor is still high. Central
government funding currently provides grants for
the Water Hibah program, PAMSIMAS, 100 percent
of new IKK production facilities, and 40 percent of
distribution funding in urban and new IKK areas,
based on the estimate that about 40 percent of
the ultimate beneficiaries in these areas will be
the urban poor. Some local governments such
as in Medan and Jambi have been successful
in engaging private sector investment in bulk
production activities, and the Government provides
support for negotiations and technical studies. The
government should continue its programs involving
the private sector in developing large bulk water
projects such as for Umbulan and Jatiluhur.
85.
Nevertheless, the main engine of

development of water supply infrastructure
remains central government investment incentives.
A c c ord i n g t o on e s t u d y, a t t h e e n d of 2005, l o c a l gov e rn m e n t s h a d re s e rv e s o f R p 4 1 . 7 t r i l l i o n o r 2 1 . 5 pe r c e n t o f t h e i r t o t a l
e xp e n d i t u re s i n t h a t ye a r, a n d a t t h e e n d of 2006 t h e i r re s e rv e s we re e s t i m a t e d a t R p. 9 5 t r i l l i o n .
34
4.3 Issues on Funding
37
86.
The Government is expected to take steps

to ensure that the new infrastructure will be
maintained by introducing incentive mechanisms.
The urgency of reaching MDG physical targets
often causes neglect of incentives for the
establishment of transparency and follow-up
systems such as public budget hearings. As a
result, local governments are often unable to
respond to citizens needs. One incentive for
more sustainability may be found in the readiness
criteria requiring (i) designation of an institution
that will perform post-construction management,
and (ii) designation of a percentage of total costs
for maintenance and operations of infrastructure
built for poverty alleviation.
The improved monitoring and evaluation

system will provide key input for
determining actual progress and need for
allocation of additional resources.
One incentive for sustainability may be
found in the readiness criteria requiring
(i) designation of an institution that will
perform post-construction management,
and (ii) designation of a percentage
of total costs for maintenance and
operations of infrastructure.
36
Currently, all government-driven urban programs

are essentially piped water programs and most
central government-driven rural programs are
community-based programs. The major rural
community-based programs monitor the number
of beneficiaries, but they tend to count all systems
because there is not a need to distinguish between
piped and non-piped rural programs. Maintenance
of a roadmap until the end of 2014 will require an
up-to-date information system and a strategy to
reduce shortfalls in funding. For this reason, the
improved monitoring and evaluation system will
provide key input for determining actual progress
and the need for allocation of additional resources.
05:
ASSESSMENT OF ISSUES & PROPOSED ACTIONS
39
38
41
FUNDING SOURCES
5.1 Programming Principles
87.
The proposed programming approach
supports the broad strategy articulated by the
Ministry of Public Works in October 2011, as shown
in Table 2. It is clear from previous discussions that
the great risk to attainment of the MDG targets is
the inability to invest sufficient local government or
local government-acquired financing such as DAK,
PPP, local banks and private sector bank financing.
In view of the short time remaining to 2014, it is
proposed that the government adopts the program
principles as elaborated below.
PROGRAMMING PRINCIPLES:
1. ATTRACT LOCAL GOVERNMENT FINANCING
2. PROVIDE FUNDING FOR EXISTING RAPID
ACCESS-ENHANCING ACTIVITIES
3. PDAM IDLE CAPACITY SHOULD BE USED UP FIRST
4. OPEN ACCESS TO ALL FUNDING SOURCES FOR ALL
QUALIFIED LOCAL GOVERNMENTS
5. IMPROVE EXISTING MONITORING AND
EVALUATION SYSTEM
PROGRAM PRINCIPLE 1: Attract as much significant

local government financing as possible
88.
It is prudent to scale up or upgrade existing

activities that have attracted significant local
government financing. Such activities would include
the Water Hibah which was oversubscribed in June
2011, and PAMSIMAS which brings out a reliable share of
local government contribution. In fact, experience with
SANIMAS and WSSLIC-2, have shown that it is possible
to structure an add-on program to PAMSIMAS to attract
provincial government contribution and significantly
more than 10 percent local government contribution,
thus reducing the cost to the central government.
PROGRAM PRINCIPLE 2: Provide funding for

existing rapid access-enhancing activities
PROGRAM PRINCIPLE 5: Improve the existing

monitoring and evaluation system
89.
92.
The only exception might be for special

areas and access for the urban poor. Should
an activity such as Water Hibah turn out to be
absorbed rapidly, that program can be scaled
up with unused funds from other programs,
whether they are urban or rural. The Government
of Indonesia is committed to an overall national
target of 68.87 percent of the national population
in 2015, so there should be flexibility in shifting
funding between urban and rural, plus or minus a
reasonable percentage. For instance, a PAMSIMAS
rural connection costs less than half of an urban
house connection. As monitoring indicates there
is a need to accelerate the program further,
resources may be diverted from urban to rural
programs.
PROGRAM PRINCIPLE 3: PDAM idle capacity should
be used up first
90.
New connections using idle capacity are the

cheapest form of new connections, so they should
be implemented as soon as possible. Programs
that use up idle capacity include Water Hibah
and Jakarta and Surabaya OBA. Idle capacity was
estimated in the most recent self-reported PDAM
data as being about 18+ percent of capacity, but
many observers feel the percentage is higher.
PROGRAM PRINCIPLE 4: Open access to all
funding sources for all qualified PDAMs/
local governments
9 1.
Due to the short period of time remaining
and shortage of funds for reaching MDGs by the
end of 2014, each funding source will be most
efficiently allocated if it is available to all qualified
PDAMs/local governments that demonstrate
P DA M s of t e n op e ra t e wa t e r t re a t m e n t a t a l e v e l f a r be l ow
t h e i r d e s i gn c a p a c i t y. P DA M s s h ou l d c o n s i d e r u s i n g u p i d l e
c a p a c i t y f i rs t be f ore c o n s t ru c t i n g a n e w p l a n t .
willingness and capability. Experience with Perpres

29 technical assistance has shown that the main
obstacle to success is lack of human resources
depth and expertise to propose and service loans.
Although it is clear that the larger PDAMs are the
best candidates for water Hibah and Perpres 29
financing, lack of reliable data from BPKP audits
and lack of data regarding the most critical success
factors (availability of clean water, technical
background of senior personnel, commitment of
local government and PDAMS, etc.) would make it
necessary to investigate candidacy for programs
on a case-by-case basis. Community-based water
and sanitation programs have demonstrated that
self-selection leads to the greatest success rate,
indicating that it is more efficient to inform PDAMs
of their financing choices and choose from among
their proposals. It is possible for DGCK to enlist
intermediary professional associations such as IATPI
and PERPAMSI to supplement DGCK informationsharing that is aimed first toward the larger PDAMs
that do not have arrears.
Improvement of the existing monitoring and

evaluation system will reduce improper use of DAK
funds and streamline the planning process in a
coordinated manner. Use of transfer funds, and
especially Water DAK funds, must be monitored in
a reliable and timely manner, and incentives and
disincentives should be used to employ 100 percent
of water DAK to national development. DAK funds
can be a significant source of funding to reach
MDGs, especially at a time when local governments
state that they do not have adequate resources
to meet their share of contributions. There is an
interdepartmental group studying reforms to DAK,
and this is the appropriate time to make reforms
that ensure that all water DAK funds contribute to
the national effort to reach water MDGs. There is an
ongoing loan program to provide incentives to local
governments to use DAK properly.
93.
Funds attracted from other sources should
be added to, rather than subtracted from, the DGCK
annual budget. Allowing the addition of outside
funds encourages acquisition of new funds, helps
retire the funding shortfall, and acknowledges that
there is a risk of not meeting MDG targets. In the
unlikely case where infrastructure targets have been
exceeded, it is always possible to reduce the next
years infrastructure budget.
94.
Health funds must comprise 10 percent of

each local government budget. They may be used
for water supply as a part of preventive health,
especially in areas where the health budget
cannot be well spent for curative measures.
40
05:
PROPOSED PROGRAMS &
CHAPTER FIVE
43
5.2
Proposed Programs
and Activities
95.
The above programming principles are the
underlying principles upon which the proposed
programs and activities are developed. At the
same time, the programs and activities that
central government has formally launched as
presented in Table 2 are taken into consideration.
The proposed programs and activities can be
broken down into three main categories (i)
investment programs/activities, (ii) program

support technical assistance, and (iii) advisory
and monitoring system improvements.
Investment Programs/Activities
96.
Program Principle no. 1 promotes the increase
in local government financing. The proposed
investment program includes introduction of Water
Hibah Program in larger cities, and implementation of
PAMSIMAS with higher local government contribution.
Under Program Principle no. 2, the focus is on
provision of funding for existing rapid accessenhancing activities. The program includes expanding
Water Hibah to larger PDAMs to increase maximum
allowable Hibah connections, continue piped water
in IKK program, allow for additional PDAMs to the
existing UWSSP loan, and implementation of Perpres
29 for access to domestic loan, although the appetite
for these programs by PDAMs is still low. Program
TABLE 4: PROPOSED PROGRAM/ACTIVITIES

