RESPONSE TO US EFFORTS ON WATER AND SANITATION

UNCLAS JAKARTA 011149

SIPDIS

DEPT FOR OES/PCI FOR SALZBERG AND BLAINE
DEPT ALSO FOR EAP/MTS
DEPT PASS USAID: MILLER AND DEELY

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: SENV ID
SUBJECT: RESPONSE TO US EFFORTS ON WATER AND SANITATION

REF: STATE 128229


1. (U) Response was prepared jointly with USAID Jakarta
Mission Staff.


2. (U) SUMMARY: Post is actively engaged with Government of
Indonesia (GOI) officials on water and sanitation issues
under the auspices of a Strategic Objective Grant Agreement
between the USG and the GOI to support higher quality basic
human services in Indonesia. The Agreement was signed in
August 2004 between USAID and the Coordinating Ministry for
People's Welfare (Menkokesra). As part of this ongoing
bilateral cooperation, USAID regularly engages officials
from the Ministry of Public Works, Ministry of Forestry,
Ministry of Environment, and Ministry of Health regarding
USG support to increase access to water, sanitation health
and nutrition services for impoverished Indonesians. Such
engagement covers issues cited in reftel and also includes
discussions of annual program work plans, presentations of
annual program progress, joint identification of leveraging
opportunities and discussion of technical and policy issues.
End Summary.

Needs, Priorities and Commitment
--------------


3. (U) Access to clean water and sanitation are significant
problems in Indonesia. Less than half of Indonesia's
estimated 225,000,000 people have access to clean piped
water (World Health Organization/United Nations Children's
Fund (UNICEF)). Many urban dwellers rely on contaminated
shallow wells for water; as of 2004, only 53 percent of
Indonesia's population obtained its water from sources
further than 10 meters from excreta disposal sites - a
universal standard for water safety (UNICEF). Instead
wastewater seepage tanks commonly are only 2-3 meters from
wells. The problem is even more pronounced in rural areas,
where only eight percent of the population has access to
clean piped water. These condition force large sections of
the population to either boil their water before
consumption, or pay exorbitant rates per liter for clean
drinking water from vendors.


4. (U) While approximately 70 percent of urban dwellers have
access to latrines and some type of septic system, only two
percent of the population living in or near urban centers
has access to a centralized sewage collection and treatment
system. Secondary and tertiary treatment of wastewater is
almost nonexistent, except for a few 'on-site' packaged
systems at malls and major office buildings. Many
residential septic tanks regularly overflow into the
drainage system, further polluting urban waterways. In
addition, virtually no "gray" water is treated before
reaching the drainage system.


5. (SBU) The GOI's failure to aggressively promote improved
hygiene practices, particularly among low-income families
and slum dwellers, limited public willingness to pay for
sewerage services, and dense living conditions in inner city
slums have exacerbated Indonesia's water and sanitation
problems. Moreover, many local water authorities (PDAMs)
are bankrupt, due to their inability to increase tariffs to
cover existing heavy debt burdens. The current regulatory
environment offers little clarity on how PDAMs can overcome
this debt burden or attract private sector investment.
Failure to reduce the scale of the water and sanitation
problems in Indonesia has led to high rates of diarrhea,
skin disease, intestinal and other waterborne disease in low-
income communities, particularly among children.


6. (U) Joint coordinated efforts between the Indonesian
government, multi-lateral donors, bilateral donors, and a
growing group of local environmental non-governmental
organizations (NGOs) are required to effectively tackle the
massive and complex nature of environmental health problems
in Indonesia. In addition to implementing projects in a
coordinated manner, USAID has identified technical
assistance, training, advisory services, and public outreach
on health and hygiene, rather than large scale
infrastructure projects, as priorities in their strategy for
improving Indonesia's water and sanitation conditions.


