World Bank Documents

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INDONE :WATER USE RIGHTS S!UDY

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Indonesia: Water Use Rights Study, Stage 2 : River Basins Surveyed

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EXECUTIVE SUMMARY

1. INTRODUCTION AT THE OUTSET, we wish to make a few points: * Water Use Rights (WURs) are a complicated subject. For ma4y WUR-related issues, there is no such solution like "one size fits all". This is especially tr e in a country like Indonesia, where 210 million people live with diverse ethnic and cultura]L backgrounds spreading over 13,000 islands. For success, solutions must be able to be varied to match each situation basin by basin. * Likewise, we can define a WUR in many ways. In this Studyr, however, we define it as a right to abstract and use water at a specific point for specific purpose and duration. A WUR is (i) recognized by laws of a state/nation, (ii) protected asainst damage caused by the actions of third parties, (iii) may be regulated by the state/nati bn, and (iv) may be managed by the state directly, or by the community, or by market forces, or by a mix of any of those. * "Right" is an emotional word. It can evoke an aggressive attitude among people involved in protecting or gaining "rights". However, the "right" in )X{UR is also about sharing of water for the good of the community. In a country like Indonesia, there is a ground for a gentler approach to rights based on the tradition of "gotong r oyong" (a collective norm of self-help) and "musyawarah" (a process of discussion culminating in a consensus choice). Thus, local participation in local negotiations is one of the key ways to deal with conflicts. * It is important to distinguish between water itself, which can] ot be "owned" or privatized under the Indonesian Constitution, and the highly limited and controlled right to abstract and use it - a right which can be owned and is the subject of ot4r study. The confusion of the two different matters lies at the heart of the opposition to watet rights transfers. * The World Bank commissioned this Study. Our client there ore is the Bank. The Bank, however, will use this study as an important contribu ion from the international professional community, to its dialogue with the Goverm nent of Indonesia where it concerns the better understanding of the WUR , and the constr acting of a WUR framework. The analysis of WUR in the varied Indonesia context is still in an early stage. It is clear that the current perspectives on WURs of the Bank, of the Government, and of the key stakeholders in the Indonesian society, such as the Parliament. can differ on several points. The introduction of WURs would likely have many ramificat ons, but the Study Team has attempted to present a professional view and avoid the politi al debate - calling a spade a spade.

* The Study also made a deliberate effort to bridge the anthropological analysis, essential to understand how resource property rights work out and can be workable in local societies, ii

with the more mundane and practical questions how such system could be administrated effectively under the constraint of a relatively weak administration framework. Covering both sides of the issue is challenging but necessary. The proposed principles and components of a WUR system should be treated as a preliminary, virtual proposition, in full cognizance of the Indonesia societal and administrative features, but possibly still understanding political and economic factors that could support or refute these recommendations. The subject deserves further study, on its economic and anthropological dimensions, but also on its practical administrative applicability. For this, piloting in the basins will be necessary.

This Study is decidedly irrigation biased, but with a good reason. In Indonesia, irrigators, who do not need permits to abstract and use water and are exempted from paying water taxes, are using almost 90 percent of total freshwater resource available. While there exist reasonable legal and institutional systems for the remaining 10 percent users such as municipalities, industries, power companies, and fisheries,.the customary right of the irrigators is not well defined or recognized, let alone quantified or registered, despite the rhetorical guarantee by the Water Use Law as having higher priority than permit holders. We felt that it is about time to squarely deal with the customary rights of the 90 percent water users. Further, demands by other sectors can often only be met from the agricultural sector, reinforcing need to recognize and protect their rights.

2. BACKGROUND

Stepping back, between 1999 and 2003, the Government of Indonesia introduced a series of reform measures based on the concept of decentralization, participation, empowerment and democratization. The water sector was no exception. Among many donors, the World Bank has been assisting the govermnent through its policy-based support and is now following up those coordinated assistance with a three-phased Adjustable Program Loan named Water Resources and Irrigation Sector Management Program - WISMP (2004-2014: the loan, however, is yet to be signed).

Before WISMP implementation starts, the Bank wished to accumulate more knowledge on WURs in Indonesia. It therefore commissioned a first set of small case studies as a Preparatory Study for Water Use Rights Administration Systems in 2003 to identify key issues in the potential introduction of WURs in Indonesia. This 'Stage 1 Study' successfully assisted the Bank in understanding the related opportunities and constraints, drew lessons from international experiences, and put in place a first opportunity to engage in a focused dialogue with the government and with other stakeholders. This preparatory study, however, was very limited in scope and aimed mainly to start the discussions on WURs among the stakeholders.

Against this backdrop, the World Bank commissioned Stage 2 of the WURs Study to further the understanding of the issues related to WURs in Indonesia, based on studying and advancing the conceptual hypotheses and outlines for administration systems in selected river basins, as recommended by the Stage 1 Study. This should then lead to such administration systems that could in principle pass the criterion of feasibility, and be further established and operationalized in later phases. A joint team of Sanyu Consultants, Inc. of Japan (the main contractor) and LP3ES of Indonesia (the sub-contractor), who carried out the Stage 1 Study, was selected to conduct the Stage 2 Study.

The Team Leader carried out a preparatory mission in January/February 2004, and the entire team consisting of nine international experts and nine Indonesian experts', all of whom paired up according to specialization, carried out intense fieldworks during March/April 2004 in two river basins, namely Brantas in East Java and Citarum in West Java, 2 as well as in Jakarta. A number of local workshops were conducted in the two basins and the First National Workshop was held in Jakarta on March 25 mainly to present the Team's findings and obtain feed back from the participants. In June, the second fieldwork was carried out in Jakarta including the Second National Workshop held on June 29 mainly to present the Team's recommendations and obtain feedback from the participants.

The new government, which was elected in September 2004, is now proceeding with the Bank to sign the WISMP by mid-2005. In the new "participatory irrigation management" paradigm, the Government considers that Water Users Association Federations (WUAFs) must be legalized at scheme level and will receive WUR, and then manage it inside the scheme. The Bank's Country Assistance Strategy (CAS) FY 04-07 for Indonesia states that its base case lending program ranges from $450 to $850 million a year. The priority of the Bank program are the reduction of poverty, and more specifically, the stimulation of economic and entrepreneurial activities, and the improvement of local-level service delivery by the Government and the utilities (which would include irrigation, bulk water supply, flood protection, etc.)

3. FINDINGS 3.1 Stakeholder and Problem Analyses in Brantas and Citarum Basins

In order to know who are the stakeholders and what problems they have in the two selected basins, the Study Team held six workshops using the Project Cycle Management (PCM) method. Regardless of whether we found anything new or not, this was a highly participatoryapproach and the process itself was extremely useful for the stakeholders to think about the subject in an orderly manner, debate about the issues and come to some consensus where possible.

ISee Chapterl for the composition of the Study Team. 2 As to why those two river basins were selected, see Chapter 2. iv

3.1.1 Importance of Horizontal Communication and Coordination

There were obvious differences in farmers' capacity between where Irrigation Management Transfer (IMT) had taken place and where it had not. Those farmers in the former were much more capable and also more motivated than those in the latter . Water User Association Federations (WUAFs) at secondary and primary levels were found to be essential for farmers to communicate and coordinate horizontally. Many participants in the PCM workshops pointed out that lack of farmers' involvement in the decision making process is the main cause of the problems on water use. Without WUAFs, irrigation committees at district level and forum at province level cannot really function.

3.1.2 Simplification of Government Services and Stable Policies

It is complicated and unclear for water users how responsibilities are divided vertically (national, province, water management corporation or Perum Jasa Tirta (PJT) - and district) and horizontally (water resources, agriculture, mining, cooperative, interior, etc.). Services, and associated taxes and fees should be simplified, and one-stop service is the best answer at least for the users.

3.1.3 Farmers' Expectation towards Industry

Industries are welcomed by farmers if factories (i) pay compensation to help meet the O&M costs of canals, (ii) treat waste water properly, (iii) minimize their water use (at least proportional to farmers' efforts), and (iv) put clean waste water back to canals.

3.2 Social Analysis

Locally managed irrigation systems in the Brantas and Citarum basins, whether traditional (informal and village-based) or integrated into an official WUA or WUAF, are efficient vehicles for operating and maintaining irrigation infrastructure and for delivering water to the farmers with full participation and low transaction costs based on the tradition of gotong royong and musyawarah. Although differentiated by the impact of urbanization and industrialization and affected by the lack of fit between territorial administrative boundaries and irrigation command area, the viability of these locally controlled irrigation associations remain key assets.

Licensing of water abstraction rights to industries has diminished customary WURs. Giving license holders full allocations during water scarce periods lessens that available for non-license holding irrigators. Rotation is necessary as a result. Yet, farmers are often forced to bribe Water-masters or manipulate gates to obtain water, breaking rotations schemes. The lack of sanctions worsens this situation. Villagers see such actions warranted if otherwise there is a significant risk that a harvest will fail; if this is the case, village irrigation officials will not necessarily consider collusion or water theft a violation of a law. V

Converting customary WURs to registered WURs will help rec ify the situation, as farmers clearly understand. Farmers and WUA officials alike indicat they would welcome the registration of historic flows at key points. Registration shou be accompanied by clear agreements as to the special and temporal dimensions of WUAs fnd convincing evidence that they will be enforced.

The conversion of customary rights into recognized and registerel WURs, and, the transfer of responsibility and authority for management of physical infrastmucture at the corresponding levels (at least secondary and tertiary, if not primary also) could itcrease water trading without external intervention. At this stage in Indonesia's modernizatior=of water management, these would be significant reforms.

3.3 HydrologicalAnalysis

3.3.1 Quantification of Customary Water Use

In the two sample areas of the Pehngaron Irrigation Scheme in Rrantas and the Wangisagara Irrigation Scheme in West Java, we tested both the actual flow-sieasurement and the demand calculation based on cropping patterns and observed a high correJation between the results of the two. Consequently, where no actual flow records are available, the crop water requirement methods can be used to estimate the historical water use. The results of the simulation exercises are shown in Figures 7.2 and 7.8 in Chapter 7.

3.3.2 Water Quality

Our surveys show cases much higher BOD and COD levels in the Lower Brantas (the Surabaya River near Surabaya City and the Brantas River near Malang City: than other areas, making the water unsuitable for irrigation. The situation, however, has started 1to improve lately.

In the Citarum basin, pollution of surface water resources upstre4m of Saguling Reservoir has reached an alarming level. There exists a serious threat for the quality of water supplied to Jabotabek region. The area can no longer use the canal water dur ing some periods of the year. Unless some serious measures are taken soon, the drinking water supply to the Jabotabek will face a crisis situation. There is a general lack of domestic wastew *er treatment, and 60% of the population in the upper part of the basin lives in areas where wa tewater is directly drained to surface water.

3.4 Economic Analysis

3.4.1 Water Re-allocation

There are three distinct causes, which would trigger inter-secioral and/or inter-site water reallocation: (i) structural trends, (ii) temporary scarcity, and (iii) |conomic opportunities. For vi

each cause, we consider the relative significance of the rights regime itself, and the level and mechanisms of compensation.

The following table summarizes the three causes.

Table ES-1: Water Reallocation Causes, Drivers and Key Issues Causes Driving Factors Issues Long-term Rural-Urban Migration Rights with Land, or Farmers? (or revert Structural Growth in Income to Government?) Trends Conversion of Sawah Land Price Environmental concerns Temporary Dry Season, Drought Compensation for affected rights- Scarcity Basic Needs take priority holders? Permits, Licenses honored Water Banking?

Economic Declining profitability of farming Improved allocative efficiency Opportunity Rent-seeking by farmers? Against food self-sufficiency Transactions costs?

The water demand projection for the Brantas and Citarum basins shows that in both basins (i) the total demand would increase (though much more rapidly in Citarum than Brantas), while (ii) the agricultural demand would decrease, and (iii) the other sectors' demand would increase.

3.4.2 Water Valuation

We do note that the Law 7/2004 prohibits transfer of WURs. We are also well aware of the reluctance by some stakeholders to accept any from of valuing water or of WURs transfers (lumped together here under the term 'water trade'). Nevertheless, certain types of water trade or reallocation are indeed being practiced, and in our opinion, those who are against water trade and would like to protect it, would be the loser, unless more orderly, transparent, and equitable water trade system is introduced and regulated by the government.

Although an immediate introduction of water trade using water market is much premature, and we should first establish a functioning WURs system, it would be worth while to think of the water prices in case there were someday an authorized reallocation of water and consequent exchange of compensation. How would then the compensation rate be determined? It requires attention to three distinct albeit related concepts: the cost, price and value of water. While it is specific to one location, the mean value of water saved by efficiency improvement is estimated at around Rp 86/m3, which is a little higher than the bulk water charge for industry by PJT-1. Details of calculating these values are presented in Chapter 8 and Annex 13.

We performed a sensitivity analysis in the Brantas basin. It was observed that if off-farm earning potential is equal to implicit on-farm family wages, roughly 23% of farmers are better off as water sellers at water price of Rp 40 per m3 (the currentbulk water levy that the PJT vii

charges to the Municipal Water Companies for raw water) and 45 E are better off at Rp 100 per m3, assuming paddy producer prices of Rp 900 per Kg.

The extent of trading was even more sensitive to variation in pa4dy producer prices. At low producer price (Rp 750 per Kg), over 25% of farmers are betterIoff as water sellers, even at water sale prices as low as Rp 10 per m3 . If water can be sold fo4 Rp 100 per m3 , over 2/3 of farmers find it more profitable to sell water and labor than to farm paddy, relinquishing water by the marginal farmers.

Declining profitability of paddy crop will strongly influence the economic opportunity of relinquishing water. In dry season, there would be no water users who have excess water in their rights and therefore, someone could suffer from reallocation it there is no compensation of any kind or any measure to create surplus water in spots by water u4e efficiency improvement.

3.5 Institutionaland Legal Analysis

The Law 7/2004 comprises eighteen chapters and one hund4d articles. It contains an overall basis for establishing a more comprehensive water rights system. It deals primarily with principles, leaving details and implementation to subordinate legispation. Because these details will be absolutely crucial to success of the water rights system, we suggest that the preparation of these subordinate documents should take note of in-dep h aspects of water rights administration which have been drawn from wide experience elsewhere and included in Chapters 3 and 10.

What are the customary rights? It is useful to divide these into "traditional community rights" covered by Article 6 of Law 7/2004 and non-commercial irrigaticn rights or "public irrigation located in irrigation system", as covered by Article 8 of the Law.

Article 8 of Law 7/2004 simply describes the "public agriculture" las a water usage right that is acquired without permit. The accompanying elucidation to A4rticle 8(1) explains "public agriculture" as cultivation covering the water need not exceeding j liters per second per family. This implies that a "family" could irrigate at times up to 1.67 ha 4vhilst still qualifying as non- licensable and exempt from water resource management charg s that would otherwise be payable under Article 80 (1). This would include most of the irri ion farmers.

The coincidence of the commitment to modern irrigated water mrnagement with the bold and also commendable decentralization policy has added to the implrmentation difficulties and a number of confusions and tensions at all levels of the government.|In particular, the rapid move of water administration functions to ill-prepared districts requi4es urgent capacity building support to ensure that the difficulties are only transient. The cau se of comprehensive WURs would be greatly assisted by a significant review and rati onalization of institutional arrangements including the provisions relating to water features that cross administrative boundaries. Such a review should center on strengthening river basin management and take viii

advantage of the experience gained in the use of state-owned corporations for service delivery functions.

There are no formal rights to enable public participation in license decision-making. Neither do the disputes provisions in either licenses or supply contracts include procedures to protect right holders in the event of disputes with PJTs or other users. Institutional weakness can be seen in the low level of supervision of compliance with license conditions. To date there has been minimal administrative enforcement and even less enforcement by prosecution as criminal offense.

The blanket ban on transfer of water use rights will be found to constitute a major impediment to the critical imperative for re-allocation of water to meet social and economic goals, particularly to meet increasing demands for urban and industrial water. Means must be found to dispel concerns about the concept, and a major effort made to formulate an acceptable reallocation mechanism that removes the current incentives for uncontrolled or black-market water transfers, and establishes a controlled re-allocation that is both equitable to the parties involved and operates in the public interest.

In summary, the present legal and institutional system needs significant development before it will be able to support a comprehensive system of WURs.

4. CONCLUSIONS

4.1 ProtectingCustomary or Non-FormalizedRights

Unlike municipalities, power companies and industries, irrigators do not have a formal and legally recognized document that records their volumetric and flow rate rights to water in the public canal system. Achieving this publicly available record of WURs or WUAFs is clearly the first step in ensuring visible implementation of the intent of the 2004 Water Resources Law that this public irrigation should have priority. To achieve this, there is a need to quantify and register such customary rights.

There are, however, real and practical problems with creating a register of rights that can be guaranteed. Mexico is one country that attempted to do this by requiring people who believed that they held some right to come forward and identify themselves within a specified time period. Apart from the volume of notifications overwhelming the bureaucracy, the approach contains a flaw that anyone who does not register their interest ahead of the due date can effectively be denied entry to the water sharing system. The decree that authorizes the process in Indonesia should contain a "safety net" provision. This provision would entail also decreeing that all such water uses (that is, public irrigation) in existence at the time of the decree are deemed to have equal status and priority with rights that are recorded in a public register. ix

In order to distinguish the water use rights for these customary use , we propose that regulations and decrees provide for a Certificate of Water Entitlement (CWE) (or similar name) with characteristics as described above. The rights certificate would ba sically record, the owner, the authorized use, and authorized maximum volumes and flows as ap licable.

Who should own such a Certificate of Water Entitlement (C'tE)? The issue of such a certificate should be given wherever possible to a properly constit ted Federation of Water User Associations (WUAF) or other appropriate organization. Duties and authority of the organization require appropriate strengthening to support the man gement of their WURs. This includes clear definition and agreement of their spatial area of authority in relation to management and allocation of canal flows.

In cases where such Federations do not yet exist, the relevant government should hold the Certificate temporarily in trust for the irrigation scheme water user. The actual office or officer who holds the Certificate should be distant from the routine irrigati on management (for example, a government-employed water-master would be inappropriate), an d be duty-bound to act in the water users' interests.

What about the rights of third parties to abstract water from tlie canals? Most likely, two permits would be needed: one, a permit issued by government to access a specified volume of water; and the other a permit issued by the irrigation entity (e.g. MUAF) to use the works of the irrigation system.

4.2 Re-allocation of Water Resources

Re-allocation in the following discussion refers to changes of relative shares of water use within a closed system with no more water left for newcomers. By d finition, re-allocation is not needed in an open system with surplus water - a new user simply acquires a new water use right.

The study team found that in fact a lot of mutually satisfying reci rocal and temporary transfer of water between neighbors was being practiced. We suggest iothing be disturbed of this practice.

The more important issue concerns permanent re-allocation. Ourl economic analysis indicated that these re-allocations are inevitable. Our study did not, however, concern itself with pursuing user-to-user permanent water transfers. Apart from the current lam, prohibiting WURs transfers, there is also the practical issue that establishment of a compi-ehensive WURs system by individuals will be slow and onerous, and is required to be complete and satisfactorily functioning before moving on to considerations of markets in use xjights. The major issue of reallocation of water from agricultural use to industrial, power anmI municipal uses is however something that is real, is happening by default anyway, and shoulk preferably be dealt with in a well-organized fashion.

It might be expected therefore that, just as parts of the groundwater basins of West Java be treated as "closed" to new or additional water users, so will the surface water basins be progressively "closed". Once this has occurred, there is no choice but to have in place well- x

developed policy to re-allocate resources from one use to another in accord with the basin development plans.

If farmers are to be given formal shares then there will need to be a policy formulated as to how to handle water that is now "resumed" by the government. This requires further extension of the economic studies undertaken by the Study Team to determine a fair compensation.

4.3 Strengthening River Basin Management

We found the existing situation to be characterized by:

* Balai that are under-resourced for their tasks or exists only on paper; and

A key task for those entrusted with the drafting of implementing regulations for Law 7/2004 must be to clarify roles and responsibilities and to ensure that the principle of 'one basin - one management' is not lost amidst the complexities of decentralization. We would urge that every attempt be made to set up a single basin institution where basins cross provincial boundaries. This single institution would be a joint venture between the provinces concerned, which would avoid creating conflicts of interest at the national level by confusing roles.

4.4 Enforcement and Conflict Resolution

The problem of traditional conflict resolution through discussion and eventual consensus is that, like the traditional water allocation mechanisms, it does not cope well with increasing commercial use of water or with increasing water scarcity.

In harmony with local culture, nonlegal dispute resolution concerning water use rights is to be preferred. The first method is setting up a so-called expert tribunal. In fact, such a tribunal may only have one expert, with other members being people of broad practical experience and standing in the community. The second approach might be termed expert mediation. On the whole the latter would seem to fit the culture rather better and we suggest that this be further developed and tried in the proposed water use rights pilot studies.

4.5 Reserving an Environmental Water Allocation

creating significant environmental change and degradation in the a sociated aquatic ecosystems. We suggest that rapid assessment techniques, such as the use of "e pert panels" as used in other parts of the world (including currently the Mekong River Basin), le explored in the near future to attempt to avoid costly and irreversible environmental damages.

4.6 Reducing Groundwater Use to Sustainable Yields

The challenge in managing groundwater is to adequately deternine the long-term recharge pattern of respective aquifers and to design an allocation system that does not allocate more water in total than is provided by the long-term sustainable yield. j[o their credit, the provincial groundwater administration in West Java has begun the process|of zoning the area to apply graduated controls (ranging from prohibition of new bores to resictions on flow rates) based on hydro-geological analysis. At both provincial and district level, illegal bores are also being physically locked off. The need for an integrated approach (including perhaps considerations of higher energy rates as disincentive for pumping) is clear.

5. MAIN RECOMMENDATIONS

5.1 General Recommendations

To achieve the goals mentioned in the previous section, we recom4nend that the Bank and other donors should assist the government with a two-part program:

* Establishment of comprehensive pilot WURs systems in fou4 representative basins across Indonesia presently under water demand stress; and

* Support for development of water allocation planning, and WILRs management policy and practice that, among other things, addresses:

* Law enforcement in managing water abstractions 1

* Broad-based public participation in water allocatiol

* Environmental flows research, policy and practice

* Strengthening river basin management, particularl4 in water licensing.

5.2 Specific Recommendations

The Study Team has made 58 specific recommendations under six broad goals mentioned above. In this Executive Summary only those six broad goals and ithe most important specific recommendations to achieve such goals are presented. The full set of the recommendations is given in Chapter 11. xii

A. PROTECTING CUSTOMARY OR NON-FORMALISED RIGHTS

Overall Recommendation: All water uses within a river basin should be brought under a consistent allocation and management regime of rights-based water sharing. It should protect customary uses in an equitable, open and participatory manner by including them in a formal registered system of rights issued (by Provincial Governor) to water user organizations. The rights should be of the same legal and enforceable nature and be complementary to the rights that exist for all other water uses.

A-1 BASIN-LEVEL OR BULK WATER USE RIGHTS

* Legal and directive instruments should be formulated to progressively authorize the registration of the basin-level water use rights of irrigation schemes through the issue of a Certificate of Water Entitlement (CWE) to each scheme. Such Certificates should have the same legal status as permits authorized under Law 7/2004 and be available for public perusal on an official Register of Certificates. (Recommendation 1 or R-1)

* A consultative approach should be adopted from the outset and a Basin Community Advisory Committee of stakeholders should be formed to guide implementation. The Committee should work also with the Basin Water Resources Management Committee (PanitiaPelaksana Tata PengaturanAir), and any water resources council or other formal coordinating bodies currently established or being established under Law 7/2004. (R-2)

* The legal and directive instruments referred to in R-1 should state that all customary water uses (that is, daily basic needs and public irrigation as defined in Article 8 (1) of law 7/2004) in existence at the time of the enabling decree are deemed to have equal status and priority with irrigation schemes recorded in the official Register of Certificates, and give any scheme or water user that believes that they have been overlooked the right to apply for registration. (R-5)

* CWE should be issued in perpetuity, but with provision for five-yearly review of all attributes including the water entitlement itself and associated conditions of use. (R-6)

* CWE should apply at the point of intake from the river, and include the water volumes and flows allowed for that scheme at specified times of the year, and specify the authorized uses of water within that scheme including volumes for irrigation and for other permitted uses where they exist. The certificate should list all the tertiary areas serviced by the scheme and include all customary rights in the entitlements including fishponds and the like. (R-7)

* CWE should be issued to appropriate water user organizations (normally WUAFs) (R-9). In cases where such Federations do not yet exist, the relevant government should hold the Certificate temporarily in trust for the irrigation scheme water users. (R-10) xiii

In recognition of the fact that WURs are meaningless unless held directly by the relevant water users, the Bank should continue to support the d velopment, promotion, and implementation of participatory mechanisms and in the ong run, irrigation scheme management transfer. (R-I 1)

A-2 WATER USE RIGHTS WITHINIRRIGATION SCHEA'ES

Overall Recommendation - It is proposed that there be a secoid tier of WURs recognized below, and contained within, the basin-level WURs as expresse4 in CWE. These second tier rights should not be controlled by government but by scheme federitions

* Concurrent with the technical work in the pilot basins needzd for establishing the basin- level entitlements, technical studies should proceed within irrigation schemes to at least the degree needed to establish entitlements at secondary canal lev~l. (R-16)

* The customary rights of traditional irrigation systems drawing off of a secondary must also be recognized and this should be accomplished by discussion and consensus, musyawarah, by all the stakeholders of a secondary canal. (R-23)

A-3 ISSUE OF NEW PERMITS WITHIN IRRIGATION SCIEMES

Overall Recommendation - Once a CWE is issued to an irriga ion scheme and the scheme federation begins managing the associated water right, new WU s of industry or other water exploitation categories (Hak Guna Usaha Air) should only b granted by the respective provinces on a basis that is acceptable to existing water users withi the irrigation scheme.

* The application for a water exploitation permit should be advertised for four weeks prior to its consideration to enable representations by potentially affected parties, and the applicant for the permit should be required to obtain formal permissioii from the scheme federation for use of the scheme infrastructure to deliver the requited water entitlement under specified conditions. (R-25)

B. INTER-SECTORAL RE-ALLOCATION OF WATER RESOURCES

Prime Recommendation: Because of growing demands for m4nicipal and industrial water supplies needed to underpin continued economic developraent, the formulation and implementation of orderly, equitable and transparent processes of water re-allocation under the auspices of Law No 7/2004 on Water Resources should proceed without delay.

* Until and unless WURs in Indonesia become considerably nlore comprehensive and well established, it is recommended that any within-season temp orary re-allocation of water within irrigation schemes that is made desirable by water shortages or other causes should remain as a matter for traditional or customary practice as at present, and as implied in R- 21. Becoming any more formalized or complicated would be premature at present. (R-28) xiv

* In relation to the more critical permanent re-allocation of water, policy development should concentrate through a more direct administrative decision for reallocation:

- Which government body should plan and control re-allocation?

- How can the public interest best be served - through a common 'water bank' or through a more direct re-allocation process?

- How does someone wanting an additional or new entitlement register his or her interest?

- How does someone wishing to divest of his/her interest in water register his/her interest?

- Should any rules be formulated to prevent potential monopolization of rights, or should each re-allocation simply be treated on its own individual merits?

- Should the compensation involved be payable by the government or by the holders of new water entitlements?

- Should the quantum of compensation be set by government or be a mutually agreed transaction between those giving up water entitlements and those acquiring new water entitlements, under an arbitration or supervision umbrella of government?

- How can the community be involved in the processes? (R-29)

These questions should be discussed when the pilot programs take place before any inter- sectoral reallocation of WURs is done.

C. STRENGTHENING RIVER BASIN MANAGEMENT

Overall Recommendation: River basin management and its institutions, especially Balai, should be strengthened and improved in capacity so that basin-wide water allocation, licensing and management can achieve the best possible social, economic and environmental results from scarce water resources.

* Under the mandate given by Articles 11 and 12 of Law No 7/2004, the government should as soon as possible establish a basin-wide comprehensive water allocation and licensing system, that incorporates all water uses including bulk customary rights as covered in Recommendations 1 to 12 (see Chapter 11) (R-32)

* Restrictions of supply at times of declared shortage be done on a proportional basis, water use category by water use category, according to the formal priorities established at law (Article 29 of Law 7/2004). This means, in effect, that a water entitlement is not an absolute quantity but a defined share of available water resources. Where the probabilities of water being available are well known, they should be publicly available in order to guide investment in water development. (R-35) xv

D. ENFORCEMENT AND CONFLICT RESOLUTION

Prime Recommendation: Present mechanisms for achieving compliance with water use rights, prosecuting or otherwise dealing with infringements, and for resolving water rights conflicts should be augmented and strengthened.

* A system of civil hierarchy of administrative sanctions should be formulated at the national level to include initial warnings, imposition of fines and through restricting access to water abstraction as a result of the permit-holder breaching conditions of the permit. (R-46)

* Every effort should be made to not lose the strength of traditional water sharing practices and the use of discussion and consensus so as to create solutions that people want to abide by. (R-47)

* The provisions on criminal enforcement set out in Law 7/2004 should be supported with procedures setting out how enforcement proceedings can be brought, the respective responsibility of each level of government and each agency and guidelines to indicate when a prosecution is warranted. (R-49)

* Consideration should also be given to supplementing criminal enforcement provisions with civil enforcement provisions that can be implemented by government agencies and which include remedies such as injunctions and damages. (R-50)

E. RESERVING AN ENVIRONMENTAL WATER ALLOCATION

Prime Recommendation: Basin-wide water allocation and water use licensing practices should be amended to provide for an environmental water allocation.

* The appropriate water environment agency in each jurisdiction should begin determination of acceptable environmental flows as soon as possible. These flows should take into account flow dynamics as well as acceptable minimum flows at critical locations. (R-53)

* Water use permit issuing agencies should be obliged to make provision for these environmental flows as an imposed minimum river flow abstraction condition on issue of all future water use permits. (R-54)

F. REDUCING GROUNDWATER USE TO SUSTAINABLE YIELDS

Prime Recommendation: All groundwater allocation planning and water use licensing practices should be based on assessed long-term sustainable aquifer abstraction and no permits should be issued in excess of this sustainable quantity.

* The move towards reducing groundwater use to match sustainable aquifer yields we observed in West Java is to be applauded and should be pursued elsewhere, including vigorous actions to detect and limit illegal abstractions. (R-55) xvi

* Such use reduction strategies should include aquifer yield zoning, refusal of new permit applications in stressed areas, and progressive reduction of water entitlements associated with water use permits at rates deemed financially absorbable by the water-using enterprise until abstractions meet safe yields. (R-56) -1-

INDONESIA WATER USE RIGHTS STUDY STAGE 2

TABLE OF CONTENTS

EXECTIVE SUIMMARY ...... i

MAIN REPORT

Table of Contents ...... -1-

Abbreviations/Glossary ...... -7-

CHAPTER 1. INTRODUCTION ...... 1

1.1 Background of the Stage 2 Study .1 1.1.1 Water Use Rights (WURs): a Complicated Subject, and No Single Correct Answer .1 1.1.2 WURs and Recent Reform Measures .3 1.2 World Bank CAS and the Study .6 1.3 Objectives and Expected Outcome of the Stage 2 Study .7 1.4 Activities under the Stage 2 Study .7 1.5 Specific Concerns about the Study Implementation .8 1.6 Outline of the Report .10

CHAPTER 2. METHODOLOGY AND WORK PLAN ...... 12

2.1 Study Process ...... 12 2.2 Methodology ...... 12

CAHPTER 3. WATER USE RIGHTS: PRINCIPLES AND MANAGEMENT ...... 15 3.1 Introduction .15 3.2 Policy Framework .15 3.2.1 Water Resource Management Objectives .15 3.2.2 Water Use Rights Management Objectives .15 3.2.3 Outcome Implications .16 3.3 Specific WURs Principles .17 3.4 Comments on Broad Principles .18 3.4.1 Sustainability Goals .18 3.4.2 Traditional Ways: Customary (or Non-formalized) Rights .19 3.4.3 Community Participation .19 3.5 Comments on Detailed Principles for Rights Design .21 3.5.1 Flexibility .21 3.5.2 Transparency .22 3.5.3 Legality .23 3.5.4 Certainty .24 -2-

3.5.5 Conformity ...... 25 3.5.6 Conditionality ...... 26 3.6 Comments on Structure of Rights ...... 26 3.6.1 Divisible Rights ...... 26 3.6.2 Modifiable Rights ...... 27 3.6.3 Priority of Access: ...... 27 3.7 Measurable Rights ...... 28 3.8 Transferable Rights ...... 29

CHAPTER 4. BRANTAS AND CITARUM RIVER BASINS: OVERVIEW . 31

4.1 Introduction ...... 31 4.2 The Brantas Basin ...... 31 4.2.1 Physical Features ...... 31 4.2.2 Economic Features ...... 32 4.3 The Citarum Basin ...... 35 4.3.1 Physical Features ...... 35 4.3.2 Economic Features ...... 38

CHAPTER 5. RESULTS OF THE PCM EXERCISE .41

5.1 Introduction ...... 41 5.2 What is PCM Method? ...... 41 5.3 Procedures Used in This Particular Study ...... 42 5.4 Results of the PCM Workshops in Brantas Basin ...... 42 5.4.1 District Level (Sidoarjo District) Stakeholder-problem Analysis at Sidoarjo Dinas in Brantas Basin on 4 March 2004 .42 5.4.2 Village Level Problem Analysis at Tempel Village in Brantas Basin on 6 March 2004 .44 5.4.3 Province Level Detailed Problem Analysis at Dinas East Java (Surabaya) on 9 March 2004 ...... 45 5.5 Results of the PCM Workshops in Citarum Basin ...... 47 5.5.1 District Level (Bandung District) Problem Analysis and Evaluation of Efforts to Solve the Problems at Majalaya sub-district in Citarum Basin on 16 March 2004 ...... 47 5.5.2 Province Level (West Java Province) Problem Analysis and Evaluation of Problem Solving Activities at Dinas West Java on 18 March 2004 .49 5.5.3 WUAF Level Evaluation of Problem Solving Activities, Problem Analysis and Way Forward at WUAF Wanir in Citarum Basin on 20 March 2004 ...... 51 5.6 Main Findings of the PCM Workshops in both East Java and West Java ...... 54 5.7 Comparison of Farmers and WUAs / WUAF's Response toward Common Issues ...... 55 5.8 Conclusion and the Way Forward ...... 57 5.8.1 Importance of Horizontal Communication and Coordination ...... 57 5.8.2 Agriculture for Farmers' Life ...... 57 5.8.3 Necessity of WUAFs' Integrated Response toward Holistic Problems ...... 58 5.8.4 Simplification of Government Services and Stable Policies ...... 58 5.8.5 Farmers' Expectation toward Industry ...... 59 -3-

CHAPTER 6. SOCIAL ANALYSIS ...... 60

6.1 Introduction .60 6.2 WURs Issues in the Brantas Basin .60 6.2.1 Traditional Irrigation Organization .60 6.2.2 Customary Water Use Rights ...... 64 6.2.3 On Customary Practice, Inefficiency, and Water Use Rights .67 6.2.4 Converting Customary WURs to Registered WURs .68 6.2.5 "Water Sharing with Compensation 9.69 6.3 Water Use Rights Issues in the Citarum Basin .70 6.3.1 Overview .70 6.3.2 Springs .71 6.3.3 Irrigation Management Transfer .73 6.3.4 WUAF Yet to be Turned Over .75 6.3.5 Village Organized Irrigation Systems .76 6.3.6 Recognizing Customary Rights .76 6.3.7 Fish Ponds ...... 76 6.4 Conclusion .77

CHAPTER 7. HYDROLOGICAL ANALYSIS: Quantification of Historical Water Use and Water Quality ...... 79

7.1 Introduction .79 7.2 Measurement of Customary Water Use in Brantas River Basin .80 7.2.1 Basic Hydrological Features .80 7.2.2 Water Allocation in the Brantas River .80 7.2.3 Pehngaron Irigation: Overview .81 7.2.4 Flow Measurement Data .82 7.2.5 Calculation Based on Crop Water Requirement .82 7.2.6 Total Water Requirement (m3/year) .84 7.2.7 Registration of Customary Water Use rights for the Pehngaron Irrigation Scheme ...... 84 7.3 Water Quality Issues in Brantas Basin .85 7.3.1 Overview .85 7.3.2 Monitoring Stations .85 7.3.3 Monitoring Result .86 7.4 Measurement of Customary Water Use in Citarum River Basin .87 7.4.1 Basic Hydrological Features .87 7.4.2 Wangisagara Irrigation Scheme: Overview .87 7.4.3 Flow Measurement Data .88 7.4.4 Water Requirement Based on Cropping Patterns ...... 90 7.4.5 Customary Water Use Rights Registration for the Wangisagara Irrigation Scheme .91 7.5 Water Quality Issues in the Citarum River Basin .92 7.5.1 Overview .92 7.5.2 Monitoring Stations .92 7.5.3 Monitoring Result .92 7.6 Impact of Forest Cover Reduction in Watershed on Water Availability . 93 -4-

CHAPTER 8. ECONOMIC ANALYSIS ...... 94

8.1 Introduction .94 8.2 Typical Causes of Water Reallocation .94 8.2.1 Structural Trends .94 8.2.2 Temporary Scarcity .95 8.2.3 Economic Opportunities .95 8.3 Water Use in the Brantas and Citarum River Basins .96 8.4 Specific and Common Issues of the Two Basins .98 8.4.1 Issues Specific to Each Basin .98 8.4.2 Issues Common to Both Basins .99 8.5 Water Valuation .100 8.5.1 Introduction .100 8.5.2 Cost and Price of Water .101 8.5.3 Mean Value of Water for Economic Use .101 8.6 Sensitivity of Water Transfer to Economic Factors in Irrigated Agriculture 103 8.7 Conclusion .106

CHAPTER 9. INSTITUTION AND LEGAL ANALYSIS ...... 107

9.1 Introduction .107 9.2 Legal Context .107 9.2.1 General Background .107 9.2.2 Water Resources Law .109 9.2.3 Comprehensive Water Use Rights .110 9.2.4 Public Participation in Water Use Rights. l ll 9.2.5. Transferable Water Use Rights .111 9.3 Institutional Context .113 9.3.1 Roles of the Government at Various Levels .113 9.3.2 River Basin Management .115 9.3.3 State-owned Infrastructure Management Corporations .115 9.3.4 Urban Water Supply Corporations .116 9.3.5 Participatory Irrigation Management .117 9.3.6 Groundwater Management .119 9.3.7 Water Resources Information .120 9.3.8 Coordination .120 9.3.9 Environmental Management .121 9.4 Summary of Legal and Institutional Observations .122

CHAPTER 10. MAIN ISSUES AND CONCLUSIONS ...... 124

10.1 Introduction .124 10.2 Major Issues Identified by the Stage 2 Study .125 10.2.1 An Umbrella Institutional Issue .125 10.2.2 Affordability and the Need for Government Subsidy .126 10.3 Protecting Customary or Non-Formalized Rights .127 10.3.1 Introduction .127 10.3.2 Traditional Community Rights .127 10.3.3 Public Agriculture Located in Irrigation System .128 10.3.4 Possible Registration of Rights .130 10.4 Re-allocation of Water Resources .131 -5-

10.4.1 Introduction ...... 131 10.4.2 Temporary Re-allocation of Water .131 10.4.3 Permanent Re-allocation of Water Use Rights .132 10.4.4 Specific Issues Related to Urbanization .133 10.5 Strengthening River Basin Management .135 10.6 Enforcement and Conflict Resolution .137 10.7 Reserving an Environmental Water Allocation .139 10.8 Reducing Groundwater Use to Sustainable Yields .140 10.9 A Conceptual Water Use Rights Framework .142 10.9.1 Introduction .142 10.9.2 Surface Water Use Rights Conceptual Framework .142 10.9.3 Groundwater Use Rights Conceptual Framework ...... ,.142 10.10 Bulk Water Use Permits for Surface Water Basin .142 10.10.1 Introduction .142 10.10.2 Certificate of Water Entitlement for Irrigation Schemes .143 10.10.3 Treatment of Other Abstractions from Irrigation Canals .145 10.10.4 Quantifying Rights - Initial Irrigation Scheme Certificates of Water Entitlement ...... 145 10.10.5 Quantifying Rights -Delivery Losses in Primary, Secondary and Tertiary Canals...... 146 10.10.6 Additional Industrial or Municipal Abstraction from Irrigation Canals. 147 10.11 Water Sharing Within Irrigation Schemes .147

CHAPTER 11. RECOMMENDATIONS .150

11.1 Introduction .150 11.2 Specific Recommendation ...... 151 A. PROTECTING CUSTOMARY OR NON-FORMALISED RIGHTS. 151 A-1 BASIN-LEVEL OR BULK WATER USE RIGHTS .151 A-2 WATER USE RIGHTS WITHIN IRRIGATION SCHEMES. 153 A-3 ISSUE OF NEW PERMITS WITHIN IRRIGATION SCHEMES . 155 B. INTER-SECTORAL RE-ALLOCATION OF WATER RESOURCES . 155 C. STRENGTHENING RIVER BASIN MANAGEMENT .157 D. ENFORCEMENT AND CONFLICT RESOLUTION .159 E. RESERVING AN ENVIRONMENTAL WATER ALLOCATION 160 F. REDUCING GROUNDWATER USE TO SUSTAINABLE YIELDS . 161

MAPS Indonesia Brantas Basin .33 Citarum Basin .37

ANNEXES

Annex 1 Terms of Reference for Stage 2

Annex 2 List of Persons Contacted -6-

Annex 3 List of Materials Collected

Annex 4 Record of the First National Workshop (March 2004)

Annex 5 Record of the Second National Workshop (June 2004)

Annex 6 Case Study: Ombilin Sub-Basin, West Sumatra

Annex 7 Demography in Brantas and Citarum Basins

Annex 8 Regional Gross Domestic Products of Brantas and Citarum Basins

Annex 9 Crop Production in Brantas and Citarum Basins

Annex 10 Record of PCM Workshops: a) Results of the Workshops b) Problem Analysis

Annex 11 Quantification of Customary Rights and Water Quality in Brantas Basin: a) Location and Layout of the Pehngaron Irrigation Scheme b) Flow Data of Pehngaron Irrigation Scheme c) LPR-FPR Method d) Water Quality Monitoring at Brantas and Subaraya Rivers

Annex 12 Quantification of Customary Rights and Water Quality in Citarum Basin: a) Observation Points on Water Quality in Citarum Basin

Annex 13 Economic Analysis: a) Water Use in Brantas and Citarum Basins b) Water Valuation

Annex 14 Institution and Legal Analysis: a) Report of the Institution and Legal Team (ILT) on Brantas and Citarum Field Trips b) Institutions for Water Resources Management c) Legal and Institutional Context - The Capability of the Present System to Support WUR d) Outline of Licensing Surface Water Use e) Review of National Legislation on Groundwater -7-

ABBREVIATIONS/GLOSSARY

Acronym Bahasa Indonesia English ADB Asian Development Bank

APBN Anggaran Pendapatan dan Belanja State budget Negara APBP Anggaran Pendapatan dan Belanja Regional budget Daerah Balai PDAS Watershed management organisation

Balai PSDA River basin management organisation

Balan PSDA Balai Pengelolaan Sumberdaya Air Regional Office for Water Resource Services(ROWRS) BAPEDAL Badam Pengendalian Dampak National Environmental Impact Management Lingkungan Agency-disbanded in January 2002 BAPEDALDA Badam Pengendalian Dampak Regional Environmental Impact Management Lingkungan Daerah Agency, established at the provincial and district level BAPPEDA Badan Perencanaan Pembangunan Regional Development Planning Agency Daerah BAPPEDA Regional Planning Agency

BAPPEDALDA Government agency for environment

BAPPENAS Badan Perecanaan Pembangunan National Planning Agency Nasional BUMD Badan Usaha Milik Daerah Regional Government Owned Enterprise

BUMN Badan Usaha Milik Nasional National Government Owned Enterprise

DAS Daerah Aliran Sungai Watershed or river basin

DAU Dana Alokasi Umum General allocation fund

DepDagri /MOHA Departemen Dalam Negri Ministry of Home Affairs

DISPENDA Tax Revenue Office

DPR Dewan Perwakilan Rakyat National Parliament / House of Representatives

DPRD Dewan Perwakilan Rakyat Daerah Regional Parliament / House of Representatives DPS Daerah Pengaliran Sungai Watershed or river basin

DSDAN Dewan Sumberdaya Air Nasional National Resource Council

DWRS District Water Resources Services

GBHN Garis-Garis Besar Halunan Negara Broad Outline of State Policy

Gol Government of Indonesia

IDR Indonesian Rupiah -8-

Acronym Bahasa Indonesia English

IPAIR Iuran Pelayanan Air Irigan Irrigation Service Fee

IPAL Instalasi Pengelolaan Air Limbah Waste water treatment plant

JICA Japan International Cooperation Agency

KADES/LURAH Kepala Desa Village Head

Kanwil Kantar Wilayah Representative central government office (role is now assumed by regional government) KepMen Keputusan Menteri Ministerial Decree

Keppres Keputusan Presiden Presidential Decree

Kimpraswil Kementerian Permukiman dan Ministry of Settlement and Regional Prasarana Wilay Infrastructure KWh Kilowatt hour

MoU Memorandum of Understanding

MPR Majelis Permusyawaratan Rakyat People's Consultative Assembly

MW Mega Watt

NGO Non Governmental Organisation

NPA Value of Water Acquisition

NPWP Tax Registration Number

NSIASP Northern Sumatra Irrigated Agriculture Sector Project PDAM Municipal Water Supply Corporations

PDAM Perusahaan Daerah Air Minum Provincial / District Public Company for Water Supply PERDA Peraturan Daerah Regional Regulation(Provincial or District)

Perum Perusahaan Umum Public Corporation

PJT Perum Jasa Tirta Water Management Corporation

PJT-l Perum Jasa Tirta 1 Water Management Cooperation for the Brantas River Basin PLN State Electricity Corporation

PLTA Hydropower Plant

POJ Perum Otorita Jatiluhur Water Management Corporation for the Jatiluhur Dam (Bulk water supplier for Citarum River) PP Peraturan Pemerintah Government Regulation

PP Pengaturan Pemerintah Government regulation PPTPA Panitia Pelaksana Tata Pengaturan Riverbasin Water Management Committee Air -9-

Acronym Bahasa Indonesia English

PROKASIH Program Kali Bersih The Clean River Program

PROPEDA Regional development plan

PSDA/WRM Pengelolaan sumber daya air Water resource management

PT Perseroan Terbatas Limited liability company(public or private)

PTPA Panitia Tata Pengaturan Air Propinsi Provincial Water Management Committee

PU Pekerjaan Umum Public Works

PWRS DINAS PSDA PROPINSI Provincial Water Resources Services

RAPP Riau Andalan Pulp and Paper Company

RENSTRA Strategic plan

REPELITA Rencana Pembangunan Lima Tahun Five Year Development Plan

SIP Letter of Permit for Public and state owned companies to drill for groundwater SIPA Letter of permit for abstraction of groundwater or surface water SIPPA Letter of permit for companies to drill for groundwater SIPRA Surat Izin Peryaubiler Peruanfaatan Letter of permit for water withdrawal and use

______A ir ______SK Surat Keptusan Letter of Decision SWS Satuan Wllayah Sungai; River basin Tory Terms of Reference

UPTD Technical Implementation Unit

UU Undang-undang Statute

UUD Undang-undang Dasar 1945 The 1945 Constitution of Indonesia

WATSAL Water Sector Adjustment Loan

WB World Bank

WLS Water Licensing System

WTP Instalasi Perjernihan Air Water Treatment Plan

WUA P3A Water User's Association

WUAF GP3A Federation of Water User's Associations

WUR Water Use Right

Balai Bureau or office

Ketua Chairman -10-

Acronym Bahasa Indonesia English

Badan Government advisory agency

Guburnur Governor of a Province

Air tanah Groundwater

Pedoman Guideline

Bupati Mayor of Rural District

Walikota Mayor of town / city

Propinsi Province

Daerah Region (Province or District)

Dinas Regional government department with operational capacity Sawah Rice field

Wilayah sungai River district

Kabupaten Rural district (local government)

Kecamatan Sub-district

Kota Urban district (local government)

Palawija / Polowijo Vegetables / Cash Crops

Air Water

Pampa Air Water pump

Bending, Dam Weir, Headwork, Intake 1

CHAPTER 1. INTRODUCTION

1.1 Background of the Stage 2 Study

1.1.1 Water Use Rights (WURs): a Complicated Subject, and No Single Correct Answer

"Law is a political product," said repeatedly the then Director General of Kimpraswil' at our first meeting early March 2004, when we started the full-scale implementation of Stage 2 of the Water Use Rights Study in Indonesia. And, indeed it was. After several years of at times heated debate at the Parliament and intense negotiations among stakeholders behind the scene, surprisingly to many, the Indonesian Parliament passed a new Water Resource Law in February 2004 in the midst of the congressional and presidential election campaign. Among many debates, two topics stood out. One was about water (use rights) trade and the other Irrigation Management Transfer (IMT), both of which have profound implications to Water Use Rights (WURs).