PRINCIPLE
CHALLENGE
Continue PAMSIMAS with higher LG contribution; Water
Attract Local
Lack LG interest,
Hibah introduced in larger cities
Government Financing
low fund level
Expand Water Hibah to larger PDAMs to increase
Fund existing
Urgency of reaching
maximum allowable hibah connections; continue piped
rapid-access activities
goal by end of 2014.
water, IKK; additional PDAMs to on-going UWSSP; Open
Use of new financing
access to domestic loan using Perpres 29
instrument (Perpres 29)

requires higher financial
sophistication in PDAMs
NRW Hibah; expansion of Water Hibah to saturation
Use up PDAM idle
point; OBA-type operation; stimulate short term,
capacity first
Shortage of funds
simple PPP schemes

Continue NAWASIS initiative, improve and simplify
Monitor use of
Need to use all of
the system
funds promptly
water DAK
Use of intermediary institutions for information sharing
Open access to all funding
Difficult to gather enough
and proposals from PDAMs, TA to introduce/ integrate
activities
information to select the
provincial, LG funds; TA for water CSR
best PDAMs for financing
5.3 Identification of Funding Sources
97.
The fourth program principle promotes open
access to all funding sources for all qualified PDAMs/
local governments. This needs significant program
support Technical Assistance. The proposed program
includes the use of intermediary institutions for
information sharing and proposals from PDAMs, and a
number of TAs to introduce/ integrate new sources of
water funds such as PIP and WSFF.
99.
Funding for water supply is a local
government responsibility. Although many local
governments have accumulated large cash
reserves, most local governments state that, after
budgeting for mandatory expenses such as staff
salaries, education, and health expenditures,
there are not sufficient funds left over from
locally-generated revenue (PAD) and annual
transfers from the central government (DAU) to
finance construction of new large-scale water
infrastructure treatment plants and distribution
networks. Thus, the central government has
provided incentives for local government to
borrow funds, such as the PDAM debt restructuring
program, the commercial credit support program,
and the PIP investment finance fund.
Advisory and Monitoring
100.
Program Support Technical Assistance
98.
PROGRAMS/ACTIVITIES
new funds such as PIP, WSFF; TA for increased
Principle no. 3 prioritizes the use of idle capacity of

the PDAMs, particularly because this activity needs
less funding but gains more results, provided that it is
properly implemented. The program includes initiating
NRW Hibah, expansion of Water Hibah to saturation
point, and stimulating short term, simple type PPP
such as outsourcing and contract management.
The fifth program principle promotes the

monitoring of use of funds transfer in a reliable and
timely manner. This is particularly important where
allocation and use of Water DAK funds will increase
in the future. The government has commenced a
monitoring and evaluation system under a national
NAWASIS monitoring and evaluation system.
This initiative needs to be continued with some
improvements. Table 4 below provides a summary
of the proposed programs and activities, based
on the program principles, and takes into account
existing government plans. The last column provides
a number of challenges for each proposed program
that needs to be addressed properly.
Table 5 and Figure 8 show the conservative

(Rp 10.5 trillion) and best-case scenarios (Rp
22.3 trillion) for augmenting local government
budgets to match central government inputs
in the DDUB program. Following Figure 7, the
following section discusses funding sources
for local government budgets including (a)
PDAM and local government funds, (b) provincial
government funds, (c) Government and Private
Sector Participation (Water Operator Partnership,
Large scale PPP, Small scale PPP); (d) On-lending
(UWSSP); (f) On-granting; (g) Financing facilities
(PIP, IIFF, WSFF); and (h) Commercial credit
support (Perpres 29).
42
Local departments of health already use Local

Government Funds (APBD) health funds for
preventive measures such as vaccinations, so
there are many precedents for use of health funds
for preventive rather than curative measures.
Similarly, political support is needed for full
utilization of the Water DAK and utilization of local
government reserves for water investment.
45
FUNDING SOURCES
FOLLOW ON ACTIVITIES
LG/PDAM/Provincial Support
Ministry of Home Affairs (MOHA) and MOF agree to assess the
CONSERVATIVE
PROJECTION,
RP TRILLION
BEST CASE
SCENARIO,
RP TRILLION
3.96
3.96
possibility of using LG reserves as security for loan from regional

banks. MOHA and MOF agree to enforce the implementation of the
regulations to ensure that PDAMs revenue is used firstly to expand
and improve services and implement the full cost recovery (FCR)
Government-to-government
Water Operator Partnership
0.35
0.35
PPP
Continue large scale (Tangerang, Umbulan, Bandar Lampung) and
1.69
1.69
small scale PPP schemes
On-granting
Expansion of Water Hibah; NRW Hibah
1.93
1.93
On-lending
Additional cities under UWSSP
0.18
0.18
Financing Facility
WSFF/PIP
1.19
1.19
Commercial credit support
Application of Perpres 29 to other PDAMs
1.62
1.62
10.92
10.92
TOTAL
FIGURE 8: CONSERVATIVE AND BEST CASE SCENARIOS FOR FUNDS TO MATCH URBAN APBN, RP. TRILLION
TOTAL
10.92
22.27
COMMERCIAL
CREDIT SUPPORT
ON-LENDING
1.62
2.58
1.19
7.54
FINANCING
FACILITY
0.18
0.41
1.93
ON-GRENTING
2.46
PPP
1.69
3.1
G TO G
0.35
1.48
LG/PDAM/
PROVINCIAL
SUPPORT
3.96
4.7
101.
PDAM and local government funds are often

indistinguishable from one another. For instance,
in the Water Hibah program, which is aimed at
encouraging local governments investment in water
utilities, PDAMs pre-funded the local governments
contribution until local governments budget became
available. The total contribution of PDAM and local
government funds to the DDUB program in 2009
was about Rp 0.6 trillion. It is expected that PDAM
and local government funding will increase at 25
percent per year from the 2010 level because of the
strict application of readiness criteria and greater
attention to local government contribution with
incentives diverted to better performers. There is a
possibility that local government reserves, which
were reported to be Rp 95 trillion at the end of 2006,
could be used as security for loans from regional
development banks for investment, but details
would have to be agreed between the Ministries of
Home Affairs and Finance.
Provincial government funding
102.
Between 2009 and 2010, provincial
government contribution to the DDUB program
increased by 75 percent. It is expected that
provincial funding will increase at a more modest
pace of 25 percent per year with application of
a technical assistance program to enhance the
interest and participation of location governments in
water supply projects.
Government-to-Government and Private Sector

Participation
103.
Government-to-government programs include
the Water Operator Partnership whereby Indonesian
PDAMs cooperate with counterpart PDAMs in other
countries for internal strengthening and general
capacity-building for a limited number of PDAMs
through bilateral donors. The capacity building
programs would help PDAMs access credit and
develop efficiency programs such as NRW reduction,
micro-credit, energy efficiency, billing efficiency,
and suppliers credit.
104.
Small scale private sector cooperation is
popular among PDAMs, mainly for provision of
raw or treated water, and/or new water supply
system in a specific new service area (greenfield
projects). A technical assistance program can
increase absorption of small scale local private
sector participation for projects averaging 100 liters
per second. The program may be combined with
developing alternative small scale funding such as
suppliers credit.
105.
Large-scale Public Private Partnership (PPP)

is a potential source of investment funds for water
supply providing an added opportunity for greater
efficiency and professionalism in operating and
managing water supply systems. Enabling conditions
for private sector entry should be considered,
such as improving existing regulations to ensure
competitiveness and transparency are maintained.
After decentralization however, most local
governments have been reluctant to spend APBD
funds to match private funding for water supply. In
addition, the PPP transaction process is constrained
by the need for understanding of the basic PPP
concept itself, mostly by local governments and
PDAMs. Because of the long lead time for private
sector funding, PPP is considered a potential source
of funds for medium to longer term development.
The current projects that are likely to result in water
supply infrastructure before the end of 2014 are in
Tangerang, Umbulan Spring, and Bandar Lampung.
106.
Corporate Social Responsibility (CSR). There
is a large potential to employ corporate social
responsibility (CSR) funding for water access, based
on UU25 and 40/2007, especially from state-owned
enterprises which are required to provide 5 percent
of their net profit for social purposes with 3% for
enhancing the environment. The potential for
CSR funding for all sectors has been estimated at
between Rp 10 and 20 trillion annually. Technical
assistance would be required to establish a fund
for water and sanitation projects that matches CSR
company requirements with needs in the field.
44
PDAM and local government funding
TABLE 5: CONSERVATIVE AND BEST CASE SCENARIO FOR AUGMENTING LG BUDGET
47
Commercial credit support
107 .
110 .
Prior to the Asian Financial Crisis, on-lending