7. (SBU) The central GOI generally understands the scope of
the nation's water and sanitation issues and is committed to
solving these problems. However, poor cooperation and
internal acrimony among ministries has hampered progress in
tackling these issues in the past. Indonesia's
decentralization program also contributes to inertia on
these problems due to the more limited technical
understanding of the issues as well as resource constraints
at the municipal government level.

Opportunities to Strengthen US Engagement
--------------


8. (U) The USAID/Indonesia Environmental Services Program
(ESP) is a proven platform on which to strengthen US
engagement in water and sanitation issues. ESP was
conceived and established as a large, multi-sectoral,
integrated program to address the complex interrelationships
of the above-described problems. The problems in Indonesia
are on a massive scale and there is no other program (by
GOI, World Bank, Asian Development Bank, or others)
similarly positioned to address these problems, particularly
at the local and community level.


9. (U) Spread over nine of Indonesia's 33 provinces
(representing 70 percent of Indonesia's population),the ESP
is making significant and noticeable impact, but even
greater effect could be achieved by increased engagement
with community groups, local governments and NGOs to roll
out this work in the seven provinces involved in the
project. Additionally, USG could expand USAID activities to
include a number of additional provinces, particularly those
in South Sumatra, Kalimantan and Sulawesi.


10. (U) USG could strengthen engagement in ESP and other
donor water and sanitation projects in relation to
governance, mobilization of domestic resources,
infrastructure investment, protection of public health,
science and technology cooperation, and humanitarian
assistance, in the following ways:


11. (SBU) Governance:

-- Work closely with the USAID Local Government Support
Program.
-- Work closely with the World Bank's Indonesian Sanitation
Sector Development Program to implement GOI policy. USAID
involvement can ensure a pro-poor and participatory approach
to sanitation infrastructure investments in major cities in
Indonesia.
-- Systematize private sector participation with step-by-
step, project life cycle type procedures, requiring good
feasibility studies, and transparent and competitive bidding
practices.
-- Work with GOI to create an `investor friendly
environment' and create one public-private partnership unit
rather than allowing each ministry to maintain its own unit.
-- Work more closely with technical ministries to
understand and promote change.


12. (SBU) Mobilizing domestic resources:

-- Add support to current program of improving the
technical, operational and financial management of water
companies. (Note: Younger, more forward-looking managers,
mayors, and Bupatis (district leaders) understand the need
for these improvements, and also understand that improving
public services may help them get re-elected. End Note.)
-- Increase involvement with the World Bank Institute's
work with the Indonesia Association of Water Utilities
(PERPAMSI),PDAMs and ESP. This will broaden USAID's
ability to mobilize domestic resources for pro-poor piped
water expansions.
-- Develop model microcredit programs through local banks
to mobilize necessary financial resources to make initial
hook-up costs to piped water systems affordable to poor
households and communities.
-- Encourage corporatization of PDAMs at a minimum, leading
to possible privatization of PDAMs.
-- Assist city officials in developing wastewater and
septic tank sludge collection and treatment methods, as well
as creating a sound system for collecting fees to cover the
costs of these methods.


13. (U) Infrastructure investment:

-- Work to improve public outreach and communication. Assure
that municipalities, communities and users participate in
the planning process, understand the need for
infrastructure, the responsibilities that come with it, the
need for efficient operation and maintenance, and the need
to fully understand what they will be paying for and what
kind of service they should expect.
-- Enable conditions for infrastructure investment at all
levels, municipal, provincial and national, through support
of corporate planning, training and capacity building.
-- Assist GOI in issuing general obligation and municipal
bonds and in ensuring that the bond issuance process is well
managed, is fully transparent, and maintains a system of
accountability.


14. (U) Protection of public health:

-- Implement extensive, comprehensive programs for
behavioral and attitude change.
-- Expand community education campaigns at the household
level.
-- Conduct more formative research to better understand how
to systematically tackle practical health issues, as well as
hygiene and behavioral change needs.
-- Work to improve Ministry of Health communications via
multi-media campaigns, innovative best practices, and
saturation techniques.
-- Expand programs with schools and youth groups, to
educate children on good hygiene practices and to stimulate
discussions with elders at home.

