Why do 8 million of Indonesia’s 9.6 million poor urban households still not have access to piped water?

Is it because they can’t afford it? No, they are already paying several times more than the official rate for piped water through their purchases from vendors.

Is it that Indonesia doesn’t have the money to invest in the expanded piped networks required to reach poor households? No, many PDAMs, because of mismanagement, are failing to realize their current and potential revenues. Besides, social and economic rates of return to water supply schemes are very large, so investments can be made to pay for
themselves.

Is it that the poor stand little to gain from being connected to house water supplies, and thus care little about the situation? No, there is overwhelming evidence that incomes of the poor rise sharply when they get access to water – and that they care very deeply about this situation.

So what is the reason?

At root it is because many local authorities who own the water companies (PDAM) are focused on what is politically and financially expedient in the short run, rather than what is good for citizens and good for the economy in the long term. In addition, many of them do not seem to be aware that it is possible to become financially stronger and rapidly expand services to the poor. As a result, while Indonesia will successfully reach many of its Millennium Development Goals, access to water is likely to be an area of failure.

The good news is that such failure is not a foregone conclusion. Indeed all around Indonesia a growing number of local PDAMs are introducing programs and investments that make good economic sense and bring water to the poor. So far, however, the numbers are not yet sufficient to turn the tide.

This report was written to highlight the current situation and lay out practical actions that can be taken. Examples are drawn from within Indonesia and from other countries. Most of the actions need to be taken at the local level, but there are many actions that the central government can also take to help educate the owners and managers of PDAMs, and to change their incentives so that new investments are made that benefit the poor. Done right, the situation can be turned around fairly quickly. Indeed, there is no reason why access to water in urban areas should not be largely universal in the next decade. Under present trends this will clearly not happen. It will require leadership at both the central and local levels, and support from Indonesia’s development partners.