was the main source of funds for new water supply
infrastructure, but PDAM on-lending was restrained
when PDAM and local government repayments fell in
arrears. The national governments debt restructuring
program has cleared the way for a resumption of
on-lending activities, although at a smaller scale
than before. Experience shows that preparation of
on-lending vehicles requires many years. Due to the
considerable lead time required to prepare loans
from multilateral agencies, the only possible vehicle
available for on-lending is now the World Bankassisted Urban Water Supply and Sanitation Project
(UWSSP). The project enables a small number of
PDAMs to increase water supply infrastructure, and it
could be expanded to double its present size with the
addition of qualifying PDAMs and projects.
Presidential instruction (Perpres) 29 of 2009

is intended to open access of local governments
to commercial banks to water investment funds.
Under AusAID cooperation with the Department of
Public Works through the Indonesia Infrastructure
Initiative (IndII), preliminary technical assistance to
20 healthy PDAMs resulted in three PDAMs being
able to access commercial loans in 2011. Templates
for evaluation of PDAMs for loan applications are
available, and larger and more creditworthy PDAMs
with better loan-processing capacity may be
assisted by the continuing technical assistance
project. The Perpres 29 mechanism is expected to
be refined by the Ministry of Finance so that it will
become a reliable source of funds for medium to
longer-term development.
Financing Facilities
On-granting
CHALLENGE
PRINCIPLE
PROGRAMS/ACTIVITIES
Lack LG interest,
Attract Local
PAMSIMAS with higher LG contribution, Water Hibah introduced
low fund level
Government Financing
in larger cities; TA for increased provincial, LG funds
Urgency of reaching goal
Fund existing
Expand water Hibah to larger PDAMs, increase maximum
by end of 2014
rapid-access activities
allowable Hibah connections; continue piped water, IKK,

PAMSIMAS programs; add to UWSSP; TA for water CSR;
accelerate WSFF
Use up PDAM idle
NRW Hibah, expansion of water Hibah to saturation point,
capacity first
stimulate short term PPP
Need to use all of
Monitor use of
Performance evaluation for water supply monitoring,
water DAK
funds promptly
Cooperation with AWASIS, coordination among ministries
Difficult to select best
Open access to all funding
Use of intermediary institutions for information sharing
PDAMs for financing
activities
and proposals from PDAMs, TA to introduce/ integrate new
Shortage of funds
111.
108.
The main on-granting vehicle is the Water Hibah

program which uses the on-granting mechanism
provided through Government Regulation 56 of 2005
and MoF Regulations 168 and 169 of 2008. The 20102011 Water Hibah program was oversubscribed, and
it was completed more or less on time. An expanded
program can connect lower income groups and sell idle
capacity. The program will be expanded until there are
signs of slowing of the absorptive capacity in each city
where idle capacity exists.
109 . Water Hibah has been so popular among local

governments that it may be used as an incentive for
enhanced local government/PDAM performance, for
instance in reducing NRW, improvement of energy
efficiency, or a case where the local government
provides public service obligations, undertaking
to support part of the cost of production and
distribution of water. An NRW Water Hibah program is
the most likely to be implemented in time to provide
results before the end of 2014. A NRW Water Hibah
program, established through a technical assistance
effort, will provide the benefits of a Water Hibah
program and the increased availability of revenueproducing water.
Funds are needed for both the central and

local government budgets, and at present the
main vehicle for assistance to the national budget
appears to be the financing facility that is under
preparation. This facility could be one of the main
sources of funds to meet the shortfall in funding for
central government funds (totaling Rp 10.3 trillion)
as well as local government funds (the remaining
gap of Rp 22.3 trillion, which will augment local
government budgets). The availability of a financing
facility is exemplified by PIP (Pusat Investasi
Pemerintah) and Indonesia Water and Sanitation
Financing Program (IWSFP) currently under
preparation by the World Bank.
TABLE 6: CHALLENGES, PROGRAMMING PRINCIPLES AND PROPOSED PROGRAMS/ACTIVITIES
112 .
Pusat Investasi Pemerintah (PIP) or the

Indonesia Investment Agency was established in
2007 under Ministry of Finance auspices as a public
service agency that provides long-term investment
and capital shares. Long-term loans are provided
to local governments, state owned enterprises,
and the private sector. This agency has provided
long term assistance for infrastructure investments
such as highways, airports and hospitals. Although
it is relatively new, the Agency has demonstrated
remarkable progress in a relatively short time. In
funds such as PIP, WSFF
only 3 years, its assets grew from Rp5 trillion in 2007

to 15.4 trillion in 2011 (April). PIP may be accessed
by creditworthy PDAMs and local governments,
but facilitation would be required by a technical
assistance project.
113.
Indonesia Water and Sanitation Financing
Program (IWSFP). The World Bank, in cooperation with
the Government of Indonesia and other donors, is
preparing this program which is aimed at increasing
access to and improving water supply and sanitation
services. The proposed program would include
establishment of a water and sanitation investment
facility (the Facility) that will provide capital grants,
output-based grants, and loans through program
partner facilities, and support to central and local
government capacity strengthening. The Program is
expected to be ready in early 2013. The facility will
pool funds from bilateral, multilateral, and private
sources to provide water and sanitation investment
for proposals from creditworthy local governments.
WSFF may use PIP as a vehicle for implementation,
and thus technical assistance to launch access to
WSFF may be combined with technical assistance
for accessing PIP.
46
On-lending
06:
ROADMAP FOR WATER SUPPLY INVESTMENT
49
48
SUPPLY INVESTMENT
6.1 Recommended Technical
Assistance and Investment Packages
The largest portion of funding is expected to
come from local government funds supplemented
by loans from banks and funding pools such as
Perpres 29, PIP/WSFF, and water CSR. Small scale
PPP is expected to take up a smaller portion of the
local government share. The second largest source
will be central government stimulus funds. The
recommended investment packages for attainment
of MDG 7c are shown in Table 7. Loans from WSFF may
contribute to central government as well as local
government budgets. Aside from WSFF, all other loan
and technical assistance packages will contribute to
the local government contribution to investment.
PACKAGE
51
SOURCE
AMOUNT
RP TRILLION
COMMENT
Local banks
PM
This is in line with program principle 2.
WB loan
Rp 0.41 T
Addition of 5-6 new PDAMs to ongoing project using existing funding
INVESTMENT
Application of Perpres 29 to open access of
domestic loan funding to qualified PDAMs
PDAMs added to the on-going UWSSP
and on-lending channels. This is in line with program principle 2.
Water Hibah
Bilateral
TBD
Current funding sources are from AusAid and USAID, already secured
their use. In the best-case scenario, total investment

over four years for both urban and rural water supply
is expected to be Rp. 65.34 trillion.
NRW Hibah
Bilateral/ multilateral
TBD
New initiative to be launched with TA.
117 .
CSR Grants to LG
Private
TBD
New initiative to be launched with TA.
Loans from infrastructure fund to LG
PIP
Rp 4.58 T
To launch loans and assist LG. TA needed, perhaps from WSFF
until 2014. Need for additional funding to expand until LG uptake abates.
114.
115 .
Table 2 summarizes projected central and
local government financing and physical targets
until the end of 2014. Chapter 5 underlines the
proposed programs and possible funding sources
as developed from the previous chapters. Local/
provincial government funding, including PDAM own
funds, and central government grants are important,
but they are not sufficient to reach the water MDG.
With five underlying programming principles as
proposed in Chapter 5, the Roadmap for Water Supply
Investment involves many investment packages.
116 .
The recommended investment packages are
expected to result in enhanced spending in the
best case scenario for both rural and urban areas
according to Table 6. Only the best-case scenario
funding amounts and the most likely packages appear
in Table 7. For instance, it is considered unlikely
that local government reserves will be used as
security for water infrastructure loans as suggested
in Table 4, so such a package is not shown. Total
investment is expected to more than double in 2012
with the application of new funding mechanisms and
incentive-based, output-based policies to accelerate
The newly-introduced financing instruments

such as Perpres 29 and PIP will need to be introduced
to more PDAMs qualified for such instruments. In
addition, it will be possible to add about US$20
million to the UWSSP project. The bulk of loan funds
are expected to come from the WSFF and PIP. Each
funding source will require technical assistance to
prepare and assist PDAMs and local government for
participation. Two technical assistance activities to
be funded by either loans or grants appear at the end
of the table because they will yield more long-term
benefits, but these benefits are also important in the
short run. A long-needed technical assistance project
for water governance can ensure that the value
of MDG-oriented infrastructure investments is not
diminished through neglect or mismanagement.
118 .
The annual gaps for various funding sources
that must be filled in the best case scenarios
are shown in Table 8. They are compared with the
calculated current funding capability, assuming
the TA activities to launch the operation of funding
sources, such as WSFF, are implemented. In the
case of water DAK, the gap is the difference between
estimates of what has been spent now and how
much should be spent from water DAK allocations.
preparation funding.
Loans and grants from water and
PIP, WSFF
Rp 13.58 T
To launch loans and grants that can be accessed by central