While practical application of the New Law must await enactment of related government regulations, the New Law laid down basic (and political) principles, in that leasing or transfer of any kind of WURs is banned in whole or in part (Article 7 (2)). This was a result of the strong objection raised by some members of the Parliament who are supported by many NGOs against any kinds of 'water trade'. They argue that water belongs to Allah and should never be subjected to trade. By not mentioning IMT, the New Law also implied the general slow down of the decentralization drive, which had been the central piece of government reform during the past several years.

The new government, which was elected in September 2004, however, is now proceeding with the Bank to signing the Water Resources and Irrigation Sector Management Program - WISMP by mid 2005, which will allow continue working on WURs. In the new "participatory irrigation management" paradigm, Water Users Association Federations (WUAFs) must be legalized at scheme level and are important because they will receive the WUR, and then manage it inside the scheme. All these could mean that the implementation will be a bit more flexible in the future.

It should be mentioned also that in late December 2004, Indonesia was hit by a huge earthquake and subsequent Tsunami. As of now (early January 2005) the death tall is soaring to about 100,000 and it is expected to increase much more. The Bank has already made $250 million of cash contribution to the Government. What will be the effect of this Tsunami to the WURs Study is too early to tell but both the Tsunami and the Study are squarely related to water, and for a mid-term and longer-term management, reconstruction and development of

The Ministry of Settlement & Regional Infrastructure, the most important ministry dealing with water resource management in Indonesia. 2 Signed by the President in May 2004 as Law No.7/2004. 2

water resources, WURs will cut across all the water sectors. It is therefore important to complete this Study for the Bank as well as for the Government.

It is important to distinguish between water itself, which cannot be "owned" or privatized under the Indonesian Constitution, and the highly limited and controlled right to abstract and use it - a right, which can be owned and is the subject of our study. The confusion of the two different matters lies at the heart of the opposition to water rights transfers. It should be distinguished also between "value" of water as may appear when rights are transferred and which is really the value of the right to use water, and fees or charges associated with access and delivery administration.

Our field surveys demonstrated that there were obvious differences in farmers' capacity between where IMT had taken place and where it had not. Those farmers in the former appeared much more capable, empowered and motivated than those in the latter. WURs are a complicated subject. For many WUR-related issues, there is no such solution like "one size fits all". This is especially true in a country like Indonesia, where 210 million people live with diverse ethnic and cultural backgrounds spreading over 13,000 islands. For success, solutions must be able to be varied to match each situation. For WURs, it means that the solutions must be different by river basins. Reflecting the wish of the Bank, the Stage 2 Study does not give basin specific solutions but remained more general (or nation wide). Basin specific solutions should be left to later studies. The next action for the government and the Bank therefore is to expand this Study to basin-specific ones. We can define a WUR in many ways. In this Study, however, we define it as a right to abstract and use water at a specific point for specific purpose and duration. A WUR is (i) recognized by laws of a state/nation, (ii) protected against damage caused by the actions of third parties, (iii) may be regulated by the state/nation, and (iv) may be managed by the state directly, or by the community, or by market forces, or by a mix of any of those.

The WURs involve many water users such as basic need users including irrigators, industries, municipalities, power companies and inland fisheries. What will be the impact of industrial and urban/domestic demand? In Indonesia now, actually industry uses only 3.4% of the total water demand and the domestic is only 7.1%. However, industries withdraw water from existing irrigation canals and that is where the concrete conflicts are, not at the basin level. The conflict between industries and irrigation is more acute in Citarum area because industrialization and urbanization are more prevalent in the area. "Right" is an emotional word. It can evoke an aggressive attitude among people involved in protecting or gaining "rights". However, the "right" in WUR is also about sharing of water for the good of the community. In a country like Indonesia, there is a ground for a gentler approach to rights based on the tradition of "gotong royong" (a collective norm of self-help) and "musyawarah" (a process of discussion culminating in a consensus choice). Thus, local participation in local negotiations is one of the key ways to deal with conflicts. 3

The study team acknowledges that the descriptions of possible water use rights and their administration are broad and require further development during the pilot basin stage of water use rights implementation. In particular, we acknowledge that establishment of rights in areas currently experiencing dry season water shortages will be difficult and require constructive negotiations among stakeholders and should be accompanied by external assistance experienced in solving such matters. Similarly with the matter of limiting water use during other periods of shortage. Exactly how each basin will do this, and how the users might be classified for priority of application of restrictions will be a matter for each basin to solve as provided for in the Law. Again, outside experience may be found useful in facilitating the process and canvassing the large range of possible approaches in each basin

1.1.2 WURs and Recent Reform Measures

Between 1999 and 2003, the Government of Indonesia introduced a series of reform measures based on the concept of decentralization, participation, empowerment and democratization. The water sector was no exception. Among many donors, the World Bank has been assisting the government through its policy-based support such as Water Resources Sector Adjustment Loan - WATSAL (1999-2004), Java Irrigation Improvement and Water Management Implementation Project - JIWMP (1995-2002), and Indonesia Water and Irrigation Reform Implementation Project - IWIRIP (2001-2004). The Bank is also following up those coordinated assistance with a three-phased Adjustable Program Loan named WISMP (2004-2014: the loan, however, is only to be signed by the new government in mid 2005).

A serious and as yet unresolved issue is the institution of a regulatory system that is able to allocate and re-allocate water to the users in an environment that is already over-used and highly competitive. WURs are potentially a critical component of an effective water allocation system. However, neither the nation, nor the Bank, have prior experience with the nature and application potential of WURs in Indonesia. While international experiences would provide universal principles, WURs are highly sensitive to local cultural conditions. Thus the Bank, in its dialogue with the government, should not rely solely on international experiences. Future Bank supported programs, such as WISMP as well as urban and rural water supply programs, will have to gradually address the issue of competition for water in a more comprehensive fashion. In the longer run, allocation systems must be introduced that are more flexible and efficient than the top-down prescriptive ones governments at times apply. This study attempts to acquire an operational understanding of the traditional water allocation and conflict resolution mechanisms, and of the opportunities created by the new sector structure. WURs are helpful in the following:

Providing security to the historical water user, as the WUR provides a legal ground to either retain the right of access over the competing claim of a new entrant, or receive acceptable compensation. 4

* The WUR entitles the water user to "count" on the availability of the water for his purposes, and this security then also encourages the water user to invest for the future.

* Directing water to its most economic use, with the help of making WURs "tradable" or "sharable with compensation", on a seasonal or on a permanent basis.3

* Providing a transparent framework to derive a fair approximation for the value of water in its competitive uses, and thus for compensation in cases of reallocation.

* Providing a simple mechanism for resolving conflict due to competition for access.

In Indonesia, formally no WURs exist, beyond the basic rule in the New Law that:

* Sets up two categories of rights (a water usage right - Hak guna pakai air - which, in effect, covers basic human needs and essentially 'non-commercial' water uses, and a water exploitation right - Hak guna usaha air - for all other uses).

* Forbids the leasing out or transferring of part or all of these rights.

* Allows for passage of water associated with a right to be conveyed over adjoining lands.

* Requires the issue of permits for new irrigation rights outside existing systems and for all other uses except human basic daily needs.

* Leaves all other regulation of WURs to the implementing regulations.

Some kind of "permit" exists in some provinces and districts, as industries and water utilities abstracting ground or surface water, or discharging wastewater, pay a "resource tax"."4 Nonetheless, all irrigation farmers practice some sort of trading or sharing of water and water rights, even if no written records exist. In the three-harvests-per-year cycle, often farmers would "lease out" their "rightful" water allocation for a third of the cycle to a neighbor in return for a share of the crop; the same seasonal leasing is intensively practiced for land. When new entrants demand new or more water, or otherwise affect historical water use, typically farmers or other historical water users such as indigenous people that depend on a particular river flow regime, do not receive proper compensation. In the absence of a good workable system, water competition tends to be resolved based on ad-hoc and political considerations, without proper guidance and recourse.

Under WATSAL the government had committed to develop and introduce a comprehensive WUR system in the country. However, during the preparation process during 1999 - 2002, it transpired that WURs are a highly complicated and politically explosive subject, and that the understanding of their concept and purpose is exceedingly limited in government

3In the light of the enactment of the new Water Resource Law not supporting water trade, this matter deserves special consideration. More on this in later chapters. 4 Note that charges can be raised for services under 'beneficiary pays principle'. Once again, distinguish between 'value' of water as may appear when rights are transferred and fees or charges for services associated with access and delivery administration. 5

and in civil society alike. The World Bank agreed that the new WISMP could in principle be used in the future as a framework program in which such hands-on development and piloting can be implemented in two pilot river basins. Because WISMP is an Adaptable Program Loan (APL) spanning 10 years, the project would allow learning lessons, and scaling up those arrangements that prove feasible.

Before WISMP implementation starts, the Bank wished to accumulate more knowledge on WURs in Indonesia. A first series of case studies was conducted, therefore, as a Preparatory Study for Water Use Rights Administration Systems in 2003, financed under a Japanese Consultant Trust Fund (CTF). This "Stage 1 Study" aimed to identify the key issues in the potential introduction of WURs in Indonesia. It successfully assisted the Bank in understanding the related opportunities and constraints, drew lessons from international experiences, and put in place a first opportunity to engage in a meaningful, focused dialogue with the government and with other stakeholders. This preparatory study was, however, very limited, aiming to start the discussions on WURs among the stakeholders. The reason to limit the study was the absence of understanding of these issues inside the country, which suggested that a staggered approach could help to gradually build up a rational program.

Against this backdrop, the World Bank commissioned Stage 2 of the WURs Study to further the understanding of the issues related to WURs in Indonesia, and test and advance the conceptual framework and administration systems recommended under Stage 1 Study in some river basins so that such ideas can be operationalized (see Annex 1, Terms of Reference). A joint team of Sanyu Consultants, Inc. of Japan (the main contractor) and LP3ES of Indonesia (the sub-contractor), who carried out the Stage 1 Study, was selected to conduct the Stage 2 Study. The following experts worked on the Study (it should be noted that for each Sub-Team an international expert is paired with a national expert): Management Sub-Team:

n Hatsuya Azumi (Japan), Team Leader/Institution Specialist

o Bambang Adinugroho (Indonesia), Deputy Team Leader/Water Resource Management Specialist

o Tomoko Nishigaki (Japan), Logistic Support Coordinator/Institution Specialist (March/April 2004); Yusuke Maruno, do (June/July 2004) * Institution and Legal Sub-Team:

n Brian Haisman (Australia: March 18, 2004 onward)/ Warren Martin (Australia: from March 1 till 17, 2004), WUR Specialist

o Rudi Febriamansyah (Indonesia), WUR Specialist

o Sarah Waddell (Australia), Legal Advisor 6

Sigit Rianto (Indonesia), Legal Advisor * PCM Sub-Team:

n Hideyo Shimazu (Japan), PCM Facilitator

a Saiful Rochdiyanto (Indoneisa), PCM Facilitator * Hydrology Sub-Team

a Toshinobu Nakano (Japan), Hydrologist * Social Sub-Team

o David Guillet (USA), Anthropologist

1 Munawir (Indonesia), Anthropologist * Economics Sub-Team:

o Akihiko Hata (Japan), Economist

o Agnes Mawarmi (Indonesia), Economist * Short-Term Advisors Sub-Team:

D Charles Rodgers (USA), Hydrologist/Economist

o Helmi (Indonesia), Water Resource Management Specialist

1.2 World Bank CAS and the Study

The World Bank's Country Assistance Strategy (CAS) FY 04-07 for Indonesia states that its base case lending program ranges from $450 to $850 million a year.5 Reducing poverty is the primary goal of the CAS. Focus will be given to implementing the principles of the World Development Report 2004, especially in health and education, but also in agricultural research, extension and irrigation, and in public services in governance, i.e. reducing corruption. The Bank will leverage the projects it finances with analytical work, policy advice, technical assistance, strategic partnerships of governance and capacity building to systematically increase standards of governance at each level of Government the Bank engages. All the above supports the Bank's involvement in the Stage 2 Study. In the next phase, however, the Government of Indonesia should continue such studies at specific basin levels, especially under WISMP.

5 This statement and those followed here depends heavily on the Indonesia - CAS FY 04-07. 7

1.3 Objectives and Expected Outcome of the Stage 2 Study

The first objective of the Stage 2 Study is to allow the Bank to acquire an operational understanding of the traditional water allocation and conflict resolution mechanisms, and of the opportunities created by the new sector structure. This should enable the Bank to identify activities that could be supported in the future to introduce an effective allocation and WUR administration system, and allow it to review and assess proposals submitted by the government. The second objective is to help create a more solid common language for the Bank, the government and stakeholders regarding WURs. It would help identify initiatives that the government could submit to the Bank for support, and that would, potentially, in the longer term lead to the establishment of a proper regulatory and administrative framework. The newly negotiated WISMP may offer a framework to the government to translate any agreed study recommendations into pilot programs.

1.4 Activities under the Stage 2 Study

More specifically, the Terms of Reference for the Stage 2 Study (Annex 1) called for the following activities:

* Further conceptualization of the broad WURs framework worked out during Stage 1 Study, through analytical and field survey work, and through simulation:

D Identification and quantification of customary rights through basin (or sub-basin)- wide identification of historical water use for aggregated (groups of) users as a system to enable licensing to customary users based on the historical use Assessment of the issues and options related to the introduction of simple, limited, and practical water trade, where the administrative implementation of the above system is less effective.

* Institutional analysis and conceptualization of a WUR administration system based on a broad two-tier system (bulk water allocation at source level; and within- [irrigation] scheme allocation):

D Analysis of precise roles of stakeholders (regulators, operators, and users, including the customary "basic needs" water users and adat, as well as the environmental in- river needs)

o Analysis of a "smart way" to license industries taking water from within (irrigation) schemes

D Analysis and identification of key institutional weaknesses and that constrain introduction of a water allocation and WUR system, including those pertaining to general administrative, procedural and financial/budgetary constraints. 8

Institutional survey of two selected basins: Stakeholder analysis and problem analysis through the use of Project Cycle Management - PCM - technique * Identification of options for a process of basin-wide registration of historical water use as the proxy for the customary water use. This analysis reviews how the process should start (e.g., survey by govermnent officials, declaration by Bupatis), identification of registration points (e.g., intakes) and a group (e.g., Water User Association Federation, and if it does not exist, another identifiable group of users), the number of years of abstraction/use record, the type of record (in the form of moving averages, or reference abstraction), etc. Evidencing and analysis of conflicts over water and their resolution Evidencing and analysis of water trade/transfer including practical ways for water valuation. The valuation study includes economic/sensitivity analysis of users' willingness to pay for water in terms of quantity, quality and timing - seasonal and daily - and the land value associated with availability of irrigation water. Valuation of the in-river water needs which is to be treated as a legitimate "water user" in competition with other "economic" water users. Anthropological analysis of customary water use by adat. Workshops for information dissemination, local needs assessment, and consensus building at national, provincial, district and WUAF/WUA levels. It should be noted that the two basins selected by the Consultants and agreed by the Bank (Brantas and Citarum) are for illustration purpose and do not necessarily represent what the government and the Bank might do under WISMP. While the analyses are specific to those basins, they are not basin specific to be selected for WISMP and therefore more general for the Nation.

1.5 Specific Concerns about the Study Implementation

From April 5 until September 20, 2004, Indonesia was going through a series of elections. The April election was for the Parliament and July/September elections were for President. There were many contentious issues in those elections but the New Water Resource Law including policies related WURs was one of the very sensitive. In fact, both the Country Director of the World Bank and the then Director General of Kimpraswil urged the Study Team Leader extreme caution in implementing this Study. One could argue therefore that this Study was ill-timed and its implementation should have been withheld until all the dust was settled after the elections. On the other hand, one can argue otherwise precisely because of the same reasons: this Study could arise interest in the subject among stakeholders in a more logical, and 9

organized manner and could contribute to shaping better thought out consensus during this crucial period of election campaign. We hope that the latter was in fact the case.

As mentioned at the outset of this chapter, two specific issues stood out in the Parliament debate, i.e., (i) water trade, in which transfer of WURs was a critical problem, and (ii) Irrigation Management Transfer (IMT). The question of 'water trade' had a lot to do with the sentiment of anti-privatization and anti-globalization among some politicians supported by many NGOs in Indonesia. Simply put, they argued that water belonged to Allah (or People in non-religious context), therefore not an economic good, thus should never be subjected to trade. If water trade is allowed, they feared, big multi-national water companies would buy up water and during the water shortage period sell it with a high profit margin. The poor, who are entitled to free access to water in the first place, can no longer afford it. Their belief was so strong that valuation of water itself was morally wrong, and the word 'water trade' or even 'water sharing with compensation' should never be used.

Again we need to distinguish water and WURs. This is well traversed in the literature on water resource management in Islamic society and would need to be a foundation for a public education program/campaign in WISMP. People do actually relax when they find out the fact that monopolization can be well controlled.

Notwithstanding the sentiment expressed by certain NGOs and politicians against 'water trade', our Study has found out that 'water trade' is actually being practiced widely in various forms (but not necessarily being called as such). Further one of the most important findings was that during the critical period of water shortage, despite the priority right guaranteed by law to customary water users (essentially farmers), water delivery agencies do give priority to paying customers such as industries, power companies and municipal water companies over non-paying customary water users. Even though the water delivery agencies wished to give priority to customary users, no body knows just how much they should be given due to lack of quantification (and registration) of the customary rights vis-a-vis much clearer rights spelled out in quantity in the license agreements for the paying customers. Thus the non- formalized customary right holders have been systematically marginalized over years.

Urbanization and industrialization are clearly visible in many parts of Indonesia and this trend would only accelerate in future. Like it or not, reallocation of water associated with this trend would be inevitable. Under such circumstances, 'water trade' in various forms would only increase. The lack of clarity on WURs extends to the cases where farmers transfer their land to non-farming use. Consequently, one can argue that it is better to have 'water trade' under a strong, transparent and regulated system monitored by the public sector. Unlike Stage 1 Study where water trade was not discussed in detail, Stage 2 Study discussed the issue more squarely and extensively.

The other issue is about Irrigation Management Transfer (IMT). Since the enactment of Law (UU) 22 of 1999, Regional Government Focus on Autonomy and Decentralization, the 10

government has been implementing a number of reform measures. Among them was Government Regulation (PP) 77 of 2001, which spelled out a new irrigation management policy. Furthermore, in the same year, KEMPEN (Ministerial Decree) Dagri 50 (by Ministry of Home Affairs) on empowerment of WUAs/WUAFs and KEMPEN Kimpraswil 529 (by Ministry of Resettlement and Regional Infrastructure) on IMT were issued. Kimpraswil has employed an army of Community Organizers to mobilize farmers in establishing and strengthening WUAs and many donors are assisting the government in this effort.

Despite the government effort in promoting IMT during the last several years, the New Water Resources Law does not explicitly mention IMT. Furthermore, we got a distinct impression from the interviews of the management of Kimpraswil before the elections that the ministry, the very ministry entrusted to implement IMT, did not whole-heartedly support the idea. It appeared that they did not believe firmly in farmers' ability in operating, maintaining and managing large irrigation facilities. In addition, our field interviews revealed that there was a wide-spread concern among stakeholders over the current reform, in that they wondered if the reform measures were not introduced in haste without proper preparation both at the central and local levels. Confusion over who does what at the local level was particularly noticeable. All in all we have noted a sign of overall slowdown of the decentralization drive. This situation, however, may markedly differ under the new government.

Having said, we must point out that the WURs framework and administration systems recommended by our Stage 1 Study were based on the assumption that the decentralization efforts, in particular IMT, would continue. Having completed our further and larger scale fieldwork under Stage 2, we still believe that stronger WUAs and especially WUAFs would be most useful in implementing the WUR framework and administration systems in particular and rural development in general. Our PCM exercises revealed significant difference in farmers' motivation between where IMT was implemented and where it was not. We are also recommending registration of customary rights (in quantity) to a group of water users. The presence of WUAFs in this connection would be extremely useful and important. Consequently, in Stage 2 Study, we would make recommendations under continued assumption that the government would continue to promote IMT. Under the new government, our assumptions appear to hold.

1.6 Outline of the Report

After Chapter 1, Introduction, Chapter 2 presents the overall methodology and work plan used for the Study. In order to maintain a degree of self-standing nature of the Stage 2 Study Report, Chapter 3 revisits the principles and management of WURs. Chapter 4 shows the physical and economic features of the two river basins that we chose for further field survey, namely, Brantas and Citarum river basins. This is followed by main findings of the Study in various themes or contexts: the results of the stakeholder analysis and problem analysis using the Project Cycle Management (PCM) methodology (Chapter 5), social and demographic analyses including anthropological analysis of customary water use (Chapter 6), methodologies to measure historical water use as a proxy to customary water rights and some simulation for registration of customary rights (Chapter 7), economic analysis including sensitivity analysis of farmers' choices in water and land utilization, conflict resolution, and water valuation for possible water trade (Chapter 8); and finally institutional and legal analyses of the current situation including implications of the New Water Resource Law (Chapter 9). All these analyses were based mainly on the field investigations in the Brantas and Citarum river basins in addition to the study of existing documents and interviews in Jakarta.

Chapter 10 provides main issues and conclusions derived from the above thematic findings. Finally, based on all the above, Chapter 11 presents our specific recommendations to solve those main issues. There are 58 specific recommendations under six broad recommendations.

The distinction between findings of the current situation and recommendations cannot be made too clear. In the main text and annexes, therefore, some degree of redundancies is inevitable. In the Executive Summary, however, we tried to minimize redundancy to reduce the volume of it by concentrating on only the main messages and recommendations. 12

CHAPTER 2. METHODOLOGY AND WORK PLAN

2.1 Study Process

The implementation of the Stage 2 Study was divided into seven sub-stages: * Sub-stage 1 (January 21 - February 6): preparation mission (Sanyu Team Leader and 3 LP3ES staff)

* Sub-stage 2 (February 29 - March 31): first field work including the First National Workshop (all Team members) * Sub-stage 3 (April 1 - June 20): preparation of Draft Final Report at each member's home office; some further field works by national experts (all Team members) * Sub-stage 4 (June 21 - July 3): second field work including the Second National Workshop (only Team Leader, WUR Expert and Legal Advisor from the international team and all the national experts) * Sub-stage 5 (July 3 - 13): finalization of Draft Final Report in Tokyo (Team Leader and Sanyu experts) * Sub-stage 6 (August-November 2004): Review of the Draft Final Report by the Peer Reviewers * Sub-stage 7 (December 2004 - January 2005): Preparation of the Final Report

2.2 Methodology

There were several major differences between Stage 1 and Stage 2 Studies: * The main objective of Stage I was simply to re-start the dialogue on WURs, which had stalled around 2000, and to achieve that with very limited time and manpower. Consequently, the World Bank expected the study team to carry out the TOR as far as possible that the time and manpower resources allowed in preparing conceptual WURs framework and administration systems. Although Stage 1 carried out three case studies, the scope of those was small and limited, and much of the work was based on the review and analysis of available documents. On the other hand, Stage 2 was to test the feasibility of Stage 1 recommendations by conducting further detailed studies and simulations in two river basins covering much more subjects than Stage 1. * Unlike Stage 1, Stage 2 included studies of conflict resolution mechanisms and water trade * Stage 1 did not deal with groundwater at all, but Stage 2 was to refer to it. 13

* Due to the extreme resource limit, Stage 1 hardly had any opportunity to fully consult with a wide range of local stakeholders, but Stage 2 was to involve as many stakeholders as possible albeit, again, its short duration.

* Although once again the duration of the study was much limited, i.e., four months plus, Stage 2 was given much more manpower and financial resources than Stage 1.

The Stage 2 Study continued to collect data through interviews (Annex 2: List of Persons Interviewed), desk review of existing literatures (Annex 3: List of Materials Collected), team brainstorming workshops, and two National Workshops (see Annexes 4 and 5: Record of the First and Second National Workshops). But the main source of information was obtained during our field survey in two river basins, i.e., Brantas River Basin in East Java and Citarum River Basin in West Java. How the two basins were selected is described below.

After consultation with the World Bank Task Manager and his advisors, the Preparatory Mission Team6 first selected five candidate basins, and ranked them as follows (0-10 and 10 being the full mark):

Jratun- Ciujung- Ombelin Criteria Wt. Bravas Seruna Cidurian Citavam (West (C.Java) (Bantten) Sumatra) Data 50% 10/ 5.0 6/ 3.0 7/ 3.5 8/ 4.0 6/ 3.0 Availability* Local Support** 30% 10/ 3.0 7/ 2.1 7/ 2.1 8/ 2.4 8/ 2.4 Conflict*** 20% 5/1.0 7/1.4 7/1.4 7/1.4 9/1.8 Weighted 9.0 6.5 7.0 7.8 7.3 Score Ranking (1) (5) (4) (2) (3) * Data on hydrology, water use, institutions, local legal systems, etc. **Existence of strong Dinas, WUAs/WUAFs, universities, etc. who could lender assistance to the Study Team ***Existence of conflict over water

The team then discussed the selection with various stakeholders. Nearly all interviewed agreed to select Brantas as a highly regulated river basin with a relatively strong Water Resource Management Company (PJT-1) and Provincial Dinas, District Dinas and Basin Management Office (Balai). But opinions were divided on the other choice. The then Director General of Kimpraswil questioned why we limited the choice in Java and West Sumatra, where, in his view, the physical and climatic conditions are more or less the same, and why not go to the east such as West Nusatengara. The World Bank Jakarta Office suggested choosing Ciujung-Cidurian, because it provides a case of unregulated river basin without any PJT.

6 Messrs. Sudar Atmanto and Bambang Adinugroho of LP3ES and Hatsuya Azumi, Team Leader (Sanyu). 14

Messrs. Ramu (World Bank consultant) and Helmi (University of Andalas) strongly suggested Ombilin sub-basin, and when Messrs. Sudar and Azumi visited the basin, the local government showed a keen interest to support the survey. Ombilin sub-basin was a very interesting case, but for Stage 2 there was one crucial disadvantage, i.e., the lack of hydrological data at irrigation waterwheels. This was crucial information needed to provide proxies for historical customary water use needed to test the feasibility of one important recommendation under Stage 1. The Preparatory Mission Team was keenly aware of how little time we had in completing the survey, and felt strongly that we should stick to the two top ranked basins, namely Brantas and Citarum, where a fair amount of data had already been collected by the Stage 1 Team. As to the Ombilin sub-basin, luckily, Dr. Helmi had already written an excellent paper on its water management, and it was agreed that he joins us as a Short-Term Advisor. He contributed a new paper on the WURs in the Ombilin sub-basin (Annex6). This has enabled us to get focused information on one more basin in addition to the two basins we have selected for detailed survey. More specific methodologies used for thematic topics by the sub-teams are mentioned in the subsequent chapters, where their main findings are presented. 15

CAHPTER 3. WATER USE RIGHTS: PRINCIPLES AND MANAGEMENT

3.1 Introduction

In order to maintain a degree of self-sufficiency of this Report, this chapter reviews principles and management of WURs. This chapter, however, assumes familiarity with generic concepts of water use rights as presented in the Stage 1 Final Report (refer to Chapter 2). In fact, if Chapter 2 of the Stage 1 Report is called 'WURs 101', this chapter should be called 'WURs 102'. It expands 'WURs 101' concepts in some detail, and discusses specifics in the Indonesian context. The chapter uses the word 'licensing' to refer to all processes related to issue of water use or exploitation permits ("licenses").

3.2 Policy Framework

Water use rights are only one part of the overall scope of water resource management, and must be developed and implemented inside the framework adopted by each country for this water resource management. We begin therefore by presenting some universal, and generalized objectives.

3.2.1 Water Resource Management Objectives

There are many examples of these objectives, some contained within various countries' water resources legislation. The following is one interpretation of the key objectives and principles contained within the Preamble articles of Law 7/2004 on Water Resources. Within a framework that respects the traditional cultural and social values, the fundamental objectives of water resource management are: * To protect public health and meet water for life needs; * To sustain the health of the environment; and * To provide a base for economic growth.

Water resource management policy, strategies and programs in Indonesia, including the development of implementing Regulations under Law 7/2004, should all remain cognizant of these key objectives.

3.2.2 Water Use Rights Management Objectives

Key management objectives for implementing the new water use rights policies in Indonesia within the broader water resources management objectives should be: * To give legal authority to activities that exploit or use Indonesia's water sources; 16

* To protect against unacceptable impacts of water use, firstly on the sustainability of existing water sources, and secondly, on the rights of organizations and individuals that use those resources and thirdly on other parties;

* To promote equity in the creation, assignment, modification, protection, delivery and compliance management of surface water rights, consistent with the values and customs of the people of Indonesia; and

* To ensure clarity in the assignment of the responsibilities and obligations to water managers and water users alike and to ensure processes are in place for these to be carried out and adhered to.

Design of a water use rights system should reflect the four pillars of good governance - accountability, transparency, predictability and participation by external entities.

3.2.3 Outcome Implications

With the establishment and effective implementation of a WURs strategy for Indonesia's water sources, there is a range of outcomes which could eventuate, (depending on the level of commitment and application by government and community):

* A perceived increase in the "value" of water, as users become more aware of the benefits of having an assigned right and, in turn, this leads eventually to more efficient management processes and water delivery efficiency. In fact, the water right is seen more as a "valued asset".

* A greater confidence in investment, as rights bring with their definition, a degree of security.

* An improved level of protection against detrimental impacts for license holders with legal rights and for third parties.

* A better level of equity in water sharing, (especially in times of shortage) as water use rights provides mechanisms to deal with users' shares through assignment of "entitlements".

* A focus on obligations for both users and managers.

* Better performance benchmarks against which compliance can be monitored and rewards assigned. 17

3.3 Specific WURs Principles

This section sets a background to consideration of the issues in Indonesia by discussing a series of principles that apply to the functional areas associated with the water use rights management processes from definition of rights through to compliance management.

For water use rights management to be successful, it is essential when developing the rights framework:

Firstly, for the policies to recognize broad principles relating to: -

Sustainability goals To protect the long term economic and ecological use of water sources

Traditional ways To meet Indonesian varied religious, customary and cultural practices in taking and using water

Community To assist with transparency and give an agreed level of Participation involvement in decisions of the community and specifically the stakeholders.

Secondly, to design the rights framework to meet detailed principles for design of rights relating to:

Flexibility To cater for the diversity of the social, traditional, physical, hydrological and institutional variations across Indonesia Transparency To ensure interested individuals and organisations have access to decisions and systems Legality To meet Indonesia's statutory provisions

Certainty To identify levels of security of supply within the rights Conformity To apply best practice standards to longer term administration and operational goals

Conditionality To ensure that all necessary approvals for land occupancy, business approvals etc are addressed. And finally, to structure the rights so that they are capable of being:

Divided To enable policies which allow rights to be split or sub- divided (multiple uses, transfers, resumption etc) Modified To allow for government to adjust rights to meet specific national, regional or local needs, and to meet the requirements of the rights regulators and the users 18

Prioritized To be able to set shares of available water to users and to the river in times of water shortages Measured To be able to prove actual water abstractions and enable rights to be managed in a professional manner

3.4 Comments on Broad Principles

3.4.1 Sustainability Goals

1) Limits on exploitation In introducing a licensing system, the process is usually to progressively license to the sustainable limit assessed through a river basin planning process and apply a constraint on further license issue. To assess this limit, detailed hydrologic modeling of the system under various levels of infrastructure development and water demands would be undertaken, using a range of operational and management rules. The outputs from these studies would provide water managers in Indonesia with information for them to advance licensing with confidence. If this inforrnation were available it would give details of appropriate "Available Water" estimates for various purposes and give indications of the levels of users' supply security. If this information is not available, (which it is understood is the more likely case) there are certain risks that arise in licensing entitlements. Water managers in the Brantas and Citarum Basins determine water availability within their basin planning processes. The total future water needs are assessed in various ways. The assessments do not stipulate the security of the supplies against water available. At present, the process assesses availability rather more on an average basis. If shares for various uses were to become formal entitlements, there is a need to become more sophisticated in comparing demands and supplies and linking licensing limits to supply data.

2) Economic efficiency and ecological sustainability It will be important for Indonesia in setting licensing limits on "water available for allocation" to use a "probabilistic" approach to the hydrologic and hydro-geological modeling rather than use of "average" values. This will be important in the "wet" season as there appear to be prospects of achieving some additional economic returns if additional land can be commanded. The approach may require a paradigm shift in how water rights are assigned to new development. It may be that the license is issued for only private diverters who take water directly from the streams. This avoids capacity problems in the irrigation schemes. 3) Good decisions require good advice Hydrologic and hydro-geological models reflecting yield variability are required in such circumstances. If sustainability is a key objective, and nothing from advice given to us I

suggests otherwise, it is important that the planners and modelers have reliable tools and system to support them. Many countries suffer from having poor models to test sustainability management policies. The outputs from such models are critical for good decisions.

It would be wise to audit the Indonesian modeling capabilities with respect to the models being applied and the modelers' and managers' interpretive skills. The latter are likely to be more than satisfactory, but their experience levels may be lower in practical applications and outcome interpretation.

3.4.2 TraditionalWays: Customary (or Non-formalized) Rights

Respect for the traditional, social and cultural values in water rights management is essential. It will be important that these values are presented in discussion for structuring the licensing system. An assembly of views of all stakeholders, including the provinces, will be a necessity prior to commencement of detail design of the system.

3.4.3 Community Participation

1) Generalprinciples

As with any management of common resources, the involvement of the owners of the water resources - that is the people of Indonesia - is vital if the management is to have credibility and be widely supported by local populations.

The long-term aim should be to have effective community participation at three major levels:

* Overall basin planning (surface and groundwater)

* System operations

* Individual applications to abstract water (see later discussion)

Customary practices currently applied at the lower levels have to be maintained as much as possible, but within an umbrella of overall equity with others.

2) Specific local issues

It is recognized that it may not be possible or practical or legally acceptable under law to incorporate all these values into a licensing system, but their extent needs to be known for their inclusion in the system and to avoid dispute, delay and added costs in designing the system. Typical licensing issues of relevance would be:

* Local rules for sharing 20

* Unwritten or implied codes of practice for management of water * Handling of disputes/appeal

3) Governance There will need to be a range of governance levels involved in framing and managing farmers' rights within irrigation schemes. Participation of farmers in both the devolution decisions and in the preceding analysis work is obviously critical to success. Assuming a two-tier water rights system (see later section on conceptual water rights framework) irrigation schemes will have a bulk "license" defining their share of water at a river basin level and an internal set of rights tailored to the configuration and needs of each scheme. At the intake point licensing location, there must be a single legal entity for coordination with the regulator and service provider. That entity would hold what might be termed in other places a Group License. Because of the provisions of Article 8 of Law 7/2004 that excludes need for permit for customary rights, we later suggest a Certificate of Water Entitlement as the formal instrument. The aim must be for this entity to be some form of irrigator association, so that the empowerment brought about by formalizing property rights can be realized. There are some suggestions that government should manage these rights on behalf of farmers, but experience suggests that this under-rates farmers' capacity and ignores the empowerment created by property rights. Also, given the current marginalization of farmers' water rights brought about under government management, there seems no reason to expect that a change that emphasizes farmers' rights might materialize. That said, there is no doubt that help will be needed, at least in the early days, for irrigator groups to be formed and to become competent. The study team found wide disparity over the two surveyed basins - ranging from admirably competent groups to non- existent. Also, there is the reality that irrigation schemes are not economic in a fully self- sufficient sense and are not likely to become so. This means that government assistance, both with subsidy and with technical help is needed for the foreseeable future. In such circumstances there is opportunity to create new kinds of government-irrigator partnerships in ways that improve irrigation scheme operations and maintenance and help preserve public sector jobs. The nature of such partnerships will depend on local circumstances, but given that district administrations are mostly carrying out the operations and maintenance tasks, they would seem to be prime choices to be the partners also in management of the water right contained within the Certificate of Water Entitlement for each scheme. Ideally, within the Water Users Associations there should be minimal interference from external areas. The Water Users Associations will need to set up a management group (or 'federation') for coordination. All internal management should rest at local levels. Setting 21

internal shares must be carried out at the local level, albeit in line with custom but with some oversight between groups to ensure inequitable outcomes are avoided.

Transactions between Water User Associations should be more formalized because of the legal nature of sharing water. This could be important in times of major shortage so as to avoid unnecessary tensions. 4) Notifications and appeal provisions

One of the key attributes of water rights management elsewhere is the provision of mechanisms to protect the water users and other individuals or organizations from inappropriate management decisions by government or from water users' or third parties' actions, which would cause adverse impacts. This is typically achieved through provisions in the statutes for a public notification of permit applications and allowing individuals to lodge claims, appeals or objections to proposals to take and use water sources for exploitation. Formal processes usually exist for hearing these. They have typically been structured at various levels to cater for the degree of significance. These vary from local forms of tribunals serviced by community and experts' representation through to ultimately involvement of Courts and the judiciary. It is unfortunate the new Law has not provided for notification or appeal relating to permit applications. It is an opportunity lost at this time to apply equity and transparency principles.

3.5 Comments on Detailed Principles for Rights Design 3.5.1 Flexibility

1) Indonesia is very diverse, geographically and culturally

This diversity requires that water use rights systems can be flexibly accommodated to meet the needs of each region.

