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Background
Indonesia’s recent policy
reform initiative as reflected in the “letter
of intent to the Indonesian people” provides an
ambitious agenda of reform on a broad range of issues,
including those directly related to poverty alleviation
and growth. The World Bank strategy to support this
momentum of reform is described in the Country Assistance
Strategy (CAS) covering the period 2004 – 2007.
The CAS specifically addresses two major challenges
– low investment and weak provision of services.
The four business platforms defined for implementation
of the Bank’s CAS include two critical platforms
to the water sector – Public Utility Platform
and Local Services Platform. The Bank financing and
projects are leveraged, among other things, with a major
commitment to capacity building. This is critical in
a decentralizing urban water services sector that will
entail the participation of new stakeholders and which
in the past had suffered from an overemphasis on physical
investments and little attention to institutional and
human capacity.
Key Water Sector Issues
Requiring Direct Capacity Building Interventions
Compared to other countries in
the region, Indonesia has low levels of municipal service
coverage with serious deficiencies and operational and
maintenance backlogs. The massive decentralization policy
of the Government aims to move decision making to the
lowest appropriate level while strengthening links between
the local demand and decisions on local public services.
Municipal water supply and sanitation services in Indonesia
are the responsibility of local governments and are
largely provided by some 300 semi-autonomous water utilities
(PDAMs). In spite of the assistance from the Government
of Indonesia (GOI), most PDAMs are fiscally struggling,
the quality of the services deteriorated and overall
coverage rates dropped during the past six years due
to urban population growth. This is of particular concern
to national policy makers and local elected officials
who have pledged to reach the Millennium Development
Goal 7 (MDG), i.e. halving the proportion of people
without sustainable access to safe drinking water by
the year 2015. Therefore, it is imperative to make PDAMs
better governed, more efficient and financially sustainable.
Current engagement and expectations of the lending institutions
and donors in Indonesia’s water sector necessitates
PDAMs to operate in a business-like manner. Corporatization
of the PDAMS, improvement in performance and accountability,
and provision of timely and accurate information to
decision-makers are among the capacity building challenges
to be met in this sub-sector.
Rationale for Water Sector Capacity
Building
Many local governments are recognizing
the need to apply sound governance procedures to the
water utilities (PDAMs) they own. The Indonesia Water
and Sanitation Program (WASAP Indonesia) is designed
to allocate funds on a competitive basis to those utilities
demonstrating the greatest willingness to improve governance
with a view to improving their fiscal sustainability
and to expand their coverage and responsiveness, so
that the poor are better served. In support of this
process, capacity building interventions and support
of development programs would be able to address the
following issues:
(a) creating a macro environment
conducive to change;
(b) establishing corporatization
partnerships;
(c) creating an appropriate institutional
framework;
(d) enhancing the internal capacity
to manage reform; and
(e) corporatizing the participating
PDAMs.
The World Bank Institute (WBI)
is in a unique position to bring global experience to
these reforms. In addition, it will assist and complement
the large capacity building programs envisaged in the
CAS. The proposed Capacity Building Program in WASAP
which is supported by the Dutch Trust Fund will take
on a programmatic approach to strengthening the capacity
of the water sector in Indonesia and also provide a
direct support to other related capacity building components
of the World Bank projects in water supply and sanitation.
Program Development Objectives
The development objectives of
the proposed capacity building program are to strengthen
water sector governance and service delivery through
a Twinning Program between PERPAMSI and the WBI, by:
- building the capacity of key
sector institutions – PERPAMSI- and targeted
service providers (PDAMs);
- providing assistance to pilot
key institutional reforms; and
- contributing to increase transparency
and accountability in the sector through utility performance
benchmarking, stakeholder participation, and public
awareness.
The program will also leverage
capacity building components in World Bank lending projects
and the Dutch development agenda in the water sector.
The proposed program consists of
three inter-related initiatives:
(1) strengthening the Professional
Association of Water Utilities (PERPAMSI);
(2) updating and expanding a National
Benchmarking System of Utility Performance; and
(3) supporting PDAM corporatization
pilots.
These initiatives have been developed
cooperatively with PERPAMSI, donors, and GOI. They are
aimed to address the development objective outlined
above in a strategic manner, linking national and local
level interventions.
As the national professional association
of water enterprises with over 300 member PDAMs, PERPAMSI
can play a key role in creating an enabling environment
for greater advocacy and transparency in the sector,
and in promoting the accountability and professionalism
of service providers. The Association is influential
at the national and local levels, and provides a variety
of services to its members in the areas of training,
communications and has a benchmarking program in which
a number of utilities are currently participants. Strengthening,
scaling up, and increasing the sustainability of these
activities are a core part of this proposal. Working
in synergy with the support provided to PERPAMSI by
other donors such as GTZ and USAID, the program will
contribute to building the association’s institutional
capacity and sustainability by helping to improve the
quality and quantity of its services, and by introducing
or increasing cost-recovery. This last point hinges
on providing services that are effectively demanded,
and doing so in a cost-effective manner. Supporting
institutional reform at the PDAM level is another key
component of the proposed program. This will be accomplished
through close partnerships with interested PDAMs and
PERPAMSI, leveraging World Bank Operational activities
and donor support.
The components of the Twinning
Program include:
a) Component 1: Strengthen PERPAMSI Communication and
Information Services;
b) Component 2: Strengthen PERPAMSI Benchmarking Program;
c) Component 3: Strengthen PERPAMSI Education and Training
Foundation (YPTD).
Facilitating Corporatization of PDAMs
Successful water utilities worldwide
share common characteristics, i.e. effective corporate
governance, autonomy, accountability, consumer orientation,
etc. Accepting these principles and creating the conditions
for making them work, may lead to the development of
a more efficient sub-sector that can provide adequate
services at a reasonable cost in Indonesia. This focused
area will support the institutional reform strategy
envisaged under the current World Bank projects’
preparation through:
a) Supporting pilot corporatization of participating
PDAMs,
b) Facilitating establishment of corporatization partnerships
regionally and globally,
c) Establishing a scholarship program for PDAM Staff
education,
d) Scaling up PDAM staff training.
Today, many of the infrastructure systems have regressed
into a state of systemic degradation, exhibiting the
accumulated effect of decades of inadequate maintenance.
Nevertheless, over the last three decades, the GOI has
made substantial investments in water infrastructure.
However, the focus of this investment policy has been
on the quantity of investments. Improving the quality
of investments is also vital. Further, while the PDAMs
are the public utilities and should be perceived as
commercially oriented undertakings, it should be recognized
that until recently they have always operated at a loss,
never generating sufficient funds to meet day-to-day
works. Most PDAMs have become accustomed to operating
as highly subsidized institutions, and their management
philosophy has been deeply ingrained along these lines.
This, coupled with the sectoral fragmentation at the
national level and low operating efficiencies in the
sector, have all played a part in reducing the impact
of the earlier investments and point to the need for
a major reform initiative. Creating the institutional
and organizational conditions that induce the water
utilities to be more efficient and more responsive to
the needs of users is clearly the major challenge of
the water sector.
( Wiwit Heris ) | |