government and LGs to expand as well as to improve services.
sanitation fund to LG, CG
TA needed to establish working procedures, identification and

preparation of TA packages for LGs/PDAMs, etc.
Technical Assistance
Water Operator Partnership
Govt to Govt
Rp 2.3 T
Twinning technical assistance for selected PDAMs.
TBD
The IUWASH project is facilitating 50 PDAMs; there is a need for
Bilateral
PDAM-focused TA facilitation for
Bilateral
efficiency and access to funds
facilitation for other PDAMs. IUWASH also supports raw water
TA for absorption of Perpres 29
acquisition in 20 locations.
funding
TA for pooling, lending water CSR
Bilateral/
TBD
IndII provided Technical Assistance for first round of 4 PDAMs,

applying lessons learned to second round.
TA to establish NRW Hibah
multilateral grant
TBD
TA will establish legal basis, procedures of water Corporate Social

Responsibility pool, a Secretariat, and begin operation.
TA facilitating access to small scale
Bilateral
TBD
TA will pioneer use of water Hibah as incentive, first by rewarding

short-term NRW reduction.
119 .
The calculation of beneficiaries shown in
Table 9 is based on the categories of assistance
(new production/ distribution, infill, communitybased, etc.) of all funding sources and most likely
number of beneficiaries given best-case scenarios.
The best-case scenario investments detailed in
the Roadmap translate into about 56 million new
beneficiaries between 2011 and the end of 2014, at
a cost of Rp 65.34 trillion.
PPP
Bilateral
TBD
TA will leverage previous spontaneous successes to accelerate

short term small scale PPP and supplier credit.
TA to increase provincial, LG
contribution to DDUB
Bilateral
TBD
TA will work with DGCK to use information sharing, incentives, and

recognition to increase provincial, LG contributions to water supply
to match DDUB funds.
50
06:
ROADMAP FOR WATER
CHAPTER SIX
TABLE 7: RECOMMENDED INVESTMENT PACKAGES
PACKAGE
SOURCE
AMOUNT
RP TRILLION
COMMENT
Bilateral
TBD
TA project will work with several ministries to facilitate acceleration
FUNDING CAPABILITY
AND GAP
TRILLIONS OF RUPIAH
2011
2012
2013
2014
TOTAL
Capability
3.09
3.49
3.94
4.45
14.97
Gap
0.00
1.51
1.63
3.09
6.24
Capability
0.80
0.90
1.02
1.15
3.88
Gap
0.00
1.17
1.48
0.48
3.12
Capability
0.44
0.50
0.56
0.63
2.13
Gap
0.00
0.48
0.43
0.37
1.28
Capability
0.40
0.48
0.58
0.69
2.15
Gap
0.00
1.38
1.29
1.18
3.85
Capability
1.00
1.20
1.44
1.73
5.37
Gap
1.95
5.94
6.04
8.35
22.27
Total
Capability and Gap
7.68
17.05
18.41
22.12
65.25*
APBN
Capability and Gap
4.33
8.05
9.06
10.17
31.61
LG/PDAM
Capability and Gap
2.95
7.14
7.48
10.08
27.64
DAK
Capability and Gap
0.40
1.86
1.87
1.87
6.00
FUNDING SOURCE
Other Activities to Promote Longer-term Benefits

TA for Establishment of streamlined
DGCK
DGWR
of large scale PPP based on lessons learned (offer good projects to
procedures for large scale PPP
the private sector, educate LG in commercial principles).

TA for establishment of sustainable
Bilateral
Other Ministries
TBD
water governance habits
53
TABLE 8: ANNUAL GAPS FOR INCREASED URBAN AND RURAL INVESTMENTS
Multi-year TA project will use lessons learned and PDAM-
DAK
consumer alliance to work with selected LG to establish

sustainable water governance in some LG.
LG/PDAM
NOTE:
*USING DGCK FIGURES; THE ACTUAL CALCUL ATION PROBABLY DIFFERS DUE TO ROUNDING
TABLE 9: CALCUL ATION OF ESTIMATED BENEFICIARIES (RESULTING FROM UPDATED PROGRAM)

MILLIONS OF BENEFICIARIES
6.2 Proposed Flow of Activities

120.
Figure 9 indicates the possible proposed flow
of activities. The darker lines indicate a greater
flow of funds and therefore a more critical activity.
Technical assistance for water Hibah is an ongoing
activity, so consultants are continuing assistance.
TA for assistance to CBO finance and Perpres 29 are
not included in this Figure because they are ongoing.
Establishment of CSR water and sanitation

pooling is expected to take 9 months, but secretariat
activities may be performed by technical assistance
after the pooling mechanism is identified. Small
scale local investments in production of facilities
will require about six months for negotiation of
terms and contracting before investment funds
would be available.
12 3 .
121.
In the best case scenario, funds can be made
available to facilitate access to PIP through WSFF funds.
Flow of loan funds from PIP would begin earlier than flow
of WSFF funding because WSFF is expected to be ready
in early 2013. TA for access to NRW Hibah funds will
require the presence of consultants during the period of
reduction of NRW and evaluation of PDAM performance.
2011
2012
2013
2014
TOTAL
URBAN WATER
3.42
10.30
11.02
16.65
41.39
12 2 .
The upgraded monitoring system, integrated

under NAWASIS, is expected to provide a
management tool for following the progress of the
updated program and making timely revisions and
adjustments as necessary.
Raw water (CG)
0.00
0.00
0.00
0.00
0.00
Piped (CG)
1.20
3.94
4.22
6.46
15.82
Piped (LG)
1.80
5.91
6.33
9.69
23.73
Water Quality
0.00
0.00
0.00
0.00
0.00
Self-provision (swadaya)
0.42
0.45
0.47
0.50
1.84
RURAL WATER
2.80
3.42
3.98
4.41
14.61
PAMSIMAS (CG)
2.25
2.09
2.55
3.25
10.14
PAMSIMAS (LG)
0.00
0.00
0.00
0.00
0.00
Water-stressed, remote (CK)
0.12
0.29
0.21
0.21
0.82
Water-stressed, remote (other CG)
0.03
0.02
0.02
0.02
0.09
DAK
0.40
1.03
1.20
0.93
3.56
Total
6.22
13.72
15.00
21.06
56.00
CG
3.60
6.33
7.00
9.94
26.87
DAK
0.40
1.03
1.20
0.93
3.56
LG/PDAM/Other
1.80
5.91
6.33
9.69
23.73
Swadaya
0.42
0.45
0.47
0.50
1.84
NOTE:
LG CONTRIBUTIONS TO PAMSIMAS (ABOUT 10%) ARE NOT COUNTED IN RURAL WATER.
PENDING ENFORCEMENT OF DAK RULES, MISCELL ANEOUS RURAL ACTIVITIES SHOULD FILL UP SHORTFALLS.
52
TABLE 7: RECOMMENDED INVESTMENT PACKAGES (CONTINUED)
55
2011
Loan
Add new PDAMs to UWSSP and PerPres 29
Operationalizing the financing facility (WSFF and PIP)
Grants
TA for Water Hibah Program
TA to establish NRW Water Hibah
TA to facilitate access to WSFF, PIP
TA to assist PDAM in small scale PPP
TA for promotion to increased provincial and LG contribution
NRW Water Hibah program funding
CSR for water funding activities
Investments
Small scale PPP funded
Key Activities
Monitoring and Evaluation through upgraded NAWASIS
Use of key institutions to inform LG/PDAM of funding options
NOTE: DARKER LINES INDICATE GREATER FLOW OF FUNDING
2012
2012
2012
54
FIGURE 9: PROPOSED FLOW OF LOANS, GRANTS AND KEY MONITORING/EVALUATION ACTIVITIES
Province
NAD
Annex 1: PDAM Database - Provincial Summary, 2009