2) Modifications to decisions as the information base improves As the decisions taken on licensing depend significantly on basin planning outcomes, the policy needs to be flexible to allow the authorization agencies (each Provincial Dinas) to revisit exploitation entitlements, discharge rights and the conditions of operation specified on licenses as information base improves over time (eg. better models; experience etc.). 3) Types of authorizations

Licenses need not be the same. In fact they should be tailored for the specific purposes. Examination of industry and municipal licenses obtained in the Brantas and Citarum survey indicate that the licenses content (conditions and detail specifications) are almost identical. Identification of the range of licenses is required together with their specific provisions for single individuals and organizations to large grouped co-operatives, cities. 22

4) Separate licenses

The current Law is confined to regulatory management for surface water and groundwater. (See Annex 14-e on groundwater licensing). Wastewater regulatory management is not included; these provisions are in the Environmental Law. The linkages between surface water, groundwater and wastewater management should be through tailored license conditions on separate license rather than attempting to have a single license to pick up all the management factors. 5) Unforeseen events There needs to be provisions in licenses to cater for emergency provisions. (fire fighting etc). This means the rights must be treated in regulations as attenuated rights, which would mean the government has powers to adjust issued rights.

3.5.2 Transparency

1) Government can change entitlements by administrative decisions Licenses and permits must clearly indicate that the access rights can be amended by government through an administrative decision under Law 7/2004 (e.g., Art 22 on water efficiency, Art 46 on basin water allocation planning and so forth) and its regulations. This power would no doubt cause concerns with users if they knew, so it is important that there is transparency in the policies for any forced modifications of approved rights. In other countries where rights can be modified, there are generally policies relating to compensation, with some variance as to whether or not compensation will apply and how it will apply. If compensation provisions are contemplated other than for changes in priority (Art 29(5)), it would be prudent for the Indonesian water managers to become conversant with the protocols applied and resultant outcomes in other countries. Because of the scale and the rapid urbanization of productive lands in Java and no doubt elsewhere, if farmers are given formal rights, compensation versus market applications will become an issue. The two are not mutually exclusive. 2) Partitioning of revenue from users Problems regarding the raising of some of the monies from users for taking and using water as "taxes," suggest that the water users, especially farmers, see licensing solely as a government revenue raising exercise. There is a lack of understanding concerning treasury management of consolidated funds and of the linkages between government's receipt of revenue and its expenditures on irrigation schemes for operations and maintenance etc as subsidy provisions. It may be better to reduce tensions if reforms are to occur, to partition fees and other receipts from water users into forms of "trust" funds" to be used specifically for irrigation 23

management based activities. As government subsidizes irrigation it would not affect the overall funding provisions but enable users to "sight" funding sources more easily and remove an avenue for disputation. 3) Management conditions must be stated on the license or permit To provide users with adequate details of their rights and government's intended management arrangements, it is essential to specify on each license such criteria. Some conditions relating to administration practices would be standard across virtually all licenses, whilst each license would have specific conditions. License conditions must indicate how water is to be shared and the license holder's share. Copies of a range of licenses and other forms of authority to share and take water were collected and are presented (in Indonesian) in Annex 14-d. The conditions on the licenses would require some revisions if farmer licensing and trading policies were to be introduced. It would be advisable to set the license's standard conditions at a minimum at provincial level or even at a national level to ensure some consistency.

3.5.3 Legality

1) Regulators not service providers should issue licenses The authorization of exploitation and utilization entitlements and discharge rights must be confined to agencies with assigned regulatory powers. They should not be assigned to service providers or operators of irrigation activities as this creates conflict of interest and can lead to inappropriate bias in decisions. The Provincial Dinas has both the regulatory and (through the balai) service provider roles within some irrigation schemes, even though internally there are separations of functions. It would be preferable for the service provider role to be eventually shed as water resource management evolves further. 2) Resource management accountability division

The Basin Corporations (PJT) have both service provider role and some resource management functions, although apparently the latter are not fully developed as yet. There needs to be clarity of delegation from the provincial water office if this is to continue, with a clear effort to ensure that no policy-making functions are delegated. 3) Water pricing alignedto water use rightsframework

Assigning water to farmers could trigger a water price policy for farmers. If there were to be a review of any new water pricing policy to match modifications to the assignment of rights under the new Law, it is important from a competition viewpoint not to have significant policy variations and to retain a level of equity at a national level. It is possible

lm 24

to use the water use rights framework to better apportion costs of regulation, service provision and resources management costs between all stakeholders. The structure proposed aligns well with pricing.

3.5.4 Certainty

1) Optionsfor basin level water user's annualentitlement

Certainty is strengthened when a user's entitlement is defined. An entitlement represents the user's share of the available water and is specified on the license or authority. There are several options, which can be used to determine "entitlements" from basin bulk shares to individual license holders, namely: 2) Basing "entitlements" on a fixed volume.

For example, if the basin's "Available Water" was say 5000 x 106 m3 / year and there were 3 Sub Basin, their entitlements might be 2500, 1500 and 1000 x 106 m3 / year respectively. The approach is then to cascade those quantities down through the management of water uses in the system to individual license holders. In this manner, a license holder would have a "fixed" entitlement expressed in m3 / year. 3) Defining the "entitlements" as a prescribedpercentage of the bulk shares. Taking the "Available Bulk Share" as determined in the planning and then defining the "entitlements" as a prescribed percentage of that quantity for both the long term and annual allocation purpose.

Using the same example, the Basin's Available Water is 5000 x 106 m3 / year. The entitlement of the Sub Basin would therefore be expressed as 50 % (2500), 30 % (1500) and 20 % (1000) respectively. This approach has the advantage that the percentage approach can also be used for annual or seasonal allocation of water. For example if it were a dry year, the "Available Water" may only be 1000 x 106 m3 and accordingly the Sub Basins' share would be 500 (50%), 300 (30%) and 200 (20%) and these amounts are then translated through an annual allocation process to individual users, again on a percentage basis. The "percentage" based entitlement approach is considered to be more appropriate for Indonesia as there is apparently an acceptance of proportionality in other forms of sharing in Indonesia. As the rights under Indonesian Law are attenuated rights, the "bulk share" for say farmers may decline over time but their individual share of the bulk remains the same. Proportional entitlements will reduce at least one level of uncertainty. The Citarum and Brantas Rivers are partially regulated. That is, the flow can be varied by the operation of reservoirs. In other unregulated river systems it can be expected that water sharing through an instantaneous maximum extraction flow rate is likely to be more 25

important for day to day operations than an annual entitlement. However, the latter is important in defining the planned share of basin resources overall.

4) Assessment optionsfor existing irrigators

There are a number of ways, in which existing irrigator rights could be determined. (Refer to Phase 1 Final report for table of possibilities and the equity implications.) The choice will rest with Indonesia water resource managers, through community advisory groups, but they will need to take regard of the sustainability and equity management objectives. Each option will produce different outcomes in relation to those objectives.

Entitlements for existing uses could therefore be based on:

The design capacity of Whilst this should be relatively easy to evaluate, it the extraction works automatically creates inequities in sharing because of either over or under design to meet the demands. Standardization of extraction works capacities offers some solution to the over or under design issue

The actual capacity of* Again this should be reasonably easy to estimate, but its the extraction works at a adoption introduces the condition of works and their prescribed date effectiveness. Those schemes with newer systems therefore would be advantaged over those with older less efficient works

Assessments of recent In this option, there would need to be judicial checks on "historic" use of water estimates for accuracy, especially for those schemes / works during seasons when for which measurement is not undertaken (which is a there were no shortages significant number). There could be decisions on those with "meters". For others the estimates would need to be assessed using an agreed procedure

Assessments using a A conventional assessment is made using area, crop types, demand index approach irrigation practice efficiencies etc. No doubt there are considerable spatial data sets which could be used to assess irrigation demands but it must be remembered that the hydrologic regime in Indonesia could introduce difficulties in getting on-farm water balances

3.5.5 Confornity

1) The administrative boundaries implications

The physical characteristics and the administrative arrangements often result in a river being the provincial boundary but that is not always the case. 26

For water sharing arrangements for a common water source (that is, where two or more provinces access water from the same river) it will be important to have an acceptable degree of conformity and equity in licensing processes applied by each of the provinces when down stream needs have to be addressed. Coordination arrangements are clearly important in such situations. Possibilities for creating a single basin-wide authority should be explored. Many models exist elsewhere that have solved this boundary issue.

2) Regulatory compliance

Regulation provisions should back all procedures.

3.5.6 Conditionality

1) Land occupancy

License holders desirably should be able to demonstrate occupancy to the lands on which works are located, the water used and if necessary discharged. There should ideally be a legal certification. This, however, will be unrealistic in Indonesia at the moment. For the farmers this may be difficult as it would appear that there is some unification of lands in individual areas to improve delivery and water use efficiency. The mechanics of occupancy in these circumstances will depend on the customary arrangements.

2) Surface water, groundwater and discharge authorizations

The linkages between the surface licensing system for extractions and those for groundwater extractions and for waste water management, when common to one user needs to be developed to best meet Indonesia's needs. However, there has to be formal linkages in the authorization process. This provides an added control mechanism for violations. Powers to curtail supply for a user with a discharge right or vice versa is a strong sanction tool.

3.6 Comments on Structure of Rights

3.6.1 Divisible Rights

1) Multi purposes uses in single licenses

There will be occasions where there will be a mix of purposes sought by one license holder - for example, "commercial" irrigation and "water for living". The licensing strategy needs to allow for this. It is likely that Certificates of Water Entitlement for irrigation schemes will contain a variety of authorized uses, including any industries taking water from canals. The policy must also allow for division of entitlements to cater for application of selective restrictions of supply at times of water shortage. 27

3.6.2 Modifiable Rights

From a public interest point of view, and to cater for unforeseen circumstances, it is important that water use rights can be modified or otherwise attenuated by an administrative decision or under the Law. The provision is already within the Law and, to some extent, existing Regulations. It caters for government to step in and adjust rights. There is also provision for compensation. The 2004 Water Resources Law and its elucidation are reasonably specific on the circumstances and means for modification including suspension or cancellation of the right.

3.6.3 Priority of Access:

1) Water for living

The Law clearly identifies domestic "water for living" as having the highest priority. All allocation and supply policies and operational procedures need to be directed towards ensuring domestic supplies are met. This "water for living" right may need to be divisible into drinking water and other components to allow for management of progressive restrictions during major water shortages. 2) Irrigationpriority in law but not in fact

In the Brantas Basin, the Water Supply Service Providers, the PJT, the Balais, or District operators, all appear in practice to assign priority under an unwritten policy related to income. Water users who pay receive priority over those who do not. Irrigator farmers, who are not "commercial," in practice have a lower priority than industry.

If farmer's rights were to be formalized, there no doubt will be pressures from government for fees and taxes. This is a sticking issue in this whole exercise, as it is driving the debate rather than security, equity and protection issues. On the other hand formalization with fees may restore the priority balance. There are millions of farmers and low fees will produce significant incomes. 3) Rights security variationsfor purposes or different security

There is evidence that farmers have received no water and industry full allocation in very dry season on the Citarum Basin. It may be necessary to apply varied priorities on same purpose licenses for irrigation, splitting it into high security and general type security to protect farmers. 4) Available supplies The determination of seasonal allocations throughout the season is based on forecasts of rainfall, use of historical statistical data and storage available. In at least the Brantas and 28

Citarum Basins there are progressive updates of water available during the seasons, with adjustments to water available announcements. Other basins may not have this luxury. The arrangements for determining proportion allocation availability is based on a cropping pattern specification provided through the Districts, Balai and Dinas with support from the PJT to a coordinating Committee (PPTA) to make the decision. The license conditions have provisions for such allocation provisions. 5) Rights are authorized but not guaranteed Water supply delivery efficiency is limited by the capability of the delivery and distribution systems. If it were not physically possible to deliver supply as required, users need to be aware that although their rights are authorized, they are not guaranteed. There appears to be an attitude that aligns "authority" with "security". It would be beneficial to act proactively to remove that attitude.

3.7 Measurable Rights

Achieving fair and authorized shares of available water resources is impossible if those shares cannot in some way be measured. Permits granted under the existing law recognize this principle and nearly all require the fitting of a water meter and, although administration of this system is not always rigorous, it is simple and can be effective. Measuring water shares for irrigation farmers is a much bigger challenge. Measuring bulk shares of a river basin resource for a whole scheme is reasonably achievable through present systems of recording, at least daily, gate openings, depth of flow and so forth at intake regulators. These measurements need calibrating and collating into water use databases, but none of this is beyond the capability of existing systems. Some non-technical schemes may pose more problems, but on the whole the intake structures are conducive to reasonable flow measuring. Measuring shares within schemes is another matter entirely. Apart from the need to quantify transmission losses as discussed elsewhere, the nature of secondary and tertiary intakes varies from quite sophisticated to primitive. The former can be dealt with as for river intakes, but some investigation and ingenuity will be needed to devise simple, cheap and acceptable flow measurements for more primitive intakes. Acceptability includes institutional arrangements that satisfy all the stakeholders. It is likely that self-recording by say a water user association may be viewed with suspicion by neighboring associations. However, officialdom should only impose a system when the associations cannot agree among themselves - "ownership" is a key success requirement. The Brantas Basin survey indicated that there is considerable work required to formalize the institutional arrangements to give effect to that proposal. WUAs are far from fully formalized and there is a lack of appreciation of the extent of what is involved to get to that stage. 29

The work needed to establish the quantum of water shares and their acceptable measurement within an irrigation scheme even at the secondary level should not be under- estimated.

Establishing internal shares should only proceed at the pace that the communities feel comfortable with and to meet recognized needs. Anything else is likely to fail.

3.8 Transferable Rights

1) Staged introduction of transferable water entitlements

In countries where water rights management has been operative for a number of years and is now mature, transfers of water access rights through markets have operated for 20 years or more. They were progressively developed, yet there remain management and institutional issues still under negotiation. Acceptance of transfers was not at all universal when proposed by government in Australia in the late 1970s and early 1980s. It took some years before the farmers concerns of "corporate" takeovers of "their" water resources abated. It is evident that this ethic exists in Indonesia within NGOs and at farm levels. Under such circumstances it would be inappropriate to "gallop" into a Transferable Water Entitlements market situation. The decision in the new Law to allow re-allocations to occur but under strong control mechanisms is considered to be the appropriate one at this time. It gives some breathing space to allow the concepts to be accepted by the community and developed within the Indonesian context.

Nevertheless, there are transfers now occurring and there will need to be some form of interim policy established to attempt to at least put some level of oversight on these. A government based reserve of water available for allocation, or "water bank", could be introduced with transfers managed through it. As water is a valued asset, then protocols would need to cover recompense provisions or those participating in the transactions. The protocols would need to be strong to avoid any forms of collusion, with independent regular audits of its performance. User participation in advancing the "water bank" concept and design of the protocols would be essential.

A water transfer market is not solely related just to water management issues. It brings in taxation issues (capital gains etc) and issues relating to security and fiscal outcomes, so experts from outside the water sector would also need to participate.

Whilst not advocating any immediate introduction of Transferable Water Entitlements in Indonesia, because growth in water use is continuing, it will be necessary to develop a plan for the implementation and set a timeframe for progressive introduction. 30

2) Market interventionprovisions

It is apparent that Indonesian NGOs and farmers for the most part are concerned about the social and economic outcomes of potential "privatization" of access to water sources and the flow. However, there are numerous activities in which governments apply intervention mechanisms with markets (trade). Provided the Law is strong in its definition of any market controls and exclusion, and the users participate in developing transfer policies, many of such concerns whilst unlikely to entirely evaporate will be lessened. Experiences in many other countries show the same pattern of initial fears and apprehensions leading to initially a highly constrained and limited application of transferable water entitlements, followed by a gradual easing of restrictions over the years as the fears are found to be unwarranted. However, it is not prudent to introduce such policy reform at rates faster than the population generally will accept.

3) "Transfers" are occurringunder land and water links

Because of the institutional linkages of land use and water use, it is necessary to have a provision in the licensing strategy to enable water licenses to be modified, when there is a change in land use authorization (e.g. land "tenure" changes). The transfer mechanism should be simple. Local approvals at village levels should apply as much as possible. 31

CHAPTER 4. BRANTAS AND CITARUM RIVER BASINS: OVERVIEW

4.1 Introduction

This chapter presents details of the physical, economic and social characteristics of the Brantas and Citarum river basins. The source of data for various analyses under the Stage 2 Study were mainly obtained through field surveys in the Brantas basin in East Java and the Citarum basin in West Java in addition to interviews in Jakarta and desk reviews of existing documents.

4.2 The Brantas Basin

4.2.1 Physical Features

The Brantas basin has a watershed of 12,000 km2 and stretches 320 km length from its spring at Mount Arjuno to the point where it branches into two rivers, Surabaya River and Porong River, that both ends into the Madura Strait. Average precipitation in the basin is about 2,000 mm/year, and available surface water is approximately 12 billion m3/year, but only less than 25% of this amount is controllable, or annual manageable water availability is about three billion m3. The development of the Brantas basin has been carried out based on a series of master plans. Development in the basin has included so far seven dams, four river improvement schemes, five barrages, and three rubber dams. Total investment in water resources infrastructure amounts to an equivalent of US$ 738 million. The geology consists of tertiary formations including basalt and andesites in the volcanic upland, marine limestone underlying the plains and delta areas and consolidated volcanic ash throughout. The plains and delta consist of alluvial soils (silt, clay, loams) well suited to paddy cultivation. The basin has distinct wet (November - April) and dry (May - October) season. Mean annual temperature ranges from 24.2 C at Malang (elevation 450 m)

to 26.6 0 C at Porong in the delta. The Brantas River has headwaters in Arjuno volcanic massif, a major topographic feature dominating the southeast-central portion of the basin. It courses clockwise around the massif, first south through the Malang Plateu (400 m elevation) then west through the major dam and reservoir complex consisting of Sengguruh, Sutami/Lahor, Wlingi and Londoyo, respectively. At the confluence with the Ngrowo river in the Southwestern portion of the basin,

7 The description of this chapter is in some part based on 1) Dr. Kikkeri V. Ramu, P.E., "Brantas Basin Case Study Background Paper", Paper prepared for the World Bank Research Project on Integrating River Basin Management and the Principle of Managing Water Resources at the Lowest Appropriate Level - When and Why it Does (not) Work in Practice, Draft Jan. 2004, 2) The World Bank, "Java Irrigation Improvement and Water Resources Management Project, Basin Water Resources Planning, Integrated Water Management Plan for the Citarum River Basin, Draft 1997, and 3) JICA, "Identification of National Policy for Intersectoral Water Allocation Study", March 2001. 32

the Brantas turns north through the agriculturally productive plains region and finally east through the delta, also an important paddy growing area, where it discharges into the Madura Strait (see Map 4.1).

The Brantas basin faces diverse problems due to the pressure of the population growth and industrialization. The population in the Brantas basin as a whole stands at 14.4 million and has been increasing at the rate of 1 % per year for the last five years. (See the map of the Brantas Basin and tables in Annex 13 of Volume II). Water demand has increased significantly, while the supply remains limited. Previous assessments to the water balance of the urban areas of Surabaya and its surrounding areas indicate the necessity of developing new surface water resources to cope with the growing demand.

Supply improvement will not put an end solution to the whole situation alone, as demand management is also an important strategy to cope with the situation. It is required an integrated strategy to meet the increasing water demand in the Basin up to 2020 with efficiency improvement of irrigation water use, water re-use and recycling, and water storage utilization.

4.2.2 Economic Features

According to Ramu (2004), the Brantas basin is one of the most developed river basins in terms of investment in the water sector and utilization of the water resources, next to the Citarum basin in West Java and also the best managed basin for water resources in Indonesia. Ramu further commends that investment in flood control and water infrastructure in the basin has helped develop the industrial belt in the Surabaya - Gresik area as well as increase in agricultural output doubling rice production and a ten-fold increase in non-rice crops in the past three decades. Map 4.1 Brantas River Basin

NEW GUNUNGSARI BARRAGE SURABAYA RIVER

MENTUJRUS RUBBER DAM . -

A ,< eJATLAEREK it9BER DAM NEW OtG BAGE 33 BENG33--KS DAMDS- - t_6 - MEIJOpERI* O r :--3 A Lw1iFt 9 - G27AIRAEU~~~~~~~~RAGE

BENINO ; AtS PK^ORONCRIVER

NGANJUK 25 RTOSONO Penhgaron Irrigation Schee|

22 '.F'.:.BARRAGE

1~~~.- tf>7|1-:-r 18 vtzess*EU3 _ jJ;E=; .~~~t / rJeM* - \ ' %@65 XZ MA~LANG TLLJ~iOAG JK 3APPAGLE -- a.TA4 12 4

TRENGL.i- rA. .,-eR DAM

rt ~ ;.G TLJUtEL U N G L'AGr DNA ' 3* ruJ-;A.^,.-ffs TlrJrJElSuTAM,DAM-r

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AGI-W, HEPP~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~_ 34

Regional Gross Domestic Product (RGDP) for 2000 was Rp98,231 billion at current prices (Rp36,760 billion at constant 1993 prices) equivalent to approximately US$ 10.5 billion. This is roughly 58% of the RGDP of East Java, indicating that the basin enjoys relatively higher per capita share of RGDP than the surrounding region. RGDP per capita in current prices is counted at Rp6.8 million per capita, or equivalent to US$ 725, in 2000. Nominal RGDP at US$ in 2000 fell from US$ 16.9 billion of 1995 due to currency crisis in 1997/98. The crisis declined the nation's economic growth, and the average real (constant price) annual growth rate from 1995 to 2000 in the Brantas basin RGDP remained around 1.7% per year.

The sectoral breakdown of East Java RGDP (constant 1993 prices) was 17.2% for Agriculture, 34.4% for Industry and 48.4% for Services in 2002. Compared to working population distribution by sector, labor productivities in industry and service sectors are calculated at 11.1 times and 3.3 times of agriculture sector respectively. Industry is concentrated in the downstream and delta regions. Important water-using industries in the Brantas include sugar processing, pulp and paper, leather and food products.

The agricultural economy of the basin is centered on the cultivation of paddy, 97% of which is irrigated in 2002. Total harvested area and production of paddy in the concerned districts and municipalities in the Brantas basin in 2002 are 427 thousand ha and 2.3 million metric tones respectively, and they occupy 25% area and 26% production of East Java. Other important food and cash crops include maize, cassava, soybeans, peanuts, tobacco, coffee, and sugarcane. Sugarcane crop was introduced in 1850's by Dutch intervention and the production in the Basin still occupies around 20% of whole Indonesia albeit the government's rice self- sufficiency policy since 1960s.

Irrigated, dry-footed crops grown primarily in the dry season including maize, soybeans and peanuts, are collectively known as polowijo. Prevalent rotations include paddy-paddy- polowijo, paddy-paddy-fallow and paddy-polowijo-vegetables. Annex 9 summarizes harvested area, production and yield of important crops within the Brantas basin.

Physical features and present social figures of the Brantas Basin are shown in the following table: 35

Table 4.1: Physical, Economic and Social Features of the Brantas River Basin

Main river course: Brantas Length 320 km Administrative location: Province of East Java 110°30' and 112955' eastern longitude, 7931' dan 815' southern latitude u Main Tributaries and Basins * Lesti * 625 km2 * Konto * 687 km2 * Widas * 1,539 km 2 * Brantas * 6,718 km 2 * Ngrowo * 1,600 km2 * Surabaya * 631 km2 2 ...... I...... -...... Sum 12,000 km o Main Reservoirs (Sengguruh, Sutami, Lahor, Wlingi, Selorejo, Bening and Wonorejo) * Gross Storage (initial/present) * 647 / 405 million m3 *Effective Stora e (initial/present) * 479 / 343 maillion rn3 ...... ------...... o Surface Water Availability * Precipitation average in the basin * 2,000 mm/year * Surface runoff coefficient * 0.50 * Surface water availability * 12 billion m3 o Surface Water Utilization * Irrigation water * 2,400 million m 3 * Domestic-residential supply * 158 million m3 * Industry bulk water * 131 million m3 * Maintenance flow * 204 million m3 * Fisheries * 41 million m3 Sum 2,934 m.illion m3 o Social-Economy Condition * East Java population (2000) * 34.0 million * Brantas River Basin population (concerned jurisdictions)(2000) * 14.4 million * Paddy production in the basin (2002) * 2.3 million ton * RGDP East Java (2000 current price) * 169,911 billion Rp * RGDP of Brantas River Basin (2000 current price) * 98,231 billion Rp * Ratio of RGDP for the Brantas River Basin to East Java * 58% * Average Annual Economic Growth Rate (1995-2000) in Brantas * 1.7% Data source: PJT-1 (By Mr.Socheh, Soekistijono and Aris Harnanto), "East Java in Figures 2002", Central Bureau of Statistics (BPS)

4.3 The Citarum Basin

4.3.1 Physical Features

The Citarum basin, the third largest in Java, is the major water resource of West Java. The Citarum River is 350km long and flows northwestward to the Java Sea through the central Java from its source in the area surrounding Wayang Mountain. The Citarum catchment has a 36

watershed of 11,600 km2 and its residents support traditional agriculture and forestry activities in addition to urban and industrial activities associated with the city of Bandung. Below Bandung, the river is well regulated through a chain of three large reservoirs: Saguling, Cirata and Jatiluhur. These reservoirs provide hydropower, irrigation water, municipal water to Jakarta (Jatiluhur), and aquaculture opportunities (Saguling and Cirata) (see Map 4.2).

Development of the Citarum basin has been continuously implemented since 1925. The major works implemented during past 40 years include: * The Jatiluhur reservoir with a designed active storage of about 2,100 million m3 and the Jatiluhur Irrigation System (JIS), with a service area of about 240,000 ha, which provides trans-basin facilities to Jabotabek through the West Tarum Canal, and to Indramayu through the East Tarum Canal; and * Two-hydropower development schemes in the mid basin namely Saguling and Cirata with active storages of about 600 and 800 million m3 respectively. Saguling is the upper most reservoir. It is located some 30km west of Bandung city and about 100km southeast of Jakarta. Cirata, the second dam in the series is about 45km from Sagling, and Jatiluhur, the third, about 50km downstream of Cirata. Saguling reservoir was completed in 1985 and has already become highly polluted, particularly with domestic and industrial effluent (organic matter, nutrients, heavy metals) entering mostly from the northern catchment and the Citarum River. Saguling essentially acts as a trap for pollutants discharged to the Citarum River in and around the urban area of Bandung. Although Saguling was built primarily for electricity generation, the displacement of approximately 40,000 people from their agricultural land led to the reservoir being used for floating fish farms, which also contribute to nutrient pollution.

The climate in the Citarum basin is tropical and is characterized by distinct wet and dry seasons. The rainy season (November to April), results from the westerly monsoon, and the dry season (May to October) results from the prevailing easterly monsoon. Spatial distribution of rainfall is not uniform. It frequently happens that there is heavy rainfall in one part of the area but no rainfall at all in other parts. Annual rainfall of the area varies from 1966 mm to 2,600mm. This variation occurs due to topographic effects. Mean annual rainfall in the basin is 2,322 mm, with almost 80% falling between November and April. The average temperature is between 22 to 240 C, while relative humidity ranges from 25 to 83%.

Due to the influence of the active volcano, the types of soils are varied and complex. In some places, it is found that one type of soil is overlying with another type of soil in different depth. Actual types of soil in the basin are highly correlated with geologic and topographic conditions. The andosol soil mainly lies on the mountainous area in the northern part which was influenced by volcanic eruption. Black andosol soils can be found in the flat area or Lembang Plain. Map 4.2 Citarum River Basin

-~~~~~~~~~~~~~~~~~~~~~..... K......

Jakarta~ ~ ~ ~ ~ Jtiuura

1 - < - t o -"V lanx-( -Nv

LAUT JAW TA~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

-* ( ;'X qtvagara 111 igatiol kSc/wiele 38

The groundwater of the upper Citarum watershed is characterized by existence of aquifer (< 30 meters), intermediate aquifer (50 - 90 meters) and deep aquifer (> 100 meters). Generally, the aquifers compose of classic materials of volcanic origin with volcanic blocks, andesite and basalt fragments, or white pumice in it. The matrix grain size varies from silt to sand. Intermediate aquifer consists of medium to conglomeratic sandstone and more and less fine gravel can be found in the aquifer.

There are two protected forest areas inside of the upper Citarum watershed, namely Juanda Great Forest Park and Tangkuban Perahu National Park. Those forest covers nearly 30% of the total area, but mostly secondary forest. Non-forest area covers approximately 70% of total area and is presently used for agriculture, plantation, housings and industries. Despite the restriction against development to protect the forest, the area has been subjected to conversion caused by human activities.

4.3.2 Economic Features

The Citarum basin contains eleven Districts and one Municipality in whole or in part. All of the four districts of Bandung, Subang, Purwakarta and Karawang, and Bandung municipality are located within the Citarum basin and remaining seven districts are partially included in the basin. The statistical data in this chapter refers to the above four major districts and Bandung municipality, and therefore the numbers described here would be most likely less than the actual numbers in the whole basin.

The population in 2002 of the major four districts and Bandang municipality is estimated at 10.4 million, which represents 28% of the total population in West Java (36.9 million). The average annual growth rate from 1995 to 2002 is 1.8%, which is slightly lower than that of the whole West Java (2.0%), but considerably higher than the Brantas basin. Population in Bandung district and municipality occupies 62% of the above jurisdictions. Textile industry has been located in Bandung district since 1940s, which would be the driving factor of the large number of population resided in the district.

Of the 4.77 million economically active population over 10 years old, 770,000 or 16.1 % of the total of such population are currently unemployed and seeking jobs. This unemployment rate is higher than that of the whole West Java, which is estimated at 15.2%. Out of the economically active population, 26.0%, 27.8% and 46.2% are working for agriculture sector, industry sector and service sector respectively, while shares of the population working for agriculture sector, industry sector, and service sector in West Java are 30.2%, 27.3% and 42.5% respectively signifying the importance of industrial and domestic water demand in the Citarum basin.

RGDP for 2000 in the above districts and municipality within the Citarum basin was Rp5O,636 billion in current prices (Rpl9,152 billion in constant 1993 prices) or an equivalent of approximately US$ 5.4 billion. GRDP per capita in current prices in the above jurisdictions is 39

estimated at Rp5.0 million or an equivalent of US$ 535 per capita. The sectoral breakdown of West Java RGDP (constant prices) was 12.8% for agriculture, 51.7% for industry and 35.5% for services in 2002. Relatively high share of industry is a significant characteristic in West Java. Compared to working population distribution by sector, labor productivities in industry and service sectors are calculated at 4.5 times and 2 times of agriculture sector respectively.

The agriculture in the Citarum basin is dominated by paddy crop with high cropping intensity. For the four major districts and Bandung municipality, the total harvested area of wetland paddy in 2002 was 470,000 ha. Production of paddy in the above jurisdictions in 2002 was 2.6 million MT, which accounts for 28% of the whole West Java.

Physical features and present social figures of the Citarum basin are shown in the following table: 40

Table 4.2: Physical, Economic and Social Features of the Citarum Basin

Main river course: Citarum Length 350 km Administrative location: Province of West Java 107925' and 108g00' eastern longitude, 6Q55' and 7930' southern latitude o Main Tributaries and Basins * Kalen Bawah * 193.90 km2 * Cilamaya * 449.16 km2 * Kali Sewo * 95 km2 * Cipunagara * 1,272.54 km2 * Citarum * 6,622 km2 * Local Sub-Basin * 3,002.63 km2 Sum 11,6335.23 km2 ...... - ...... Li Main Reservoirs

(Effective Storage Capacity) * Jatiluhur * 2,100 million m3 * Cirata * 800 million m3 .. Saguling . 600 million m3 o Surface Water Availability * Precipitation average in the basin * 2,300 mm/year * Surface runoff coefficient * 0.50 * Surface water availability * 12,950 million m3 o Surface Water Utilization * Irrigation water * 6,655 million m3 * Jakarta Municipal water * 459 million m3 * Domestic & Industry water * 153 million m3 * Bandung Municipal water * 23 million m3 * Waste water * 383 million m3 Sum = 7,673 million m3 o Social-Economy Condition * West Java population (2002) * 36.9 million * Citarum River Basin population (four districts and a municipality fully located within the Basin, 2002) * 10.4 million * Paddy production in the basin (above jurisdictions, 2002) * 2.6 million ton * RGDP West Java (2000 current price) * 174,649 billion Rp * RGDP of Citarum River Basin (2000 current price) * 50,637 billion Rp * Ratio of RGDP for the Citarum River Basin to West Java * 29% * Annual Ave. Economic Growth Rate (1995-2000) in Citarum * 2.6% Data source: PJT4II, "West Java in Figures 2002", Central Bureau of Statistics (BPS) 41

CHAPTER 5. RESULTS OF THE PCM EXERCISE

5.1 Introduction

In the previous chapter, we described the physical, economic and social features of the Brantas and Citarum basins based on the secondary data most recently available. In this chapter, we present our primary data on who are the stakeholders in those two basins, what sort of problems they are facing, and their own ideas on how to solve those problems in future, based on the Project Cycle Management (PCM) workshops that we conducted in six locations. Compared to the previous chapter's basically statistical analyses, this chapter's analyses are more of qualitative opinion surveys and needs assessment of those stakeholders.

As discussed in the next paragraph, PCM is usually used for project planning and not limited, as this case was, to stakeholder analysis and problem analysis. We felt, however, that using the format of PCM workshops, we can collect primary information from larger and variety of audience more efficiently in a participatory manner than the usual individual interviews. Further, we felt that conducting PCM workshops at various levels of administrative boundaries would arouse the interest of stakeholders in WURs, which very few really know what they are and rarely thought of them systematically. In other words, the PCM workshops would be one of the most effective ways of conducting an awareness campaign. While we had to improvise a lot and treat the PCM methodology extremely flexibly, we are confident that we gathered highly reliable information in a short time. Even though most of the findings were those we had expected, the participatory process itself was worth doing. As we gained experience, the quality of the workshops became increasingly better.

5.2 What is PCM Method?

Project Cycle Management (PCM) method was originally designed by Foundation for Advanced Studies on International Development (FASID) of Japan. It is a combination of logframe (logical framework and project design matrix [PDM] promoted by USAID) and ZOPP (Objectives Oriented Project Planning by GTZ), and consists of a set of tools to (i) analyze the situation (stakeholder analysis and problem analysis), (ii) plan strategies and program (objectives analysis and selection of projects), (iii) design projects (logframe), and (iv) monitor and evaluate projects (logframe and plan of operation [PO]).

PCM Workshops can work as a catalyst of both top-down planning process with macro- perspective and bottom-up planning process with micro-perspective. PCM Workshops can be used "for the people", "with the people" and also "by the people". For the WURs Study, Stage 2, however, we do not expect PCM Method to be used "by the people" immediately. The main task is to do needs assessment "with the people" to guarantee that the Study is really "for the people". PCM Workshops can be held at national level, provincial level, district level, village level, community level or any other levels. 42

5.3 Procedures Used in This Particular Study

Since the objective of the PCM workshops of this particular study is to know water users' evaluation on the activities to mitigate water use and WURs problems, and their own possible solutions for the future, and not to design projects, we planned to use a combination of stakeholder analysis of the situation including evaluation of previous efforts, and problem analysis.

We had six PCM workshops in total, three in Brantas Basin (4, 6 and 9 March 2004) and three in Citarum Basin (16, 18 and 20 March 2004). The three PCM workshops in each survey area were held at province (basin) level, district (sub-district) level and village / WUAF level. Province and district level workshops were held with representatives of major stakeholders such as local governments, WUAFs, industry & PDAM, and NGOs & universities. The main objective was to identify issues, which can be common to all the stakeholders or specific to each stakeholder, and to analyze the relations among them. The tools used are stakeholder analysis, self-evaluation of activities and problem analysis. Possible solutions and way forward were also discussed.

Basin Province level District level Village / WUAF level

Brantas 3. East Java 1. Sidoarjo 2. Tempel

Citarum 5. West Java 4. Bandung 6. WUAF Wanir

The number denotes the sequence of the workshops. Village / WUAF level workshops were held with farmers or representatives of WUAs. The main objective is to identify issues or conflicts from farmers' point of view. The tools used are problem analysis and self-evaluation of activities. Possible solutions and way forward were also discussed.

5.4 Results of the PCM Workshops in Brantas Basin

5.4.1 District Level (Sidoarjo District) Stakeholder-problem Analysis at Sidoaijo Dinas in Brantas Basin on 4 March 2004

There were 33 participants: 9 farmers, 2 from NGOs, 13 government officials and 9 from industries. [See Annex Table 10 a)l for more details] Sidoarjo Dinas was chosen for the site of the district-level PCM workshop in Brantas Basin because the Stage 1 Study identified this area as having rapid urbanization and more conflicts on water use among farmers, industry and PDAM. We planned to do stakeholder analysis in the morning and problem analysis in the afternoon, but it took more time for stakeholder analysis than expected. We therefore combined stakeholder analysis and problem analysis together and also spent some time for possible solutions (see Annex 10 for further details). 43

The Majokerto workshop identified the following major problems and solutions at the district level:

Stakeholders Major Problems Major Solutions (1) Irregular operation and irregular intake by farmers. (It became easier to (1) Improvement of law enforcement. operate by mechanization. Some (2) To make duty and responsibility of 1. Farmers farmers are not satisfied with the government officials (especially government rules. Cropping patterns water masters) clear. and water distribution do not match (3) Public awareness of farmers. the real situation.) (1) Improvement of land conservation (1) Water scarcity at Kerembong program. 2. Industry sugarcane factory (September to (2) Law enforcement against illegal November). logging. (3) Public awareness on illegal logging. (1) Illegal construction of weirs reduces (1) Consensus on water management the amount of intake of PDAM in dry among farmers, industry and 3. PDAM season. PDAM. (2) Water quality at the intake of PDAM (2) Law enforcement on water is getting worse. pollution. (1) Clear definition of responsibility of (1) NGO cannot know whom to report each government office relating 4. NGO when farmers meet problems such as water issues including allocation of pollution. water, pollution, land conservation, etc. (1) Farmers think District Resources (1) Priority on water allocation should 5. Government Office tends to give too much priority be defined clearly by the Irrigation for industry than farmers. Committee.

In sum, the Majokerto workshop's major findings for the SidoarJo District were: * Unclear duty and responsibility of government offices and government officials (especially for water masters) might be the most important issue discussed in the workshop.

* Unclear water use priority between agriculture and industry is another important issue. The major solution discussed was the Irrigation Committee to define the priority on water allocation clearly, and to reach consensus on water management among farmers, industry and PDAM.

* Some officials even said district regulation put the priority of industry water use higher than irrigation water use. 44

The representative of PDAM complained about the water quality of industry's discharge.

5.4.2 Village Level Problem Analysis at Tempel Village in Brantas Basin on 6 March 2004

There were 11 participants, all of whom were farmers. Of those, three were from up stream, seven from middle stream, and one from down stream. [See Annex Table 10 a)3 for more details] Tempel village was chosen for the village-level PCM workshop site because it is one of the places where serious conflicts on water are clear and present. There are small-scale industries and also an intake of PDAM in the area. Since farmers are quite busy in this season, we could spend only two and half hours for problem analysis. We also found through interviews on the next day that many farmers do not even know what HIPPA (WUA in their language in East Java) is. Farmers also mentioned that no WUA has been organized in Tempel village and water allocation is decided by the government.

Because of time constraint, we needed to start problem analysis with a pre-deterrnined core problem. We chose a general core problem of "Farmers have difficulties in getting water in dry season" to avoid leading participants to specific issues. The direct causes identified at the workshop for this core problem were as follows [See Annex 10 Figure b) 1 for the complete problem tree]:

Core problem Farmers have difficulties in getting water in dry season. Water level is lower than the gates at secondary canal. (Too much removal Direct cause 1 of sedimentation and digging of canal to increase flow capacity by (Most serious) government, and government did not increase discharge as promised when government did them for PDAM.)

Direct cause 2 Farmers are getting water without permiission. (Association at secondary Direct cause 2 level has not organized yet, and communication among farmers at secondary canal is weak.) There are a lot of losses of water at secondary level. (Drying up for canal Direct cause 3 maintenance is not done, and level of maintenance at secondary level is low.) Direct cause 4 Water availability at the weir is very limited. Note: The problems in parenthesis are the causes for direct causes and are shown here to make the direct causes clearer.

In sum, the Tempel Village workshop's major findings were:

* Farmers of Tempel village hardly communicate at secondary level.

* They communicate at tertiary level, but not through WUA but through farmers' organization. 45

* Removal of sedimentation and digging of canal for PDAM, which made the floor of the canal lower than the intakes for farmers, is one of the major issues.

* In the interview, no farmer mentioned water issues at all but complained a lot about low price of rice and high production costs. One farmer mentioned that he could not grow rice three times a year because of lack of labor force.

* Industry is very important for the villagers of Tempel. We found that about half of the villagers are part-time farmers.

5.4.3 Province Level Detailed Problem Analysis at Dinas East Java (Surabaya) on 9 March 2004

There were 32 participants including four women [See Annex Table 10 a)4 for more details]. From the stakeholder/problem analysis at Sidoarjo Dinas and the problem analysis at Tempel village, we had pre-selected three major issues to discuss at the province level workshop:

* Farmers do not follow the rules

* Actual water allocation is not optimal, and

* Water of Brantas basin is polluted.

The Surabaya Workshop for the East Java Province identified the direct causes of those core problems as follows [See Annex 10 Figures a)2, a)3, and a)4 for the complete problem tree]:

Core problem Farmers do not follow the rules.

Condition of irrigation scheme is not good. (Some farmers do not pay O&M Direct cause I fee. Farmers are not involved in designing, so design of canal is not appropnate. Farmers have no control over construction, so physical construction of canal is not good.)

Farmers do not follow the cropping pattern, which was decided by the Direct cause 2 government. (Farmers want to grow rice for the third crop, and government allows farmers to grow horticulture. WUA is not functioning well, and information on water allocation is not enough.)

Water is not allocated equally between upstream and downstream. (Farmers Direct cause 3 cannot join decision making, and irrigation water for downstream is limited.)

Direct cause 4 There is no law enforcement on water management. (Influence of elder and local leaders become weak, and public awareness of regulations is weak.) 46

Core problem Actual water allocation is not optimal.

Direct cause I Irrigation performance is getting lower. (Fund for O&M is limited, some (Most serious) Opfarmers destroy the gates and canals on purpose, and there are many (Mosserous) operational mistakes.)

Direct cause 2 Limitation of water availability. (Water resource capacity in the catchment (Next) area is low due to illegal logging, poor land conservation, and no proper attention by the govermnent.)

Direct cause 3 Farmers do not follow the cropping pattern. (Farmers do not get the information of the cropping pattern, and farmers cannot plant rice on time.)

Direct cause 4 Industry and PDAM tend to use more water than allocated.

Direct cause 5 Implementation of water allocation does not follow the plan.

Core problem Water of Brantas Basin is polluted. Direct cause 1 (Most serious) Industry waste goes directly into the water body. Direct cause 2 Polluted domestic waste goes directly into the water body.

(N e x t)______Direct cause 3 Excessive use of pesticides / fertilizers + too much rain. Direct cause 4 Landslides and erosions in mountain area.

