Indonesia’s Water Supply Regulatory Framework: Between Commercialisation and Public Service?

Due to financial and operational problems faced by local Indonesian water supply companies (Perusahaan Daerah Air Minum – PDAMs), people depend for their domestic water on many private providers, who use groundwater as their source. Within this context, this article interrogates the current water supply regulatory framework and its implications. Indonesia is at the crossroads of treating water supply as a public service or commercialising it through market or market proxy mechanisms. Through content analysis and a literature study on the impacts of such regulations in the past, this article shows that Indonesia’s regulatory framework lends itself to the commercialisation option. Some findings on the current regulations and their impacts indicate that awarding commercial water rights has the potential to marginalise traditional users as well as create administrative problems; adopting the full cost recovery concept has made PDAMs reluctant to expand their services, especially to the poor; inviting the private sector to manage water supply is surely not in the best interests of the provision of public services; assigning an Indonesian National Standard (SNI) has resulted in bottled water becoming the most reliable drinking water; and allowing groundwater extraction to take place without sufficient regulation and law enforcement has resulted in excessive extraction at a detriment to the environment