No
Province
57
Annex 2: PDAM with Debt Restructuring Program, 2009

Debt restructuring
Debt restructuring
approved
under process
Kota Banda Aceh

Kab. Aceh Barat
NAD
No of
No of
POPULATION, 2009
CITY/
PDAM
Total
In Service
SERVED
PROVINCE
with Data
(people)
Area
PEOPLE
(%)
Debt restructuring
Debt restructuring under
approved
process
EAST JAVA
Kab. Gresik
Kab. Lumajang
EAST JAVA
Kab. Bangkalan
Kab. Nganjuk
Kab. Ponorogo
Province
NORTH Sumatera
Kota Sibolga
EAST JAVA
Kab. Pamekasan
Production
Installed
No of
NORTH Sumatera
Kab. Tanjung Balai
EAST JAVA
Kota Blitar
Capacity
Capacity
connection
NORTH Sumatera
Kota Pematang Siantar
EAST JAVA
Kota Pasuruan
(l/sec)
(l/SEC)
(unit)
NORTH Sumatera
Kota Tebing Tinggi
EAST JAVA
Kota Mojokerto
WEST Sumatera
Kota Padang
EAST JAVA
Kab. Tulungagung
(people)
Kab. Padang Pariaman
WEST Sumatera
Kota Solok
EAST JAVA
Kab. Blitar
NAD
23
22
4,292,464
1,359,816
671,556
49%
2,629
2,127
137,755
WEST Sumatera
Kab. Sawahlunto
EAST JAVA
Kab. Jember
North Sumatera
28
23
12,566,590
5,907,619
2,800,540
47%
9,872
9,125
612,868
WEST Sumatera
Kab. Padang Panjang
Banten
Kab. Tangerang
Kab. Lebak
West Sumatera
19
18
4,676,172
1,876,276
835,347
45%
3,965
3,051
195,276
WEST Sumatera
Kab. Tanah Datar
Bali
Kab. Tabanan
Kab. Jembrana
Riau
11
10
4,987,361
1,631,149
237,523
15%
1,708
1,192
56,152
WEST Sumatera
Kab. Pasaman
Bali
Kab. Badung
Jambi
10
2,200,664
790,026
547,379
69%
2,012
1,566
131,672
Jambi
Kota Jambi
Bali
Kab. Gianyar
South Sumatera
15
15
7,238,096
8,868,208
924,610
10%
6,108
4,469
219,102
Jambi
Kab. Kerinci
Bali
Kab. Klungkung
Bengkulu
1,310,497
594,480
234,954
40%
1,164
956
55,501
Bangka Belitung
Kota Pangkal Pinang
Bali
Kab. Karang Asem
Lampung
11
11
7,508,573
1,695,002
271,086
16%
1,739
1,238
66,413
SOUTH Sumatera
Kota Palembang
Bali
Kota Denpasar
Bangka Belitung
670,519
394,447
58,028
15%
845
453
13,899
Lampung
Kota Bandar Lampung
Kab. Lampung Selatan
NTT
Kota Kupang
10
Kep. Riau
315,375
250,686
102,171
41%
340
237
22,874
WEST JAVA
Kab. Indramayu
Kab. Cirebon
WEST Kalimantan
Kota Pontianak
11
West Java
26
23
36,527,753
19,785,949
4,211,228
21%
19,982
16,427
1,145,912
WEST JAVA
Kab. Subang
Kab. Majalengka
CENTRAL Kalimantan Kota Palangkaraya
12
DKI Jakarta
9,215,356
9,215,356
0%
794,930
WEST JAVA
Kab. Purwakarta
Kab. Sumedang
SOUTH Kalimantan
Kota Banjarmasin
13
Central Java
35
35
32,758,169
13,587,514
3,822,438
28%
16,951
12,763
968,056
WEST JAVA
Kab. Karawang
SOUTH Kalimantan
Kab. Banjarbaru
14
DI Yogyakarta
3,507,306
2,376,470
349,750
15%
1,973
1,488
109,297
WEST JAVA
Kab. Bekasi
EAST Kalimantan
Kota Samarinda
15
East Java
38
37
36,564,402
15,470,795
6,148,458
40%
23,244
18,885
1,242,452
WEST JAVA
Kab. Sukabumi
EAST Kalimantan
Kab. Bulungan
16
Banten
9,314,155
4,623,061
754,579
16%
6,013
5,660
170,848
WEST JAVA
Kota Bandung
NORTH SULAWESI
Kota Bitung
17
Bali
3,297,790
1,928,164
1,100,518
57%
4,602
3,978
265,185
WEST JAVA
Kab. Garut
NORTH SULAWESI
18
NTB
4,200,510
1,291,287
557,696
43%
2,703
2,166
142,999
WEST JAVA
Kab. Ciamis
SOUTH SULAWESI
Kota Makassar
Kab. Bone
19
NTT
20
20
4,633,754
1,183,113
320,817
27%
1,316
818
75,045
WEST JAVA
Kab. Kuningan
SOUTH SULAWESI
Kota Palopo
Kab. Barru
20
West Kalimantan
14
12
4,135,810
1,478,355
592,749
40%
2,834
2,125
132,953
CENTRAL JAVA
Kab. Cilacap
SOUTH SULAWESI
Kab. Gowa
Kab. Tana Toraja
21
Central Kalimantan
14
26
2,090,462
762,087
360,222
47%
1,607
1,228
84,333
CENTRAL JAVA
Kab. Sragen
SOUTH SULAWESI
Kab. Bulukumba
22
South Kalimantan
12
10
2,824,579
1,241,646
790,337
64%
3,500
3,087
211,320
CENTRAL JAVA
Kab. Grobogan
SOUTH SULAWESI
Kab. Maros
23
East Kalimantan
14
11
2,845,061
1,702,187
1,102,363
65%
5,390
4,421
257,452
CENTRAL JAVA
Kab. Blora
SOUTH SULAWESI
Kab. Takalar
24
North Sulawesi
13
2,170,457
969,383
350,407
36%
2,519
1,851
89,848
CENTRAL JAVA
Kab. Rembang
SOUTH SULAWESI
Kab. Pangkajene Kepulauan
25
Central Sulawesi
11
2,643,900
749,212
214,029
29%
1,098
773
50,212
CENTRAL JAVA
Kab. Semarang
SOUTH SULAWESI
Kab. Enrekang
26
South Sulawesi
23
4,066,917
2,015,005
925,453
46%
3,893
3,385
202,839
CENTRAL JAVA
Kab. Purbalingga
CENTRAL SULAWESI
Kab. Toli Toli
27
Southeast Sulawesi
12
1,784,696
590,024
245,735
42%
1,054
920
54,743
CENTRAL JAVA
Kota Surakarta
Kab. Donggala
28
Gorontalo
628,418
276,513
97,621
35%
500
383
24,819
CENTRAL JAVA
Kota Semarang
CENTRAL SULAWESI
Kab. Muna
29
West Sulawesi
1,050,292
428,551
125,960
29%
395
305
26,800
CENTRAL JAVA
Kota Pekalongan
CENTRAL SULAWESI
Kab. Buton
30
Maluku
1,069,574
317,160
106,951
34%
687
539
22,918
CENTRAL JAVA
Kab. Wonosobo
CENTRAL SULAWESI
Kab. Kolaka
31
North Maluku
872,253
360,987
176,818
49%
662
536
37,889
Yogyakarta
Kab. Sleman
Gorontalo
Kota Gorontalo
32
West Papua
418,837
269,782
76,506
28%
441
261
19,617
EAST JAVA
Kab. Jombang
Kab. Malang
WEST SULAWESI
Kab. Mamuju
33
Papua
27
10
824,690
486,936
194,672
40%
1,189
865
42,718
EAST JAVA
Kab. Madiun
Kab. Pasuruan
NORTH MALUKU
Kota Ternate
Indonesia
467
384
213,211,452 104,477,247 29,308,502
28%
132,930
107,275
6,889,768
EAST JAVA
Kab. Magetan
Kab. Kediri
Papua Barat
EAST JAVA
Kab. Bojonegoro
Kab. Lamongan
Papua
SOURCE: DGCK Database
Source: Ministry of Finance
Kab. Bolaang Mongondow
Kab. Manokwari
Kota Jayapura
56
ANNEX
NO
PROVINCE
CITY/PROVINCE
DKI Jakarta
EAST JAVA
59
Annex 3: PDAM Piped Connection, 2009 (CONTINUED)