In sum, the major findings of the East Java Province level workshop held in Surabaya were as follows: * Farmers want to grow rice for the third crop. * Farmers are excluded from decision-making on irrigation such as cropping pattern, rotation system and canal design. Also farmers do not have enough information on water allocation and there is no horizontal communication at secondary and primary canal level. * Participants talk with elder and local leaders rather than WUAs on water management issues. * There are incidents of destroying the gates and canals on purpose. * Participants pointed out weakness of communication between government and farmers. * There were not so many farmer participants as expected. One official commented that farmers do not seem to be very eager about attending the meetings held at government offices. 47

* The discussion in the PCM workshops in East Java could not cover WUAFs' activities so much because we could not facilitate the workshops so well compared with the workshops in West Java.

5.5 Results of the PCM Workshops in Citarum Basin

5.5.1 District Level (Bandung District) Problem Analysis and Evaluation of Efforts to Solve the Problems at Majalaya sub-district in Citarum Basin on 16 March 2004

There were 30 participants: 15 farmers, 2 from university and NGO, 5 from industry, and 8 from government. Since this was the first PCM workshop in West Java, we avoided to use a pre-determined core problem and started from free discussions on important issues related to water use. From the 16 important issues discussed among each stakeholder group, "conflict on water among farmers, industry and PDAM" was chosen as the core problem. [See Annex 10 Table a)5 for more details]

After problem analysis, we asked the participants to discuss and evaluate the major approaches to solve the problems using a format of 1) specific problems, 2) efforts to solve the problems, 3) results so far, 4) lessons learned, and 5) way forward. Since it took time to decide the core problem, not much time for discussions on way forward was left. That is one of the reasons why farmers showed us a "shopping list" for government in way forward not what they can do by themselves.

The Bandung workshop identified the core problem and its direct causes as follows [See Annex 10 Figure b)5 for the complete problem tree]:

Core problem Conflict on water among farmers, industry and PDAM.

Direct cause 1 Shortage of water in dry season. (Water availability of the river goes down, (Mosserio many damages in irrigation structure, farmers' water use is not efficient, and (Most serious) PDAM and industry tend to take more water than licensed.)

Direct cause 2 Water users do not follow the rules. (Regulation on water is not clear, and (Next) law enforcement is low) Forum for communication and coordination is not optimal. (Irrigation Direct cause 3 committee at district level is not working well, and forum in irrigation at province level does not exist.)

Against those problems, the Bandung workshop identified the following major efforts being done and the way forward [See Annex 10 Table a)6 for more details]: 48

Major problems Major efforts so far Way forward

(1) Government should allocate enough 1. Maintenance (1) Several secondary money for regular maintenance. of the canals canals have already (2) Government should build small dumping is not good. maintained by WUAF. sites and collecting stations. WUAF will campaign not to dump and monitor. (1) In dry season (June-August), 2. Conflict (1) Rotation (6 am to 4 pm downstreamers of gate 12 (125ha) should among for gates 1 to 8 [15Oha] irnigate using pumps: fuel should be paid farmong at and 4 pm to 6 am for by farmers and industry, farmers at and 4 pm to 6 am forgoen nt but pumps by secondary gates 9 to 12 [350ha] government. seondary gates 9een introd12u[c (2) Industry should operate water treatment facilities and discharged water should go back to irrigation canal. (1) When there was a Conflict conflict with the guards of rich farmers who did among not let others to take None farmers at tertiary tertirylvel.level, thewater, guards WUAF to a invitedmeeting and got a consensus. (1) Government should keep standardized rice price because farmers harvest at the 4. Fanneslederdo ( adillae asame time. (This is the consensus by the 4.nFarmers do (1) V tige leaderhh ao participants and not not follow meeting with farmers to SuyTa) necessarily by the the cropping decide planting time Study Team). pathemrop g andecind p t tie (2) Government should give subsidies for fertilizers and pesticides. (This is the consensus by the participants and not necessarily by the Study Team).

In sum, the main findings at the district level workshop in Bandung were:

* Farmers had very strong voices compared with the workshops in East Java. One of the participants, who is chairman of WUAF, had Government Regulation No.77 with him and was taking notes throughout the workshop. He also asked a participant from the industry about the kinds and amounts of taxes and fees which industry has to pay and took note.

* Participants from industry complained that they have to pay too many taxes and fees and farmers were also surprised at the kinds and amounts of tax fees which industry has to pay.

* Factories are paying Rp.150,000 to RP.250,000 to the WUAF for operation and maintenance of the irrigation facilities. 49

* Though there were meetings between industry and farmers, it was difficult to get any consensus because the representatives of industry were not decision makers.

* Participants thought Irrigation Committee does not work well because the Chairman is too busy. Since the Vice-chairman is a farmer, it is very difficult for him to improve the performance of the committee especially the members from the government. * There is reluctance among farmers in protesting against factories' waste-water because their children are working at the factories.

5.5.2 Province Level (West Java Province) Problem Analysis and Evaluation of Problem Solving Activities at Dinas West Java on 18 March 2004

There were 50 participants: 7 farmers (one woman), 4 from industry (one woman), 33 government officials (six women) and 6 from universities, NGOs and consultants. Since we spent too much time on deciding the core problem at the previous workshop, we started with a pre-determined core problem of "conflict on water among farmers, industry and PDAM", which was chosen at the district level workshop at Majalaya sub-district. We asked the participants to divide into farmers, industry and government, and to talk about what conflict means in the core problem. As a result, the core problem was defined as "conflict among water users on (i) quantity, (ii) quality, (iii) control and regulation, (iv) water fee and license, and (v) land use". [See Annex 10 Table a)7 for more details] In the discussion of way forward, we asked the participants to talk about what they can do rather than what they want other stakeholders to do. We asked them to divide the column for way forward into three stakeholders: (i) WUAF, (ii) industry & PDAM, and (iii) government, to clarify who need to do what.

The West Java Province level workshop defined the core problems and their direct causes as follows [See Annex 10 Figure b)6 for the complete problem tree]:

Core problem Conflict among water users on 1. Quantity, 2. Quality, 3. Control and regulation, 4. Water fee and license, and 5. Land use. Direct cause 1 Water availability in the rivers and lakes is low. (Water resources are decreasing partly due to reclamation of lakes.) Direct cause 2 Flow capacity of the rivers is low. (A lot of sedimentation in the rivers.) Direct cause 3 Illegal water intake by industry & PDAM. Direct cause 4 Gate keeper / water master does not follow the rules. Direct cause 5 Water quality of rivers and canals is bad. Direct cause 6 Too many kinds of water fees for industry. 50

The major problems, effort so far and way forward at the West Java Province level are summarized below [See Annex 10 Table a)8 for more details]:

Major problems Major efforts so far Way forward

(1) Empowerment of farmers by WUAF (1) Regulation on water cooperating with village leaders. use has already issued (2) Establishment of forum among water and implemented. users in Cisangkuy river. (Industry & 1. Law (Government) PDAM) enforcement is (Gorn nd (3) Improvement of law enforcement in weak. ( ontoling ad each government office. implemented. (4) Strengthening of punishment and (Government) reward. (Government) (5) People's involvement in making government regulation. (Government)

(1) Adjustment of cropping pattern (1) Farmers adjusted according to water availability. cropping pattern (WUAF) according to the water (2) Planting crops at the same time. availability. (WUAF) (WUAF) 2. Limitation of (2) Reforestation has (3) Application of efficient water use in water in dry been implemented agricultural system. (WUAF) season. (not only in the (4) Operation of water treatment facilities. government land but (Ind.) also in the community (5) Flow the suitable waste water to land of farmers' irrigation canal. (Ind.) group). (G, WUAF) (6) Preparation of water pond. (G) (7) Full functioning of traditional lakes. (G)

3. Farmers in (1) Rotation system has (1) Improvement of rotation system in downstream been modified every dry season. (WUAF) don't get enough (daytime for (2) Construction of water reservoir. (I) water by rotation upstream, evening for (3) Proper water use according to the system in dry downstream). license. (I) season. (WUAF) (4) Preparation of water allocation manual. (G). (1) Campaign for not dumping garbage into 1) District regulation on canal by WUAF cooperating with 4. Water is polluted water pollution has village leaders. in the river, formed and already (2) Construction of storage for hazardous mimhepleverformed ndtaread. Gwaste. (I) implemented. (G) (3) Construction of collective hazardous waste treatment center. (G) 5. Too many kinds (1) Establishment of one-stop government of water related service system. (G) fees and taxes Not yet Sic e system. (G) for industry. (2) Simplify the tax and fee system. (G) 51

In sum, the major findings at the West Java Province level were:

* All the stakeholders were actively involved in the discussion even though the number of participants was more than any other workshops. Participants clapped hands together several times.

* All the participants agreed on the necessity of one-stop government service system and simplification of water tax and fees.

* Hazardous waste is one of the serious problems in this area.

* Industry has difficulties in getting groundwater because many people are against it.

* Intake water of Saguling Power Plant is polluted.

* WUAF Ciherang is giving penalties to the farmers who do not follow the rule.

* Village leaders have big positive influence on empowering WUAs.

* Industry uses bodyguards to get enough water.

5.5.3 WUAF Level Evaluation of Problem Solving Activities, Problem Analysis and Way Forwardat WUAF Wanir in Citarum Basin on 20 March 2004

There were 18 participating farmers mostly from the WUAF Wanir. Most of them were board members of 14 WUAs under WUAF Wanir. The workshop was held at the house of chairman of WUAF Wanir. WUAF Wanir covers Pacet, Ciparay and Majalaya sub-districts and we also had a PCM workshop at Majalaya sub-district on 16 March 2004. WUAF members, industry and PDAM have conflict on the same source of water. Those are the reasons why WUAF Wanir was chosen for the PCM workshop.

From the previous workshop and the interview with three core leaders of WUAF Wanir on the day before, we were surprised at how active WUAF Wanir is. We thought we needed to spend more time on evaluation of their efforts and decided to start from evaluation rather than problem analysis. We first asked the participants to talk about (i) specific problems, (ii) efforts to solve the problems, (iii) results so far, and (iv) lessons learned. Then we asked them to define the same pre-determined core problem, and the result was "conflict among water users on (i) quantity (supply), (ii) rotation system, (iii) quantity (demand), (iv) pollution, (v) communication and coordination, and (vi) operation and maintenance (financial)". [See Annex 10 Table a)9 for more details]. After the problem analysis, we asked the participants to talk about the way forward on priority issues for (i) WUAF, (ii) industry and PDAM, and (iii) government.

The WUAF level workshop at Wanir revealed the following problems and efforts so far [See Annex 10 Table a)10 for more details]: 52

Major problems Efforts to solve the problems (1) WUAF consulted government office for having discussion with 1. Conflict on water PDAM. distribution among (2) Government facilitated discussion with PDAM for WUAF. WUAF, PDAM, and (3) The person who came from PDAM was not a decision maker. industry. (4) WUAF asked PDAM not to take water in dry season, and follow the rotation system.

2. Rehabilitation and (1) WUAF had a meeting with village leaders. maintenance done by (2) WUAF submitted farmers' needs to district government office. govermnent office farmer's (3) WUAF, NGO, universities, water resources service, board of needs (primary and district development planning office, district agriculture office secondary canal) etc. had a formal meeting

3. Water distribution (1) Water distribution schedule was discussed at WUAF's amofnWUAFthe unitsis members' meeting and decided as 6:00-18:00 for upstream and of WUAF (14 units) is 18:00-6:00 for downstream. not suitable.

4. Government (1) WUAF had a meeting and agreed on an arrangement of their gatekeepers are not own gatekeepers, and reported to the government. (Government functioning. gatekeepers were replaced by WUAF gatekeepers.)

The WUAF Wanir workshop defined the core problem and direct causes of such problem as follows [See Annex 10 Figure b)7 for the complete problem tree]:

Conflict among water users on 1. Quantity (supply), 2. Rotation system, Core problem 3. Quantity (demand), 4. Pollution, 5. Communication and coordination, and 6. Operation and maintenance (financial).

Direct cause 1 Water is limited in dry season.

Direct cause 2 Not enough water downstream even with rotation.

Direct cause 3 PDAM continuously takes large amount of water in dry season.

Direct cause 4 Industry uses bodyguards to take enough water.

Direct cause 5 Industry does not follow the water allocation rule.

Direct cause 6 Canal water is polluted.

Direct cause 7 Water allocation among the water users is not disciplined. Direct cause 8 Irrigation canals are damaged.

The main issues and the way forward at WUAF Wanir are summarized below [See Annex 10 Table a) 11 for more details]: 53

Major issues Way forward

(1) Adjustment of cropping pattern according to water availability. (WUAF) 1. Farmers tend (2) Planting crops at the same time. (WUAF) not to be (3) Application of efficient water use in agricultural system. (WUAF) disciplined. (4) Strengthening government role in discipline enforcement. (Government) (5) Coordination with farmers' leaders on law enforcement. (Government) (1) Regular control of water gate for PDAM. (WUAF) 2. PDAM and (2) Taking water according to their needs. (Industry & PDAM) industry take (3) Establishment of compensation fund for canal maintenance and land much water conservation. (Industry & PDAM) (4) Monitoring of every intake for PDAM. (Government)

3. Illegal taking (1) Strengthening of coordination with village leaders, sub-district leaders, water in and tertiary block leaders. (WUAF) upstream of (2) Development of technical dam for village irrigation / simple irrigation Wanir weir system. (Government)

4. Canal (1) Regular maintenance of canal by WUAF according to farmers' capacity maintenance (finance as well as manpower). is poor. (2) Payment of water fee for O&M. (Industry & PDAM) (3) Financial support for O&M cost. (Government)

In sum, the main findings at the WUAF Wanir workshop were as follows:

* Farmers think almost everything has become better with IMT except confrontation between WUAF and the government. WUAF Wanir was organized in 2000, two years before IMT was introduced in 2002.

* WUAF had own rotation table before the district prepared a rotation table. WUAF showed the Government Regulation No.77 to the district, went to Jakarta for demonstration, and the district agreed to use WUAF rotation table.

* Farmers discussed water fees for O&M and land conservation as same as amount of water taken by industry and PDAM in dry season. A chairman of WUAF even said "industry can save money if industry pays water fee to WUAF instead of paying bodyguards to get water" in the interview. (Industry has been paying Rp.175,000 for bodyguards to fill the reservoir once)

* WUAF / WUAs want complete management of irrigation water.

* WUAF / WUAs think farmers need to pay water fee for O&M.

* WUAs under the WUAF Wanir were first organized according to administrative boundaries in 1982. There was an adjustment according to hydrology in 2000, and there are 16 units in 14 villages now. 54

* Chairman of WUAF Wanir and some participants lead the discussion actively from beginning and participants discussed eagerly what they have done in the past especially.

* WUAF Wanir is responsible only for water use. If farmers need to buy seeds or fertilizer together, they use government cooperative under cooperative Dinas at district level.

5.6 Main Findings of the PCM Workshops in both East Java and West Java

What were the overall findings of the series of PCM workshops we conducted in East and West Java? Our PCM workshops got progressively better as we gained experience and adjusted the process. All in all the workshops in West Java were more successful than in East Java because of the experience we gained but also the knowledge of the attending farmers on their WUAs and WUAFs. It was also noted that the problems of water management and competition were much more serious in West Java than East Java.

Having concluded those workshops, however, we had some fundamental questions:

D Although each stakeholder mentioned many problems on water use during workshops, farmers talked a lot about low price of rice given by middlemen, rats and insects, and high production cost for hiring labors and purchasing fertilizers and pesticides, but not much about water issues. These were clearly noticeable in the PCM exercises and interviews, especially in Brantas Basin, East Java. Water does not seem to be a life-or-death problem for farmers.

a If farmers can harvest enough staple food only from the first crop season, it is a matter of income to grow rice the third crop or not. And if water use is an issue only in dry season (that is also the third crop season), the problem can be solved by not planting during the third crop season. Then it is not a food-for-security problem and it can be an income generation issue rather than water use or WUR issue.

a Having said, however, the trend for increasing competition over water is undeniable even in East Java, and having a clear vision and strategy for WURs will be more and more important in the future.

* What is farmers' perception of water where water is abundant?

o Farmers seem to take abundance of water normally. Many participants only complained about water scarcity in dry season, and the perception of these farmers must be different from that of the farmers where water is quite limited, such as in arid and semi-arid areas, and they have to rely on irrigation. This is particularly the case for the Brantas basin farmers.

o If there is no water at the beginning, people think from zero (having nothing), but if there is affluent water, people think from ten (having enough). Value of water for 55

the farmers in Java might be based on the demerit system. They demand money for something taking away from them, but do not want to pay any money for something already given (from heaven) from the beginning. Under such circumstances, they have no objection for selling water for money as compensation, but never want to buy water. * Is water use by industry & PDAM itself the problem or lack of coordination the problem?

n It appears that, for farmers, the lack of coordination is a bigger problem than the increasingly large amount of water being used by industry and PDAM. WUAFs in West Java are now taking water fees from some factories for O&M of the canals. They want water fees from industry & PDAM. This is not the case in East Java. Also in the workshops in West Java, farmers and industry agreed on simplification of water tax and fees and one-stop service by government for licensing. On the other hand, in East Java, there were heated discussions on who should pay for the O&M costs between farmers on one hand and industry & PDAM on the other in the province and district level workshops in East Java. Probably one reason is that coordination and communication among water users on 0 & M cost is not so active in East Java as seen in West Java, and another reason is that several government officials in East Java consider that industry should be given higher priority over irrigation.

5.7 Comparison of Farmers and WUAs / WUAF's Response toward Common Issues

The responses of the farmers, WUAs and WUAFs toward common issues such as (i) mismatch of cropping pattern, (ii) water scarcity at downstream farms, (iii) irregular operation by gate keepers / water masters, (iv) poor maintenance of canals, and (v) illegal logging, were completely different in the workshops between where IMT has been implemented and where IMT has not been implemented. Farmers where IMT has not been implemented tend to rely on government for everything. On the other hand, leaders of WUAs / WUAFs where IMT has been implemented tend to think about what they have done in the past and what they can do in the future basically by themselves. For example, the result of self-evaluation by the WUAF Wanir (see Annex Table 10 a)10) shows how actively WUAF made efforts to solve the problems, which are still common in other WUAFs, through good communication and coordination with other stakeholders. This may be a good example of how IMT will affect the attitude of farmers, WUAs and WUAFs to cope with the problems by themselves. The table below gives examples of how farmers' attitude is different between the areas where IMT has been introduced and not introduced: 56

Where IMT has not been implemented Where IMT has been implemented Common issues (happens to be the (happens to be the selected workshop sites in Citarum selected workshop sites Basin) in Brantas Basin)

Efforts so far: 1. Farmers do not (1) Village leader had a meeting with farmers to decide agree with Way forward: planting time and kind of crops. government (1) Improvement of law (2) Farmers adjusted cropping pattern according to cropping enforcement. water availability. pattern and (2) Public awareness of (3) WUAF had own rotation table before the district poattern and (2 Pulcaarmeness of prepared a rotation table. WUAF showed the system. . Government Regulation No.77 to the district, went to Jakarta for demonstration, and the district agreed to use WUAF rotation table.

Way forward: Efforts so far: (1) Improvement of law (1) Water distribution schedule was discussed at enforcemento WUAF's members' meeting and decided as 6:00- 2. Downstream (2) To make duty and 18:00 for upstream and 18:00-6:00 for downstream. farmers cannot responsibility of Way forward: get enough government officials (1) Improvement of rotation system in every dry season. water. (especially water (WUAF) masters) clear. (2) Construction of water reservoir. (Industry) (3) awaenesubli of (3) Proper water use according to the license. (Industry) farmers. (4) Preparation of water allocation manual.(Government) Way forward: Efforts so far: 3. Gatekeepers / (1) To make duty and (1) WUAF had a meeting about arrangement of their water masters responsibility of (1)eWUAFehad a meeting aout arrngmento do not follow government of ficials gatekeepers, and reported to the government. thenotrules w (vespenfciall (Government gatekeepers were replaced by WUAF the rules (especially watergaeepr. masters) clear. gatekeepers.)

4. Rehabilitation Efforts so far: and Way forward: (1) WUAF had a meeting with village leaders and maintenance (1) Govemment to give submitted farmers' needs to district. WUAF, NGO, of primary and enough funding for universities, district water resources, district secondary full functioning of development planning office, district agriculture canals are not canal. office etc. had a formal meeting. good. (2) Several secondary canals have already maintained by WUAF. Way forward: (1) Strengthening of public awareness and application of punishment by WUAF and strengthening of law Way forward: enforcement by WUAF coordinating with related (1) Law enforcement government offices. 5. Illegal logging against illegal (2) WUAF will buy seeds for conservation and will logging at the provide manpower for reforestation. catchment area. (3) Establishment of fund by government for land conservation, control and law enforcement, appointment of proper person for campaign of reforestation, and proper command on illegal logging by government 57

5.8 Conclusion and the Way Forward

Although it is presumptuous to consider that mere six PCM workshops in East and West Java could provide enough information for suggesting the way forward for water management in those areas, the workshops have given us some clarity in identifying common issues and the stakeholders' own thinking of how to cope with those problems. We have identified the following five issues for future consideration by the stakeholders:

* Importance of horizontal communication and coordination

* Agriculture for farmers' life

* Necessity of WUAFs' integrated response toward holistic problems

* Simplification of government services and stable policies

* Farmers' expectation toward industry

5.8.1 Importance of Horizontal Communication and Coordination

As mentioned above, there is quite an obvious difference in farmers' capacity between where IMT has been implemented and where has not. In the interview, we found that farmers do not even know what HIPPA (WUA) means at Tempel village in East Java. The governments only talk with elders and village leaders or traditional farmers' group even about water management issue.

While communication and coordination at tertiary level is possible through farmers' organization or village organization, it is impossible to go beyond village, sub-district and then district. WUAFs at secondary and primary levels are essential for farmers to communicate and coordinate horizontally. As shown above, WUAFs in West Java have been making great efforts to solve the problems on water use on their own (e.g. rotation schedule, gatekeeper/water master, rehabilitation and maintenance, etc.) coordinating with all the stakeholders including village leaders. Further, many participants pointed out that lack of farmers' participation and involvement in the decision making process is the main cause of the problems on water use. Without WUAFs, irrigation committees at district level and forum at province level cannot really function.

5.8.2 Agriculture for Farmers' Life

It appears that farmers can solve existing water shortage problem by changing the third crop from rice to secondary crops. And it is not a food security issue but an income issue if farmers can harvest enough rice to eat by the first crop. If our judgment is correct, the next step is to address the agronomical and marketing (especially middleman's) issues to solve the water problem at least partly. Although many farmers complained that price of rice by middlemen is 58

very low and cooperatives are not functioning, they still wanted to grow rice for the third crop. If the reasons why farmers do not want to plant secondary crops could be: (i) fluctuation of price, (ii) more labor intensive, (iii) share croppers do not have full choice, (iv) easily damaged, etc., it is important to prepare an environment where farmers have the freedom to choose secondary crops and make profit from them. Further, we found that farmers need more information and extension services on agricultural product.

Factories in the areas are a valuable source of income for farmers, but at the same time they bring shortage of farming labor and increase of farming wage, which lead to higher production cost. Farmers may choose less labor-intensive crops rather than higher profitable crops and the style of agriculture will change. Also farmers who live near urban areas seem to get more income from other sources.

5.8.3 Necessity of WUAFs' IntegratedResponse toward Holistic Problems

It is difficult to discuss water use issue in isolation from other issues surrounding farmers' life. In the last several years, low price of rice and high production cost have been the most serious problems for farmers. Also collective power for marketing and purchasing, information sharing and strategic cropping can promote the shift from rice to secondary crops in dry seasons. Under Government Regulation No.77, WUAFs can actually make decisions on cropping pattern, sale of their products, or purchase of seeds, fertilizer and pesticides. In reality, however, WUAFs need to coordinate with village leaders and other farmers' organizations, which are vertically divided by government offices responsible for water resources, agriculture, cooperative, interior, etc. There are simply too many farmers' organizations at village level. That could be an obstacle for farmers to respond to holistic agricultural problems and to get empowered. A system, where WUAFs can tackle the problems in an autonomous and sustainable way, needs to be established. But at the same time, because farmers' organizations, elders and local leaders still have great influence over villagers' life and provide knowledge about both agricultural production and water management, it is important to involve those in the strengthening of WUAFs, in that hasty steps should be avoided and careful coordination and cooperation with those other stakeholders would be needed.

5.8.4 Simplification of Government Services and Stable Policies

Unclear government policies and responsibility of each government office relating water issues are some of the key problems all the stakeholders mentioned and agreed in the workshops. It is complicated and unclear for water users how responsibilities were divided vertically (national, province, PJT and district) and horizontally (water resources, agriculture, mining, cooperative, interior, etc.). Those services, taxes and fees should be simplified and one-stop service is the best answer at least for the users. 59

From the result of six workshops, we can see that the progress of IMT and capacity of WUAFs vary from place to place. The background of the community, history of farmers' organizations (e.g., WUAs have been there since 1982 in Wanir, Bandung District), and activities of NGOs (e.g., a community organizer delivered Government Regulation No.77 to WUAF leaders in Bandung District) might be totally different from region to region. Likewise and perhaps because of that, implementation of IMT policy or organizational strengthening of WUAFs are also different. All those add to the current confusion about government policies at the field level.

Some officials think industry water has priority over agricultural water, although the priority was clearly defined otherwise in the 1974 Water Resource Law as well as the New Law. If fundamental and important policies related water use are not clear and change frequently, water users will be simply confused. Those policies must be consistent and stable so that rather long-term implementation, evaluation and feedback are possible.

5.8.5 Farmers' Expectation toward Industry

Although farmers have some complaints about industries' water use as mentioned above, they are not rejecting factories as we had suspected at the beginning of the study. What farmers are expecting from industry seems to be to (i) pay for O&M of canals, (ii) treat waste water properly to meet the standards, and (iii) discharge the clean wastewater back to canals. Factories in the villages are a valuable source of income for farmers, and one of WUAF leaders, who is also an elementary school teacher, even said "I don't want our children generation to stay in agriculture." Therefore, we might be able to conclude that factories are welcomed by farmers if (i) factories pay enough compensation to meet the O&M costs of canals, (ii) factories treat waste water properly, (iii) factories minimize their water use (at least proportional to farmers' efforts), and (iv) factories put clean waste water back to canals. 60

CHAPTER 6. SOCIAL ANALYSIS

6.1 Introduction

The previous chapter presented the results of the PCM workshops we conducted in Brantas and Citarum river basins. Those workshops were most helpful in collecting local information directly from a large number of stakeholders in a short time. PCM workshops also worked as a venue for the various types of stakeholders to gather in one place and debate on specific issues and form their consensus. This chapter, on the other hand, shows the analyses made by two anthropologists of our team, who, in addition to observing the PCM workshops, carried out a number of mainly individual interviews to look at the local communities in the two basins from the anthropological and sociological view points. This chapter also presents some data on aquaculture. Prior to the fieldwork, published material on farmer-managed irrigation was collected in Washington at the Library of Congress. This chapter is organized into two sections. The first section deals with Brantas and the second Citarum. We first analyzed traditional irrigation organization, customary WURs, converting customary WURs to registered WURs, and local conceptions of water sharing with compensation from the perspective of the Brantas river basin. What was found in Brantas was also found in Citarum. The second section therefore addresses these and other issues peculiar to the Citarum basin.

In approaching our material, we took the farmers as our starting point, and worked from the bottom up. Farmers in our study area follow a complex mix of subsistence and market- oriented agriculture, aquaculture, animal husbandry, and arboriculture. The small-scale production of paddy dominates the mix. In a recent field study in the Brantas Basin, for example, where irrigated plots average less than 0.4 ha, around 40% of the paddy produced was consumed within the farmer's household and much of the income obtained from the sale of paddy was used to supply basic necessities. Over 70% of the water abstracted in the Brantas is used for surface irrigation by smallholders (Rodgers and Zaafrano 2002 cited in Sarwan, Subijanto and Rogers 2003).

6.2 WURs Issues in the Brantas Basin

6.2.1 Traditional Irrigation Organization

In the Brantas basin, farmers live in small, face-to-face, villages (desas), highly delimited social worlds, the locus of day-to-day social, economic and religious interaction. Villages usually correspond to sub-districts, a division of the administrative category of district, or hamlets of sub-districts. When village-level governance is discussed, the reference is commonly to sub-district officials, headed by the kapala ("mayor"). These villages tend to be quite small, an aspect which works in their favor, since the smaller the group the greater the rewards to cooperating. 61

Javanese village institutions contribute to the viability of traditional irrigation organization. Perhaps the most important is gotong royong, a collective norm of self-help. In the post-independence era, the government used this institution to construct a uniform system of local government of village councils and neighborhood organizations across Indonesia's 27 provinces. Villagers draw on gotong royong, in turn, to organize the allocation and delivery of water and the operation and maintenance of hydraulic infrastructure. In applying gotong royong to canal maintenance, for example, each irrigator is expected to contribute labor on an equal basis. In one village this occurs three times a year and one can pay a fee in place of participating. In rehabilitating canal infrastructure, on the other hand, labor is made proportional to the size of one's landholding. This system of making labor obligations equal to expected benefits has been argued to be a key element in successful locally managed irrigation systems, helping to ensure participation in collective labor (Chambers 1980: 41).

The gotong royong system also contributes to trust, widely considered a key element in reducing the transaction costs of establishing property rights (Kahan 2002). When farmers see others behaving cooperatively, they are more apt to contribute to the public good even without the inducement of material incentives. On the other hand, when they see others shirking they will be moved by resentment and pride to retaliate.

Still another strength of Javanese desas is a shared, religious-based, worldview. Islam is a particularly strong influence in the Brantas basin: 96% of the population there is Muslim. Frequent gatherings in mosques reinforce local norms. The consensus building approach to discussion and conflict resolution which emanates from Islamic ideals is transferred to the spheres of irrigation and water management, heightening social awareness of the interaction of water use rights and issues of justice and fairness (Ramu n.d) Farmers use local norms of fairness to evaluate the actions their government takes. Their sense of fairness accepts the role of urbanization and industrialization in transforming their lives. This awareness includes both the potential benefits of these forces as well as the stresses they put on the provision of public services. Their children look to the city as a source of cultural enrichment and employment and the opportunity it offers to improve their lives. Industries are thought as sources of employment and, to a lesser extent, of upward mobility; many spouses and children appear to take advantage of this opportunity. On the other hand, farmers are keenly aware that both cities and industries compete for scarce water once used freely for irrigation.

Industrialization is widely recognized as producing demands for water which conflict with its use for irrigation. Indeed, industrialization is the primary external force of change in the Brantas countryside. Government officials realize the political benefits of providing industrial employment and often privilege this aspect to the detriment of allocating water for irrigation. Farmers are also aware that a spouse's or a son or daughter's employment with an industry may be jeopardized if the industry has to shut down or slow down because of a lack of water or, 62

more directly, if an industry fires workers related to farmers who take collective action demanding water for irrigation.

But in the government's approach to the growing demands of cities and industries, farmers sense that fairness requires equity. While they understand that municipalities deliver water for drinking, and this is a basic need, industries are thought of differently. In their sense of fairness, industry and agriculture should be treated "proportionally": whenever there is a decline in water, industries should receive a cut proportional to what irrigators receive. This logic corresponds to a sense of equity and awareness that farmer's claims to water are prior to those of the industry.

The strengths of these norms are such that when notions of justice and fairness are violated sufficiently, individual and collective action will follow. Such action will not necessarily be thought "illegal" or "illegitimate" since these same norms are used to evaluate legitimacy. Examples will follow below.

Another strength, which needs to be confirmed through further research, is the lack of glaring land-based (landlord-peasant) class differences in farmer's discourse about equity and justice. This is not to say that inequality necessarily weakens the willingness to cooperate; some argue that group heterogeneity is conducive to the effective management of irrigation systems. But, as a first approximation, the apparent lack of land-based differences can be considered an asset with respect to the performance of traditional irrigation organization. Nor are villages relatively homogenous; significant socioeconomic differences do exist. Differential access to economic opportunities outside the commons can be important source of inequality. And peculiar to irrigation, one's position on the upstream-downstream axis is still another. The sources of heterogeneity also derive from the impact of urbanization and industrialization. Not all farmers are full-time; many work in local industries, with "one foot in the farm, and the other in industry." Others work as government employees or as craftsmen. These forces are behind apparently high rates of transfers of land. In one village, about 40% of the fields had been sold to outside residents in order to accumulate money or because children were no longer interested in taking over the household's lands. In one district, 90% of farms were not owner-operated. Outsiders purchase land in the villages, often as an investment and lease it out for the income. Leaseholders may have less of a commitment to the welfare of the village and are much less likely to follow procedures, e.g. the annual cropping plan, agreed on through consensus. All of these strengths dissipate when a village's administrative territory is not coterminous with irrigation divisions. They work best, for example, when a sub-district overlaps with a tertiary block; and are weakened when a sub-district's boundaries include several tertiary blocks. Put differently, if a tertiary block comes under the territorial jurisdiction of more than one village, then problems of coordination, cohesion, and cooperation surface. This situation is not uncommon and is a source of tension and conflict. 63

Two examples of locally controlled irrigation systems were addressed in the field survey: one in the lower basin and one in the upper basin. In the Brantas, these systems are made up typically of smallholders with an average farm size per household of 0.29 ha (summary profile, Brantas Basin: 1). In the lower Brantas basin, the hamlet or sub district appoints a tuwowo, translated roughly as "technical official of the village for managing water," to run the village irrigation system. The tuwowo is selected through, musyawarah, a process of discussion culminating in a consensus choice. The role of the tuwowo, often assisted by helpers, is to distribute water within a village and to interact with village authorities and external government and private agencies. He also coordinates the plowing of paddy in preparation for transplanting and the distribution of water in each of the stages of paddy growth. In this tuwowo system, there were 80 farmers within an area encompassing parts of 5 tertiary blocks.

The village as a collectivity, not irrigators as such, set the rates for compensating the tuwowo and for providing operating and maintenance expenses. In-kind compensation is paid by households in kilos of dry rice according to the amount of irrigable land each holds. The tuwowo and his assistants share this rice as their compensation. The amount of operation and maintenance costs required of each household is set in the same way. For a field with two paddy crops annually, they were as follows:

Household Assessments for Local Irrigation

Landholding Size (sq.m) Compensation (dry rice) 0 and M (rupiah)

300 2 kg. 1,500

1,100 7 kg. 3,000

1,500 10 kg. 5,000

Collection of these fees is the responsibility of the tuwowo who has the ability to sanction for non-payment. Faced with a recalcitrant farmer, the tuwowo sends a series of notices asking for payment. If payment is still not forthcoming, a notice is sent to the effect that the farmer's water will no longer be delivered if he fails to pay. This usually works and no case could be cited where water had to be cut off.

Often, when water rights are attached to land, and there are communal obligations for this right, a potential free rider surfaces when one farms land in a village but lives outside the village. This problem does not seem to surface in the Brantas: all who cultivate village land live in the village. Outsiders who purchase land generally consider it an investment and lease it out for the income. Leaseholders live in the village. This should be considered tentative however until confirmed through more detailed investigation.

One of the most important responsibilities of the tuwowo is consultation with village authorities in matters of irrigation. In putting together the village's annual cropping schedule, 64

meetings are held with villagers and village authorities. Discussion follows on individual's intentions for cropping the next year. DINAS authorities then use the final cropping calendar, arrived at through collaboration, to schedule the annual delivery of water. Farmers are aware of the need for more efficient use of water in wet rice cultivation and ask for assistance from trained professionals.

Another example of village level organization was observed in the upper Brantas basin. A traditional irrigation official, the jogotirto, operated at the local level much as the tuworo. As in the lower basin, villages decided collectively on the formulas for his compensation and for household contributions to the 0 and M costs of maintaining irrigation infrastructure. The jogotirto position disappeared when WUAs, in this region known as HIPPAS, where instituted in recent years.

6.2.2 Customary Water Use Rights

The rights that villagers attach to water can be categorized into water for agricultural uses and water for non-agricultural uses. In the agricultural category, acquisition of a parcel of land brings with it the attachment of a right to the water sufficient to irrigate the land. Rights to water for irrigation, in turn, bring the right to water animals from it. Non-agricultural uses of water to which one has the right include: water for drinking, fighting fires, washing, cleaning clothes, fish ponds and religious ends. Some of the water for these non-agricultural uses is obtained through wells and hand operated pumps (water for drinking, cleaning clothes, religious purposes). In some villages, a system of piped water supplies water for these purposes. Water for non-agricultural purposes will not be discussed further. In the tail end sections of the Brantas irrigation systems, drainage maintains a large number of brackish-water fishponds and flows into the Madura Strait. Rights to water for these fishponds and the organization of conveyance were not investigated directly for lack of time. Available studies suggest these brackish-water fishponds have some of the characteristics of mass-production systems. Small-scale operation prevails and most of the owners live away from their ponds, leaving the management to employees (Iwakiri 1980). The rights claimed by users of this water should be the subjects of study. Since the water pond owners' use is drainage, rights may not be as fully developed as for upstream irrigators. Whatever their claim to the water, declining quality has seriously impacted its use for fishponds. Indeed, the uncontrolled dumping of organic and non-organic material polluting water flowing downstream is a frequently heard criticism. This is one of the few water management issues that unite irrigators and municipalities alike and is attributed by both to the lack of law enforcement. The water right attached to land was not absolute, however, but rest on a set of obligations. These obligations illustrate the implementation of the principles of gotong royong as a system of balanced reciprocity. In return for the right to water, farmers assume the 65

obligation to contribute labor, in-kind and monetary payments to local irrigation officials for the operation and maintenance of village infrastructure. These reciprocal rights and obligations are operationalized in traditional irrigation organization, i.e. specific labor, in-kind and monetary contributions are specified for irrigators depending on the size of the irrigated landholdings. Extended fieldwork would probably reveal other "taken for granted" obligations: e.g. residence in the village, performance of religious rituals and practices, and the like.

What if one does not have the right to water when one needs it? Can it be obtained? This problem surfaces for farmers in the dry season. During this period, distribution shifts to a system of rotation, in effect, a form of water sharing. Some very poorly endowed systems have to practice rotation even during the wet season. Ideally, gates are manipulated on a 3-3 or 3-4 day schedule and when water flows to a block of paddy fields, it is delivered on a spatial rotation scheme within the block. Numerous constraints intervene to keep rotation systems from operating as intended and this is the cause of widespread inefficiencies.

One common problem is the lack of fit between the water allocation plan and the supply and demand of water as it emerges in real time during the irrigation cycle. The water allocation plan refers to the schedule of water delivery set by government agencies, the Water Resourced Management Commnittee, Panitia Tata Pengaturan Air (PTPA), at the Provincial level which coordinates with the Panitia Pelaksana Tata Pengaturan Air (PPTPA) at the basin level. At the local level, the beginning of cultivation triggers the irrigation cycle but for various reasons this date can deviate significantly from the water allocation plan. The reasons are quite complex. Individual farmers may for their own reasons deviate from the water allocation plan. Villagers point out that many farms are not owner-operated. They refer indirectly to the previously mentioned social dynamic complicating communal water management. Many are taking up industrial employment and can no longer farm their paddy. They then lease their fields out. Other industrial workers invest in paddy but since they are unable or unwilling to cultivate the fields, they lease them out. Leaseholders are not fully committed to the water allocation plan negotiated by villagers and for their own reasons deviate from it.

Even if a farmer intends to follow the water allocation plan, one may be forced to deviate from it. The irrigation cycle usually creates peak periods of labor demand and farmers are not able to recruit the necessary household or reciprocal labor. The tractor may not arrive on time. Water may not be available when promised. For these and other reasons, even when intended, farmers may be forced to delay a particular stage of the water allocation plan. If one does not have legitimate access to water when it is needed, there are other ways to obtain it. First, "side-payments" can be made to the Water master who controls gates to obtain water out-of-turn. The Water-master may simply adjust the gates himself or "look the other way", allowing the farmer to manipulate the gate to obtain the needed water. "Side- payments" are an interesting phenomenon that probably has some relation to supply and demand and could conceivably be analyzed as a separate market for water. 66

A word should be said here about Water-masters. They were key points in the interaction in the Brantas between farmers and irrigation agencies. Water-masters have the power to hold back or release water into tertiary canals, making or breaking a cropping cycle. Effective Water-masters can adjust water delivery schedules to real-time needs. They should have the discretion to compensate for distortions to water allocation that conveyance losses or water thievery might engender. This is especially critical if the ordering of water distribution is identical to the physical ordering of fields by distance from the water source (the upstream/downstream problem). Many farmers make their own adjustments to the problem by scattering their portfolio of fields throughout the command area.

But farmers consistently complain about the ineffectiveness and corruption besetting Water-masters and, in extension, government officials above them such as Water Observers, who monitor 0 and M responsibilities and below them, such as Gatekeepers. A frequent comment is the need to bribe a Water-master to release water. Undoubtedly some may be guilty of these charges. It is just as likely that many are honest and trying to do their job. Whatever the case, the problem is related to the direction decentralization has taken. 0 and M costs in year's past were the responsibility of the central government and funds provided in central budgets. The shift in responsibility for 0 and M from central administration and central budgets, to the provincial and district levels, without commensurate increases in their budgets is at the heart of the problem. Funds are lacking to pay Water-masters adequately or to provide for the transportation and other expenses necessary to carry out their duties. As a result, bribes are welcomed and may well be necessary to maintain their households. Creative solutions are necessary to remove the corruption and make the work of a Water-master more effective. (Thought should be given to incorporating the positions into the civil service system. This would empower Water-masters and give them the security and recognition that their work deserves.) (These suggestions were criticized by some of the Peer Reviewers.)

If collusion with a Water-master is not possible, farmers can take matters into their own hands and, individually or collectively, manipulate gates to obtain the needed water. This may entail breaking the gates. In one sub-district, Dinas officials estimated that 90% of the gates had been damaged in this way. In another sub-district, every farmer had a "key" to the gate and could manipulate it at will.

Farmers frequently point to the lack of sanctions for these and other infractions. They express confusion as to who exactly is responsible for monitoring infractions, what if any the penalties infractions bring, and who assigns penalties and monitors compliance. Within traditional village-level irrigation systems, this process works rather well it seems: laggard dues payers are dunned and eventually pay up and infractions do not appear to be excessive. But above the level of the village systems, the weakness of sanctions is far more pressing.

Are these actions considered "illegitimate" from the local perspective? In terms of local notions of justice, the action is warranted if without it there is a significant risk that a harvest will fail. Village irrigation officials will not necessarily consider this a transgression. If the 67

water will merely increase the return to the field, then such actions are unjustified and the village irrigation official is expected to penalize the transgressor.

But, from the downstream village's point of view both collusion and "water theft" is always considered unjustified because it results in a net loss of the flow. Upstream villages are always privileged in this regard, since they have the luxury of getting access through collusion or water theft. Downstream villages are dependent on the available flow and if it is insufficient, collusion and "water theft" will not necessarily help (the classic upstream-downstream problem). Downstream villages see the problem as essentially technological. By this they mean, of course, the lack of maintenance of long canals, which leads to filtration and leakages. But, equally important is the issue of gates. Old style gates, difficult to raise and lower, have been replaced in recent years with new improved gates. The new gates are much easier to operate - and to sabotage - and require a "key." The Water-master is usually charged with keeping the key but keys are relatively easy to copy. Downstream villagers see the solution as a return to the older gates to make it more difficult to obtain water out of sequence.

