Water Financing and Disaster Risk Reduction in Indonesia
Highlights of a National Dialogue on Water
This report presents the policy recommendations resulting from the National Dialogue on Water in Indonesia, which took place between June 2022 and March 2023. Getting water resources management right, underpinned with appropriate financing mechanisms, is a prerequisite for realising Indonesia’s ambitious national economic growth agenda to become one of the top five global economies by 2045. The Dialogue, therefore, centred around two priority areas: 1) financing water infrastructure and 2) non-structural measures for flood disaster risk reduction.
The report explores several instruments to enhance the financing of water services in Indonesia, such as the advantages and disadvantages of uniform water tariffs, independent economic regulation, pollution charges and demand management instruments. The report recommends the utilisation of land value capture as an additional source of financing. It also explores how water information systems for disaster response, flood forecasting and early warning can reduce flood disaster risk.
The National Dialogue on Water in Indonesia is part of a regional initiative with the Ministry of Environment of the Republic of Korea, the Asia Water Council and the OECD.
Robust water tariffs and charges
Indonesia has achieved impressive results in increasing access to improved water supply and sanitation. However, the financial and operational distress of water services providers, and the water sector as a whole, prevent universal access to water supply and sanitation. This chapter argues that commercial finance for the water sector can be unlocked through national tariff reforms, economic regulation, and enforcement of charges for pollution and abstraction. It discusses the advantages and disadvantages of a nationwide, uniform water tariff, and it concludes that such a reform is to be implemented with caution.
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