Connection
NO
PROVINCE
CITY/PROVINCE
Connection
NO
PROVINCE
CITY/PROVINCE
Connection
NO
PROVINCE
CITY/PROVINCE
Kota Jakarta
794,930
48
Bali
Kab. Buleleng
33,086
95
WEST JAVA
Kab. Sukabumi
18,292
142
CENTRAL JAVA
Kab. Tegal
12,667
Kota Surabaya
407,225
49
WEST JAVA
Kab. Tasikmalaya
32,954
96
Riau
Kota Pekan Baru
18,189
143
Banten
Kab. Lebak
12,567
NORTH SUMATERA
Kota Medan
397,065
50
EAST JAVA
Kota Madiun
31,681
97
Bengkulu
Kab. Rejang Lebong
17,428
144
Yogyakarta
Kab. Bantul
12,540
WEST JAVA
Kota Bandung
146,247
51
NTB
Kab. Lombok Tengah
31,200
98
Gorontalo
Kota Gorontalo
17,262
145
WEST KALIMANTAN
Kab. Sambas
12,440
SOUTH SUMATERA
Kota Palembang
142,651
52
CENTRAL JAVA
Kab. Demak
29,841
99
Banten
Kota Tangerang
17,243
146
CENTRAL JAVA
Kab. Sukoharjo
12,275
WEST JAVA
Kab. Bekasi
137,474
53
Bali
Kab. Badung
28,997
100
SOUTH SULAWESI
Kab. Gowa
17,242
147
EAST JAVA
Kab. Bondowoso
12,164
SOUTH SULAWESI
Kota Makassar
130,486
54
WEST JAVA
Kab. Cianjur
28,745
101
NORTH SULAWESI
Kota Manado
17,076
148
WEST KALIMANTAN
Kota Singkawang
12,099
CENTRAL JAVA
Kota Semarang
129,933
55
NAD
Kota Banda Aceh
28,532
102
CENTRAL JAVA
Kab. Kebumen
17,061
149
Banten
Kota Cilegon
12,000
WEST JAVA
Kab. Bogor
126,399
56
WEST JAVA
Kab. Subang
26,984
103
CENTRAL JAVA
Kab. Grobogan
17,030
150
EAST JAVA
Kab. Lamongan
11,943
10
SOUTH KALIMANTAN
Kota Banjarmasin
117,199
57
Papua
Kota Jayapura
26,106
104
NORTH SUMATERA
Kab. Tanjung Balai
17,021
151
NORTH SUMATERA
Kota Sibolga
11,849
11
Banten
Kab. Tangerang
103,000
58
WEST JAVA
Kab. Garut
25,989
105
CENTRAL SULAWESI
Kab. Donggala
16,806
152
SOUTH KALIMANTAN
Kab. Hulu Sungai Utara
11,755
12
WEST JAVA
Kota Bekasi
102,000
59
EAST JAVA
Kab. Jember
25,481
106
EAST JAVA
Kota Pasuruan
16,676
153
NORTH SUMATERA
Kab. Tapanuli Selatan
11,706
13
EAST JAVA
Kota Malang
97,374
60
CENTRAL JAVA
Kab. Klaten
25,426
107
CENTRAL KALIMANTAN
Kota Palangkaraya
16,358
154
Banten
Kab. Pandeglang
11,641
14
EAST KALIMANTAN
Kota Balikpapan
92,307
61
CENTRAL JAVA
Kab. Temanggung
25,371
108
SOUTH SULAWESI
Kota Pare Pare
16,135
155
Riau
Kota Bengkalis
11,637
15
EAST KALIMANTAN
Kota Samarinda
90,849
62
CENTRAL JAVA
Kab. Purbalingga
24,730
109
NAD
Kab. Aceh Besar
16,110
156
EAST KALIMANTAN
Kota Bontang
11,576
16
EAST JAVA
Kab. Sidoarjo
88,240
63
SOUTH KALIMANTAN
Kab. Banjarbaru
24,671
110
NORTH SUMATERA
Kab. Deli Serdang
16,055
157
NTB
Kab. Bima
11,566
17
WEST JAVA
Kota Bogor
82,487
64
CENTRAL JAVA
Kota Salatiga
24,588
111
NORTH SULAWESI
Kota Bitung
16,000
158
EAST JAVA
Kab. Mojokerto
11,489
18
Jambi
Kota Jambi
80,104
65
CENTRAL JAVA
Kab. Semarang
24,554
112
CENTRAL JAVA
Kab. Brebes
15,858
159
EAST JAVA
Kab. Sumenep
11,321
19
WEST SUMATERA
Kota Padang
75,345
66
WEST JAVA
Kab. Sumedang
24,240
113
CENTRAL JAVA
Kota Pekalongan
15,858
160
CENTRAL SULAWESI
Kota Bau Bau
11,251
20
WEST KALIMANTAN
Kota Pontianak
71,785
67
CENTRAL JAVA
Kota Magelang
24,050
114
NTB
Kab. Lombok Timur
15,853
161
NORTH SUMATERA
Kota Binjai
11,106
21
Bali
Kota Denpasar
66,583
68
Bengkulu
Kota Bengkulu
23,000
115
NORTH SUMATERA
Kab. Tanah Karo
15,738
162
SOUTH SUMATERA
Kab. Ogan Komering Ulu
11,076
22
EAST JAVA
Kab. Malang
66,140
69
CENTRAL JAVA
Kab. Jepara
22,688
116
EAST JAVA
Kab. Tulungagung
15,707
163
Papua Barat
Kota Sorong
11,046
23
EAST JAVA
Kab. Gresik
63,596
70
EAST JAVA
Kab. Tuban
22,675
117
SOUTH SUMATERA
Kab. Muara Enim
15,686
164
SOUTH KALIMANTAN
Kab. Tabalong
11,042
24
NTB
Kota Mataram
60,811
71
EAST JAVA
Kab. Situbondo
22,620
118
WEST SUMATERA
Kota Payakumbuh
15,599
165
Bali
Kab. Bangli
10,995
25
WEST JAVA
Kota Cirebon
55,331
72
EAST JAVA
Kab. Madiun
22,471
119
EAST JAVA
Kab. Ponorogo
15,577
166
SOUTH KALIMANTAN
Kab. Hulu Sungai Selatan
10,667
26
CENTRAL JAVA
Kota Surakarta
54,828
73
EAST KALIMANTAN
Kab. Kutai
21,794
120
CENTRAL JAVA
Kab. Rembang
15,478
167
EAST JAVA
Kab. Sampang
10,549
27
CENTRAL JAVA
Kab. Wonosobo
54,400
74
WEST JAVA
Kota Sukabumi
21,531
121
SOUTH SUMATERA
Kab. Musi Banyuasin
15,460
168
CENTRAL SULAWESI
Kab. Banggai
10,229
28
WEST JAVA
Kab. Indramayu
53,865
75
WEST JAVA
Kab. Purwakarta
21,414
122
NORTH SULAWESI
Kab. Minahasa
15,405
169
EAST JAVA
Kab. Pacitan
10,135
29
WEST JAVA
Kab. Bandung
53,046
76
CENTRAL JAVA
Kab. Kudus
20,818
123
NORTH SULAWESI
Kab. Bolaang Mongondow
15,218
170
WEST SUMATERA
Kab. Agam
10,095
30
NORTH SUMATERA
Kota Pematang Siantar
51,402
77
CENTRAL JAVA
Kab. Wonogiri
20,689
124
CENTRAL JAVA
Kab. Purworejo
15,209
171
SOUTH KALIMANTAN
Kab. Hulu Sungai Tengah
10,060
31
CENTRAL JAVA
Kab. Cilacap
50,235
78
CENTRAL KALIMANTAN
Kab. Kotawaringin Timur
20,545
125
EAST JAVA
Kab. Nganjuk
14,602
172
WEST SUMATERA
Kab. Pasaman
9,821
32
EAST JAVA
Kab. Magetan
48,808
79
CENTRAL SULAWESI
Kota Kendari
20,425
126
CENTRAL JAVA
Kota Tegal
14,428
173
CENTRAL SULAWESI
Kab. Kolaka
9,750
33
WEST JAVA
Kota Depok
46,716
80
CENTRAL JAVA
Kab. Pati
20,422
127
Banten
Kab. Serang
14,397
174
WEST SUMATERA
Kota Bukit Tinggi
9,729
34
Bali
Kab. Gianyar
46,443
81
NTB
Kab. Sumbawa
20,305
128
WEST SUMATERA
Kab. Padang Pariaman
14,381
175
Bengkulu
Kab. Bengkulu Utara
9,661
35
CENTRAL JAVA
Kab. Banyumas
44,992
82
NORTH MALUKU
Kota Ternate
20,027
129
SOUTH SULAWESI
Kota Palopo
14,266
176
Riau
Kab. Indragiri Hilir
9,648
36
WEST JAVA
Kab. Karawang
43,046
83
EAST JAVA
Kab. Ngawi
20,001
130
NORTH SUMATERA
Kab. Langkat
14,249
177
NORTH SULAWESI
Kab. Kep. Sangihe Talaud
9,443
37
CENTRAL JAVA
Kab. Kendal
42,684
84
Yogyakarta
Kab. Sleman
19,914
131
NORTH SUMATERA
Kab. Asahan
14,211
178
WEST KALIMANTAN
Kab. Sanggau
9,380
38
CENTRAL JAVA
Kab. Magelang
39,949
85
CENTRAL JAVA
Kab. Pemalang
19,878
132
EAST JAVA
Kab. Jombang
14,172
179
EAST JAVA
Kota Batu
9,365
39
Bali
Kab. Tabanan
39,783
86
Bali
Kab. Klungkung
19,809
133
WEST JAVA
Kab. Majalengka
14,151
180
CENTRAL JAVA
Kab. Blora
9,253
40
WEST JAVA
Kab. Cirebon
38,000
87
CENTRAL JAVA
Kab. Boyolali
19,585
134
NAD
Kab. Aceh Utara
13,949
181
CENTRAL KALIMANTAN
Kab. Kotawaringin Barat
9,210
41
EAST JAVA
Kab. Banyuwangi
35,393
88
Kepulauan Riau
Kota Tanjung Pinang
19,524
135
EAST JAVA
Kab. Bangkalan
13,807
182
SOUTH KALIMANTAN
Kab. Tapin
9,189
42
Yogyakarta
Kab. Gunung Kidul
34,976
89
Bali
Kab. Karang Asem
19,489
136
WEST SUMATERA
Kab. Tanah Datar
13,690
183
CENTRAL KALIMANTAN
Kab. Kapuas Hulu
9,141
43
CENTRAL JAVA
Kab. Karanganyar
34,859
90
WEST JAVA
Kab. Ciamis
19,434
137
EAST JAVA
Kota Probolinggo
13,332
184
CENTRAL SULAWESI
Kab. Toli Toli
9,088
44
CENTRAL JAVA
Kab. Sragen
34,801
91
WEST JAVA
Kab. Kuningan
19,418
138
EAST KALIMANTAN
Kota Tarakan
13,108
185
NTT
Kab. Sikka
9,075
45
Yogyakarta
Kota Yogyakarta
34,552
92
EAST JAVA
Kab. Lumajang
19,410
139
EAST JAVA
Kota Kediri
12,908
186
NORTH SUMATERA
Kab. Dairi
9,055
46
Jambi
Kab. Kerinci
33,925
93
EAST JAVA
Kab. Pasuruan
19,338
140
EAST JAVA
Kab. Kediri
12,758
187
NORTH SUMATERA
Kota Tebing Tinggi
9,050
47
Lampung
Kota Bandar Lampung
33,256
94
CENTRAL JAVA
Kab. Batang
19,214
141
EAST JAVA
Kab. Probolinggo
12,687
188
CENTRAL KALIMANTAN
Kab. Barito Selatan
9,018
Connection
58
Annex 3: PDAM Piped Connection, 2009
NO
PROVINCE
CITY/PROVINCE
189
NAD
Kab. Bireuen
8,986
190
EAST JAVA
Kab. Pamekasan
8,844
191
WEST Sumatera
Kota Solok
192
EAST JAVA
193
194
61