6.2.3 On Customary Practice, Inefficiency, and Water Use Rights

In the local irrigation systems observed in the Brantas, apparent conflicts surfaced between practices considered "customary" by the farmer and "inefficient" by the hydraulic engineer and agronomist. Care should be taken with such labels. Given the ideological weight of Adat and customary law in Indonesia, there is a tendency to defend such practices as "custom", cordoning them off from objective analysis. This leads to accusations of "inefficiency" and "economic irrationality." A series of questions follow. Should "customary," but inefficient, practices be prohibited? Is the word of the hydrologist or agronomist sufficient to deem them inefficient?

An example is the case of levels of water used to grow rice. Farmers are aware of the merits of crop science since they have for some time adapted hybrid rice into their cultivation practices and experienced the increases in productivity. Yet, they continue to practice what seems like irrational and inefficient water use practices in paddy. In paddy production, irrigation is divided into four separate procedures corresponding to the stage in the growth of rice: * Land preparation

* From 0 to 4 days to 5-54 days after transplanting * From 55 days after transplanting to flowering * From flowering to harvesting.

Sumaryanto, Siregar and Wahida (n.d.: 18-19) have found a considerable gap between the minimum water level maintained through irrigation of 1 cm. and an average of over 6 cm. In the last stage, the average is more than 7 cm. Interviews with farmers and managers of Water 68

User Associations (HIPPA) conducted by the authors of the study pointed to several plausible reasons: (1) farmers want to lessen the possibility of water insufficiency during the critical phases of paddy growth, (2) the levels are kept high to control the growth of weeds and of pests, (3) several factors conspire to control the water height in their fields: uneven fields, inadequate canals, small fields and varied cropping patterns.

The lowering of water levels during each stage would contribute to the saving of irrigation water. Sumaryanto, Siregar and Wahida (n.d.: 19) suggest that a reduction from an average of 6-7 cm to 4-5 cm is possible over the short term, with the hope that over the long term a reduction to less than 2.5 cm would be possible. Such reductions, which agronomic studies suggest are feasible while maintaining crop productivity, would help toward the increasing the agronomic efficiency of irrigation. They argue that finding other means to control weeds would allow farmers to reduce water levels. Indeed, contemporary efforts in rice breeding are oriented to this issue: to reduce the height of the rice stem while maintaining sufficient width so that water levels can be lowered (Personal communication, Warren Martin).

In terms of "custom" however, if farmers are asked how much water they keep over paddy during each stage, they will give figures that fall within the average noted by Sumaryanto, Siregar and Wahida. They may well consider this "traditional." What should be kept in mind is that there is usually an economic logic in traditional farming behind what otherwise appears "irrational"; in the case discussed here, high water levels can be explained as a response to measures to control pests and to reduce the risk exposure from uncertain water delivery, on the one hand, and unforeseen externalities on the other. Put differently, anyone with the stock capital and labor and knowledge of the practices available to the Javanese paddy farmer, but lacking the specialized knowledge of the agronomist and hydrologist, would probably keep water at "high" levels.

6.2.4 Converting Customary WURs to Registered WURs

Farmers interviewed for this study grasped the concept of registering WURs as a defense of customary usage. The practice of privileging license holders over irrigators during periods of scarcity offended their notions of justice and fairness. The idea of countering this discrimination by solidifying tenuous customary rights appealed to all interviewed. In pursuing the form this might take, farmers and WUA officials alike indicated they would welcome the registration of historic flows at key points, particularly at off takes to secondary canals.

But farmers interviewed say that it is essential that enhanced law enforcement accompany recognition and registration of WURs. Their experience suggests to them that the registration of customary rights alone would not necessarily guarantee that inequitable allocation practices would disappear. License holders have been given full access to water at the expense of downstream irrigators with prior rights. Additional efforts to ensure enforcement should accompany any program to register rights. 69

Farmers also want agreements on the scheduling of water deliveries to accompany the certification of water rights. If water rights are specified in space and time, then they want guarantees that the schedule will be followed. If this is the case, then it should help to bring cropping patterns into line with water delivery schedules.

While the availability of data on historic flows at the secondary canal level is an excellent resource for WUR registration, the data should be treated with care. If the time series does not extend sufficiently into the past to antedate the granting of licenses to industries, then the use of these data could result in reifying inequitable allocation practices. Judicious calculation of flow volume/hectare for crops and for soil types can be combined with historic flow data to more equitably arrive at volumes allocated.

It may well be the case that comparable data of sufficient time depth are lacking elsewhere in Indonesia. If this is true, then farmers would likely accept a formula based on liters per second/hectare, adjusted for local agronomic indictors of crop needs, soil type, transpiration, etc.

Registering historic flows at the secondary canal level should be combined with certifying the customary rights of traditional irrigation systems drawing off of a secondary. Farmers suggest in interviews that the best way to do this is for all of the traditional irrigation systems on a secondary to negotiate together the allocation of the flow, an application of musyawarah. In principle, this idea seems reasonable and appropriate to the worldview of farmers. The only caveat is that the process should be monitored to ensure that one or more WUAs or village does not dominate the process, introducing another axis of inequality. If done successfully, this method of allocating customary rights should leave the locally managed irrigation systems relatively intact. The solution builds on the experience of villages managing water and minimizes the transaction costs of extending property rights to individual farmers. Conveying water rights to individual farmers would be impractible given the enormous transaction costs.

6.2.5 "Water Sharing with Compensation"

In Islamic belief, water is given by God and is a public good. Villagers will resist any statement to the contrary as an affront to these beliefs. But, interviews with farmers and with knowledgeable irrigation officials do suggest cases of what in the irrigation literature would be considered "water sharing with compensation." In a village in the upper Brantas, for example, farmers cited a case of an upstream village "selling" its turn to a lower village. The upper village had access to a spring, which it claimed as its own under a form of riparian rights. This gave the village secure water, in excess of what its needs were. The WUAF collected Rp 110,000 from the lower village and delivered it to the upper village to finalize the transaction. This should not be considered market-based "water trading" in that the WUAF perceived it as one WUA helping out another, lower, WUA which suffered from severe water shortage. The Rp 70

110,000 represented the recognition by the lower village of the value of the water and a "gift" to the upper village for helping it out.

Although time did not permit the further analysis of this case, it seem clear that the transaction was understood as reasonable and just. Certain kinds of transactions obviously obey a cultural logic, probably informed by notions of shared poverty and qoranic values of moral responsibility to one's neighbors.8 Islam lays emphasis on specific acts of kindness, for example, including one's neighbors and other Muslims. Certain kinds of exchanges, labeled in the irrigation literature as "water sharing with compensation" may well fall within the category of the justifiable.

The fact, however, that the discourse of water use rights is generated in the West, in general, and is associated with the World Bank, in particular, makes the use of any such terms as "water trading" or "water sharing with compensation" problematic. The reason why is that to varying degrees the West is seen as spiritually superficial and beset with corporate greed and consumerism. Important distinctions between market based trade and "water sharing with compensation" are lost. While Chapter 1 argued to "call spade a spade", this term could be avoided wherever possible. There should be further studies made of those cases where it has occurred. The study should be made by a native Bahasa4ndonesia-speaking anthropologist or sociologist attuned to patterns of water use to uncover the language and cultural logic given by informants to explain the practice of "water sharing with compensation." An accepted phrase for the practice could then be used as a gloss for "water sharing with compensation."

6.3 Water Use Rights Issues in the Citarum Basin

6.3.1 Overview

Most of the patterns described for the Brantas were supported by fieldwork in the Citarum: the importance of the village as social world, the pervasiveness of a religious - Islamic influenced - world view, a discussion and consensus-based approach to problem solving, the apparent lack of land-based class differences, and water sharing through rotation during the dry season. Rights to water are attached to land but compliance with a set of

8 These transactions often fit into a category of what anthropologists call "... generalized reciprocity ... transactions that are "putatively altruistic," and "the expectation of direct material return is unseemly" or, at best, "implicit." "The material side of the transaction is repressed by the social: reckoning of debts outstanding cannot be overt and is typically left out of account". Yet though there is no explicit quid pro quo, terms are not explicit, and relationships are not impersonal as is the case with contracts, reciprocity of this type seems to stand midway between amoral exchange and altruism, and it is consistent with self- interest. The relationship is one that Ronald Oakerson, following Hobbes, calls a covenant, as opposed to a contract. "A covenant ... represents an agreement as to a set of principles or norms to govern future conduct. It draws as much upon moral reasoning as upon economic calculation. This in turn requires an ability to take on the perspective of others, and to consider the interests of others, as opposed to a purely self-interested orientation" (Oakerson 1983: 7). To see the material and economic side of long-term intrahousehold exchange and cooperation is not to deny the presence of unselfishness or the power of love (Netting 1993L 66)." 71

obligations is necessary to maintain rights. These balanced sets of rights and obligations are expressed in the cultural idiom of gotong royong. Citarum farmers interviewed also welcomed the recognition and registration of customary rights.

In the Citarum, on the other hand, evidence was found of free rider problems in applying gotong royong principles when "outsiders" farm land in one village but live in another. Farmers say it is difficult to get "outsiders" to contribute labor and in-kind or cash to 0 and M and for this reason they have a different set of obligations. In Lembang village, for example, fees to hook up to the communally managed potable water system were Rp 800,000 for local villagers and Rp 1,000,000 for outsiders.

In the Citarum, farmers did not contribute to the formulation of the "global cropping schedule" as they did in the Brantas (to be discussed below). The mismatch between ideal (global cropping schedule) and actual water and demand was at least as, if not more, apparent in the Citarum. Groundwater pumping by farmers during the dry season to make up for shortages did not appear to be a widespread practice as it was in the Brantas.

Interviews with farmers in the Ciwalengke confirmed the results of previous research (Kurinia, Avianto and Bruns 2000) that abstractions by industry license-holders are depriving farmers of their traditional water supplies.

In addition to the issues raised during fieldwork in the Brantas Basin, others were the object of special study in the Citarum: the customary use of the water from springs, irrigation management transfer, and fish ponds.

6.3.2 Springs

Springs are an important source of water for irrigation that seems not to be widely discussed in the literature on water management in Indonesia. Analysis of the knowledge and practice of the property rights of springs can illuminate hidden dimensions of customary water use principles. For this reason, an effort was made in the fieldwork to seek out a variety of cases for analysis. In the first, Sendangsri sub-district, water from a spring on private land was used in the past to irrigate land there and in an adjoining sub-district. The sub-district installed a system of pipes to deliver water from the spring to households for drinking water. A quantity continues to be used for irrigation for the two sub-districts.

The BPAB (drinking water management body of the sub-district) gives Rp 85,000 per month to the owner of the land on which the spring is located. The land remains in the landowner's control and he harvests the watercress, which grows extensively in the area of the spring. BPAB officials consider the compensation "payment" to the landowner for the water. The village receives Rpl,000,000 a month from the 200 hookups receiving piped water. Sendangsri farmers objected strongly to the water diversion by the municipality as a violation of their customary rights to the use of water for irrigation. 72

Interviews were conducted in other villages with spring-based irrigation and potable water systems in an attempt to clarify the discrepancies concerning local knowledge and practice surrounding spring water. In Suqihmukti village (Pasirjambu sub-district), the landowner of a small plot of land with a spring donated the water from the spring to the village as a gift, wakaf. The village installed a potable water system with the spring flow and services via flexible tubing 88 homes and some 300 people. The water is clean and healthy and no fees are charged for the privilege. A series of questions were given to villages officials to clarify the rights attached to the spring:

Question: "If the landowner had not donated the land, could the villagers still have used the water for drinking?"

Response: "Before the 1960s, this land was in paddy and the spring was used for irrigation. A hamlet was then built here and the spring used for drinking.... If the landowner did not give it to the community, the community could claim it through communal rights."

Question: "If so, would the village feel the need to compensate the landowner?" Response: "Thoha Kusnayo (the owner of the land on which the spring is located) is a good Muslim. He recognizes that the land is his but the water belongs to Almighty Allah" ... "This is Sudanese culture; it is tolerant. It may be that Thoha Kusnayo doesn't want compensation. This is his chance to do the best for his community. This is Islam." ... "Each time someone drinks the water, there will be a spiritual reward that Thoha Kusnayo's descendents and all his future generations will receive."

A third case of spring water was examined in Lembang village. This is a sophisticated system of the communal management of water from a spring started up in 1987 with a 37 million grant from an NGO in 1987 and finished with village labor and funds. Spring water is used for drinking and for hydroponic cultivation. In the first stage, 250 connections were made to village households; by 2004 there were 1,645. All connections are metered and rates are set by discussion and consensus among villagers. The spring originates in an upper village and Rp5,000 per month is paid to this village. To clarify the rationale behind this transfer, a series of questions were asked:

Question: "What exactly are they compensating the other village for?"

Response: "It is not exactly a compensation ... It is like 'thanks' to the upper village for convincing the community to allow us to put our pipes on their land. ... and, it is to make sure the upper village 'protects' our water."

Question: "What would happen if a municipality attempted to abstract water from the spring?" Response: "We would defend our rights in this way. We have discussed and agreed (musyawarah) to use the water for our community. The upper village has also agreed to allow 73

us to put our pipes on their land to get the water. And our village is close to the spring. (There is a basic principle that) resources in a village should be used for the good of the village." The system works relatively smoothly and villagers say there have been no major problems. Fees are charged for the initial hook-up and for water consumption. Hook up fees vary by type of consumer: (1) poor villagers pay nothing; hookup fees are covered by a subsidy of Rp300,000 taken from annual revenues (2) villagers pay Rp800,000, and (3) outsiders pay 1,000,000. Outsiders (not from the village) are expected to pay more because they do not participate in gotong royong i.e. contribute labor to 0 and M tasks.

Revenues collected from the annual hookup fees and monthly payments totaled Rp 64,000,000 in 2000 and Rp 126,000,000 in 2003. Revenues are used for a variety of village projects, besides 0 and M: the purchase of land for a school, the expansion of the mosque, a health post, housing and food for the poor, and women's groups.

In sum, while land rights can clearly be private, villagers believe water "belongs to Almighty Allah." This belief is fully consistent with Muslim water law, which sees water as a gift from God and establishes a fundamental right of human access to water and an equally fundamental obligation to conserve and to share water. Sharing is based on a priority of need, in this order: water for domestic uses, water for animals, and water for irrigation. Water is viewed as a common good (waqf, usufruct or common property) (Faruqui et. al. 2001). These beliefs are reified in state water law, specifically Water Resources Law No. 11/1974 where water is identified as a gift of the Almighty and everyone has a right to its use (Sarwan, Subijanot and Rodgers 2003: 5). The owner of land on which a spring flows can "donate" it to a community, but this donation seems to be understood in terms of one's obligations as a Muslim to see to the welfare of one's community. While land and water, thus, give the appearance of being separated, one should be careful not to imply that water is thereby subject to market driven forces of supply and demand. Rather, its transfer is constrained by local norms of "appropriate" use (e.g. for social ends).

6.3.3 IrrigationManagement Transfer

In the Citarum basin, the PJT-2 operates at the central government level; Dinas and Balai at the provincial level. The Balai and PJT-2 and the District make recommendations on license applications to the Provincial Dinas. Once an application is approved, Dinas officials say fees collected are high enough to ensure the efficient use of water by the license holder. There is no available evidence to indicate that this is true. The Retribution fees paid by the license holder are a "guarantee" that the water contracted for will be delivered.

In the area irrigated in the Citarum basin, WUAs usually correspond to villages. One WUA will irrigate land in 2-5 tertiary blocks. WUAs, in turn, are organized into WUAFs. A WUAF, thus, corresponds to the WUAs along a secondary and is responsible for the organization and monitoring of an agreed-on rotation scheme among the WUAs. For example, 74

in the Tirta Jaya WUAF one group of WUAs in the head will irrigate from 4:00 AM to 4:00 PM; the tail end group will irrigate from 4:00 PM to 4:00 AM. Conflicts between WUAs do occur from time to time, but informants stated that they could usually be resolved through dialogue within the WUAF. Statements seem to indicate that at both the WUA and the WUAF levels, cooperation and coordination for rehabilitation, cleaning and other 0 and M requirements is good.

The cultural principle of Gotong royong, for example, operates at these levels to organize the rights and obligations of cooperation and coordination. It functions at two levels: at the secondary level, within the set of WUAs; and, at the local level, within villages and hamlets of a WUA.

Water delivery, however, remains in the hands of government agencies. The district Dinas agricultural officer in conjunction with a district Dinas water officer writes a global cropping plan (GCP). Farmers have no input into the creation of the global cropping plan. Based on this plan, water is scheduled for delivery to farmers. This system has problems, however. Farmers lack input into the initial formulation of the GCP, the GCP is not updated regularly (e.g. weekly) with data on current supply and demand, and the GCP is never adequately communicated to farmers. In practice, then, there are two "parallel" schedules of water delivery: the "ideal" GCP pattern and an "actual" pattern of supply and demand deriving from real time cropping and irrigation decisions of farmers.

Since 1985, the licensing of industries to abstract water has created massive problems. Industries abstract water from secondary canals and often exceed their licensed volumetric maximums. There are many transgressions according to farmers. There is more than one point of abstraction and abstractions are not metered, according to farmers. There is no communication with farmers prior to the granting of a license.

Before 1985, farmers followed a paddy, paddy, fish/paddy, crop rotation pattern, indicating adequate levels of water through the year for an intensive wet-rice/aquaculture domestic economy. After 1985, abstraction by industry so diminished the availability of water, that in the last year (2003), 200 were unable to be harvested because of water scarcity. In the year 2000, 350 were unable to be harvested. The WUAFs protested through official channels to the Provincial Dinas, and outside of government channels directly to the regional parliament and to the national parliament through the formation of a lobbying group (an informal West Java Network) to no avail. WUAFs complained of the marginalization of the existing rights of farmers. The formation of the West Java Network is significant. Although the association is not formally organized and lacks officers and regular meetings, it has an explicit agenda and opinion leaders keep in touch informally. It appears to enjoy community-based, massive support certainly beyond that which most NGOs appear to have.

Prior to 1982, the government collected fees for 0 and M. In 1982, irrigation management was turned over to farmers. Previously, Dinas hired a Watermaster for each 75

secondary canal to release water to tertiaries. According to farmers, side payments were made to Watermasters by industries to divert water illegally. After turnover, WUAFs replaced the Watermasters with their own hires. This has helped solve the problem of illegal diversions of water to industries. For example, in the Tirta Jaya irrigation scheme, industries now receive water from secondaries from 6:00 PM to 10:00 PM during the dry season rotation scheme. They have reservoirs of water, however, to allow them to continue operation when their water delivery stops during the rotation. Now that the WUAF hires the Watermaster industries no longer can acquire water by illegal side payments. In the Tirta Walatra region, this motivated the industries to negotiate with the WUAF. They agreed to pay Rp 1,000,000 per month but the first year of the agreement, they refused to pay during the wet season. During a meeting held by the WUAF in the following dry season to address the issue of non-payment, only 3 of the 30 factories sent representatives to participate. So, the WUAF is reluctant to give water to the industries in the next dry season. With turnover the WUAF became responsible for collecting 0 and M fees. In one WUAF, the fee was set at 25 kg/ha. Many farmers have refused to pay 0 and M fees, however, after 1985 when industries began to abstract water, reducing the flow during the dry season to irrigation. Farmers also complain that since WUAFs now assume the costs of 0 and M of their canals, this subsidizes unfairly PJT-1.

West Java has issued regulations to protect farmer's access to water at the local level, ultimately with the goal of transferring authority and responsibility to farmer's organizations. But these regional regulations will have to be revised in lines with the new national water law. In general, farmers at the local level are satisfied with the situation following turn over, particularly since the WUAFs have been able to hire Water-masters. Their major problems stem from competition for water from industries and municipalities. It seems clear that in order to recognize customary water rights at the secondary level, there must be turnover of management authority to the farmers at the secondary level.

6.3.4 WUAF Yet to be Turned Over

Interviews were also conducted in Ciherang WUAF that had not yet been turned over. There were 26 WUAs each consisting of one tertiary block in the WUAF. Administratively, the WUAF overlapped 5 sub-districts. In Ciherang WUAF, irrigation organization was entirely separate from village organization. Villages were considered "advisory" to water management institutions. If the WUA was located in a village, then village officials advised the WUA. If the WUAF was located in the sub-district center, then sub-district officials advise the WUAF. In Ciherang, Dinas hires the Water-master. This has not as yet created problems, however, because industries upstream are not abstracting excessive water. Fanners said, further, that there were no 76

problems within the WUAF and it was working satisfactorily. During the dry season when such problems occur, the WUAF, sub-district officials and Dinas staff meet to work things out.

6.3.5 Village Organized IrrigationSystems

Interviews were conducted with farmers in an irrigation system of five villages that share water taken directly from a river. The irrigation system operates rather simply and effectively. The heads of each of the villages met and discussed ways to organize the system and came up through consensus, musyawarah, with a rotation scheme. Each village takes a turn in the night or the day, in rotation. The rotation scheme is written down and works well. There is no trading of water shares.

6.3.6 Recognizing Customary Rights

How can farmers protect themselves from unfair competition for water from industries and municipalities? This question was given to farmers interviewed in the Citarum surrounding the recognition of customary rights. Interviewees advanced three methods: (1) Return to the situation prior to 1985 and allow no industries to be licensed to abstract water. Have the factories take water from another river with the factories, assisted or not by the government, paying for the costs of the hydraulic infrastructure; (2) Pump water from the river for irrigation to make up for the loss from industry abstraction; (3) Recognize, legally, the customary rights of farmers, making certain that these are certified as prior, existing, rights. Farmers also said the process for recognizing and certifying water rights for industries and for farmers should be different. While industries should start the process of applying for a license, the province should be proactive and approach the farmers, discuss the issues and negotiate until consensus a request for the recognition and registration of customary rights. Farmers in villages that have not yet been turned over see the advantages to having their customary rights recognized at the secondary level. Where neither industries nor municipalities are currently competing with them for water, they understand that recognition of their customary rights will protect them against the possibility that the government could allow industries to gain control at the secondary level. They also understand that in order to do this there will have to be administrative turnover at the secondary level. But they also would expect that the government give them assistance with 0 and M and not turnover as assets, worn-out and inadequately maintained hydraulic infrastructure.

6.3.7 Fish Ponds

Fishponds were a striking aspect of the household economy in the majority of the villages studied. This use of water is ancient, according to farmers, and some suggested that the use of water for fishponds came before the use of water for wet rice. The exception is upland 77

villages specializing in horticulture and flowers that do not grow wet rice. Most households in sawah villages, particularly in Majalaya, the center of the fishpond economy, have a small fishpond attached to the house and watered through the irrigation system. Households have a customary right to construct a fishpond next to their houses and to draw water from the irrigation system to fill it. There is a continuous flow of water, if minimal in volume, through fishponds (necessary to supply the oxygen for fish to live). Even during rotation periods when there is no turn and water is not supposed to be flowing through the irrigation system, customary practice is to keep a small opening between the sluice gate and the floor of the canal in order for sufficient water to enter to maintain fishponds. This is an important example of a customary right never acknowledged in discussions of traditional water rights. Yet, it cannot be ignored. The fishpond domestic economy is extremely important because it supplies the essential protein for households in this rice-based society that usually cannot afford meat. In addition, some households in certain villages have built larger ponds for commercial aquaculture and for leisure time "fishing." In these cases, the WUA has to be approached to obtain rights to use water from the irrigation system to fill the ponds. Usually fees are increased for the use of irrigation water for commercial fishponds. In one case, the fee is doubled over that for agriculture. Some commercial fishponds have been purchased by industries and, according to informants, are incorporated into their licensed water rights.

In the villages that still practice paddy, paddy, paddy/aquaculture, tiny fish are introduced into paddy once the transplants have set roots. In twenty days, they are removed and placed in a much larger fishpond for growing-on. The system works well and is quite remunerative.

6.4 Conclusion

Locally managed irrigation systems in the Brantas and Citarum basins, whether traditional or integrated into a Water User's Associations and Federations of Water User's Associations, are efficient vehicles for operating and maintaining irrigation infrastructure and for delivering water to the farmers with full participation and low transaction costs. They possess much strength - small, face-to-face groups with high social cohesion, norms of self- help and reciprocal rights and obligations gotong royong; built-in trust, strong sentiments of justice and fairness, and religious traditions of conflict resolution through discussion and consensus, musyawarah. This is not to say that all locally managed irrigation systems work flawlessly. Many could benefit from creative intervention from district, provincial and central government agencies and from domestic nongovernmental organizations (NGOs). Although differentiated by the impact of urbanization and industrialization and affected by the lack of fit between territorial administrative boundaries and irrigation command area, the viability of these locally controlled irrigation associations remain key assets. (see Hutapea, Dirjasanyata and Nordholt for comparable material on these problems from Central Java) 78

Another resource on which to build are the informal groups (e.g. "Forums" and the West Java Network) found in the study to have organized to lobby for irrigator's interests. While not notable successes, judging from the cases, they do offer promise. External intervention may well tip the balance to irrigators. NGOs have been involved, for example, in assisting communities in East Kalimantan to negotiate logging agreements with timber companies by providing information to communities in relation to the value of the standing forest, and by assisting in leveraging the communities' negotiation strategies (Engel, L6pez, and Palmer 2003).

Licensing of water abstraction rights to industries has diminished traditional WURs. Giving license holders full allocations during water scarce periods lessens that available for non-license holding irrigators. Rotation is necessary as a result. Yet, farmers are often forced to bribe Watermasters or manipulate gates to obtain water, breaking rotations schemes. The lack of sanctions worsens this situation. Villagers see such actions warranted if otherwise there is a significant risk that a harvest will fail; if this is the case, village irrigation officials will not necessarily consider collusion or water theft a transgression.

Converting Customary WURs to Registered WURs will help rectify the situation, as farmers clearly understand. Farmers and WUA officials alike indicated they would welcome the registration of historic flows at key points, particularly at off takes to secondary canals. If historic flow data of sufficient time depth are available at the secondary level, these data should be used together with a I/s per ha formula. Registration should be accompanied by clear agreements as to the special and temporal dimensions of WUAs and convincing evidence that they will be enforced. Responsibility and authority for the management of the secondary physical infrastructure should be transferred at the same time as WURs are granted at the secondary level.

Exploration of the language and cultural logic attached to cases of water sharing with compensation will reveal the justification for these kinds of transactions and help communicate their role in WURs. The conversion of customary rights into recognized and registered WURs, and, the transfer of responsibility and authority for management of physical infrastructure at the corresponding levels (secondary, tertiary) could increase water trading without external intervention. At this stage in Indonesia's modernization of water management, these would be significant reforms. 79

CHAPTER 7. HYDROLOGICAL ANALYSIS: Quantification of Historical Water Use and Water Quality 7.1 Introduction

The previous chapters have already discussed the need for clearly defining, quantifying and registering customary rights holders' entitlement. This chapter presents the findings of our hydrological field surveys in the Brantas and Citarum river basins with a view to identifying options for a process of basin-wide quantification of historical water use as a proxy for the customary water use rights. It suggests registration points (e.g., intakes), a group associated with the area (e.g., WUAF), availability of data, and how to use those in calculating the amount to be used for registration, and if all these data are not available what other alternative method of calculation could be used based on other available records. This chapter also discusses the water quality issues the two basins are currently facing. The Team owes PJT-1 in East Java and PJT-2 in West Java for their generous support in providing data and guidance, and the Provincial and District Dinas for assisting us in the field data collection. We also met many stakeholders through PCM workshops and group/individual interviews in field.

We have considered the following two methods for quantification of existing irrigation water use: (i) by actual flow measurement, and (ii) by demand calculation based on cropping patterns. Flow measurement data are not necessarily available at the Provincial or District Dinas in all the secondary and tertiary intake points. Many Provincial Dinas seem to have had good record until 1999 when the Decentralization Law (UU22) was passed. Since then, however, the central records kept at the Provincial Dinas have become incomplete or not necessarily uniform. Some WUAs and WUAFs, which are functioning well, do have such data within their schemes. From the experience of the Stage 1 Study and in consultation with Provincial and District Dinas, we chose the Pehngaron Irrigation Scheme in East Java and the Wangisagara Irrigation Scheme in West Java for sample surveys and simulation exercises.

When flow-measurement is not available, we considered adopting a demand calculation method based on cropping patterns. For this, there are two ways: (i) LPR-FPR method often used in the Brantas basin, and (ii) Factor-K method often used in the Citarum basin. Brief descriptions of those calculation methods are made later in this chapter and further technical details are presented in Annex 11. In the two sample areas, we tested the two methods and observed a high correlation between the results of the two. Consequently, where no actual flow records are available, the crop water requirement methods can be used to estimate the water use. This chapter shows our findings in the Brantas basin first and then those of the Citarum basin, and finally presents the over all conclusions based on the two surveys. 80

7.2 Measurement of Customary Water Use in Brantas River Basin

7.2.1 Basic Hydrological Features

As mentioned in Chapter 4, the Brantas basin has a watershed of 12,000 kmn2 and stretches 320 km length from its spring at Mount Arjuno flowing down clockwise to the point where it branches into two rivers, Surabaya River and Porong River, that both ends into the Madura Strait. Average precipitation in the basin is about 2,000 mm/year, and available surface water is approximately 12 billion m3/year, but only less than 25% of this amount is controllable, or annual manageable water availability is about 3 billion m3. The long-term flow condition at Jeli in the middle reach of Brantas River is shown in Figure 7.1. Statistical analysis of monthly flow measurement based on 50 year's observation shows a declining tendency starting from the year 1976. Figure 7.1

Flow Discharge of Brantas River at Jeli (3,464 km2) 600

500

400 lMean: 167.7 m3/s th nivingazerages c200 1 i 1

Year Source: PJT-1

7.2.2 Water Allocation in the Brantas River

According to DPU (District Public Works) Pengairan, the total net irrigated area of the Brantas Basin as a whole was 309,000 ha and the net area of the Brantas direct schemes was about 83,200 ha in 1996. The PTPA (Provincial Water Management Committee) in theory replaced longstanding Provincial Irrigation Committee as the primary coordinating institution for water resources allocation. The Committee consists of representative of PJT, DPU, PDAMs, industrial and fisheries services, the State Electric Power Company and other water users. It meets in November (beginning of the rainy season) and May (beginning of the dry season) to negotiate and agree on the reservoir operation protocols for the coming season. Allocations are made for each 10-day period over the season, as consistent with the longstanding practice in the irrigation sector. 81

The infrastructure built by the Dutch Colonial Government in 1852 have made water more accessible to farmers, who have utilized it for irrigation for almost 150 years. Over the years, those farmers have earned their customary rights. Their rights, however, have never been clearly recognized in any regulation issued by Provincial or District Government, nor clearly quantified anywhere.

The water allocation mechanism practiced in the Brantas basin is shown schematically below:

Institutional Framework for Irrigation Water Allocation Physical System Water Management Institution Water Allocation Institution River Basin PJT(Perun Jasa Tirta) PTPA (Dam, Head works) (Water management (Provincial water management Irrigation off-take Corp t committee) Primary Balai PSDA PPTPA (Basin Water (Regional office for water Management Committee) resource services)

Secondary Kab Dinas Seks Kab Irrigation Committee (District irrigation services)

Sub-district Tertiary Juru Pengairan Irrigation Service (Water master) (Sub-district irrigation service) Il r HIPPA(WUA) Farm Channel Farmer

Local Organization Provincial=>District (Kabpaten) =>Sub-district (Kecematan) Dinas Pengaran<=>Water resources/Irrigation service

7.2.3 Pehngaron Irrigation: Overview

Pehngaron Irrigation has an area of 978 ha with water supply from Pehngaron weir in Pikatan River, which is one of the tributaries of Brantas River. The area is irrigated by Pehngaron Primary Canal and four Secondary canals, i.e. Pandangan Secondary Canal, Tirim Kidul Secondary Canal, Tampung Secondary Canal and Kintelan Secondary Canal. There are seven WUAs and one federation (WUAF) with 1,603 members.

Those WUAs and the WUAF appear to be performing extremely well. There are 25 flow measurement facilities at primary, secondary and tertiary canals, and flow discharge data 82

are recorded once a day by 13 gatekeepers organized by WUAs. Figure a) in Annex 11 shows the location of the Pehngaron Irrigation and the details of the canal layout respectively. Physical canal condition is fairly good as demonstrated in a high irrigation efficiency of 95% in rainy season and 85% in dry season.

Only Dinas can operate Pehngaron Weir, and turnouts (bangunan bagi and Bangunan Sadap) are operated by WUAs or WUAF. Accordingly farmer has to plan to allocate irrigation water for each secondary canal. However, WUAs or WUAF do not have any right to allocate the planned water at the weir point.

7.2.4 Flow Measurement Data

There are three recorded data at the Pehngaron weir, i.e. overflow, left intake and right intake. Summary of the record is shown in Annex 11. Discharge record at the weir is shown in Table - of Annex 11. While the total discharge at the weir from both left and right banks are only 10.4% of the total available discharge of Pikatan River in rainy season, all available discharge goes into the Pehngaron intake in dry season. In the rainy season, cumulative discharge of all secondary canals is more than its intake at the weir due to additional water extracted from under ground. On the other hand in the dry season, cumulative discharge of all secondary canals is lower than its take due to conveyance losses from the weir to turnout or losses by water management. The losses in the dry season I (second crop period) are larger than dry season II (the third crop period) and it may be a result of decreasing management losses: the more water is available, the more farmers use water, it seems.

7.2.5 Calculation Based on Crop Water Requirement

According to the 2003 data, crop intensity of 978 ha was 300 %. In the three seasons during a year, sugarcane was planted in 521 ha (53.3%) in each season. Paddy was planted in two seasons, i.e. in the rainy season in 456 ha (46.6%) and dry season I in 181 ha (18.5%). Polowijo (non-paddy crops) were planted in two seasons: 275 ha (28.1%) in Dry Season I and 456 ha (46.6%) in Dry Season II. Polowijo mainly consisted of corn and soybeans. Water allocation of the Pehngaron Irrigation Scheme mainly follows the LPR-FPR Method, which uses the following formula:

LPR = K x Acrop

FPR - Qintake dam LPRp where: Acrop = Cropped area K=Crop Factor 83

FPR = Faktor Polowijo Relatip (1/s/ha): water taken from intake weir for one hectare of polowijo.

LPRP = Luas Polowijo Relatip (ha): area if entire area were planted with Polowijo using the above mentioned FPR (1/s/ha)

Q = Water requirement (1/s/ha)

More detailed explanation is given in Annex 11.

FPR is influenced by the characteristics of soil. In Pehngaron, medium soil dominates, thus FPR is 0.32 V/s/ha. This FPR value is further adjusted by the way water is applied as follows:

FPR >0.32 x 0.7=0224 Irrigation by continuous flow

All area given all time

FPR 0.15 - 0.224 Irrigation by intermitted flow (Rotational irrigation)

WUA /WUF plans to schedule water allocation

FPR <0.10 WUA /WUF requests Dinas to get water supply from Bacem Weir

Based on 2003 data, the average FPR of the Pehngaron District Irrigation were as follows:

FPR Rainy Season 0.234V/s/ha.pol

Dry Season I 0.332 I/s/ha.pol

Dry Season II 0.256 V/s/ha.pol

Based on the above FPR calculations in the primary, i.e., the FPR = Qlint * dam LRp Water requirement (Q) was further estimated at secondary and tertiary levels. The results of those calculations of the discharge (Q) in 2003 are given in the Tables in Annex 1 -b). Based on the above calculations, the total water requirement in Pehngaron Irrigation District in 2003 at the weir intake (the Pehngaron WUAF controls the whole command area below this point) turned out to be 16.78 million m3/year. Let us call this Q optimum, which will be compared with Q operated, which is the actually measured flow of water. 84

7.2.6 Total Water Requirement (m3/year)

The total water requirement in Pehngaron District Irrigation in 2003 at the weir intake turned out to be as follows:

Q optimum = 16.78 million m3 per year (using demand assessment based on cropping patterns)

Q operated = 13.09 million m3 per year (using actual flow measurement)

There is about 3.6 million m3 per year difference between Q optimum and Q operated. This was on the basis of the total year. On the other hand, the calculation of those month by month revealed much better correlation between the two figures, with exceptions in certain months, as shown in Figure 7.2 below.

Figure 7.2 Water Use Pattern for Pehngaron Irrigation Scheme (A=978ha)

1.800

1.600 - Actual flow Calculated demandl 1.400 Water use right

1.200 _ __ _

- 1.000 ______, l_

U 800 _ _ _ _ _ l., 400 *0-

0. ,~, - 4001/ss N

Month

7.2.7 Registration of Customary Water Use rights for the Pehngaron Irrigation Scheme

Water requirement depends on crop calendar and planted area. Accordingly the registration of the customary water use rights can be made as a set of scenarios with seasonal minimum water requirement and the total annual amount of requirement. For example, Pehngaron water use rights can be shown as the red line in the above figure and quantified as follows; Year total: 13.05 million m3 Wet Season ( MT-1): 600 I/s Dry Season I (MT-2): 400 1/s Dry Season II (MT-3) : 300 I/s 85

7.3 Water Quality Issues in Brantas Basin 7.3.1 Overview

Industrial development and population growth in East Java have brought positive economic impact to the Brantas basin. On the other hand, this has resulted in water shortage and pollution. In order to reduce pollutants from industries, the government issued regulation that all industries have obliged to install Waste Water Treatment Plant. Due to variety of type of industries, there are some difficulties for small industries (cottage industries) to follow the regulation. Further more, even some large industries that have WWTP are reported not using the facility always.

The main problems in water quality management at present in the Brantas basin can be grouped as follows:

* Increasing water pollution due to the population and economic growth: the main sources of pollution are industrial, domestic and agricultural wastes.

* Lack of environmental awareness by industrial, domestic and agricultural water user: e.g., deficient waste water treatment plants in industries, disposing of waste water and rubbish directly to the river by the domestic water users, and excessive consumption of fertilizer and pesticide by the farmers.

* Ineffective institutional arrangement for water quality management due to lack of coordination among concerned agencies, and shortage of fund. * Incomplete regulations and ineffective law enforcement.

7.3.2 Monitoring Stations

Brantas basin has 51 sampling points with off-4ine monitoring station and 56 points at potential pollution source of industries, 11 points at domestic disposal outlets of hospital, hotels and public sanitations, which have been installed since 1988. River water and wastewater monitoring are principally carried out by PJT-1 on a monthly basis, but in the lower part where river water is used for drinking water purposes, the monitoring is performed on weekly and in some places on a daily basis.

Since 1999, the Government of Indonesia in cooperation with Indonesian Institute of Science, has developed a Brantas River water quality monitoring system with 23 on-line water quality monitoring stations along the Brantas River. The monitoring results have been taken into consideration for water use, baseline data, inventories, regulations and guideline development, law enforcement, modeling and discharge permit. In order to reduce the pollution load and to improve water quality, on-ine data have been used immediately for river basin management. The suitable location of the monitoring stations will be selected in view of closeness to the 86

pollutant source. In the metropolitan areas, the government will give priority to public health and improvement of intake points for drinking water to secure safe water for human needs.

The continuous quality analysis of the river water is carried out through 23 on-line quality-monitoring stations. The following parameters are continuously analyzed and recorded: temperature, pH, conductivity, turbidity, dissolved oxygen and the nutrient (ammonia and orthophosphate). Annex 11 a) shows the location of the monitoring stations.

The other supporting laboratories for the water quality monitoring are newly constructed in Malang and also the existing laboratory in Lengkong - Mojokerto has been upgraded.

7.3.3 Monitoring Result

Monitoring result is forwarded to the East Java Governor. Then the result is used for giving guidance on the enforcement of regulation in the form of warning and closure of effluent outlet channel. The result of water quality monitoring on year 1991and 2002 (BOD, COD, and DO) along Brantas and Surabaya River are shown in Annex 11 a). Comparing 1991 with 2002, water pollution condition is improving year by year. However, at present the Surabaya River along Surabaya City area and Brantas River along the Malang City area are still polluted by organic pollutants. BOD in these reaches is about 10 to 20 mg/l and 8 to 15 mg/l respectively. COD also exceed the water quality standards in the main-stream and tributaries of the river all around the year.

In most of the reservoirs eutrophication is in progress because of nutrients flow in to the water body. High values of phosphorus and low transparency have been recorded. The water quality in the reservoir shows BOD level of 5.6 to 63.2 mg/l and COD value varies from 13.7 to 128.9 mg/l as a monthly average. Comprehensive water quality standards have been set for the different reaches of rivers. The Brantas River from Wadas River confluence, Surabaya River and Porong River are classified as 'B' class (It is fit as raw water for drinking) and all other rivers as 'C' class (It is fit for fishery and husbandry purposes).

The maximum allowable BOD level for irrigation is around 5-6 mg/l and that of COD is about 10-12 mg/l. Our surveys in the Brantas Basin show cases much higher than those levels particularly in the Delta Brantas, making the water unsuitable for irrigation. The situation, however, has started to improve lately. Nevertheless, it is highly important to continue monitoring the situation. 87

7.4 Measurement of Customary Water Use in Citarum River Basin

7.4.1 Basic Hydrological Features

The Citarum River Basin covers an area of about 11,000 km2. It includes the river basins of Citarum (area 6,600 km2) and a number of independent basins such as Cilamaya/Ciherang, Cijengkol, Cigadung, Ciasem, Cipunegara and Cilalanang as well as a number of small sub-basins. It extends from the Cibeet in the west to the Cilalanang in the east and is bounded on north by Java Sea and in the south by the Tangkuban Perahu Mountain and the mountain ranges south of Bandung. The long-term flow condition at Nanjun in the upstream of Citarum River is shown in Figure 7.3. Statistical analysis of monthly flow measurement based on 30 year's observation shows stable discharge in the Citarum Basin. However water pollution and water demand is increasing significantly. These problems are becoming a threat for water resource management in the basin. (More on water quality issues later). Figure 7.3

Flow Discharge of Citarum River at Nanjung (1,675 km2)

250 * ___ Mean: 71.43 mr3/s 200 200 /~~ 37œnonth moving vees

,E 150 CD

-~100

a~~~~~~~~~~~Ya 0 e~ r. t~ ~O~0 - C' Ti U' W~(br.M o 0 - c -~' Lf O r-. oW a 0 -

Year

Total net irrigation area in the Citarum basin is estimated at 244,844 ha, of which 2,844 ha is in upstream of Citaram basin and 242,000 ha in the downstream of Jatiluhur Reservoir. There are three reservoirs consisting of Sagling, Cirta and Jatitiluhur in the basin. Saguling reservoir has been operated and managed since 1984 by PT Indonesia Power, Cirata reservoir by West Java Province since 1988, and Jatiluhur reservoir by PJT-2 since 1967.

7.4.2 Wangisagara Irrigation Scheme: Overview

In choosing a sample area in the Citarum basin, we took into account of the Stage 1 Study, availability of data and local support, and also consulted with the Provincial and District Dinas. As a result, we chose the Wangisagara Tn'igation Scheme. 88

Wangisagara Irrigation Scheme is included under the jurisdiction of the Bandung District Irrigation Services. The command area of the scheme is scattered in 16 villages within four sub-districts (Jeruk, Ciparay, Majalaya and Ibun) with a total irrigated area of 1,718 ha. The Wangisagara weir is located in the village of Wangisagara, Sub-District of Majalaya, which is bordered with the Village of Karyalaksana in Sub-District of Ibun. The weir was constructed in 1942 and has two primary canals, Ciwalenghe and Cikaro. The water source for the Wangisagara Irrigation Scheme is Chitarum River. The Cikaro canal gets additional water supply from the Cikaro Baru River through a 281 m long canal. The general location and layout of the Wangisagara Irrigation Scheme are shown in Figure 7.4.

