1. Water Supply and Sanitation Projects in Indonesia An Overview of Their Performance
International Seminar on Water Supply and Sanitation Sector Reform in the Context of Regional Autonomy
Jakarta, May 21-23, 2001
Klas Ringskog, OED, World Bank

2. The Role of OED
OED reports to the Executive Board (and not to Bank Management) to give an independent evaluation of the integrity of the process and of the quality of the work
OED distills the lessons from completed projects and feeds them back into the Bank’s accumulated knowledge

3. The OED Evaluation Methodology
Evaluation Criteria
Relevance
Efficacy (Achievement of Objectives)
Efficiency
Outcome (Aggregates relevance,efficacy,and efficiency)
Institutional Development Impact
Sustainability
Bank Performance
Borrower Performance

4. Evaluating the Performance of Bank-financed Water and Sanitation Projects in Indonesia
Evaluated Projects:
Second Jabotabek Urban Development Project (Jakarta)
Water Supply and Sanitation for Low Income Communities (WSSLIC)
Semarang-Surakarta Urban Development Project

5. Five Lessons Learnt
Integrated Urban Development Infrastructure (IUDI) projects have slowed water policy reform and progress
Absence of credible sector regulation has hurt both consumers and service providers
Private sector participation (PSP) is costly when the environment is risky but offers great promise
Sound water resources management has not reached the city level
Sustainable water and sanitation services depend on wider user participation and health education

6. Lesson One: Effect of IUDI on Water Supply and Sanitation Sector
Integrated Urban Development Infrastructure (IUDI)
+ Support of decentralization but:
- Excessive focus on investment rather than on efficient operations and maintenance
Little success in creating financially and institutionally local utilities
Little success with accountability and regulation

7. Effect of IUIDP on Service Levels
Country
GNP/capita
US$, 1997
Urban water coverage,%
Urban sewerage,%
Bolivia
950
74%
41%
Bulgaria
1,140
98%
18%
China
860
95%
65%
Indonesia
1,110
35% 0%
Philippines
1,220
60% 4%

8. Alternative Water and Sanitation Sector Strategy
Future domestic and external financing should go to:
PDAMs willing to co-finance investments with surpluses from operations
PDAMs with tariffs that reflect and recover the full costs of service
PDAMs willing to willing to submit to national service quality and tariff regulation
PDAMs independent from local politics

9. Alternative Financing Policies
Future financing is better if:
As a repayable loan, channeled through banks that compete for the business ( Example: FINDETER in Colombia)
Subsidies are targeted to help the poor connect

10. Lesson Two: Absent Sector Regulation is Costly
Consumers suffer from no regulation because:
PDAMs are not accountable to consumers
PDAMs lack incentives to serve consumers well
PDAMs often offer intermittent service
PDAMs often offer unsafe service

11. Lesson Two: Absent Sector Regulation is Costly
PDAMs suffer from no regulation because:
They are not financially independent and cannot become independent, professional providers
They have few incentives to serve consumers well
They are forced to think short-term in a long-term business

12. Recommended Sector Regulation
National sector regulation is needed in order to:
Allow cost and quality comparisons
Minimize regulatory costs and use scarce staff
Provide PDAMs with a benchmark for negotiations with private operators

13. National Sector Regulation
Regulation should comprise:
The coverage and quality of service
The cost of service ( tariff regulation)

14. Quality Regulation Quality regulation should comprise:
Percentage of households connected to piped water
Percentage of households connected to public sewerage
Percentage of households with continuous water supply
Percentage of household with disinfected supplies

15. Tariff Regulation Tariff regulation should comprise:
The efficiency of service since consumers should only be asked to the costs of efficient service providers
The average tariff level
The tariff structure to measure cross subsidies and affordability ( including of connection charges)

16. Indonesian and International Efficiency Data
Company
Indicator
PAM Thames
PALYJA
PDAM
Semarang
Surakarta
Best practice
Unacctd
Water,%
47 %
48%
41%
29% 5%
Staff/000
connectns
5.3
5.6
6.0
7.5
2.0
Working ratio
60%
100%
70%
37%
35%

17. Lesson Three: More Private Sector Participation
More private sector participation is justified to:
Get accountability and contractual performance
Allocate risks to whom can best manage them
Separate operational and regulatory responsibility
Raise the efficiency and quality of service
Obtain financing without sovereign guarantees

18. Lesson Three: More Private Sector Participation
BUT: More PSP must be competitively procured:
PDAMs must decide on performance before PSP
PDAMs must get expert assistance for bidding and negotiations
PDAMs must resolve the treatment of employees before PSP
Regulation should exist before PSP

19. Lesson Four: No Sound Water Management at Local Levels
The World Bank provided a Water Resources Sector Adjustment Loan of US$ 300 million in 1999 but:
At local levels ( such as in Jakarta and Semarang) groundwater is still overexploited with little control
Groundwater extraction fees are too low and ineffective
Coastal sections are sinking due to overexploitation
The future drainage and sewerage cost is ballooning because pumped drainage will replace gravity drainage

20. Lesson Four: No Sound Water Management at Local Levels
The Allocation of Raw Water Sources need:
Consider all available raw water sources ( surface or groundwater) without excluding any one
Select the source that is the cheapest
Compensate the owner of the source selected
Formalize the use of each source contractually because otherwise private sector participation is difficult

21. Lesson Five: More User Participation and Health Education
The Water Supply and Sanitation Project for Low Income Communities teaches that:
Users must be asked to signal how much they can pay
Sustainable health improvement requires safe and continuous water; sanitary excreta disposal; and health education
Service providers must offer service levels that are affordable in order to raise service levels