PROVINCE
CITY/PROVINCE
PROVINCE
CITY/PROVINCE
PROVINCE
CITY/PROVINCE
236
Jambi
Kab. Sarolangun
5,046
237
WEST Sumatera
Kab. Sawahlunto
5,016
283
EAST KALIMANTAN
Kab. Malinau
3,118
284
EAST KALIMANTAN
Kab. Penajam Paser Utara
3,095
330
Kepulauan Riau
Kab. Natuna
1,900
331
SOUTH SUMATERA
Kab. Empat Lawang
8,527
238
SOUTH Sumatera
Kab. Ogan Ilir
4,942
285
WEST KALIMANTAN
Kab. Bengkayang
1,894
3,062
332
Gorontalo
Kab. Pohuwato
Kab. Blitar
8,440
239
SOUTH SULAWESI
Kab. Tana Toraja
4,847
286
Lampung
1,883
Kab. Tanggamus
3,040
333
NAD
Kab. Gayo Lues
1,876
WEST Sulawesi
Kab. Mamuju
8,300
240
Maluku
Kota Ambon
8,293
241
NAD
Kota Sabang
4,843
287
EAST JAVA
Kab. Trenggalek
4,777
288
WEST KALIMANTAN
Kab. Melawi
3,021
334
Babel
Kab. Belitung
1,856
Lampung
Kota Metro
3,014
335
Riau
Kab. Rokan Hulu
195
CENTRAL JaVa
Kab. Banjarnegara
8,278
242
NAD
Kab. Aceh Barat
4,749
1,811
289
NAD
Kab. Pidie Jaya
3,000
336
NAD
Kab. Aceh Singkil
196
EAST Kalimantan
Kab. Paser
8,184
243
WEST Papua
Kab. Manokwari
1,702
4,538
290
Lampung
Kab. Pesawaran
2,988
337
CENTRAL KALIMANTAN
Kab. Pulang Pisau
1,690
197
WEST JAVA
198
NAD
Kota Banjar
8,149
244
SOUTH Kalimantan
Kota Langsa
8,100
245
Lampung
Kab. Balangan
4,510
291
CENTRAL SULAWESI
Kab. Buton
2,953
338
CENTRAL SULAWESI
Kab. Konawe
1,681
Kab. Lampung Utara
4,420
292
CENTRAL SULAWESI
Kab. Tojo Una Una
2,948
339
SOUTH SUMATERA
Kota Lubuk Linggau
199
CENTRAL Kalimantan
Kab. Barito Utara
7,943
246
1,500
WEST Kalimantan
Kab. Kapuas Hulu
4,338
293
NTT
Kab. Belu
2,928
340
NTT
Kab. Sumba Barat Daya
200
NTT
Kab. Ende
7,942
1,500
247
Papua
Kab. Yapen Waropen
4,277
294
CENTRAL SULAWESI
Kab. Kolaka Utara
2,925
341
CENTRAL KALIMANTAN
Kab. Barito Timur
1,496
201
NAD
Kota Lhokseumawe
202
WEST Sumatera
Kab. Solok
7,898
248
EAST JAVA
Kota Mojokerto
4,275
295
NORTH SULAWESI
Kab. Kep. Talaud
2,818
342
CENTRAL SULAWESI
Kab. Muna
1,475
7,587
249
NAD
Kab. Bener Meriah
4,257
296
CENTRAL SULAWESI
Kab. Wakatobi
2,808
343
CENTRAL SULAWESI
Kab. Bombana
203
WEST Sumatera
1,475
Kab. Polewali Mandar
7,500
250
NORTH Sulawesi
Kab. Minahasa Selatan
4,243
297
NORTH SUMATERA
Kab. Simalungun
2,757
344
Maluku
Kab. Maluku Tenggara Bar.
204
1,469
NTT
Kab. Manggarai
7,431
251
Riau
Kab. Indragiri Hulu
4,221
298
NORTH SUMATERA
Kab. Nias
2,712
345
NTT
Kab. Lembata
1,468
205
Yogyakarta
Kab. Kulon Progo
7,315
252
NORTH Sumatera
Kab. Toba Samosir
4,219
299
SOUTH SUMATERA
Kab. Ogan Komering Ulu Tim.
2,689
346
Kepulauan Riau
Kab. Kep. Anambas
1,450
206
NAD
Kab. Aceh Tenggara
7,075
253
NORTH Maluku
Kab. Halmahera Selatan
4,200
300
CENTRAL SULAWESI
Kab. Buol
2,673
347
NORTH SUMATERA
Kab. Mandailing Natal
1,438
207
NORTH Sumatera
Kab. Labuhan Batu
7,000
254
Lampung
Kab. Lampung Barat
4,157
301
Lampung
Kab. Lampung Timur
2,667
348
Riau
Kota Dumai
1,431
208
WEST Sulawesi
Kab. Majene
7,000
255
Jambi
Kab. Batang Hari
4,125
302
WEST SUMATERA
Kota Pariaman
2,600
349
Lampung
Kab. Way Kanan
1,404
209
NAD
Kab. Aceh Tamiang
6,943
256
NTT
Kab. Flores Timur
4,108
303
Maluku
Kab. Maluku Tenggara
2,570
350
Jambi
Kab. Muaro Jambi
1,394
210
SOUTH Sulawesi
Kab. Pinrang
6,943
257
WEST Kalimantan
Kab. Sintang
4,072
304
NAD
Kab. Aceh Selatan
2,548
351
WEST SUMATERA
Kota Lima Puluh Koto
1,324
211
WEST Sumatera
Kab. Pesisir Selatan
6,870
258
SOUTH Sumatera
Kab. Lahat
4,065
305
Bengkulu
Kab. Mukomuko
2,528
352
NTT
Kab. Manggarai Timur
1,300
212
SOUTH Kalimantan
Kab. Kotabaru
6,747
259
Papua Barat
Kab. Fakfak
4,033
306
Papua
Kab. Nabire
2,520
353
Lampung
Kab. Tulang Bawang
1,233
213
SOUTH Sulawesi
Kab. Bulukumba
6,735
260
Babel
Kota Pangkal Pinang
4,000
307
Maluku
Kab. Buru
2,462
354
NTT
Kab.Rote Ndao
1,231
214
SOUTH Sumatera
Kab. Banyuasin
6,668
261
WEST SULAWESI
Kab. Mamasa
4,000
308
Maluku
Kab. Kepulauan Aru
2,462
355
SOUTH SUMATERA
Kab. Musi Rawas
1,112
215
EAST JAVA
Kota Blitar
6,471
262
WEST KALIMANTAN
Kab. Pontianak
3,998
309
Riau
Kab. Kuantan Singingi
2,460
356
CENTRAL KALIMANTAN
Kab. Gunung Mas
1,028
216
Lampung
Kab. Lampung Selatan
6,363
263
Riau
Kab. Kampar
3,965
310
Papua
Kab. Paniai
2,451
357
CENTRAL KALIMANTAN
Kab. Sukamara
945
217
NAD
Kab. Pidie
6,224
264
NTT
Kab. Sumba Timur
3,883
311
NAD
Kab. Aceh Tengah
2,409
358
CENTRAL KALIMANTAN
Kab. Seruyan
897
218
SOUTH Sulawesi
Kab. Wajo
6,185
265
Lampung
Kab. Lampung Tengah
3,871
312
Bengkulu
Kab. Kepahiang
2,404
359
WEST KALIMANTAN
Kab. Landak
770
219
NTT
Kab. Ngada
6,180
266
NORTH SULAWESI
Kota Tomohon
3,847
313
Riau
Kab. Pelalawan
2,390
360
CENTRAL KALIMANTAN
Kab. Lamandau
684
220
CENTRAL JaVa
Kab. Pekalongan
6,126
267
NORTH MALUKU
Kota Tidore Kepulauan
3,738
314
EAST KALIMANTAN
Kab. Kutai Barat
2,318
361
NAD
Kab. Subulussalam
605
221
Babel
Kab. Bangka
5,986
268
SOUTH SUMATERA
Kab. Ogan Komering Ulu Sel.
3,698
315
NTT
Kab. Manggarai Barat
2,272
362
CENTRAL SULAWESI
Kota Palu
585
222
NTT
Kab. Timor Tengah Sel.
5,979
269
SOUTH SUMATERA
Kab. Prabumulih
3,680
316
CENTRAL KALIMANTAN
Kab. Murung Raya
2,217
363
NORTH SUMATERA
Kab. Padang Sidempuan
542
223
NAD
Kab. Aceh Timur
5,949
270
Papua
Kab. Merauke
3,600
317
NORTH SUMATERA
Kab. Serdang Begadai
2,206
364
NTT
Kab. Sumba Tengah
532
224
WEST Kalimantan
Kab. Ketapang
5,929
271
NORTH Sumatera
Kab. Tapanuli Tengah
3,484
318
NORTH SUMATERA
Kab. Batubara
2,206
365
Bengkulu
Kab. Seluma
480
225
CENTRAL Sulawesi
Kab. Poso
5,922
272
WEST Sumatera
Kab. Solok Selatan
3,443
319
WEST KALIMANTAN
Kab. Sekadau
2,059
366
WEST SUMATERA
Kab. Dharmasraya
411
226
NORTH Sulawesi
Kab. Minahasa Utara
5,798
273
NORTH Maluku
Kab. Kep. Sula
3,375
320
Babel
Kab. Belitung Timur
2,057
367
Riau
Kab. Rokan Hilir
400
227
NORTH Sumatera
Kab. Tapanuli Utara
5,797
274
Papua
Kab. Biak Numfor
3,373
321
NTT
Kota Kupang
2,050
368
Papua
Kab. Jayawijaya
391
228
EAST Kalimantan
Kab. Bulungan
5,788
275
NORTH Maluku
Kab. Halmahera Utara
3,364
322
SOUTH SUMATERA
Kab. Pagar Alam
2,027
229
Gorontalo
Kab. Gorontalo
5,674
276
WEST Sumatera
Kab. Pasaman Barat
3,360
323
NAD
Kab. Aceh Jaya
2,000
230
Maluku
Kab. Maluku Tengah
5,662
277
NTT
Kab. Timor Tengah Utara
3,352
324
NORTH SUMATERA
Kab. Nias Selatan
2,000
231
WEST SUMATERA
Kab. Padang Panjang
5,543
278
NTT
Kab. Alor
3,304
325
Jambi
Kab. Tebo
1,990
232
SOUTH KALIMANTAN
Kab. Tanah Laut
5,480
279
NTB
Kab. Sumbawa Barat
3,264
326
CENTRAL SULAWESI
Kab. Morowali
1,961
233
NTT
Kab. Kupang
5,467
280
NORTH Maluku
Kab. Halmahera Barat
3,185
327
SOUTH SUMATERA
Kab. Ogan Komering Ilir
1,954
234
EAST KALIMANTAN
Kab. Kutai Timur
5,315
281
CENTRAL Kalimantan
Kab. Katingan
3,161
328
WEST SUMATERA
Kab. Sawahlunto/ Sijunjung
1,935
235
Jambi
Kab. Bungo
5,088
282
NTT
Kab. Nagekeo
3,120
329
NTT
Kab. Sumba Barat
1,923
Connection
NO
Connection
NO
Source: Database DJCK
Connection
NO
Connection
60
62
Annex 4: Map showing PDAM Piped Connection Distribution by Region/Island, 2009
INDONESIA
Sumatera
Maluku,
1,511,512
Sulawesi
449,261
Kalimantan
WEST JAVA,
686,058
DKI JAKARTA,
Banten
2,111,690
EAST JAVA
1,242,452
CENTRAL
JAVA,
YOGYAKARTA
1,077,353
PDAM Piped Connection by Region/Island