Figure 7.4

CITARUM RIVER NORTH

El El CIMANGGUNGcIAo RIVER MAIN CANAL //13 // \\CIKARO SERVICE AREA RIVER (1,370 ha) CIKACEMBANG RIVER CIWALENGKE MAIN CANAlL El ~~~~SERVICEARIEA E (348 ha)

CIPADAULIN \ RIVER

CIKARO WEIR

El Area Location for Factory Plan

7.4.3 Flow Measurement Data

Wangisagara District Irrigation scheme takes water from Wangisagara Weir in Citarum River. Recorded data are available at the weir regarding overflow, left intake and right intake. Overflow and intake are recorded once a day. Summary of the record is shown in Figure 7.5 below. 89

Figure 7.5

Overflow at Wangisagara Weir

10,000 9,000 A.- Over Flow

8,000

7,000

n 6,000

5,000

E 4.000IJ

3,000

2,000

1,000

0 J.1l Jeim Febl Feb11 M.1 Me11 Apri April Mayl MAyll J-nr J-erl1 JdI Jull AOl A,ll 6epI SepI OcIl ODll N-l N-1l Deel D.,l Month

The total intake and overflow at the weir are shown in Figure 7.6 below.

Figure 7.6

Total Intake and Overflow at the Wangisagara Weir 14,000

12,000

A~~~~~~~~~~~~~~~~I Overf low 1000ooo X\ A| I!Total Intake 8,000

6,000

4,000

2,000_ [

JC-l Jan- Febl FebWMarl Mn AFI AIr Mayl MaN JU I rm JUI JUN Augi Se5I SAN OWIrI NcINFl NAN Dl Dse Month 90

The total intake and its allocation to each canal at the weir are shown in Figure 7.7 below. Figure7.7

The Total Intake and its Allocation at the Wangisagara Weir Intake

2,500 ECiwalengke Main Canal

- OCikaro Main Canal

2,000 _ - - Solokan Jeruk Secondary

1,500

0I M1,000 - ; ..

500

7.4.4 Water Requirement Based on Cropping Patterns

As was the case in the Brantas basin, we estimated also the customary water use by water demand based on cropping patterns. In the West Java, a Factor K Method has been generally used since the Dutch Period. Factor K is the ratio of the available intake at the weir and the water requirement:

Qit + Qs - Qh - QI Factor K = 0 ter Where: Qit is available water at intake

Qs is water supply from the other canal

Qh is water losses (tertiary canal 25 %, secondary canal 10%, primary canal 10%)

Ql is other requirement (non agriculture)

Qter is water requirement at tertiary gate based on unit crop water requirement and crop area

If the Factor K is equal or greater than 1, water distribution would be made with a continuous flow to enable 100% of the cropping plan. If the Factor K is less than 1, the quantity of the water to be distributed for the cropping plan must be curtailed by the Factor K and an intermitted flow would be given. More detailed calculation of the Factor K is given in Annex 12. 91

The total water requirement in the Wangisagara Irrigation Scheme in 1999 at the weir intake turned out to be as follows:

Q operated = 53.30 m3 million per year (using actual flow measurement) Q optimum = 57.27 m3 million per year (using demand assessment based on cropping patterns)

There is about 3.97 million m3 difference between Q optimum and Q operated. This was on the basis of the total year. On the other hand, the calculation of those month by month revealed much better correlation between the two figures, with exceptions in certain months, as shown in Figure 7.8 below.

Figure 7.8 Water Use Pattern for Wangisagara Irrigation Scheme (A=1,718ha)

3,500

3,000 ______

2,500 -_-___- _-- -______._ _

2,000 __ __ _

Jan I Feb I Mar I Apr I May I Jun I Jul I Aug I Sep I Oct I Nov I Des I Month

7.4.5 Customary Water Use Rights Registration for the Wangisagara Irrigation Scheme

As evidenced by the above figure, the correlation between actual flow method and demand calculation method is high. Thus, where no actual flow data are available, one can use calculated demand based on cropping pattern for which data are usually available.

Wangisagara water use rights can be shown as the red line in the above figure and quantified as follows;

Year Total: 53.30 m3 million

Wet Season (MT-1): 2,000 V/s Dry Season I (MT-2): 1,500 V/s Dry Season II (MT-3): 900 V/s

7.5 Water Quality Issues in the Citarum River Basin

7.5.1 Overview

Pollution of surface water resources upstream of Saguling Reservoir has reached an alarming level. Concentrations of pathogen bacteria, dissolved oxygen, ammonia and some heavy metals currently exceed water quality standards, especially in the dry season. The three reservoirs (Saguling, Cirata and Jatilhur) still have a natural purification capacity, but there are signs (occasional fish-kills in Sagling reservoir, anaerobic conditions in the deeper parts of the reservoirs) indicating such purification capacity might be close to be surpassed or already surpassed. This forms a serious threat for the quality of water supplied to Jabotabek region. In the area downstream of Jatiluhur reservoir, the water quality situation is less alarming than the upstream of Saguling, but the area along the West Tarum Canal suffers from degrading water quality, caused by the discharge of untreated wastewater. Consequently, the water quality of the rivers that have been used to supply water to the Cibeet-Cikarang-Bekasi Canal, thus the Jabotabek area can no longer use the canal water during some periods of the year. Unless some serious measures are taken soon, the drinking water supply to the Jabotabek will face a crisis situation. There is a general lack of domestic wastewater treatment, and 60% of the population in the upper part of the basin lives in areas where wastewater is directly drained to surface water.

7.5.2 Monitoring Stations

Monitoring of the river water is being carried out under the PROKASIH (Clean River Program) Action at 25 locations along the Citarum River and 10 locations along the Bekasi River, 13 points non prokasih, 13 points on West Tarum Canal (WTC) and 5 points on North and East Tarum Main Canal. Further, industrial waste quality analyses for 110 industries have been carried out and their reports have been submitted to the related institutions. The locations of the water quality monitoring stations in the Citarum River are shown in Annex 12.

7.5.3 MonitoringResult

Monitoring result is used for preparing recommendations to the Local Government on liquid waste disposal license. The result of water quality monitoring in 1992 and 2002 (BOD) 93

along the Citarum River are shown in Annex 12. BOD in the Cimahi River, which is one of Citarum Branch River, shows high value of 94.5 mg/l in 1992 and 161.4 mg/l in 2002. This polluted water makes the water quality in Saguling reservoir worse. In 2002, BOD value exceeds a threshold of 6 mg/l at all 25 monitoring stations along the Citarum River. At the downstream of Jatiluhur reservoir, the water quality (BOD and COD) of the West Tarum Canal in 2000, 2001 and 2002 show high value such as 8 mg/I of BOD and 15 mg/I of COD.

7.6 Impact of Forest Cover Reduction in Watershed on Water Availability

One of our peer reviewers questioned about the changes in the watershed in terms of forest cover loss on the dry season base flow and how these changes exacerbated competition over water.

Advice from officials in West Java indicated that dry season flows had diminished in recent years by some 5-10 percent and this was said to be a consequence of deforestation. The study team was unable to locate definitive evidence of this decrease or of the links to deforestation. Population increase could as easily be the cause. When the popular notion is tested by hydrology studies, people's instinct are not always confirmed and loss of forest can just as easily result in increased runoff depending on slopes, soil types, nature of vegetation changes, etc. For example, http://www.unu.edu/unupress/unubooks/80635E06.htm mentions some Indonesian studies in East Kalimantan and the Kali Modo Basin, Java. The impression given in that document supports the general studies that loss of forest cover increases total water yields. A more modern study in Indonesia (Asdak, Jarvis and Gardingen, "Modeling Rainfall Interception in Unlogged and Logged Forest Areas of Central Kalimantan, Indonesia", Hydrology and Earth System Sciences, 1998) shows an increase in total yields, though it did not look at the within-season variations such as possibilities of increased wet season flooding and decreased base flows in the dry season.

Anecdotal evidence from water users was that there had been no organized response to the phenomenon in the sense of re-negotiated water sharing arrangements, but that the decreases merely added to the difficulties of conflict resolution at times of low flows. 94

CHAPTER 8. ECONOMIC ANALYSIS

8.1 Introduction

This chapter presents our findings on the WURs in the economic context. Our field surveys in this respect in the Brantas and Citarum river basins focused on evidencing current status of water use by sectors and practice of water trade or reallocation to secure water during water shortage period. We also discussed with the provincial officers, PJT directors, industry personnel and farmers possible alternatives to secure water or more specifically to secure the benefits accruing from customarily possessed or legally authorized water use rights. Also from the PCM workshops in field and the National Workshops, we have gotten several significant ideas and proposals from the stakeholders.

8.2 Typical Causes of Water Reallocation

There are three distinct causes, which would trigger inter-sectoral and/or inter-site water reallocation: (i) structural trends, (ii) temporary scarcity, and (iii) economic opportunities. For each cause, we consider the relative significance of the rights regime itself, and the level and mechanisms of compensation.

8.2.1 Structural Trends

Structural Trends describe the predictable and measurable structural, macroeconomic and demographic factors that induce patterns of reallocation of water resources between sectors of the economy (municipal, industrial, agricultural, environmental, fisheries, etc.) and between locations within river basins or across river basins (inter-basin transfers). Such factors include migration of population from rural to urban areas in search of higher incomes and cultural opportunities, increased demand both for high-quality water and for manufactured goods as a consequence of income growth, conversion of sawah (irrigated rice lands) to home and commercial sites, and increased societal demand for improved environmental quality, both for health and aesthetic reasons. Other broad trends, albeit less easily predictable, include changes in international commodity prices and agricultural trade, price and investment policies of the Government, each of which influences the profitability of paddy cultivation and the cultivation of alternative irrigated crops such as sugarcane. Important questions include the following: If land is taken out of irrigation, what happens to the associated water use right? Does it revert to the Government, or does it transfer to the new user, or does it remain in the hands of the original irrigation water rights-holders? How the answers to those questions differ by what happens to the land ownership? Do all these transactions require a contractual arrangement? What role does the Government (or Basin management entity) play in these transactions? 95

8.2.2 Temporary Scarcity

Temporary Scarcity of Water is a cause of short-term (within-season) reallocation induced by transient shortage or drought, and predicated on the statutory water allocation priority structure. Specifically, as "water for life" or basic uses (hak guna pakai air) have explicit priority over commercial uses (hak guna usaha air), under conditions of insufficient supply water will be reallocated from the latter to the former. Historically, de facto transfers under conditions of scarcity have reallocated water from non-permit holders (irrigated agriculture) to permit holders (PDAM, industry) without compensation, although this situation would change should water use rights for irrigators be quantified and registered. Although temporary scarcity and the hierarchy of rights may mandate such reallocations, it is essential to have clear procedures and protocols by which the reallocations are effected.

Important issues include: What are the rules that are used to reallocate water during shortage? What are the respective roles of the parties involved (PDAM, irrigation system, Provincial Government, Basin management unit)? Shall compensation be awarded to rights- holders who suffer economic damages in the event of such reallocations? What is the appropriate level for such compensation, if awarded?

8.2.3 Economic Opportunities

Opportunities refer to situations in which transfer of water or water entitlements, either temporary or long-term and either within or across sectors, is motivated by the potential for mutual economic benefit. The statutory water allocation priority structure may or may not play a role in such transfers, but levels of compensation and administrative feasibility are clearly significant issues.

These transfers can be of two basic types: private transactions between two consenting parties (either via contract or less formal covenant) in which the government is not a direct participant; or transactions either through the agency of the Basin water management entity or through the Provincial or District / City (Kabupaten / Kotamadya) government. The specific form that voluntary transfers of water use rights take will be determined and constrained by law. The basic economic calculus that determines whether or not a voluntary reallocation is desirable rests on respective opportunity costs. If, for example, a farmer (or WUA) can derive more income from the leasing of water use rights, and possibly from the diversion of other complementary resources under their control (in particular labor) away from irrigated agriculture than from irrigated agriculture itself, then a reallocation appears beneficial. The receiving party's motivation is also economic. Either they can secure water through negotiated reallocation at a lower cost than via the official tariff structure, or their demand for water exceeds their permitted quantity, or they are interested in securing water for 96

future expansion. Or, if the receiving party is another WUA or similar aggregation of irrigators, their marginal value product of water may be higher than the leasing party's. Finally, transactions costs must be low enough so that the reallocation still results in a net gain to both parties.

The following table summarizes the three causes. Table 8.1 Water Reallocation Causes, Drivers and Key Issues

Causes Driving Factors Issues

Long-term Rural-Urban Migration * Rights with Land, or Farmers? (or Structural * Growth in Income revert to Governent?) Trends * Conversion of Sawah r rtGe * Environmental concerns

Temporary * Dry Season, Drought * Compensation for affected rights- Scarcity * Basic Needs take priority holders? * Permits, Licenses honored * Water Banking?

* Improved allocative efficiency Economic * Declining profitability of * Rent-seeking by farmers? Opportunity farming * Against food self-sufficiency * Transactions costs?

8.3 Water Use in the Brantas and Citarum River Basins

In conducting field surveys in the Brantas basin (mainly delta area) and Citarum basin (upper region: Bandung District), we paid particular attention to the following topics: 1) water demand projection in the two basins, 2) water shortage and sufferings, 3) conflicts, and 4) current practice of securing water. The details of the findings are shown in Annex 13. In this chapter only the water demand projections are presented below. Table 8.2 Brantas Basin Water Demand Projection Based on IFPRIVADB Study 2003

Year 2003 2020 Growth Irrigation 2,575.0 82.8% 1,902.3 57.1% 0.74 Domestic 220.0 7.1% 955.1 28.6% 4.34 Industry 106.5 3.4% 270.6 8.1% 2.54 Flow Maintenance 207.4 6.7% 207.4 6.2% 1.00 Total 3,108.9 100.0% 3,335.4 100.0% 1.07 (Unit: million m3/year) 97

Figure 8.1 Brantas Basin Water Demand Projection (IFPRIVADB 2003)

4,000.0 -_ Irrigation " Domestic _____ -Industry Flo Maintenance 3,500.0 Total , 3,000.0 E _ 2,500.0

E 1,500.0

a 1,000.0 , . - -

500.0 . - - - 0.0 2003 2020 Year

Table 8.3 Citarum Basin Water demand Projection Based on PJT-2, 2003

Year 1990 2020 Growth Irrigation 177.30 85.4% 168.00 61.5% 0.95 Industry 7.91 3.8% 25.00 9.2% 3.16 Drinking Water 9.77 4.7% 45.00 16.5% 4.61 Fishery 1.00 0.5% 20.00 7.3% 20.00 Flushing 2.00 1.0% 15.00 5.5% 7.50

Peak Hour Load 9.51 4.6% 0.00 0.0% _ Total 207.49 100.0% 273.00 100.0% 1.32 (Unit: m3 /s)

Figure 8.2 Citarum Basin Water Demand Projection (PJT-II, 2002)

300.00o Irr-igaton Industry . _ _ _ - - -Dr1inkigWater - Fisheryi Flushing -- "-eak Ho., Load_ 250.00

Q 200.00 E _------x; 150.00

E8 100.00

50.00

0.00 1990 2025 Year 98

8.4 Specific and Common Issues of the Two Basins

8.4.1 Issues Specific to Each Basin

From the findings of the field survey in economic point of view, it is considered that the differences between the two basins are not precisely substantial but mostly observed in magnitude. One remarkable and rather substantial difference is the relationship between industry and farmer groups. In the upper Citarum basin, with the history of decades, industries and farmer groups have formed mutual cooperation to share water. Industry could abstract water customarily entitled to farmers as exchange of services to the farmers, as industry contributes to maintaining or rehabilitating canal at their expenses.

Although the farmer groups are in lesser position to negotiate with industries, which are providing job opportunity to farm households, and hence industry would sometimes abstract more water than they are allocated, the reallocation coordination has been more developed in the upper Citarum basin than the Brantas basin.

The situation may reflect to the opinions of farmers and industries about water trading. In the Brantas basin, it was consistently heard from farmers interviewed that they anticipate that the disparity between the rich and the poor would increase, if water trading were introduced. That perception of farmers includes fear from industry, which would have more power to purchase water.

Industry personnel interviewed in the Brantas basin are also reluctant about the practicability of water trade. They indicated technical obstacles and trigger of conflicts with farmers. They picked up the technical difficulties such as how to acknowledge the volume of water received from certain water user or in another word absence of indicator to measure the amount of water and of accountability for water quality to be received from other water users. As for the upper Citarum basin, farmers interviewed did not have the idea or concept of water trading, although they were not necessarily against it and indicated necessity of significant compensation to be paid for such idea. The table below summarizes the difference between the two basins. 99

Table 8.4 Comparison of the Two Basins from Economic Viewpoint

Item Brantas (mainly delta) Citarum (upper region) Demand increase would be gentler than Citarum but share of irrigation would decrease - Demand increase by 2020: Structural trend drastically. 132% from 1990 / - Demand increase by 2020: - Irrigation demand share: 107% from 2003 / From 85.4% to 61.5% - Irrigation demand share: From 82.8% to 57.1% Farmer'srelationship with More and has long history Industry Less with textile industries in Bandung

Rearrangement of rotation within irrigation system / Practice of water reallocation Transfer of water from other Cooperation between Industry irrigation scheme by the facilitation of district office. Opinion on Water Trade Strongly against Not as strong as Brantas No restriction and some of Restricted by the Ministry of industries install shallow well. Mining and Energy. It is not Ground water as alternative But not all the industry equip feasible to develop, since it water resource well. Water quality of needs to drill more than 100 m groundwater also bears to reach aquifer and water additional cost. quality is also considered bad.

8.4.2 Issues Common to Both Basins

Common issues in economic context between the two basins are more clearly observed and these issues would have to be taken account in formulating the conceptual framework of water reallocation. Following are the common issues:

* Structural trend: water demand projection in both basins shows similar trends that are stagnant demand for irrigation and increasing demands for industry and municipality. Overall future demand will increase but the potential of new water resource development is limited. Therefore, reallocation of water use would inevitably gain force.

* Potential of efficiency improvement: efficiency improvement is a way to meet the future water demand and saved water from each sector could be released to reallocation. Each sector has potential to use water more efficiently. Installment of water recycling plant will improve water use efficiency in industry, but the high cost of such plant constrains to small-scale factories. PDAM also has room to minimize water loss and application of progressive water charge will also give the end users incentive to use 100

water efficiently, but municipal water demand seems much more rapid than the potential system efficiency improvement. As for irrigation sector, it is estimated based on empirical data in the Citarum basin that there are possible efficiency improvement of 10% at primary and secondary canals and 25% at tertiary level.

* Water shortage for all the sectors in dry season: water shortage occurs in dry season and affect simultaneously to all the sectors. The case some of the water users have excess water during water shortage period would be rare. Therefore, if some water users acquire water from other water users, most likely other sectors must give up their production or otherwise to make effort to save water. In case irrigation sector would release water to other users without any efficiency improvement of water use, they would have to at least rotate irrigation and most likely have to shift their choice of crop from paddy to other crops or make it fallow during the dry season.

* Rearrangement of rotation within the irrigation system: to allocate water as equal as possible, rearrangement of rotation during water shortage period between tertiary canals is practiced in some areas. This arrangement does not necessarily accompany with compensation, as the arrangement is mostly based on mutual agreement of farmers in their virtue or cultural norm or gotong royong and musyawarah.

* Inter-sectoral conflicts: from farmers' point of view in both Brantas and Citarum basins, it seems for them to make complaints against industry is more difficult unless they are firmly united as under a federation.

* Industry abstracting water from irrigation canal: there are industries abstracting water from irrigation canals. There are negotiations between farmers and industries to avoid conflicts and farmers sometimes advocate industries because they provide off- farm job opportunity to the farmers.

8.5 Water Valuation

8.5.1 Introduction

We do note that the Law No. 7/2004 prohibits transfer of WURs. We are also well aware of the reluctance by some stakeholders to accept any form of valuing water and water trade. Nevertheless, as we have pointed out repeatedly in this report, certain types of water trade or reallocation are indeed being practiced, and in our opinion, the very target group that those who are against water trade would like to protect would be the loser, unless more orderly, transparent, and equitable water trade system is introduced and regulated by the government.

Against this backdrop, if there were an authorized reallocation of water and consequent exchange of compensation, how would the compensation rate be determined? In this section we try to guess the value of water from observable data, which would be the basis of compensation rate for formalized water reallocation. 101

The analysis of determining compensation rate requires attention to three distinct albeit related concepts: the cost, price and value of water, respectively. The cost of water refers to some measure of realized expenditures for storing, controlling and managing water resources as required to make such resources reliably available for various uses. The price of water is also a financial concept, the actual tariff charged to various users of water on a comparable per-unit basis. The value of water is an economic concept, typically the average (or marginal) value product of a unit of water in its most profitable use or value of irrigated land on which the value of water is capitalized. Here with available data, above concepts are discussed. In this chapter only a summary of the valuation exercise is presented. Further details are given in Annex 13 b).

8.5.2 Cost and Price of Water

The cost of water as well as water tariff (price) would account lower bound of the value of water. PJTs as wholesalers charge bulk water tariffs to power, municipal and industrial users, while PJTs cannot determine the tariffs alone but need approval of provincial governor or parliament decisions. This creates gap between actual water tariff and cost of water, as the PJTs studies indicate the actual water tariff falls short of the ideal operational cost recovery level (excluding capital investment recovery). PJT-1 quotes the situation in 2001 on its study report 9 saying that a few of O&M activities had to be canceled due to short of water tariff collection.

8.5.3 Mean Value of Water for Economic Use

The mean value of water for economic use is calculated by dividing net return of products in Rp per unit by estimate of water requirement in cubic meters per unit of production. For irrigated agriculture, it is estimated from data on crop-profit analysis and water requirement. For industry, profit of products and water used through processing are analyzed. In this Study, a case of sugar industry is analyzed.

As rough estimations, the value of water showed the ranges from Rp 20/m3 to Rp 560/m3 in different use and process of water used (see Figure 8.3). Difficulty is to measure marginal value of water. If there were ample water like during wet season, marginal value of water or user's willingness to pay for water could be zero and higher bound of the value of water would be restrained with the profitability of irrigated agriculture and industries. The value of water differs by occasion and therefore, estimating compensation rate in case of reallocation would have to clarify the condition on which the reallocation takes place. Conditions are occasional water availability, use of water, production cost of water, profitability of water by location, natural, social condition etc.

9 "Comprehensive Proposal for Water Resources Financial Management (Usulan Komprehensif Pembiayaan PengelolaanSumberdaya Air Di Wilayah Sungai (WS) Kali Brantas)", Jan 2002, Tariff Evaluation Team, Ministry of Resettlement and Infrastructure 102

Figure 8.3 Range of Indicators implying Water Value

600 1 Tarif (Municipaliy PJT-4) T i;ff(I 1st, PIT4I')

I II aA. - ..n Mt.P;. -.. .- . ,.r, ; 'iT

4QiiI- ~ ~ ~ - Y--1- 11 1

C') 30' C q::....; .;.a. . r. '

- 20:; I A ., M I P, 0, ... .~

1 2 3 4 5 69 7 . 10 11 12 13 14 15

An issue is that if farmers gave up paddy cultivation to obtain compensation, it would contradict national food security policy. Therefore, compensation rate which would be set for public transaction of water reallocation, should not be too high for farmers to get unduly motivated to sell water. On the other hand, the investment in efficiency improvement to create surplus water to return to basin operator should be awarded.

Most prospective field of improving efficiency is tertiary level of irrigation systems. Albeit the difficulty to measure the volume of water saved by improving water delivery facilities, an empirical investigation of the West Java provincial water resources management office identifies that delivery efficiency of 25% can be improved by concrete lining of the tertiary canals. The average value of water by efficiency improvement is calculated as following formula: annual investment and O&M costs divided by annually saved volume of water:

Y:, Ave. Value of Water Released by Tertiary Improvement (R pM 3Iyr) S: Annual Cost for Tertiary Improvement (Rp/halyr) Q: Annual Saved Water (m 3 /ha/yr) P:- Investment Cost at Present Value (Rp/ha) M: Annual Maintenance Cost (Rp/ha/yr) i : Discount Rate (O/) nA: Operation Duration (Year) 103

Applying the numerical mean values'°, the mean value of water saved by efficiency improvement is estimated at around Rp 86/m3, which is a little higher than the bulk water charge for industry by PJT (No.8 in the above Figure).

8.6 Sensitivity of Water Transfer to Economic Factors in Irrigated Agriculture

A sensitivity analysis was performed which examines the likely extent of economically- induced water transfers under a range of assumptions concerning microeconomic and macroeconomic factors. These factors include the producer price of paddy, the cost structure of paddy production, the opportunity costs of family and hired labor, the price at which water could be sold between or across sectors, and a range of administrative, legal and information- related costs collectively referred to as transactions costs.

The basic model described here assumes the following: (i) Water transfers are permitted by law, either as private transactions or, more reasonably, as government-brokered trades; (ii) potential trades do not conflict with the statutory structure of use rights, permits and/or priority of rights; (iii) transfers are motivated and justified by economic opportunity; and (iv) trades are restricted to the Dry Season (May-October, approximately) since water is unlikely to be sufficiently scarce during the wet season to motivate transfers. In this simplified exercise, farmers (or farm communities) are assumed to face two basic choices: they can cultivate paddy for profit, or they can forego cultivation and sell (or more properly lease) their water use right- based allotment to other parties and sell their labor in regional labor markets.

The data supporting the analysis was collected in 2000 as a component of the IFPRI/PJT/CASER Brantas study described in Rodgers, et al. (2003)11. Recall data for the 1999-2000 cropping season was collected from 480 farmers in the upper, middle and lower parts of the Brantas Basin. The 480 farm families collectively cultivated 610 plots during the Dry Season of 2000. The variation within this sample of 610 plots with respect to yields, costs of production and family labor intensity provides the basis for the sensitivity analysis. The variation in net returns to paddy cultivation per hectare is depicted in Figure 8.4.

10 Investment cost: US$ 260/ha or Rp484,809/ha (US$=Rp8,300) estimated based on standard concrete lining work / Annual O&M: assumed 1% of Investment Cost: Rp5,530/ha/yr / Discount Rate: 17% (Average investment loan interest of 5 years at State Banks: Source: Economic Indicators 2002 Oct. BPS) / Duration of investment: 10 years (Standard) / Volume of water saved by tertiary improvement: 5,609m3/yr (Average of the Brantas and Citarum basins: data from East and West Java provincial water resources management offices) 1 ICharles Rodgers, Claudia Ringler and Mark Rosegrant, "Irrigation Investment, Fiscal Policy and Water Resources Allocation in Indonesia and Vietnam. Final Report prepared for ADB and IFPRI", Oct. 2003 104

Figure 8.4 Sample Distribution of Net Returns to Paddy Cultivation, Brantas 2000 (Units: 1,000 Rps)

18.00 . . . -

16.00_

14.00

.2 12.00 0. E c~10.00

8.00

L 6.00

4.00

2.00

Rp/Ha Net

In the sensitivity analysis, we examine variation in three factors that influence the relative profitability of paddy cultivation, and hence the extent of water trade: (1) the producer price of paddy, (2) the opportunity cost of family labor and (3) the potential sale price of water. As transactions costs are ignored in the analysis, the extent of water trade is most likely biased upward. The amount of water each plot could sell was calculated using the relative polowijo (non-paddy dry season crops) factor (LPR) method used by East Java provincial water resources management office. The range of prices at which this water might be sold is suggested by the actual pattern of water tariffs prevailing in the Brantas Basin.

The results of the sensitivity analysis are summarized in Figure 8.5 (off-farm income opportunities and water prices, (paddy prices assumed Rp900 per m3 )) and Figure 8.6 (paddy producer prices and water prices, (off-farm wage opportunities assumed at 100% of on-farm wage)). It is observed that when opportunities for off-farm income are restricted, so that farm families can only expect to earn, on average, 50% of their implicit farm wage through off-farm wage labor, only a minority finds it profitable to become wage laborer/water sellers. Even when water can be sold at Rp 100 per m3 , only 30% of plot owners are better off selling water and labor. However, if off-farm earning potential is equal to implicit on-farm family wages, roughly 23% of farmers are better off as water sellers at water price of Rp40 per m3 (the current Municipal tariff) and 45% are better off at RplOO per in3 , assuming paddy producer prices of Rp900 per Kg. 105

Figure 8.5 Extent of Trade with Respect to Water Price and Off-Farm Income Opportunity

50 00/0,

40.0%

4 3 5.0 % rE 3 .0%0//

5.0%

200

0 0.0%

5.0 0/10

0.0% . 1 00 9 - _ 0.9 1 9 0 8-0 0.8 70 60 50 40 3 20 07 %On-Farm Wages

WaterPrice RpfMi3 30 20 - 0 5

Figure 8.6 Extent of Trade with Respect to Water Price and Paddy Producer Price

60.0 0/_

e9 5 .0 %.