(Note: USAID is doing a great deal of the above protection
of public health work routinely in each of the provinces in
which it is engaged under ESP; however, the current program
cannot keep up with current demand for these interventions,
signaling a need for additional spending in these areas.
End Note.)


15. (U) Science and technology cooperation:

-- Increase the number of exchanges, study tours, and
observation tours related to water and sanitation
technology.
-- Fund universities to develop programs on appropriate
designs for sanitation, minimum design standards and
building codes, wastewater treatment methods, waste
reduction and disposal techniques, and energy efficiency.
-- Encourage water treatment equipment manufacturers to
establish plants in Indonesia for domestic consumption as
well as competitive exports, possibly using export
processing zones with investor incentives.
-- Set up regional learning centers based in Indonesia, in
English language, to attract regional students, similar to
the Asian Institute of Technology in Bangkok.


16. (U) Humanitarian assistance:

-- Help the government to coordinate and synergize relief
and donor agency efforts for both short and long term goals.
-- Create experienced, knowledgeable, in-country rapid
response Water and Sanitation teams to respond to
emergencies, rather than bringing in teams from overseas who
face a steep learning curve.


17. (U) Agricultural and industrial pollution of streams,
rivers and ground water is an important area of concern that
the ESP and other agencies have not addressed. This issue
warrants a much larger and broader program, and could
include the concept of a "river basin commission" to
maintain responsibility for monitoring the entire length of
affected waterways.


18. (U) USAID also is supporting Aman Tirta, a program
implemented through Johns Hopkins University that is
designed to facilitate increased access to safe water
through the introduction of a point-of-use water treatment
method. The point-of-use treatment method safely and
affordably chlorinates water at the household level to
prevent recontamination. The program will develop a
commercial model of a non-subsidized sustainable point-of-
use water treatment product through a public-private
partnership. The program runs from February 2005 - February
2007 and operates in the pilot provinces of North Sumatra,
Banten, West, Central and East Java, and DKI Jakarta.

Opportunities for Leveraging Projects in Other Sectors
-------------- --------------


19. (U) ESP cooperates with other USAID programs such as the
Health Services Program, the Safe Water Systems Program, the
Local Government Support Program, the Food Security and
Nutrition partners, and, importantly, the Decentralized
Basic Education program. However, additional funding would
strengthen these linkages. USG could leverage these
projects by creating joint education modules for schools,
training of the trainers programs, and multi-media campaigns
to support large scale behavioral change in the areas of
handing washing, water treatment, and improved sanitation.
Together these programs reach 1000+ communities and schools.


20. (U) USG also could link water and sanitation programs
with the new Avian Influenza program, especially in areas
with large chicken slaughter industries that would benefit
from improved sanitation, solid waste management, drainage
disposal, better initial planning, and licensing by health
inspectors.

Specific Opportunities to Support Mission Efforts
-------------- --------------


21. (SBU) Washington programs can provide expertise,
resources, and, very importantly, high profile publicity to
current mission programs that are successful at the local
level, assisting Indonesia in raising the impact of these
programs to the national stage. Mission objectives would
benefit particularly from:

-- Adding resources to the Safe Water System program would
benefit numerous every-day households as well as the
inevitable disaster response efforts.
-- Dramatically expanding the small Aman Tirta program
would significantly increase its impact.
-- Increased collaboration with Japan Bank for
International Cooperation (JBIC) to develop public-private
partnerships that leverage commercial finance, JBIC loan
funds and credit enhancements to lower financing costs of
municipal water and sanitation infrastructure projects.
-- Assisting USAID's Development Credit Authority to be
more aggressive in understanding local conditions, risk
management, and mitigation of these risks in order to
increase the opportunity to facilitate more credit
guarantees.
-- Assistance from Washington to improve the political
will of the GOI to see bond and private sector programs
through with a high level of transparency, competition and
good practice to increase investor confidence would also be
highly useful.


PASCOE