SOURCE: www.undp.org
Bali,
NTB,
NTT
483,229
WEST Papua,
Papua
123,142

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I

INDONESIA WATER INVESTMENT ROADMAP | 2011-2014

Indonesia continues to face the dual challenges of low water

The Government strategy for water supply development includes

Since the economic crisis of 1998, the development of water

the water supply sector including Directorate General of Water

supply coverage and low service quality. Nation-wide, in 2010,

central government support for raw water source development,

supply in Indonesia has been constrained by a number of factors

Resources (DGWR), DG Cipta Karya, Ministry of Finance (MOF)

only 47.71 percent of the total population had access to a

poverty alleviation, areas with water scarcity, remote and dry

including limited funding and a lack of capacity in most local

(fiscal balance, treasury, debt management, budget), Sarana

sustainable source of safe water, and only about 25.56 percent of

areas, fishing villages and areas near borders with neighboring

water companies (Perusahaan Daerah Air Minum - PDAMs) and local

Multi Infrastructure (SMI), Indonesia Infrastructure Guarantee

the population had access to piped water. An ambitious target of

countries. This strategy is translated into various programs such

governments to support additional infrastructure and provide

Fund (IIGF), Bappenas, Badan Pendukung Pengembangan Sarana

access to safe water for 68.87 percent of the population in 2015

as a program,for IKK (capital of subdistricts), raw water source

new connections. Provision of water infrastructure has not kept

Air Minum (BPP SPAM), and the Ministry of Home Affairs.

development, transmission pipeline, water treatment plants and main

pace with population growth because rapid decentralization and

distribution networks. For rural areas, central government support

outstanding PDAM debt arrears resulted in an interruption of on-

The sector needs more than the current level of investments in

addition, an instruction from the President calls fir provision of

includes continuation of projects for community-based water supply

lending for large scale water supply investments.

order to meet the Governments targets. The funding gap and

water to prevent future water crises in remote, dry areas and

and water supply for low-income communities such as WSSLIC/

areas with water scarcity.

PAMSIMAS. To reach the MDG water target, the Government estimates

Between 1998 and 2008 the proportion of Indonesias urban

quantified in the Roadmap. The current GOI strategy to achieve

population served by piped water decreased from 36 percent to

the water MDG target relies heavily on local government

leaving a probable funding gap in the amount of Rp. 36.76 trillion.

only 31 percent. To reach the water Millennium Development Goal

investment, but the amount of the central governments

(MDG) target, local governments have to increase piped water

stimulus budget and its scope for intervention are limited.

Under the Water Resources Law 7 of 2004, the responsibility

the annual sector investment from all resources have been

Considering the weak fiscal capacity of most local governments,

coverage in urban areas to 55 percent of the urban population

The current strategy also relies heavily on other non-central

the central government needs to stimulate local governments

by the end of 2014. The government has launched a national

government sources such as Public Private Partnerships (PPP),

through targeted incentives to provide an adequate stock of

Investment, 2011-2014. This important document proceeds from an

program to add more than 10 million (mainly piped) new water

internal cash generation, and revolving funds.

infrastructure to meet national development targets for urban

assessment of the problems and issues to identification of activities

connections from 2010 to 2015. To achieve this ambitious

and rural areas. So ,far, there has been satisfactory progress in