o, 40.0 0%

e 3 0.0%

10.0%

0.0 %

~~~~~ c ~~~~~~~~~~~~C)

Water Price R p/M '3 c 0 o °0 GKP Prod. Pr ice Rp/Kg

The extent of trading is even more sensitive to variation in paddy producer prices. At low producer prices (Rp750 per Kg), over 25% of farmers are better off as water sellers, even at 3 water sale prices as low as RplO per m . If water can be sold for RplOO per m3 , over 2/3 of farmers find it more profitable to sell water and labor than to farm paddy. However, at high producer prices (Rpl,200 per Kg), only 16% of farmers would choose to sell water, even at 3 3 RplOO per m , and at more realistic prices of Rp4O - Rp75 per m , less than 10% find it more profitable to sell than to cultivate. It should be noted that over 3% of our sample farmers will always find it more profitable to sell water and labor, since they are losing money, at least at Rp900 per Kg paddy. 106

8.7 Conclusion

Although there are strong and consistent reluctance to accept water trading, the structural trend of water demand projection in the two basins shows that there will be in the long-term necessity of the reallocation of water in different uses. Economic opportunity for selling water is getting incentives for farmers; especially declining profitability of paddy crop will strongly influence the economic opportunity of releasing water. In dry season, there would be no water users who have excess water in their rights and therefore, someone could suffer from reallocation if there is no compensation of any kind or any measure to create surplus water in spots by water use efficiency improvement. 107

CHAPTER 9. INSTITUTION AND LEGAL ANALYSIS 9.1 Introduction

This chapter focuses on the new Water Resources Law (Law No.7 of 2004)12 and its implications, together with some discussion on the broad institutional context of water use rights in Indonesia. Many of the issues raised below emerged during the field trips to East Java and West Java. The notes from the field trip are found in Annex 14-a). A summary of the institutional arrangements as set out in the relevant laws and regulations, are contained in Annex 14-b). Annex 14-c) presents our analysis of the capacity of the present system to support water use rights for surface water. An outline and details of the present licensing system for surface water and its operations is found in Annex 14-d) together with a summary of the licensing system for groundwater and its capacity to support water use rights is set out in Annex 14-e).

9.2 Legal Context

9.2.1 General Background

The legal context within which water use rights are situated in Indonesia can be said to be essentially unremarkable in its overall form and structure in comparison with other countries, both regionally and more widely. There exists a familiar hierarchy of principal and subordinate legislation at national level which are expanded by provincial and district regulations, and accompanied by Presidential Instructions or Decrees or Instructions (which are also used for major policy setting) and various instructions or directions issued from ministers and from heads of departments.

One dilemma for Indonesia is the extent to which these elements are harmonized, particularly in relation to decentralization and autonomy as mandated by Law 22/1999. After reviewing a range of all related laws, regulations and decrees, we understand that clarifying amendments are needed in a number of areas to remove ambiguities and conflicts between some existing legal elements across sectors and jurisdictions. Certainly, in the water resources area, we found that both officials and water users were unsure of roles and responsibilities in many cases. This is discussed further in considering the institutional context.

In a water use rights sense, the two areas of interest in legal context are the water resources legislation itself, and legislation that manages or impacts upon irrigation. Irrigation is of particular importance because of its strong social connotations, its relevance to national food security, and the fact that it is by far the largest consumer of the nation's water resources - generally more than 90 percent of total water use.

12 Including the Elucidation, which is considered to be a part and parcel of the Law in the Indonesian legal system. 108

Indonesia does not have a separate or stand-alone national water resources policy but chooses to embed national water resources policy in such policy within national development plans. In addition, as noted, Presidential Decrees are frequently used to set major policy directions. The development plans are produced under the purview of the State Ministry of National Development Planning Agency (BAPPENAS). The importance of water resources however is such that BAPPENAS has an internal Directorate of Water Resources and Irrigation that, in effect, forms the national water policy making body.

Indonesia sets development policy over a twenty-five year major planning horizon (PembangunanJangka Panjang) then prepares five-year action plans (Repelita) that set specific goals and budget targets including for water infrastructure maintenance and development. In the first such major development plan (PJP 1: 1969-1993) government policy in the agricultural sector set a goal of achieving food self-sufficiency, with a major emphasis on rice. PJP I thus concentrated strongly on water resource development with scant regard it must be said for modern integrated water resources management. Indonesia is presently in the early years of the Second Twenty-Five Year Long-Term Development Plan (PJP II). The current, or seventh, five-year action plan was delayed by events in the late 1990s but eventually began implementation in 2001.

This seventh action plan, Repelita VII (National Development Program 2001-2005 Propenas), specifically incorporates sustainable development principles as articulated in Agenda 21 and is a significant part of Indonesia's formal response to Agenda 21. That is, Indonesia has now embarked, at least in a policy sense, on a road towards modern integrated water resources management within an articulated sustainable development policy framework. In line with this policy direction, these principles have also been incorporated in a new Water Resources Law of 2004 that was given Presidential consent and signature during our Study period.

A National Water Resource Policy has also been passed. As set out in Decree of the Minister for the Economy No. 14 of 2001 on National Water Resources Policy (Keputusan Menteri Koordinator Bidang Perekonomian Nomor: Kep-14/M.Ekon/12/2001 tentang Arahan Kebijakan Nasional Sumberdaya Air), contains a long list of the goals to be achieved through the national water policy. The mission statement refers to: conservation of water resources to protect sustainable use; equitable use of water resources that takes into account the needs of the community for water quality and quantity; empowerment and increasing the role of the community; increasing the role of the private sector and government in the management of water resources; and increasing openness and access to data and information (Article 3).

The statement of general direction of the policy includes the encouragement of integrated water resources management between sectors and related areas within the river territory (wilayah sungai) (Article 4 (b)). The policy lists a number of general policies, which include: the stipulation of criteria for the determination of watersheds (daerah aliran sungai); determination of plans of management based on the river territory; improvement of planning so 109

as to balance use and conservation; and determination of principles of management for water and groundwater use (art 5). A number of policies are set out in terms of goals to be achieved, including: policy on water conservation (Articles 6-7); water use (Articles 8-9); control of the destructive power of water (Articles 10-1 1); community empowerment and increasing the role of the public, the private sector and the government (Articles 12-13); and openness and the supply of information (Articles 14-15).

Water resource management in Indonesia, under the influence of national planning, is therefore proceeding along internationally familiar lines. In common with other countries, the second half of the twentieth century had a strong emphasis on water resource development aimed at meeting national economic and social goals. Then towards the end of that century, policy makers began to recognize the finite nature of water resources, the interaction of water with other natural resources, and the need to maintain a healthy natural environment. Water resource management generally moved near the end of the twentieth century from its "resource development" phase to its "resource management" or mature phase.

One significant implication of the broad policy directions of PJP II is that irrigation is now just another user of water in competition with other uses and must operate within a new paradigm that recognizes the imperative of sustainability and the need to maintain a healthy aquatic environment. Goals for the agriculture sector, including food self-sufficiency, mean that irrigation will remain a dominant factor in water resources planning, but a major shift in public administration is needed to de-couple water development and water resource management. This imperative is reflected in changes in other countries in the region (for example, Thailand and Vietnam, both in the last two years) where an irrigation development and operations agency has previously been the de facto water resource manager, but where the needs of sustainability have required the establishment of new legal and institutional arrangements that provide for separate natural resource management.

9.2.2 Water Resources Law

The 2004 Law comprises eighteen chapters and one hundred articles. In broad terms, it sets the scene for water resources management, establishes authority for the exercise of various management functions, describes community rights and obligations, and sets penalties for specific infringements.

The preamble to the Law sets up a number of key principles, which are expanded upon in Article 1. In essence, water resource management is to take place on a river basin basis and should follow familiar principles of sustainability, justice, autonomy (meaning local management), integration, harmony, transparency and accountability. The state "guarantees" water for minimum daily basic needs for a clean, healthy and productive life. Water is to be used for the "utmost welfare of the people", and traditional rights are to be preserved.

From water use rights perspective, the 2004 Law merely: 110

* Sets up two categories of rights;

* Forbids the leasing out or transferring of part or all of these rights;

* Allows for passage of water associated with a right to be conveyed over adjoining lands;

* Requires the issue of permits for new irrigation rights outside existing systems and for all other uses except human basic daily needs; and

* Leaves all other regulation of water use rights to the implementing regulations.

Because these implementing regulations are still in various stages of drafting we cannot comment on their implication, but have included in Chapter 3 a significant discussion on desirable aspects of water use rights in the Indonesian context and in the light of water licensing practices and documents observed during this study.

The two categories of rights are a water usage right (Hak guna pakai air) which, in effect, covers basic human needs and essentially 'non-commercial' water uses, and a water exploitation right (Hak guna usaha air) for all other uses. The accompanying Elucidation to the Law expands on the 'non-commercial' use rights in terms of water needed to support a family unit - see further discussion in Chapter 10. Interestingly, the basic 2004 Law does not set duration limits for water use permits. These will be contained in regulations.

9.2.3 Comprehensive Water Use Rights

The new Law, whilst giving public irrigation in existing schemes equal priority to daily basic human needs, does not clearly give the holders of this substantial right any means to enforce the right either in an absolute sense or relative to the rights held in other existing schemes. The right is not quantified or documented other than in the general provisions of the law and the holders of the right are at the mercy of system operators. We understand that, contrary to the law, system operators tend to favor permit holders at times of water scarcity.

If the basin planning aspirations of the New Law is to be achieved, and if the principles of justice, transparency and accountability are also to be achieved, a means needs to be found to codify these basic rights. Article 8 states as follows:

(1) The right to make use of water is obtained without a license for the fulfillment of basic daily needs for people and for farming communities that exist within irrigation systems.

(2) The right to use water as intended in (1) above needs a license if:

(a) the method of use will change the natural condition of the water resources;

(b) it points to the need of a group for water in a large quantity. Article 10 states that provisions for water use rights are to be provided for in a government regulation. This opens up the opportunity for elaboration of the system of water use rights. It would seem possible (through a wide interpretation) to use the provisions of Article 8 (2) a and b to establish the inclusion of most, if not all, existing irrigation schemes within a comprehensive water use rights system. The use of water by farming communities could be said to change the natural condition of the water resource and also involves use of water by a large community. Article 8(1) does not exclude the quantification and registration of customary or informal rights. Furthermore, if farming communities are not caught by article 8(2) as needing a license, it could be argued that it does not explicitly exclude providing a form of registration or certification for such users.

This would not only better provide protection for these highest priority water use rights, but would create an underpinning of integrated water resource management.

9.2.4 Public Participationin Water Use Rights

The Law provides for public participation during phases of river basin planning, but then appears to assume that this will suffice and that water use permit issue and management can then proceed without further reference to the public. Experience elsewhere demonstrates the sensitive nature of continued permit issuance in highly developed river basins and it would be prudent to extend participation and consultation. This is discussed further in Chapter 10.

9.2.5. Transferable Water Use Rights

The 2004 Law provides an outright ban on the leasing or transfer of any kind of water use rights in whole or in part (Article 7 (2)). We have already noted that at this early stage of the establishment of comprehensive water use rights as a basis for water allocation planning and management, there is poor understanding of what such rights really comprise and there are significant concerns about some kind of open and uncontrolled market trade in rights - frequently misunderstood and misrepresented as a trade in water itself with all the connotations of the typical misunderstandings about privatization of water services. In such circumstances, it would be clearly prudent to not introduce transferability too rapidly.

There is ample evidence of such re-allocation happening right now and the trends are continuing. We understand that up to 25,000 ha of land pre-1997 were being annually 3 converted from agricultural to urban uses.' Clearly a good proportion of this would be formerly irrigated lands. The Bank itself has estimated that by 2010 roughly 13% of Java's 3.4 million ha of rice fields may be converted into non-agricultural land. Whilst the value of the water and canal infrastructure has been at least partially capitalized into the associated irrigation

13According to Dr. Helmi of Andalas University, the land conversion from agriculture to non-agriculture is now around 50,000 ha per year.

11I~~I ~ ~I ~~~I 112

lands, giving some recompense for farmers selling lands, there is a need to have a better government control and management in satisfying the growing water demands of urban and industrial water users. We believe therefore that the Bank should continue to support the development of transferable water use rights as the most efficient and effective, just and transparent means to meet permanent water re-allocation.

There are many options apart from an open private market in water rights. Indeed most countries do not favor such a result and, in view of the critical importance of water resources, they typically take a much more interventionist approach. We believe the Bank should support continued public education about transferable water entitlements under the empowerment Chapter of the new Water Resources Law (Article 70). This should aim at putting fears about illegal private ownership of water to rest, dispel misunderstandings about religious constraints, and should seek to engage water users in dialogue about desirable future systems of water use rights transfers with goals of:

* Protecting individual rights;

* Facilitating economic development;

* Re-allocating water in a controlled manner; and

* Serving the public interest (water used for the "utmost welfare of the people").

There is also the matter of transferability of the water entitlement associated with a water use right as distinct from transferability of the right itself. This is sometimes referred to in other countries as "temporary water transfers". Such transfers occur when the holder of a water use right is not going to use all of the water allocated to that right (referred to as a water entitlement) and allows someone else to use that water in the meantime, but continues to hold the actual water use right. These kinds of transfers are typically defined as occurring within a single water season and are regular features of day-to-day irrigation water sharing, including in Indonesia. They are generally arranged by mutual cooperation amongst irrigators.

Law 7/2004 is silent on these temporary transfers, which raises the question of the desirability of government intervention in such transfers in the public interest. The main reasons for such intervention would be to ensure that transferred water can physically be delivered (that is, adequate canal capacity exists) and to ensure that there are no adverse environmental impacts. Where canal management has been transferred to water users, the first of these is of course a matter for water user associations and federations. It would be usual for governments to play no role in temporary water transfers within such irrigation schemes. 113

9.3 Institutional Context

9.3.1 Roles of the Government at Various Levels

In Indonesia, water resources are managed within a unitary state with four distinct governance nodes - central government, provincial government, district and town administrations, and village administration. Although the central government is paramount, there is really not a hierarchical relationship between the other nodes of governance and potential overlaps, confusions and tensions are inevitable.

Jurisdiction Primary Roles related to Water Use Rights as per Law 7/2004

* Determine water resources national policy * Establish National Water Resources Council * Determine standards and guidelines for Water Resource Management (WRM) * Provide technical assistance to provinces/districts/towns * Facilitate dispute resolution among provinces Central government * Actually carry out all WRM functions* for river basins that cross provincial or state boundaries and for 'nationally strategic' basins * Give technical recommendations for groundwater allocation and use for groundwater basins crossing provincial boundaries * This includes actual issue of surface water use permits

* Determine provincial water resources policy * Establish Provincial Water Resources Council * Provide technical assistance to districts/towns * Facilitate dispute resolution among districts/towns * Actually carry out all WRM functions for river basins that Provincial government cross district/town boundaries, including granting of surface water use permits for those basins * Give technical recommendations for groundwater allocation and use for groundwater basins crossing district/town boundaries, but not including the granting of water use permits

* Determine district/town water resources policy * Establish District/Town Water Resources Council * Fulfill daily basic needs of district/town community * Carry out all WRM functions for river basins internal to the Districts /towns district/town, including granting of surface water use permits * Regulate, determine and issue licenses for the supply, allocation, use and exploitation of groundwater. * (The Law is silent on groundwater use permits, but the practice we observed was for all such permits to be granted by district/town administrations.) 114

Roles and responsibilities of each node and relationships between them are gradually being clarified through the institutional arrangements for decentralization triggered by Law 22/1999, but the task is a long way from complete. Chapter II of the new Law defines in some detail the water resource management roles of each jurisdiction, as shown on the previous page. Decentralization of water resources management is made complex than other aspects of decentralization by the consideration not only of the devolution of authority downwards but the movement of authority back upwards, when a river basin crosses a government boundary.

However as can be seen, the roles in relation to the granting of water use permits (both surface water and groundwater) have variable application because of the over-riding provision that whenever a geographic water-related feature being managed happens to cross an administrative boundary the functions are moved up to the next larger governance node. The results are to fragment the administration of water use rights across three nodes of government. In the case of surface water this is completely contrary to the principles of river basin management espoused by Law 7/2004 and will require special effort in coordination for success.

In addition, development, management, operations and maintenance of irrigation schemes follow similar responsibility patterns when the schemes crossing administrative boundaries. Article 41(2) of Law 7/2004 (together with the elucidation) on the development of irrigation schemes provides for the following arrangements.

Jurisdiction Development of irrigation schemes managed Central government Those that cross provincial boundaries or more than 3,000 ha. Provnciagoerm-ent Those that cross district/town boundaries or between 1,000-3,000 Provicialgoverment ha. DistricsAownsThose contained within district or town boundaries or less than Districts/towns1,000 ha..

The operation and maintenance of primary and secondary systems of irrigation is stated to be the responsibility of central and regional goverinment (provincial and district) according to their respective authority (Article 64(6)(a)).

For irrigation schemes there appears also to be an intention to vary the source jurisdiction for scheme finance according to scheme size as further clarified by the Elucidation. The result is that nothing occurs consistently at any governance level or node and there is a consequent dispersal of skills, knowledge and resources. Chapters 10 and 11 further discuss this issue and propose some pragmatic responses.

Furthermore it is notable that in relation to irrigation systems, the New Water Law allocates responsibility for development, operations and maintenance, it is less clear about "management". While there is a definition of management of water resources in the Act 115

(Article 1 (7)), there is no definition of management of irrigation systems despite the fact that it has been a focus of some considerable debate in terms of who does what.

9.3.2 River Basin Management

Indonesia had previously established the concept of management of surface water resources on a river basin basis through river basin technical agencies (Bbalai) that are now established (on paper) within provincial government. This commendable basin management concept continues under the 2004 Law, but support for the balai is not so evident. These are clearly the entities where basin resource inventories are maintained, where surface water assessment programs reside, where basin planning should occur, and where basin water allocation including abstraction permit management should also occur.

Provinces presently issue water use permits for only two years. We were unable to discern any substantial reason for this limited period other than to postulate that it maximized income to the agency. We were also informed by Balai officials that they used permit renewal to conduct a review, but then if an industry say was found to be using more water than its entitlement, instead of taking compliance action the renewed permit simply formalized the new increased level of water abstraction. Resources for supervision of compliance with permit conditions are inadequate at both provincial (Balai) and district levels. Means to expand this must be found if the much needed comprehensive water use rights system is to be successfully established.

Also the role of Balai is confused by the necessity to perform operations and management tasks for irrigation schemes crossing district boundaries. In common with every other country supporting irrigation, government has generally inadequate resources for ongoing management such as operations and maintenance. In this situation, it would be desirable to concentrate the expertise in order to maximize efficiency and effectiveness. Apart from this, there is a conflict in being both a resource manager and a service provider, arising from this irrigation role and from siting the balai within a central public works agency (Kimpraswil). On the whole it will improve transparency and accountability if these roles are separated.

9.3.3 State-owned InfrastructureManagement Corporations

In the two basins we studied in depth, each has an additional institution in the form of a state-owned corporation responsible for infrastructure management and bulk water supply over a defined geographical area (Perum Jasa Tirta or PJT). Mirroring experience elsewhere, we found that the creation of such enterprises produces a different management culture, with a strong focus on results and accountability. There is a sense of 'ownership' and an emphasis on cost-effective operations that are generally absent from line agencies that receive annual funding allocations from government. In that sense, these corporations are successful. 116

There is a need however, to clarify responsibilities in resource management as distinct from resource development and use. We observed a number of confusions and conflicting views of responsibilities of the corporations and Balais. In addition, financial self-sufficiency remains an elusive goal. Because a large proportion of water used is consumed by subsistence agriculture ("public irrigation within existing irrigation schemes") and because this will always require a substantial injection of public funds, it would be useful to identify this and to make such funds explicit in the budgeting process. This is practice elsewhere and recognizes the reality of what is sometimes termed "community service obligations" in otherwise commercial entities.

There is a question of the role of the PJT in water use permits. Clearly they are well placed to perform some of the administration - particularly monitoring. There are successful models operating elsewhere that take advantage of this whilst avoiding the conflict between resource management (by river basin authority) and resource delivery and use (infrastructure management corporation). The critical success element is to have a contract between the basin authority and the corporation that defines only administrative and purely mechanical tasks as being delegated to the corporation. This of course requires a high level of coordination and sophistication in basin planning and management to be established as a precursor to such arrangements.

Where a water use right has been granted to take water from within the operations area of a public corporation, the water user in addition to the water use permit issued from the province must also obtain what amounts to a supply contract from the corporation covering rights and responsibilities associated with delivery of the water use right. This system appears to be reasonably well established although we did find some urban water supply entities complaining that they were yet to receive such a contract and were therefore in no position to enforce supply from the corporation.

9.3.4 Urban Water Supply Corporations

Indonesia has a well-established system of public corporations set up for provision of urban water supply and wastewater services (Perusahaan Daerah Air Minum or PDAM). Again we observed the management culture benefits of separating out and quasi- commercializing the purely service delivery aspects of water management.

Provinces issue water use permits to PDAMs, which in turn may also need supply contracts from PJTs. We found the matter of water use permits to be curious because whilst PDAMs supply some water for industry, they are also obviously heavily involved in supplying basin daily human needs. It seems therefore somewhat illogical to license PDAMs but to leave out irrigation schemes when both are supplying mixes of commercial and non-commercial water users. 117

The PDAMs suffer the same financial problems as do their larger cousins the PJTs. Both are unable to raise adequate operations and maintenance funding. We found however that some customers, for example hotels, were choosing to sink their own bores in order to get reliable water supply. This suggests that at least for commercial companies it is not cost but service standards that determine their actions. PDAMs are aware of this and are trying to catch up, but long periods of deferred maintenance means that they must not only meet routine operations and maintenance costs but must invest heavily in fixing significant backlog problems. Backlog maintenance is amply demonstrated by the very high levels of 'unaccounted-for-losses' in the reticulation network in PDAM Kota Bandung of around 50 percent.

Increasing service levels by PDAMs however also creates an increase in water abstraction to meet urban needs at rates higher than population growth. For example at PDAM Kota Bandung they have already run out of water resources (current demand 3,027 Vs; current supply 2,469 Vs) but have only 53% service coverage. In other words, demand will potentially double even if there were to be nil population growth in Bandung. This of course is exacerbated by the fact that rising economic standards of living carry with them an increasing per capita demand for water. This is where integrated basin water planning is so important. The 47% non-covered area in Bandung mostly takes groundwater, which is in severe deficit. This is clearly a problem requiring significant coordination and a long-term strategy for sustainability.

The current water supply shortfall for PDAM Kota Bandung of 558 I/s is estimated by the PDAM to rise to 4,839 V/s by 2020, assuming coverage at 80% and population growth from 2.5 million to 3.7 million. What is interesting is that the whole of this shortfall could be met by retiring less than 3,000 hectares of irrigation. This is only around 1% of irrigation in Citarum Basin (245,000 hectares) but would of course have local effects, including the displacement of maybe 10-15,000 people from irrigated agriculture. Public policy issues for all nodes of government are obvious, but solutions are rendered significantly more difficult by the absence of comprehensive water rights, which could provide an equitable and quantitative basis for working through the social, economic and environmental dilemmas implicit in this major natural resource and public policy issue.

9.3.5 ParticipatoryIrrigation Management

Indonesia has been engaged for some time in implementing forms of participatory irrigation management. This was given impetus in 1999 when the President issued a public Declaration of Irrigation Management Policy Reform (DIMPR). The start of participatory irrigation management in Indonesia is generally taken to be the 1978 Irrigation Operations and Management Policy. This policy established a formal system of water user associations that were recognized by registration with district government and began the process of participation with the smaller schemes. Some government funding was supplied in recognition of deferred maintenance. 118

A significant milestone in the legal and institutional context occurred in 2001 with the passage of Government Regulation No 77 of 2001 on Irrigation. This contained the implementation details of the 1999 Presidential DIMPR and unequivocally put farmer water users at the center of irrigation scheme management. Clause Article 4 (1) provides:

"Irrigation management shall be carried out by putting in prioritizing the interest of the farmers' communities interest as well as giving wider authority and with placing the farmers water user association as the decision maker and main actor in managing the irrigation within his working area", which becomes their responsibility.

In the water use rights context, an Article Clause 14 is important - ": the water use right is given by Bupati / Mayor, governor and relevant Minister in accordance with their respective authority to the farmers' water user association in the irrigation area level, legal body, social organization, individual, and user of irrigation water user with different purposes for their different needs in every utilized water resource."

We understand that this regulation is in the process of being re-drafted. It remains to be seen the extent to which the provisions mentioned above will be amended. However, the 2004 Law on Water Resources Article 8 (2) combined with Clause 14 (1) of Regulation 77/2001 (or something similar) would provide a substantial legal basis for the establishment of a comprehensive water use rights system that includes water user associations and the like as key actors.

The progress, successes and failures of participatory irrigation management have been documented by other researchers and will not be repeated here other than to say they follow a familiar pattern under influences similar to those existing in other countries that embarked on the same path for much the same reasons, whether they are developed or less-developed. At the time of this study, we observed what might be called a patchy situation. (See Chapters 5 and 6) There are highly motivated associations (and federations of associations) and others either non- existent or still in the throes of the old days of paternalistic government administration and displaying a certain dependency by both irrigators and officials on maintaining the status quo.

Most of the work on participatory irrigation management occurs through the provincial water agency and particularly through district government. In addition, the Agriculture Department also has a role because of its responsibility for co-ordinating the training of extension staff, who in turn are required to interact with farmer groups including water users.

Because participatory irrigation management has been shown to make significant contributions to securing the sustainability of irrigation schemes that were created for social and political reasons as distinct from economic reasons, we believe the Bank should continue to support this transition in Indonesia. More critically from a water use rights point of view, the success of a comprehensive water rights system needed for management of scarce water resources relies on there being a viable entity to hold irrigation scheme bulk water rights. We therefore urge an accelerated effort in the formation of viable water user organizations that, in 119

the words line with of the stated principles set out in the 2004 Law on Water Resources, will participate in local autonomy for sustainability of both basin water resources and the irrigation schemes using these resources.

9.3.6 GroundwaterManagement

The 2004 Law on Water Resources requires there to be integration of surface water and groundwater management - see A (Articles 11 and 37) and 68. But that Management at present resides within separate Ministries - Settlement and Regional Infrastructure on the one hand and Mining and Energy on the other. This reflects the different professions involved (hydrology and geology) as much as anything else, but does require additional effort to secure integration. (Also see Annex 14 on groundwater licensing)

Whilst there is widespread use of groundwater, available volumes are much less when compared with surface water. Groundwater that is not particularly abundant in Indonesia has with mainly soft rock and fractured rock aquifers and not many high-yielding alluviums. Combined with the effects of incomplete coverage of urban water supply systems, most aquifers of the study basins are presently under significant stress. Management of groundwater is broadly split between central government (technical advice), provinces (policy and administration) and districts (permit issue and management), and further complicated by provisions for groundwater basins that cross administrative boundaries to be managed by the next geographically larger government level. As distinct from surface water basins, such boundary crossing basins are something of a norm in groundwater and there is perhaps less confusion in this regard.

We found policy approaches at provincial district level to be sound, with a good understanding of the water rights management needed to restore sustainability to overdrawn groundwater basins. However, the capability of districts to carry out implementation is highly variable and ranges from adequate to very limited. Concern was expressed that some district administrations are issuing groundwater use permits contrary to good water resources practice simply to acquire the additional revenue. This limited capacity of districts is exacerbated by the limited activity of the criminal and civil courts systems in assisting with enforceability.

Enforceable water rights are particularly critical in groundwater where the imperatives of basin sustainability require that in some areas there be no new permits granted, and in many areas those permits already in existence must have a steadily reducing volume of water abstraction. Water users do not take kindly to either of these management techniques and the force of law is usually required to ensure compliance. 'Getting it right first time' is clearly the preferable strategy. 120

9.3.7 Water Resources Information

The new Law recognizes the critical role played by water resources information (Chapter VII) and authorizes its acquisition, maintenance and accessibility.

We found however that, at least in surface water resources, the decentralization of 1999 has subsequently moved much data collection from balais to districts with often very poor results. In relation to groundwater, it is also the districts that are responsible for water use monitoring and for monitoring the piezometer network. Districts were mostly ill-equipped for the task and it is feared that much critical data has been lost. We found it to be very difficult to assemble basin-wide water resources information.

A review of the effectiveness of institutional arrangements for water resources information acquisition, analysis, archiving and accessibility on a basin basis should now quickly follow the passage of the new Water Resources Law.

9.3.8 Coordination

There has existed to date both basin level (PanitiaPelaksana Tata PengaturanAir or PPTPA) and provincial level (Panitia Tata PengaturanAir or PTPA) committees with water resource coordination roles. These are supplemented to various degrees by district irrigation committees and the like for such things as determining cropping patterns for water delivery and so forth. These committees have the weakness that PTPA/PPTPA members are all government officials. There is not strong water user representation. Although they are able invite representatives of affected communities to meetings, there is no requirement for water user representation. In fact some committees have none. The PTPA/PPTPA are supplemented to various degrees by district irrigation committees and the like for such things as determining cropping patterns for water delivery and so forth.

The new Law on Water Resources has provided for various water councils to be created:

* National government: National Water Resources Council, Water Resources Councils for river basins that cross provincial boundaries, Water Resources Councils in strategic basins (Article 14(h))

* Provincial government: Provincial Water Resources Council and/or Water Resources Councils for river basins that cross district boundaries (Article 15(h))

* District Government: District Water Resources Council and/or Water Resources Council for a river basin within the district (Article 16(h)).

Provincial water resource councils, basin water resource councils and district water resource councils to be established (in addition to a National Water Resources Council). These councils are to be established under principles of the Law requiring an extensive role for the 121

community and business world. This direction is to be commended and encouraged. However, in setting up the new institutional arrangements, much care is needed to provide both the clarity of roles that is absent at present, and a significantly increased level of water user representation and participation on these bodies.

Having said, there should have been a National Water Resources Coordination Team formed at the national level to guide policy making for water resources management (Presidential Decree No. 123 of 2001). This team has never been brought into existence and the concept is now being replaced by National Water Resources Council, which actually does not yet exist. There seems to have been a level of inertia within the National Government in forming Water Resources Councils. For the introduction of WURs framework and administration systems, an alternative interim organization might be needed.

9.3.9 Environmental Management

Management of the water environment is largely the responsibility of stand-alone regional environment protection agencies, the BAPEDALDA. The agency, unsurprisingly, has a major focus on pollution control, but is also responsible for wider aspects including the compilation of State of the Environment reporting (the Provincial BAPEDALDA). As with both surface and groundwater resources agencies, it maintains there is a policy and program role at provincial level, but much of the implementation occurs within district government, including pollution licensing. A pattern similar to water management was observed, with some districts having an excellent capacity and others virtually none.

At present the environment agency is not part of the water use permitting process but sees a desirable future role for itself in this process. There are, of course, a number of ways of building in pollution management and environmental controls to water use permiits, and with the passage of the new Water Resources Law, it would be timely to begin debate on the methodology appropriate for Indonesia. We understand that a water licensing coordination group operates in East Java and this may provide a useful model if it were to be extended to include the BAPEDALDA.

Because of the necessarily heavy emphasis currently being placed on water pollution control and management, the agency BAPEDALDAs have not yet put in a lot of effort into the more general subject of environmental flow management. There has been some work done on minimum desirable flows from the point of view of managing biochemical oxygen demand, but little else. Given the seemingly widespread practice of permitting water abstractions down to the minimum historic flows, and given the significant demand stress on surface water resources in the studied basins, it would seem likely that the aquatic environment is at significant risk. Environmental flow management should be an early task for the new basin water resources councils, in addition to the coordination of water quality activities by the water resources and environmental agencies. 122

This is not the place to describe modern environmental flow management in detail, but it might be noted in the present water allocation and rights context that a number of countries have found it useful to formally set aside water specifically for the maintenance of the aquatic environment in the form of an "Environmental Reserve".

9.4 Summary of Legal and Institutional Observations

Overall it can be said that there is a basis for establishing a more comprehensive water rights system within the new Law; now existing within legislation, but subordinate legislation and other instruments will need to take account of more detailed principles of water rights management. (See Chapters 3 and 10). In addition, there is an inadequate information basis for comprehensive definition of water rights. Current water use rights, as evidenced by the licensing system is limited to the commercial use of water, and officials involved will need capacity building in the role of water rights in integrated water resources management. For example, there is no overall conception of how a broad range of rights could be assigned and modified. Similarly, permits presently have a limited range of standard conditions and appear to be primarily concerned with revenue. A substantial cultural change is needed. The commitment to modem integrated water resources management signified by the 2004 Law on Water Resources is to be commended, but it must be said that its coincidence with the bold decentralization policy has created major difficulties and a number of confusions and tensions. In particular, the rapid move of water administration functions to ill-prepared districts has caused significant difficulty. The cause of comprehensive water use rights would be greatly assisted by a significant review and rationalization of institutional arrangements including the provisions relating to water features that cross administrative boundaries. Such a review should center on strengthening river basin management and take advantage of the experience gained in the use of state-owned corporations for service delivery functions. The delivery of rights is hampered by lack of financial resources for maintenance of rivers, construction and maintenance of primary, secondary and tertiary irrigation canals as well as infrastructure for the supply of drinking water. These issues also impact upon the protection of rights where they affect security of supply. Moreover, licenses as presently formulated do not operate in an effective manner to protect rights through the formulation of obligations on either the right holder or the government. There are no formal rights to enable public participation in license decision-making. Neither do the disputes provisions in either licenses or supply contracts include procedures to protect right holders in the event of disputes with PJTI/II or other users. Institutional weakness can be seen in the low level of supervision of compliance with license conditions. To date there has been minimal administrative enforcement and even less criminal enforcement. The blanket ban on transfer of water use rights will be found to constitute a major impediment to the critical imperative for re-allocation of water to meet social and economic 123

goals, particularly to meet increasing demands for urban and industrial water. Means must be found to dispel concerns about the concept, and a major effort made to formulate an acceptable re-allocation mechanism that removes the current incentives for uncontrolled or black-market water transfers and establishes a controlled re-allocation that is both equitable to the parties involved and operates in the public interest.

In summary, the present legal and institutional system needs significant development before it will be able to support a comprehensive system of water use rights. 124

CHAPTER 10. MAIN ISSUES AND CONCLUSIONS

10.1 Introduction

The fundamental issues facing water resources management in Indonesia are remarkably similar to those in most countries of the world. That is, Indonesia has: * Water scarcity in some locations of high demand; * A challenge to achieve or restore sustainability of the water resource itself; * A challenge to achieve financial sustainability in the water supply sector (including irrigation supply); and * A coordination challenge resulting from water resource management existing within complex, and still evolving, institutional arrangements. The original impetus for Phase 1 of this water use rights study arose from the problem that long-established, mostly community-based, and largely agrarian water sharing was not coping well with the impact of growth in urban and industrial water use, or with the entry of newcomers to the system. This remains a fundamental issue but is really a symptom of an underlying physical reality. That is, water resources are finite. When water use demands rise to be equal to water availability, a new demand can be met in one of only two ways: 1. Give the new user water by effectively deducting a small amount from all existing users, thereby decreasing reliability of water supply for all users; or 2. Consider the water source to be closed to additional users, and arrange for selected existing users to diminish or cease so as to free up water supply for the new user.

Governments everywhere struggle with this dilemma imposed by this uncomfortable but unavoidable physical reality and will typically use method 1 by default, because method 2 is perceived as too difficult or politically unacceptable. Eventually however, the decreasing reliability of water supply caused by continuing with method 1 becomes critical and the resulting crisis in water supply forces a new approach. More dams only penalize non- consumptive water uses without solving the dilemma. In the basins studied, we found that surface water is still being allocated under method 1 but that, at least in some localities, groundwater shortages had passed the political pain threshold and by necessity method 2 is starting to appear. Unfortunately, as discussed later in this chapter, the legal and institutional support for method 2 is not yet well-developed and stagnation is the result. That is, 'closing' the water source results in exactly what the word means and new users cannot enter the system. 125

10.2 Major Issues Identified by the Stage 2 Study

The preceding theme chapters describe a multiplicity of issues and findings relevant to the matter of water use rights. However, when aggregated, we have identified six dominant needs for the achievement of socially just, economically efficient, and environmentally sound water allocation by a system of rights-based water sharing.

These water allocation needs can be summarized in the following goals: * Securing protection and equity for existing non-formalized customary rights;

* Establishing orderly, equitable and transparent processes of water re-allocation to be able to continuously meet communities' changing needs;

* Strengthening a basin approach to water resources management in order to better manage scarce water resources and to optimize their allocation;

* Establishing improved enforcement and conflict resolution mechanisms; * Reserving river water flows to sustain the aquatic environment; and * Reducing groundwater use to match long-term sustainable yields.

10.2.1 An Umbrella Institutional Issue

Achievement of the six water allocation objectives must take place in an environment of institutional complexity that is responsible for introducing uncertainties and confusions for various stakeholders. This complexity arises from a number of factors related to Indonesia's vast geographical and cultural diversity, and to ongoing changes in governance resulting both from the autonomy law (Law No. 22 of 1999 on Regional Government) and from continuing evolution of water-related law. The most recent example of this latter being Law No 7 of/ 2004 on Water Resources, together with associated regulations, which, as yet, are only in drafting stages.

Some of the confusion relates to what is, on the face of things, a contradiction of devolution but can alternatively be construed as a piece of pragmatic public administration. That is, the decentralisation law seeks to devolve the delivery of basic public services (for example education, health care, management of natural resources (see Article 11 of WU 22/1999) to district and municipal levels whilst, in Article 9, allowing administration to move up a level in the national-provincial-4ocal government system whenever a matter crosses a geographical administrative boundary.

The Water Resources Law 7/2004 takes up this theme and makes it more explicit for river basins, irrigation schemes, groundwater basins, etc. As a result, which entity happens to manage a specific water resource or water supply matter at any particular locality is essentially 126

an accident of earlier boundary creation that paid no heed to the needs of natural resources management. The outcomes are not particularly conducive to efficient and effective management. Apart from creating potential conflicts of interest, this also results in dispersal of skills and expertise across three levels of government with no guarantee that policies and standards are consistent. Obviously,.coordination is of paramount importance. From the narrow point of view of assigning some kind of registered and specified water use right to irrigation schemes, a key problem is the additional complexity of determining the entity that might be most appropriate to hold the right. It is possible to envisage circumstances that could result in a province issuing such a right to it. It is of course possible for the local administrators to be quite pragmatic concerning interpretation of these rules about entities that straddle boundaries. Indeed, the study team found, for example, in the Citarum basin, in the case of at least some irrigation schemes that crossed district boundaries and were therefore technically the responsibility of the provincial dinas, Balai, the actual physical operation and maintenance was, quite sensibly, being carried out by the workforce of one or other of the districts on behalf of the province (Balai). Arrangements of this nature are to be commended and encouraged.

10.2.2 Affordability and the Needfor Government Subsidy

The generalized institutional issue discussed above also raises the whole question of affordability. Stage 1 studies suggested that a comprehensive water use rights system was needed for the future. The system would bring irrigation schemes under the purview of some form of defined water use licensing, or at least some form of documented and protected use rights. In the Citarum basin with 246 water use permits as at the end of December 2003, the addition of all irrigation schemes has the potential to triple this number and hence significantly increase the associated administration. Even allowing for the fact that the current extremely short issue period of two years is apparently intended to be lengthened to at least five years, the potential impact on administrative costs is clearly a significant management issue. With government providing continuing subsidies, particularly to irrigation water users, it would be inappropriate to introduce systems with costs above affordability levels. Assessments of likely cost increases for improvements or extensions to existing water use rights activities should be estimated in broad terms. Whilst industry and "commercial" irrigators currently meet a portion of the total costs, farmers do not contribute to the costs of access to water, the capital works for delivery and supply of water, or to water resources management costs. Furthermore, their capability to meet additional water charges appears to be minimal. This suggests that initially government would have to contribute the highest proportion to the costs of any modified water use rights system. Accordingly, it is considered that there 127

should be a focus on capacity to pay rather than on full cost recovery at this stage. This latter could be a "stopper" unless cost savings can be found. Any major shifts in processes at the administrative and operational levels would require some structural adjustment to existing administration and operational costs to balance costs of expanded water use rights activities.

There are currently reviews of the functional and organizational management of Provincial Dinas, which are likely to affect the technical agencies (Balai) by streamlining their activities. The driver for these reforms is Government Regulation No. 8 of 2003 on the Organization of Regional Instrumentalities. This regulation limits the number of Dinas within a province to ten (Article 5(5)) and sets out the functions of the Balai (5(8)).

10.3 Protecting Customary or Non-Formalized Rights 10.3.1 Introduction

The term "customary rights" is used here in a generic sense to denote all non-specified rights of the type not requiring a water utilization permit under current legislation. It is useful to divide these into "traditional community rights" covered by Article 6 of Law 7/2004 and non- commercial irrigation rights or "public irrigation located in irrigation system", as covered by Article 8 of the Law.

10.3.2 Traditional Community Rights

These are very long-standing rights, going by a variety of names in different locations within Indonesia, but sometimes referred to under the generalized notion of adat philosophy, said to consist of flexible, amorphous principles, locally considered to be essentially impenetrable for outsiders. A key feature of adat is that it has applicability only in small traditional communities. It cannot be applied at national levels of society where more consistent legal systems are needed.

The 2004 Water Resources Law explicitly recognizes and determines this right if the traditional community meets three elements of continuing existence (refer Elucidation Article 6(3) of the New Law):

* Traditional community element - i.e. the existence of a group of people who still consider (themselves) bound by traditional law as a member of the community together with a certain law system, which recognizes and applies provisions of this in daily life.

* Regional element, i.e. the existence of certain traditional land, which becomes the environment of the people of that law system and the place for taking daily life needs. * The element of communication between the community and its region, i.e. the existence of traditional law system about arrangement, control and utilization of traditional land which is still in force and obeyed by members of the community of law system" 128

As is not uncommon in natural resources rights legislation dealing with retrospective recognition and determination of indigenous rights, this recognition is subject to the rights not being "...contradictory to national interests and laws and regulations". That is, the rights can be effectively extinguished by operation of statute law.

The study team in the two case study basins did not attempt to map these rights. Because of the widespread irrigation development in both basins and the existence of a public basin infrastructure and bulk water supply corporation in each, the extent of such residual traditional rights was considered likely to be insignificant. Certainly, the detailed water user inventories of both the Balai and basin corporations do not contain any such recognized users.

In a general sense then, these rights can be put to one side as already protected by law, even if not quantified and registered. For future studies in other basins, discovery of the nature and extent of such rights will be a key requirement.

10.3.3 Public Agriculture Located in Irrigation System

Article 8 of Law 7/2004 simply describes this "public agriculture" as a water usage right that is acquired without permit.

It also explains "public agriculture" as cultivation covering: "...various commodities, i.e. crops, fishery, cattle breeding, plantation and forestry managed by the public with certain area, the water need of which does not exceed 2 liters per second per family."

Protection of the right comes effectively from Article 29, Clause (3), which states: "Supply of water resources to fulfill daily basic needs and irrigation for people's agriculture in the existing irrigation system represents water resources supply top priority above all other needs." The accompanying elucidation to the Law explains "daily life needs" as including religious services needs, drinking, cooking, bathing, washing and peturasan. "Public agriculture" is explained as cultivation covering "...various commodities, i.e. food plants, fishery, cattle breeding, plantation and forestry managed by the public with certain area, the water need of which does not exceed 2 liters per second per family."

Protection of the right comes effectively from Article 29 (3), which states: "Supply of water resources to fulfill daily basic needs and irrigation for people's agriculture in the existing irrigation system represents water resources supply top priority above all other needs."

In other words, there is a serious attempt to describe and quantify a fundamental non- licensable right to obtain a quantity of water sufficient for family subsistence. Similar concepts in water allocation are not unfamiliar around the world, often expanded with phrases something like, "...from which the produce is not offered for sale..." in an attempt to further distinguish commercial irrigation from family subsistence irrigation. The 2 I/s figure is interesting as, in West Java for example, the standard intake flow adopted at irrigation schemes is 1.2 V/s/ha. This implies that a "family" could irrigate at times up to 1.67 ha whilst still qualifying as non- 129

licensable and exempt from water resource management charges that would otherwise be payable under Article 80 (1). Since many irrigation farms are of the order of a half ha or thereabouts, there would seem to be some room for entrepreneurial families to expand their enterprises unless local decrees exercise some further control.

There is evidence (refer Chapters 5 and 6) that irrigators in a number of irrigation systems have suffered progressive loss of supply over the years. Typically this manifests itself as areas at the downstream ends of systems that are short of water, at least in the dry season. There are seven major possible causes.

* Rainfall-runoff relationships have varied in the catchments as a result of changes in vegetative cover.

* River geomorphology has changed the entry flow characteristics at irrigation scheme intake regulators. (Some are seen to be at odd angles to the flow where the river has changed its course, and others are severely silted.)

* Other water users on the same river upstream of the irrigation system may be abstracting more than their fair share.

* Distribution canals within the irrigation system no longer operate at or above design capacity due to siltation, vegetation growth, and/or lack of maintenance. (Note - maintenance of regulators etc can also be a factor.)

* Upstream irrigators within the irrigation system may be abstracting more than their fair share.

* The granting of additional abstraction licenses upstream of the scheme intake is diminishing the total water available for abstraction.

* The use of the canal system to supply water to licensed industries and municipalities may limit supplies to downstream irrigators at times.

Our expectation is that all seven factors play some part at various localities, but the study team has no data on relative magnitudes or importance. Every river will, of course, be different. What was interesting in interviews with irrigation communities was that other impacts on the success of farming enterprises, such as the cost/price squeeze, appeared to loom larger than water shortage as an issue among those present.

A comprehensive water use rights scheme gives a means of sharing quantified access to water during shortages fairly, but such a system has no part to play in ameliorating the root causes of the first five of the above factors. Further discussion will center therefore on the issue of the effects of additional abstractions by licensed water users.

The primary assessment tool for determining whether water may be available to meet a new use has been the water balance. (Water balance is simply a calculation that compares, over 130

a selected period of time, the volume of water available with the volume of water demand.) A problem with water balances is that while they can indeed demonstrate availability or otherwise, it is done in an averaging fashion over the selected time period, which has the effect of disguising local and/or instantaneous flow effects. Where not already the case, water managers need to introduce probabilistic concepts to their water allocation processes.

To demonstrate this effect, take the example of the Citarum Basin. Over the period 3 1990 - 2000, inflows (available water) to the basin have averaged 11,570 million m per year. 3 Maximum demand in that period was in 1998 at 7,750 million m . On this basis the next 3 industry that apples for say 100,000 m3 per month (1.2 million m per year) can apparently be easily accommodated. Taken continuously this represents about 38 liters/second. Assuming the industry needs double this, or around 75 Vs, to meet peak process demands, this is roughly equivalent to the flow taken by about 60 ha of paddy irrigation, or 120+ farms. Clearly, where it is intended to take water from an irrigation system, local canal capacity is also an issue requiring assessment.

However, unlike municipalities and industry, irrigators do not have a formal and legally recognized piece of paper that records their volumetric and flow rate rights to water in the public canal system. Achieving this publicly available record of water use rights is clearly the first step in ensuring visible implementation of the intent of the 2004 Water Resources Law that this public irrigation should have priority. In addition, apart from the issues discussed later of transferability of rights to meet changed demand patterns, the potential importance of creation of economic choices for farmers should not be under-estimated.

10.3.4 Possible Registration of Rights

A right to use water cannot be 'protected' by a river operator or basin manager, in the sense of making sure there is enough water in the river to service the right, if the operator is not aware of the existence, location and quantum of that right. A first logical step in protection is therefore to create knowledge of the totality of the rights within each basin.

In the case study basins, which are unique because of the existence of well-managed government-owned bulk water supply corporations managing wide-ranging water infrastructure, the existence of most uses and users of water is relatively well known. It can be argued therefore that the information already exists that would enable management of the associated rights in a way that can protect interests of the holders of these rights - even although this has not happened in any detailed way to date. However, in the remainder of Indonesia, there are apparently basins where the amount of irrigation unknown to the provincial water office exceeded that of the schemes listed in the records of the office.

Furthermore, there are real, practical problems with creating a register of rights that can be guaranteed to be complete and definitive. Mexico is one country that attempted to do this by requiring people who believed that they held some sort of right to come forward and identify 131

themselves within a specified time period. Apart from the volume of notifications overwhelming the bureaucracy, the approach contains the flaw that anyone who does not register their interest ahead of the due date can effectively be denied entry to the water sharing system.

It is proposed therefore that when the time comes to create a comprehensive public register of water rights in Indonesia, the decree that authorizes the process should also contain a "safety net" provision. This provision would entail also decreeing that all such water uses (that is, public irrigation) in existence at the time of the decree are deemed to have equal status and priority with rights that are recorded in a public register. Japan did something similar in its River Law some year's back, but included notions of seniority of rights in time. Seniority concepts, apart from protection of traditional rights, are not presently included, or proposed to be included in the future to our knowledge, in Indonesian water resources legislation.

It will be important in setting up such a register that transaction costs are minimized. Given that market-style transfer of rights is currently prohibited by law and, in any case, is not being proposed at this stage of development of rights-based water-sharing in Indonesia, the right issued to irrigators will not need to have all the administrative characteristics of a water utilization permit as currently issued to industries and municipalities. The right will need to be of equal standing, indeed the Law requires it to have a higher priority for available water supplies, but there is no need for complex renewal procedures and the like for some time to come.

In order to distinguish the water use rights for these customary uses, we propose therefore that regulations and decrees provide for a Certificate of Water Entitlement (or similar name).

10.4 Re-allocation of Water Resources

10.4.1 Introduction

Temporary re-allocation does not involve any changes in water use rights; they remain unchanged in size and remain with their original holders. Instead the water entitlement attached to the right is temporarily used by another party by mutual agreement. Permanent re-allocation (in a closed system) involves the retirement of some water use rights and the creation or augmentation of other water use rights.

10.4.2 Temporary Re-allocation of Water

It is firstly useful to repeat a passage from a recent report on Indonesian land tenure.

Western educated analysts and advisors working in Indonesia are often accused of importing value laden models based on democratic principles, such as individual rights 132

and transparency, supported by laws replete with remedies and recourse, all aimed at establishing uniformity in markets across a global environment. More and more we find that this market friendly model is antithetical to the cultural norms of this country. The question that remains unanswered is there in fact an "Asian" way, with unique characteristics of its own, that can deliver similar results to society? One most notable difference in values pertains to conflict of interest. The concept simply does not yet exist in the Indonesian vocabulary. It is not understood. In fact the opposite appears to be true: it is an obligation to help family members, friends and colleagues to increased wealth. (J Wallace, Prof A Parlindungan, A Hutagalung; Indonesian Land Law And Tenures - Issues In Land Rights; BAPPENAS 2000)

The study team found that in fact the mutually satisfying reciprocal and temporary transfer of water between neighbors, or members of a community, was not necessarily "antithetical to the cultural norms of this country". Such transfer is seen and accepted as being driven by altruism, not commercialism, and does not conform to notions of a classical free market with prices set by supply and demand. Locally the practice can be referred to as pinjam or 'borrowing'.

Interestingly, whilst it can be postulated that this approach to such transfers is a result of local cultural norms, it is by no means unique. In the strongly westernized neighboring country of Australia, when officialdom first let it be known that it would not object to minor transfers of water within an irrigation district under the exigencies of drought conditions, the farmers regarded such dealings as altruistic and not at all a market in water rights. Many were repelled at the suggestion that they could charge their neighbors for supply of any surplus water. This was seen as immoral. A neighbor who was short of water was someone to be helped, not taken advantage of.

10.4.3 Permnanent Re-allocation of Water Use Rights

Chapter 8 has explored in some detail the drivers of water use rights re-allocation both generally and in the studied basins. The important message from Chapter 8 is that these reallocations are inevitable and there are a number of anecdotal incidents of water entitlement transfers already occurring in which some kind of consideration or quid pro quo is involved. Whilst Article 7 (2) of Law 7/2004 specifically prohibits a water utilization right from being leased out or transferred, partially or wholly, it seems inevitable that holders will find ways to achieve transfers if the imperative to do so is strong enough. Certainly, this has been the experience in all other jurisdictions. To avoid the situation getting out of control, an acceptable means of re-allocation needs to be found which passes the test of fairness. That is, water users who relinquish water entitlements are not harmed thereby as implied by Article 29 (5) (albeit dealing with use priorities) and new water users meet the "beneficiary pays" implications of Article 26 (7) even though the latter essentially relates to "services". 133

In this regard, it is important to examine practices elsewhere. Clearly, the often- promoted water rights and water trade systems of the Western US have no place in Indonesia. However, what the literature does not always also make clear is that these systems are far from the norm and that most countries, "western" or otherwise, share Indonesia's fundamental water resource principles and also take a cautious approach to entitlement transfers. One common method, as noted in Chapter 9, is for the government to control all steps of the transfer. New water users are required to go through the whole procedure of applying for a new permit and the water user gives up their water to the government (agency), which then re-allocates it accordingly. The public interest is protected by requiring advertising and making it mandatory for the responsible water agency to consider any representations made by affected parties. The consideration given by the new water user can be a private transaction between the parties or an amount set by open averaging systems or other variations on transparent pricing. Refer to suggestions in Chapter 8. Whatever the solution, re-allocation cannot be avoided. Industries and cities need to grow and they need to get their water from somewhere. It would seem highly desirable, if not vital, for government to be involved in the resultant inter-sectoral water reallocations.

This present study did not concern itself with pursuing direct water transfers. Apart from the current law prohibiting water transfers, there is also the practical issue that establishment of a comprehensive water use rights system will be slow and onerous, and is required to be complete and satisfactorily functioning before moving on to considerations of markets in use rights. There is no point in complicating the matter now, although it is unfortunate that the law has 'closed the door' in the meantime. The major issue of re-allocation of water from agricultural use to industrial and municipal uses is however something that is real, is happening by default anyway, and should preferably be dealt with in a well-organized fashion.

10.4.4 Specific Issues Related to Urbanization

One of the water use rights management issues which will come to the fore if farmer's rights are formalized will be the policy associated with impacts of urbanization. There are two issues, which stand out now: 1) Urbanization and policy on reassignment of surrendered water, and 2) acquisition of water for industrial and municipal development in closed systems. 1) Urbanization andpolicy on reassignmentof surrenderedwater

Urbanization impacts typified by the situation around Surabayah in the Brantas Basin are substantial. Statistics indicate that the area under irrigation in one district has reduced from 36,000 ha in the 1990s to 20,000 ha now with projections to 15,000 ha by 2010 to cater for the expanding city limits and provision of land for housing and industry. From a water use rights management perspective there are two significant issues: -

* The rate of loss of productive agricultural lands with little opportunity to develop alternative irrigation within the scheme. This loss means of closures of water 134

distribution works and attendant longer term pricing issues for farmers. There will be lesser numbers of farmers over which to spread costs of delivery in the systems or to spread charges by PJT if these are raised in the future. The policy vacuum regarding reassignment of the water, which had been attached to the agricultural lands and which are now urbanised. The situation with the expansion of the city limits is shown in the table below.

Planning The city planners obtain rezoning of the agricultural lands and Planning this precipitates sale. Farmers sell the land privately at a market rate. It is interesting to note that the value of water is captured in land prices but only within its use for common purposes. Land used for Land sales and water irrigation in good service command of areas, if marketed, has a "value" higher price than land with poor command if there were to be "value" continuation of irrigation. Farmers thus see a value in water but it is more based on location than on access right. It is a start. If the land is sold for housing the water value disappears and it represents a dry land block. The water does not go to the urban purchaser nor is the farmer Water destination paid compensation. They have no rights, so the water to them folowing sales has no value in this circumstance. Windfall gain for The water apparently returns to the "common pool" and is then government reassigned to new industries.

If farmers are to be given formal shares then there will need to be a policy formulated as to how to handle water that is now "resumed". This requires further extension of the economic studies undertaken by the Study Team to determine a fair compensation. This should be done, however, basin by basin. 2) Acquisition of waterfor industrialand municipaldevelopment in closed systems At present, a new applicant for, say, an industrial water use permit is typically given what is considered to be "new" water. That is, water which is not presently formally allocated for any other purpose. As noted previously, this consideration as "new" water is, of course, not strictly accurate. Any new allocation of water diminishes the common pool and where, as in the Citarum Basin, water is already heavily allocated and therefore the residual environmental flows are critical, the additional allocation is in fact subtracted from these environmental flows and/or from system reliability. It might be expected therefore that, just as parts of the groundwater basins of West Java are treated as "closed" to new or additional water users, so will the surface water basins be progressively "closed". Once this has occurred, there is no choice but to have in place well- 135

developed policy to re-allocate resources from one use to another in accord with the basin development plans.

It would be useful in the near future if formal provision to declare both surface water basins and groundwater basins to be "closed" to new applications could be provided for within the water resources legislation and associated decrees. This would greatly assist public officials in being able to enforce sustainable taking of water.

Given the prohibition in Law 7/2004 on transfer or leasing of a water use right, it will be necessary to develop policy and regulations that, for example, allows a new right for an approved purpose to be created and to be allocated the water previously associated with rights that the government has resumed in the public interest and cancelled in order to allow for economic development. As already noted, such a policy would require the government to make some compensation to the holder of the extinguished right (as implied in Article 29 (5)) and, presumably, to require the holder of the new right to make payment for the benefits so obtained (as implied in Article 26 (7)).

Interestingly, this is not all that different from the processes in countries that are ostensibly freely allowing permanent transfer of water use rights. Whilst the consideration (or payment) for this transfer may be considered to be a private matter between the transferor and the transferee, governments typically legislate to be intimately involved in approval of the whole process to ensure that: * The water use transfer is in the public interest; * Water rights are not monopolized; and that

* Environmental issues are adequately considered and dealt with.

Governments achieve these policy requirements by requiring the cancellation of the existing permit and activation of all normal statutory and participatory processes for the creation of a new permit.

10.5 Strengthening River Basin Management

Our examination of Law 7/2004 reveals that at least in a policy sense there is recognition of the value of a strong and holistic river basin approach to integrated water resources management in circumstances of stressed water resources. However, there is now a challenge to make this happen 'on the ground'. We found the existing situation to be characterized by:

* Balai that are under-resourced for their tasks; and 136

* Public bulk water supply corporations existing in the two study basins in parallel to Balai, with some confusion on resource management roles as distinct from resource development and operations roles. The concept of management based on the watershed was introduced in Indonesia in 1989, when the national government established 90 river territories across the country. The majority of these (73) have been under provincial government management since 1990. We understand from discussion with officials that these 90 river basins may be re-determined as 120 river basins. The possible boundaries are being investigated and will be followed by a period of consultation with stakeholders. It is possible that the management arrangements will be as follows: * District- 8 river basins found within district government boundaries * Province - 80 river basins that cross over district boundaries and are contained within provincial borders. Of the 80 river basins found within provinces, an as yet undetermined number will be classified as 'strategic basins' and will therefore fall under central government authority. * Central government - 27 basins where the boundaries cross provincial borders plus an undetermined number of 'strategic basins'. A key task for those entrusted with the drafting of implementing regulations for Law 7/2004 must be to clarify roles and responsibilities and to ensure that the principle of 'one basin - one management' is not lost amidst the complexities of decentralization. Where public corporations exist, or where new corporations are created that have some relationship with river basin management, the same rigorous attention to a proper assignment of roles in the context of integrated water resources management should be pursued. It is possible to carefully delegate service delivery roles associated with water use rights to other entities, such as district administration, but policy, control and holistic management must be retained at basin-level so as to maintain a consistent and orderly management of rights, especially as water becomes ever more scarce. We would stress that a fundamental component of holistic river basin management is the establishment of a comprehensive system of defined and publicly registered water use rights that includes all water users and all water uses in-stream or off-stream. To this end, as well as to achieve institutional efficiency and consistency, we would urge that every attempt be made to set up a single basin institution where basins cross provincial boundaries. This single institution would be a joint venture between the provinces concerned and, apart from meeting the spirit of autonomy, would avoid creating conflicts of interest at the national level by confusing roles. There are many models and examples in existence elsewhere that show the benefits of this approach. 137

We believe that the Bank should continue to support the development and strengthening of river basin management as a vital part of managing scarce resources and to provide essential under-pinning of a comprehensive water use rights system.

10.6 Enforcement and Conflict Resolution

Conflict in water management and water allocation is an inevitable consequence of water scarcity. Resolution of such conflicts is obviously best done in a manner that is harmonious with local culture and norms. In Indonesia the law, both civil and criminal, is less used for this purpose than in many other places, and various forms of consensus through discussion are generally practiced and to be preferred. There are a series of instances in the processes of water allocation where citizens can be in conflict with either official actions or with the actions of an individual. Some of the more important briefly are:

* Basin water planning

* Applications for water abstraction permits

* Decisions on granting permits

* Actions of individual water abstracters

* Operations of water infrastructure

Law 7/2004 provides for basin water planning to occur in a consultative fashion and for the draft plans to be exhibited for comment. This is to be applauded. However, there are no provisions for participation or conflict resolution at the detailed level of permit issuance processes and subsequent operations.

In West Java, the provincial water administration has recently taken the commendable step of requiring that staff when assessing permit applications to abstract water from canals should actively seek the views of potentially affected irrigators. We propose that this principle should be extended as a regular feature of such processes, and that it be applied in a proactive manner by requiring some advertising of the application in the relevant locality. This advertising would recognize that, as water becomes increasingly scarce, the effects of a new abstraction occur not just in the scheme from where the water is taken but can be significant also in the water resources of the particular river or basin in the way of diminished total resources. Citizens would obtain a right to make representations to the approving authority (e.g. provincial water administration), which would be required to have regard to these representations. For purposes of a trial of this process, a director general's instruction would suffice. 138

The suggestion above is in harmony with the consultation and equity principles of Law 7/2004 but will introduce a number of new concepts and procedures. It will be important for these concepts and procedures to be developed also in a consultative way with all stakeholders including the Basin Water Resources Management Committee (Panitia Pelaksana Tata PengaturanAir). In many water rights systems, citizens have formal legal recourse to appeal against or to dispute the decisions of the approving authority. Such a relationship between Indonesian bureaucracy and the general public, where officials are indeed the servants of the public, is unlikely to materialize in the near future. However, the strength of a formally recognized right to lodge representations and to have them duly considered should not be under-estimated and is a recommended first step. In harmony with local culture, and in line with experience elsewhere, non-egal dispute resolution concerning water use rights is to be preferred. There are two main approaches to such a process. Both require at least one recognized independent and technically expert person who can both conduct quantitative assessment of water matters and exercise sound judgment based upon significant experience. The first method is the creation of an accessible and informal substitute for a court to which the parties in dispute can present their case and have an independent decision made, to which they have previously agreed to be bound. Typically, this involves setting up a so-called expert tribunal. In fact, such a tribunal may only have one expert, with other members being people of broad practical experience and standing in the community. The aim here is for the parties appearing before the tribunal to have confidence in the judgment and commonsense of the tribunal members. Parties should know that although the technical member will advise the other tribunal members, the decision will not necessarily rest on purely technical grounds but will take into account local conditions, practices and culture. The second approach might be termed expert mediation. It involves the assembling of both water expertise and mediation expertise. The difference is that the mediator takes a proactive stance to seeking out the causes of the dispute and exploring progressively with the parties a path towards negotiated consensus. In a sense it reverses the procedures of an expert tribunal that typically requires the parties to come to the tribunal, present a case, and await a decision. Instead, the mediator comes to the parties and asks for information. The process does not conclude with a decision that maybe suits no one but, in fact, the process continues towards consensus. On the whole this approach would seem to fit the culture rather better and we suggest that this be further developed and tried in the next water use rights pilot studies. Whilst mediation bodies of one sort or another may be readily created and fit well with Indonesian dispute resolution culture, the overall matter of enforcement of the water laws remains highly problematical. 139

Firstly, the use of police or other law enforcement officers and a strong, rapid and effective court system to back them up is not yet well developed in Indonesia, at least in relation to natural resources. In many ways this is just another manifestation of traditional ways not coping well with modem realities and with looming water scarcity. Secondly, there are apparently significant levels of corruption in such matters. Payment to strongmen (bodyguards) for supply of illegal shares of water is said to occur and there are even quoted market rates for this service. Similarly, payments to officials for services rendered can occur in these circumstances. The study team did not pursue this matter in the time available, and found officials understandably reticent, but it remains a major issue.

The study team does not propose any particular solutions to this corruption dilemma, but notes two optimistic factors. Firstly, experience with decentralization suggests that management closer to the location of the action can sometimes be held more accountable by the local population. Secondly, the creation of specified and registered water use rights for irrigation farmers will create a measurable property right, which can be expected to be vigorously defended by the holders. In turn this creates the climate in which officialdom either has to act and/or is empowered to act. That said, it must be recognized that best practice water law, accompanied by best practice water use rights, are quite useless unless ultimately backed up by rigorous law enforcement.

10.7 Reserving an Environmental Water Allocation

The objective for surface water resources is to secure river water flows of adequate quality and quantity so as to maintain a healthy aquatic ecosystem. The primary role played by water use rights is to apportion shares of water in a planned fashion between consumptive use (water extracted from the river) and in-stream use - including ecosystem maintenance. As many aquatic species depend for their existence on the variability of flow regimes, these shares may not be fixed in relation to time, but may be dynamic according to established ecosystem needs. It is important to note also that in-stream uses are not confined to ecosystem maintenance but in many localities actually represent a critical customary use when related to both subsistence and commercial fisheries. The identification, quantification and protection of such customary uses are key challenges for design of water use rights. Additionally, the issue of surface water use rights provides an opportunity to attach conditions to the use permit that assist in protecting water quality. These can include specific requirements for discharge permits, stipulation of vegetated buffer distances between irrigation and riverbanks to filter runoff and to maintain riverine zone systems, and so forth. Where water abstraction permits and water discharge permits are granted and administered by different agencies (as is the case in Indonesia) close cooperation between the agencies is clearly beneficial. 140

Present allocation practices observed in both the Brantas and the Citarum Basins make no real allowance for volumes of water needed to maintain aquatic ecosystems in a healthy condition. Typically the cut-off point for further allocation was reported to be the lowest historically observed flow in any particular river. This implies that as water use intensifies, the river will potentially be diminished to these low levels for steadily increasing periods of time.

The science of environmental flows is still largely in its infancy, but international practitioners believe that flow abstractions in excess of around 20 to 30 percent of average flows are at risk of creating significant environmental change and degradation in the associated aquatic ecosystems. Since these ecosystems do not just support themselves, but support also the surrounding human population, especially in the case of subsistence fisheries, there is some urgency in addressing this issue.

In the case of the Citarum Basin, the annual water usage from 1990 to 2000 has ranged from 36 to 76 percent of available water, depending on whether the seasons were wetter or drier than average. The average usage over this period of 55 percent of available water is well into the range where major changes to the aquatic ecosystems, including river geomorphology, can confidently be expected to be occurring. It would be expected that significant changes are also occurring within the estuarine zone and to the immediate offshore fisheries and other biological systems.

The urgency of starting to assess environmental needs and adjusting allocation policies to suit is obvious. We suggest that rapid assessment techniques, such as the use of "expert panels" as used in other parts of the world (including currently the Mekong River Basin), be explored in the near future to attempt to avoid costly and irreversible environmental damage.

Some countries, notably South Africa, in introducing comprehensive water rights have legislated for an 'environmental reserve' to be set aside in addition to the reservation of water for basic human daily needs. This is being emulated elsewhere and is worthy of consideration for Indonesia.

10.8 Reducing Groundwater Use to Sustainable Yields

The challenge in managing groundwater is to adequately determine the long-term recharge pattern of respective aquifers and to design an allocation system that does not allocate more water in total than is provided by the long-term sustainable yield. Around the world, groundwater tends to be less well managed than surface water because it is not immediately obvious to water users that they are over-using or 'mining' the available resources. For this and other reasons, such as ownership of groundwater in some places being associated with possession of the overlying land, groundwater systems are frequently over-allocated. Correcting over-allocation is highly unpopular with users, politically sensitive, and potentially very costly. However, when well-specified use rights exist at least there is a quantitative basis that can support negotiation processes to reduce abstractions in the most equitable manner. 141

As in the case of surface water, the existence of groundwater use rights gives an opportunity to attach permit conditions that help to protect water quality. Such conditions typically relate to the nature of the well or bore construction, and particularly to sealing of the area around the bore head so as to prevent flow or leaching of surface pollutants into groundwater. Additionally, where there is say a highly saline aquifer, sealing of this zone by cement grout or by use of appropriate bore casing may be needed to prevent the bore from providing a contamination path between other better quality aquifers and the saline aquifer. We found some of these conditions are now being placed on groundwater permits and we understand that new regulations being drafted will strengthen this process. This is to be encouraged.

Overuse of groundwater to the point where the water table, or 'standing water level', is consistently falling is said to be common in the vicinity of major urban areas. Certainly the area around the West Java provincial capital of Bandung exhibits this over-use. In simple terms, falling water tables indicate that more water is being extracted than is being replenished through natural recharge processes. Sooner or later this results in the water supply being exhausted, with major and possibly catastrophic social and economic effects on the people and industries that have been relying upon the water supply. As in nearly all other countries, the illegal sinking of wells and drilling of bores poses a significant problem for the resource managers. For Indonesia where some of the illegal bores apparently support industries providing a significant level of employment in the locality, it is obviously a politically sensitive issue for water managers to close down or reduce the taking of groundwater. This difficulty is compounded because legal processes involving law enforcement agencies are not yet readily available in the Indonesian context. Nonetheless, there is no easy choice. The laws of physics still apply and either the water managers must exercise control or eventually the water supply dries up and a natural form of control then occurs. To their credit, the provincial groundwater administration in West Java has begun the process of zoning the area to apply graduated controls (ranging from prohibition of new bores to restrictions on flow rates) based on hydro-geological analysis. At both provincial and district level, illegal bores are also being physically locked off. It is too early to see results of this push into enforcement of sustainable extraction, but the management direction is entirely sound and to be commended.

At least some of the emphasis on groundwater extraction is brought about by the limitations on reticulated surface water supplies. It is no surprise to find that in Jakarta and in Bandung, hotels for example typically have their own groundwater supply bore. Efforts to reduce groundwater extractions in stressed basins must be integrated with service improvements and extensions in reticulated water supplies. Some bore owners object to paying municipal water charges, but seem happy to pay the not insignificant costs of energy for pumping groundwater in exchange for consistency and certainty of supply. The need for an integrated approach (including perhaps considerations of incentive energy tariffs) is clear. 142

10.9 A Conceptual Water Use Rights Framework

10.9.1 Introduction

Bearing in mind that the whole purpose of a water use rights system is to create order and fairness in water resource sharing under conditions where there are no longer unlimited water resources available, there needs to be one kind of water use right system for bulk abstractions from surface water basins and from groundwater basins, and another kind of system tailored to the needs of users within the bulk abstractions - principally the water users within irrigation schemes. Additionally, a comprehensive framework should also provide for the rights of traditional water users as protected by Article 6 of the 2004 Water Resources Law. The table below shows very simply the water use rights framework for these three classes of water users.

10.9.2 Surface Water Use Rights Conceptual Framework

Irrigation scheme Traditional water Basin water sharing wtrsaiguewater sharing uses

Comprehensive set of Defined individual or Defined, protected Description of bulk water rights, group rights, water uses - can be rights: including allocation for including shared registered as required in-stream uses canal losses

Government agency at Irrigation Scheme To be managed basin level for basin cooperative(s)/WUA/ Villages or by: sustainability and for WUAF for benefit of traditional leaders equity between bulk rights holders members

10.9.3 Groundwater Use Rights Conceptual Framework

Groundwater comprises less than ten percent of available water in most localities and the administration of groundwater basis is seen to be moving towards proper sustainable management and allocation plans. Concepts of 'two-tier' systems as proposed in surface water are not relevant. Nonetheless, we urge the designers of groundwater allocation plans to take note of the material outlined in Chapter 3 - Water Use Rights - Principles and Management.

10.10 Bulk Water Use Permits for Surface Water Basin

10.10.1 Introduction

The primary water allocation policy for each selected basin will be contained within the water resources management plan prepared pursuant to Chapter IV (especially Articles 26 to 30 143

inclusive) of the 2004 Water Resources Law. In particular, this plan will determine the allocations for in-stream needs and for various classes of use - especially the emergent and rapidly growing needs for urban and industrial water supply and for hydropower.

As noted, provincial authorities already issue bulk water use permits for industrial, municipal and other defined classes of users, but not for recognized irrigation schemes. It is proposed that these schemes be included within the framework so as to provide the primary means of transparently defining their water rights and to provide a means to quantitatively assess the impact of new development on the reliability of these rights. It is not proposed that the same permit be used with simply the authorized purpose amended to read say 'public irrigation', but that the means of acquiring the "permit" and the design of the "permit" itself should be aligned to the needs and capabilities of these priority water users. In any event, Law 7/2004 provides that a permit as defined under that law is not required.

10.10.2 Certificate of Water Entitlement for Irrigation Schemes

We propose that the water use right for irrigation schemes granted under Article 8 of Law 7/2004 be recognized by a Certificate of Water Entitlement for each irrigation scheme. The nature of the certificate is described later, but there is an immediate problem - who should be the holder of this certificate?

It is proposed from the outset that the bulk water entitlement for an irrigation scheme should apply at the point of abstraction from a river - regardless of who actually manages the primary and other canals. Nothing else is logical from the point of view of sustainable management of a basin's water resources. To distort the system because of the peculiarities of the mixed management structures and arrangements is to lose the opportunity for this holistic river basin management under conditions of resource scarcity.

That said, we consider it absolutely critical to the entire rationale of protecting the rights of customary water users that the water users themselves hold water use rights represented by the proposed Certificate of Water Entitlement. It is obviously highly desirable, in order to realize the full benefits of the property right represented by the Certificate, that the water users should also take up responsibility for entire systems including primary and secondary canals. However, regardless of this responsibility transfer, we regard it as essential that the task of formation of legally recognized and competent water user organizations should be given high priority in parallel with the formalization of their water rights. During any interim period it will be necessary to set up a partnership model with government for ownership and management of the bulk permits unless and until these water user organizations are in place. This partnership model would use the current philosophy of participatory irrigation management where government agencies remain a source of technical and financial assistance for as long as remains necessary. (It is clear that the degree of participation by irrigators varies widely across Indonesia and this fact must be allowed for in design of the rights system basin by basin.) 144

If transfer of operational responsibility does not eventually occur, then the advantages of an irrigation scheme water use right will be limited. As noted, for purely pragmatic implementation reasons, we favor transition partnership models. However, it is not reasonable to expect government official or body acting as the irrigation scheme management authority to act entirely objectively or in an unbiased and independent manner on behalf of water users. Such an arrangement can only be temporary at best.

It is important also to understand that the purpose of the rights system is not irrigation management or industry management but water resource management. The initial permit or rights certificate to be issued for an irrigation scheme intake will therefore not just refer to irrigation but also to all currently permitted uses within the scheme. Technical readers will already have grasped that a good deal of technical work will be needed scheme by scheme. This will analyze the capacity of irrigation canals and the location and water demand of licensed industries and municipal water companies so as to determine the extent to which demands for irrigation and other uses can be simultaneously serviced or will require priority sharing and rostering of canal capacity. The answer to this analysis will determine the nature of the water rights certificate for that scheme.

The precise nature of the certificate will need to be developed in a consultative fashion with affected parties. The minimum information to be provided on such an irrigation scheme Certificate of Water Entitlement would be:

* Ownership of the right (e.g. Federation)

* Water source (e.g. River)

* Point of abstraction

* Duration of the right

* Right of renewal

* Volume and/or flow share definition (i.e. the entitlement to water)

a For irrigation

a For each licensed industry

a Etc.

* List of secondary and tertiary associations/areas

* List of water use permits (e.g. industries) within scheme

* Specification of the diversion works

* Environmental obligations (e.g. tail-water returns and water quality)

* Constraints and rights during times of water shortage (low river flows) 145

* Other conditions of water use

10.10.3 Treatment of Other Abstractionsfrom Irrigation Canals

At present, provincial water authorities have issued permits for these abstractions in exactly the same way as if the canals were rivers. Presumably that is because the canals are a public water distribution system (and there seems no intention that this be otherwise) and the irrigators are not full-cost paying beneficiaries, the irrigation system has not been treated as an asset in the care of irrigators. It will be necessary to build in to the initial Certificate of Water Entitlement for each scheme the industrial and other use permits already existing.

There are signs that the issue of these permits in more recent times has been taking more account of irrigators' rights and needs. For example, in West Java, some industrial use permits less than one year old now have a maximum instantaneous flow rate added to the allowable monthly extraction volumes and there is a condition requiring on-site storage of minimum specified size. This change is highly significant because it reflects the legal reality that public irrigation has priority over industry for water access. In a restricted capacity canal system this requires that canal capacity be first assigned to irrigation needs, then only when these needs are satisfied can the canals be made available to transport industrial water. This principle of first and second priority for canal capacity underpins the suggested treatment of industrial and municipal supplies taken from canals under a comprehensive water use rights system.

10.10.4 Quantifying Rights - Initial IrrigationScheme Certificates of Water Entitlement

Establishing the authorized volumes and flows (termed "water entitlements" here for short) that are to be attached to water use rights is not a simple process.

The issue of the appropriate annual entitlement for irrigation has already been discussed in the Stage 1 Final Report and again in Chapter 3 of this report. Some form of calculation of recent historical use has its attractions, as well-tested crop factor computation methods are available and there is generally some knowledge of historical crop areas (Refer Chapter 7 also). We found however that the most frequent water quantity complaint along natural rivers concerns the diminished flows available to downstream users. As already noted, the recent historic flows approach legitimizes and locks in such current inequities between schemes, and where irrigation area has been lost for whatever reasons (e.g. Wangisagara Irrigation District) it stays lost. On the other hand, use of design parameters will lock in any inequities arising from design variations and will require upstream irrigation schemes to give up some of their current security (albeit unfairly obtained) in favor of downstream schemes. To give effect to Article 11 of the Law it is important that the value judgments involved in this choice be made as far as is possible by the affected communities. 146

Clearly, what is needed is some hybrid approach that positively seeks to reduce the inequities associated with all methodologies. It is absolutely critical that this be done in a consultative manner with affected parties. Water users will be found to possess a sophisticated appreciation of the equity issues and the water use rights system will not be accepted if there is not a major effort to minimize, to the extent sensibly possible, the inevitable inequities arising from initial assignment of rights. Ultimately however the absolute quantity of a water entitlement attached to a bulk water use right is less important than achieving an equitable relationship between the entitlements attached to bulk permits. These water entitlements are effectively shares of available resources and the quantum of each share will vary month-by-month and season-by-season in accord with overall basin water availability.

10.10.5 Quantifying Rights -Delivery Losses in Primary, Secondary and Tertiary Canals.

Water use rights entitlements must have regard to delivery losses in distribution systems. The advice tended in meetings in the Brantas Basin suggests excessively high losses (30% to 50%) occur but this may require further inquiry. In cropping pattern estimates used to determine seasonal short-term delivery quantities to irrigation schemes, there is provision for such losses. If there are to be formal entitlements for irrigator associations then losses have to be incorporated. The sharing of these losses between water users is a critical factor in determining secondary and tertiary canal water entitlements and for adjusting within-scheme entitlements when a new non-irrigation user is granted access to water supply from the scheme infrastructure. Clearly, individual detailed studies of every scheme verges on the impossible, so it will be necessary to develop district or regional norms in many cases. The application of these should be in close consultation with the affected communities through associations and federations as applicable. A second issue arises concerning losses, which deals with the cost sharing and assignment of any water saved by improving canal delivery efficiencies. In the discussions with the Brantas basin corporation (PJT-1), its management indicated the corporation had under consideration a proposal whereby farmers would be asked to contribute to works to improve such efficiency. The saved water would be made available at a price to organizations or individuals seeking water and the revenue returned to a "trust" type fund to be used for operations and maintenance works. Its success would depend on profit potential. It is untried. In Indonesia, this may be a difficult issue as the efficiency of delivery of the water distribution works varies considerably. Equity issues arise in this decision. Systems with poor efficiency require more water to carry water through the system. Those with good efficiency require less. If the capabilities of the system are used to determine the losses quantities, the responsible companies maintaining efficient systems are penalized. A general equity principle 147

in consideration of water saved through efficiency improvements is that the savings go to the body that financed the efficiency improvements. Environmentalists and other sometimes mistakenly believe that irrigators will create water efficiencies and then altruistically make a gift of the water saved to the common pool source. Investing without planning for a return on the investment is not common practice.

10.10.6 Additional Industrial orMunicipalAbstractionfrom Irrigation Canals

Following the initial water use rights certificate, additional issue of rights from each irrigation scheme would require three key actions. WThe new industry or municipal abstracter would be required to obtain a new water use permit from the appropriate authority. This would require evidence that the basin can sustainably support the additional abstraction, together with all necessary environental clearances, including discharge permits. Note that this authority should not be delegated below basin level, as such action would tend to negate the principles of integrated basin arrangement trying to be achieved. That is, the issuing authority should be provincial water office or Balai. (A case can be made however for administrative delegation under strict rules to a basin corporation and there are successful models operating in other countries.)

* The new industry or municipal abstracter would require written concurrence from the appropriate water user association as to whether or not the canal system can provide the necessary service and under what rules of priority and so forth. As participatory irrigation management proceeds, it would be expected that the nature of this concurrence would eventually become an agreement, possibly in the form of a memorandum of understanding, between the industry and the water user association detailing the circumstances and conditions of water supply.

* The bulk water use rights certificate for the irrigation scheme will require amendment by the issuing authority to include any additional abstractions by the new industry not already contained within the bulk entitlement.

10.11 Water Sharing Within Irrigation Schemes

This represents the second tier of water use rights, being a sub-division of the bulk irrigation entitlement for each irrigation scheme. Whereas the first tier of water use rights is intended to foster sustainable river basin management and to foster equity between irrigation schemes, this second tier is intended to foster equity between the principal parts of an ir-rigation scheme. It will also allow a more precise assessment of effects of urbanization, or of the proposed entry of a new water user such as a new industry, but will be onerous in design and implementation. 148

At this point it is worth remembering two of the fundamental principles learned the hard way by those who have implemented such systems.

* Keep It Simple - Do not apply more management effort than necessary to achieve immediate water management goals. Technical perfection may not be needed.

* Implement systems progressively in small, solid steps, at a speed that the community can happily absorb.

Experience suggests that it will be all too easy to get caught up in the technical detail of of computing rights within irrigation schemes and fail to check whether the results lose implementation actually achieve anything worthwhile. In other words, it is important to not sight of the broad objectives.

Initially then, the challenge will be to compute the bulk rights to apply at each secondary canal intake. This will require an assessment of canal transmission losses between the start of the primary canal and each point of secondary intake, and of the share of overall scheme losses to be apportioned to each secondary canal.

Clearly equity issues arise. If one particular secondary has a long history of high losses, should these be recognized forever in the bulk entitlement for this secondary? What happens be when the irrigators on this secondary manage to improve transmission efficiency? Will they a rewarded with the water savings? And so on. It will be important to approach this matter in highly consultative fashion within each irrigation scheme.

Another key issue is measuring and monitoring. The existence of secondary bulk that entitlements will require that secondary flow records be possible and be well recorded so the entitlements can be protected as intended.

As an irrigation scheme and its water user associations become proficient in managing secondary bulk entitlements, the opportunity arises to move to a system of tertiary bulk entitlements. Designing these is not conceptually different from designing the secondary bulk do entitlements but add a further layer of measurement and management. Also, tertiary intakes to not lend themselves to reliable water measurements and some innovation will be needed solve this problem.

There is in fact a good argument for the computation and establishment of the water use and rights for each tertiary irrigation area to be performed concurrently with the computation establishment of the bulk water right represented by the whole scheme's Certificate of Water for Entitlement. Assuming that some form of modified historical use becomes the basis computing the entitlements, these will in fact generally be computed by establishing the tertiary rights then aggregating these along with canal losses to arrive at the scheme entitlement. And since, by definition, a federation cannot exist without its component water user associations; there could be much to be gained by applying both the basin-evel rights and the tertiary area 149

rights simultaneously. We suggest that both approaches - stepwise and simultaneous - be included in pilot basins in order to determine the relative merits. It is of course highly unlikely that individual water use rights within irrigation schemes will appear any time in the near future. Apart from significant technical difficulties with definition and measurement, especially where cascades of farms are the norm, the magnitude of the management problem with thousands of individual farmers is expected to completely swamp the small benefits that might accrue. Until and unless traditional water sharing methods within tertiary systems break down, there is no obvious reason to intrude beyond the tertiary intake regulators or their equivalents. 150

CHAPTER 11. RECOMMENDATIONS

11.1 Introduction

With comprehensive water allocation being a clear and urgent need, we have focused our recommendations on the goals detailed in the preceding chapter. That is: * Securing protection and equity for existing non-formalized customary rights; * Establishing orderly, equitable and transparent processes of water re-allocation to be able to continuously meet communities' changing needs. * Strengthening a basin approach to water resources management in order to better manage scarce water resources and to optimize their allocation; * Establishing improved enforcement and conflict resolution mechanisms; * Reserving river water flows to sustain the aquatic environment; and * Reducing groundwater use to match long-term sustainable yields. To achieve these goals, we recommend that the Bank and other donors should assist with a two-part program: * Establishment of comprehensive pilot water use rights systems in four representative basins across Indonesia presently under water demand stress; and * Support for development of water allocation planning, and water use rights management policy and practice that, among other things, addresses:

o Law enforcement in managing water abstractions

o Broad-based public participation in water allocation

o Environmental flows research, policy and practice

a Strengthening river basin management, particularly in water licensing.

Finally, we reiterate that whilst these recommendations may seem to place undue focus on the agricultural sector, this is in fact driven by the criticality of water allocation for non- agricultural uses. In typical basins under water stress, agriculture is both the lowest value use of water and the most prolific water user. The agriculture sector often contains the only source of water available to meet the needs of other sectors of the Indonesian economy. It is necessary to first address property rights in this water before orderly, equitable and transparent reallocation can become possible. Note: In these recommendations "water use right" means the formalized right to access and abstract water. "Water entitlement" means the water volumes, flows and conditions of water use associatedwith this right. 151

11.2 Specific Recommendation

A. PROTECTING CUSTOMARY OR NON-FORMALISED RIGHTS

Overall Recommendation: All water uses within a river basin should be brought under a consistent allocation and management regime of rights-based water sharing. It should protect customary uses in an equitable, open and participatory manner by including them in a formal registered system of rights issued to water user organizations. The rights should be of the same legal and enforceable nature and be complementary to the rights that exist for all other water uses.

A-i BASIN-LEVEL OR BULK WATER USE RIGHTS

1) Appropriate legal and directive instruments should be formulated to progressively authorize the registration of the basin-level water use rights of irrigation schemes through the issue of a Certificate of Water Entitlement (CWE) to each scheme. Such Certificates should have the same legal status as permits authorized under Law 7/2004 and be available for public perusal on an official Register of Certificates. (This legal status means that entitlements cannot be reduced without consent, the rights are enforceable, and the holder is able to apply for additional water.)

2) A consultative approach should be adopted from the outset and a Basin Community Advisory Committee of stakeholders with uniform representation of water users upstream and downstream should be formed to guide implementation. The Committee should be disbanded at the end of this task, although it could conceivably mutate into an ongoing body to enhance participation in basin water management. It should include NGOs and other interests as applicable. It should include environmental interests to ensure adequate consideration for provision of environmental flows. The Committee should work also with the Basin Water Resources Management Committee (Panitia Pelaksana Tata Pengaturan Air), and any water resources council or other formal coordinating bodies currently established or being established under Law 7/2004. (An illustrative diagram is included at the end of this chapter.) 3) In order to improve water outcomes, the participatory implementation processes as above should be accompanied by capacity building programs so that committee members understand issues in some depth and can positively contribute to policy development and implementation.

4) The registration and certification process should be initiated automatically and directly by the government authorized to grant water usage permits in the relevant basin, in consultation with the Basin Community Advisory Committee, without need for irrigation schemes to apply for registration. 152

5) The legal and directive instruments referred to in Recommendation 1 should state that all customary water uses (that is, daily basic needs and public irrigation as defined in Article 8 (1) of law 7/2004) in existence at the time of the enabling decree are deemed to have equal status and priority with irrigation schemes recorded in the official Register of Certificates, and give any scheme or water user that believes that they have been overlooked the right to apply for registration. 6) Irrigation scheme CWE should be issued in perpetuity, but with provision for five- yearly review of all attributes including the water entitlement itself and associated conditions of use. To be conducted by Balai, the review should meet all consultative and participative requirements of Law 7/2004. 7) Irrigation scheme CWE should apply at the point of intake from the river, and include the water volumes and flows allowed for that scheme at specified times of the year, and specify the authorized uses of water within that scheme including volumes for irrigation and for other permitted uses where they exist. The certificate should list all the tertiary areas serviced by the scheme and include all customary rights in the entitlements including fishponds and the like. (An illustrative certificate is included at the end of this chapter.) 8) Because irrigation is a major water user and other sectors are finding it difficult to source water for their needs, irrigation scheme CWE should include among the conditions of water use attached to the Certificate, specific requirements for the scheme to improve water delivery and water use efficiency. The provision for five-yearly review should include the ability for the permit issuing authority to make related changes to the bulk entitlement. 9) The issue of CWE should be made wherever possible to properly constituted WUAF or other appropriate organization in the case of non-technical or similar schemes. Duties and authority of the organizations require appropriate strengthening to support the management of their water use rights. This includes clear definition and agreement of their spatial area of authority in relation to management and allocation of canal flows. 10) In cases where such Federations do not yet exist, the relevant government should hold the Certificate temporarily in trust for the irrigation scheme water users. The actual office or officer who holds the Certificate should be distant from the irrigation (for example, a government-employed water master would be inappropriate), be duty-bound to act in the water users' interests, and be indennified in the execution of this duty. 11) In recognition of the fact that water use rights are meaningless unless held directly by the relevant water users, the Bank should continue to support the development, promotion, and implementation of participatory mechanisms and in the long run, irrigation scheme management transfer. 153

12) Registration processes should be piloted in four representative basins chosen on the basis of capability, need and potential contribution to the formulation of national water rights models. These pilot schemes should be fonnal and include the issue of all necessary enabling instruments. The Bank should continue to support the development of comprehensive rights-based water sharing in Indonesia by providing specific assistance with the pilot schemes.

13) After completing the necessary technical studies, a discussion paper and consultative process should be prepared to enable the Basin Community Advisory Committee to make an informed choice between:

l Scheme bulk water entitlements based on historical flows (either as directly measured and recorded, or as synthesized from cropping records through use of crop water factors); or

Scheme water entitlements based on say scheme design parameters (design area, intake discharge capacity etc) in order to expose the embedded equity issues.

This choice of accepting whatever inter-scheme inequities currently exist, or of attempting to redress at least recent inequities (for example, adding back in the water use by industries to the figures arrived at by studying recent intake flows) should remain within the hands of the affected communities, but with technical assistance from government.

14) In implementing inter-scheme rights as represented by the CWE, it should be recognized that the theoretical or technical studies will not always produce viable results and a means of reviewing and modifying interim water use rights should be established at the outset. The Basin Community Advisory Committee should be the principle negotiating and advisory body for this purpose, with technical advice from government sources.

15) Although irrigators have limited capacity to pay, fees should nonetheless be levied on issue of the basin-4evel water use right certificates in recognition of the service that Balai will provide in ensuring equity of water access between all entitlement holders along a river both in normal seasons and at times of water scarcity. The fees must not be contrary to Article 80 (1), which exempts daily basic needs and public agriculture from water resource management fees. Also, in conformity with Article 26 (7) of the Law, such fees should not in any way constitute a tax but be commensurate with the services provided.

A-2 WATER USERIGHTS WITHINIRRIGATIONSCHEMES

Overall Recommendation - It is proposed that there be a second tier of water use rights recognized below, and contained within, the basin-level water use rights as expressed in 154

CWE. These second tier rights should not be controlled by government but by scheme federations, although to procedures mandated by official instruments and with appropriate technical assistance from government.

16) Concurrent with the technical work in the pilot basins needed for establishing the basin- level entitlements, technical studies should proceed within irrigation schemes to at least the degree needed to establish entitlements at secondary canal level. Where the size and nature of the scheme warrants, and where adequate means to measure and verify flows exist or can be created, these technical studies should carry down to tertiary canal level. The quantum of the second tier water entitlements should be established by government in consultation with water users, including agreement on sharing of canal transmission losses.

17) Because these within-scheme rights are actually a form of property right, the design of the rights and associated administrative system and instruments should proceed with legal assistance and advice.

18) In implementing within-scheme water use rights in the pilot basins of Recommendation 11, both a progressive approach in some irrigation schemes and a simultaneous approach on others should be used to test the methodology. In the first case the successful operation of each higher level of right is established before proceeding further. In the second, tertiary area rights are established an issued at the same time as the bulk water entitlement for the entire scheme.

19) In implementing within-scheme rights it should be recognized that the theoretical or technical studies will not always produce viable results and a means of reviewing and modifying interim water use rights should be established at the outset. The scheme federation should be the negotiating and decision-making body, with technical advice from government sources.

20) Once finally determined, tertiary area rights should be incorporated in each scheme's CWE issued by government and the delivery and management of these rights to the relevant intakes should be made the responsibility of the scheme federation under defined delivery conditions.

21) Within-scheme water use rights should be held by the relevant water user association managing each tertiary area. The distribution of the water within each right, that is, within the tertiary area, should be solely the prerogative of the relevant association but in accordance with policies of the scheme federation, and conditions of the bulk CWE held by the scheme.

22) Responsibility and authority for the management of the secondary physical infrastructure should be transferred at the same time as water use rights are determined and granted to tertiary areas. 155

23) The customary rights of traditional irrigation systems drawing off of a secondary must also be recognized and farmers suggest this should be accomplished by discussion and consensus, musyawarah, by all the stakeholders of a secondary canal.

24) At times of water shortage, flows to permit holders within the scheme and farmers holding customary rights or recognized water use rights through their water user associations should be cut proportionally. Industries and irrigators can be expected to find their own solutions to these proportional cuts. In accord with the law, rights to drinking water i.e. "rights to life," should not be cut during water-scarce periods. Management of such flows should remain the responsibility of the federation of water user associations.

A-3 ISSUE OF NEWPERMITS WITHIN IRRIGATION SCHEMES

Overall Recommendation - Once a CWE is issued to an irrigation scheme and the scheme federation begins managing the associated water right, new water use rights of industry or other water exploitation categories (Hak Guna Usaha Air) should only be granted by the respective provinces on a basis that is acceptable to existing water users within the irrigation scheme.

25) The application for a water exploitation permit should be advertised for four weeks prior to its consideration to enable representations by potentially affected parties, and the applicant for the permit should be required to obtain formal permission from the scheme federation for use of the scheme infrastructure to deliver the required water entitlement under specified conditions. The pro forma arrangements for advertising, for consideration of representations, and for issue of federation permission should be uniform across the basin and come from authorized directions of the relevant government authority.

26) In the formation of WUA and WUAF and in the articles of constitution of existing association where schemes are being issued with CWE the nature of the duties and authority of the body require appropriate strengthening to support the management of their water use rights. This includes clear definition and agreement of the spatial area of authority in relation to management and allocation of canal flows.

27) The general principle should be observed that infrastructure management transfer goes hand in hand with the recognition and registration of water use rights.

B. INTER-SECTORAL RE-ALLOCATION OF WATER RESOURCES

Prime Recommendation: Because of growing demands for municipal and industrial water supplies needed to underpin continued economic development, the formulation and 156

implementation of orderly, equitable and transparent processes of water re-allocation under the auspices of Law No 7/2004 on Water Resources should proceed without delay. 28) Until and unless water use rights in Indonesia become considerably more detailed, comprehensive and well-established, it is recommended that any within-season temporary re-allocation of water within irrigation schemes that is made desirable by water shortages or other causes should remain as a matter for traditional or customary practice as at present, and as implied in Recommendation 21. Becoming any more formalized or complicated would be premature at present.

29) In relation to the more critical permanent re-allocation of water, policy development should concentrate on the key questions of: Which government body should plan and control re-allocation? 'water bank' or D How can the public interest best be served - through a common through a more direct re-allocation process?

o How does someone wanting additional or new entitlement register their interest?

o How does someone wishing to divest themselves of water register their interest?

o Should any rules be formulated to prevent potential monopolization of rights, or should each re-allocation simply be treated on its merits?

o Should the compensation involved be payable by government or by holders of new water entitlements?

o Should the quantum of compensation be set by government or be a mutually agreed transaction between those giving up water entitlements and those acquiring new water entitlements?

o How can the community be involved in the processes?

30) Chapter 8 demonstrates the possibility that the creation of "new" water through savings made by improvement in canal transmission efficiencies might be economic and worthwhile. Studies should continue to establish a compensation rate that would be potentially effective in freeing up such water. 31) As part of Indonesia's current drive towards establishment of a comprehensive water use rights regime, and in recognition of the fact that transferable water entitlements have been found in other parts of the world to provide the fairest, most open, and most efficient means of achieving re-allocations, policy development concerned with reallocation should continue to explore acceptable possibilities for application in Indonesia. 157

C. STRENGTHENING RIVER BASIN MANAGEMENT

- Including water allocation and water use licensing

Overall Recommendation: River basin management and its institutions, especially Balai, should be strengthened and improved in capacity so that basin-wide water allocation, licensing and management is able to achieve the best possible social, economic and environmental results from scarce water resources.

32) This basin water planning approach mandated by Articles 11 and 12 of Law 7/2004 should as soon as possible establish a basin-wide comprehensive water allocation and licensing system, that incorporates all water uses including bulk customary rights as covered in Recommendations I to 12.

33) In establishing this basin-wide allocation and licensing system, due cognizance should be given to the detailed generic principles and implementation guidelines in Chapter 3 Water Use Rights - Principles and Management. These principles and guidelines should also be used as a checklist by those preparing and drafting the implementing regulations of Law 7/2004. Attention must be paid to improved definition and administration of all water use rights in a uniform and consistent manner - not just the proposed new basin-level CWE for irrigation schemes.

34) The basin-wide water allocation plan should include actions to restrict water abstractions at times when insufficient water is available. This will require that water entitlements associated with water use permits are carefully defined as being available only when river flows are adequate and that the basin authority has the ability to declare periods of restriction at other times. We recommend that restrictions of supply at times of declared shortage be done on a proportional basis, water use category by water use category, according to the formal priorities established at law (Article 29 of Law 7/2004). This means, in effect, that a water entitlement is not an absolute quantity but a defined share of available water resources. At times of water shortage, proportional reductions in basin-level water entitlements should be applied throughout the basin so that the reductions are shared equally by upstream and downstream users. Where the probabilities of water being available are well known, they should be publicly available in order to guide investment in water development.

35) Attention should also be given to the water delivery aspects of all water use permits, including actions or sanctions associated with failure or partial failure to deliver water in accord with the expectations of the rights holder. Where delivery is made through infrastructure controlled by a public corporation, or through infrastructure controlled by a WUAF (or by government), a separate document from the water use permit is required to define the conditions of use of the infrastructure. Work is needed to develop performance standards, agreed sanctions, indemnities under specified conditions for the delivery body, conflict resolution mechanisms and so forth. 158

36) A formal basis should be established for making a declaration that a river basin or a groundwater basin has reached its desirable limits of water abstraction and that no further permits can be issued in excess of this limit. 37) The technical work needed to determine this limit should proceed without delay in basins with high water demands and should include reservation of an environmental reserve in accord with Recommendation 52. 38) Final determination of basin abstraction limits should be a part of the water planning activities required and authorized by law 7/2004, including the necessary exposure for public comment. Where Basin Community Advisory Committees have been established, they should be an integral part of the process. 39) In applying water allocation principles at basin level, consideration should be given to a review of the hydrology and hydrogeology planning and simulation models, and to the adoption of probabilistic concepts in water allocation. 40) To give proper effect to Recommendation 34, the water use permits issued to urban water supply public corporations (PDAMs, etc) should be amended to separate the water entitlements for basic human needs from the entitlements for industry and other non-basic water uses. If this proves impossible to calculate, the water use permit should explicitly state a condition of use that recognizes the water use priorities established by law and require the corporation to have a water restriction management plan to deal with times of water shortage. 41) Through mutual agreement among the parties involved, every effort should be made to eliminate the disjointed nature of administration and problems of both creation of conflicts of interest and dissipation of expertise caused by the decentralization principle of shifting the management of water entities that cross administrative boundaries to another tier of government. 42) To the extent that agreement can be reached, the following pragmatic working conventions are suggested, based on achieving consistency and clarity of roles, and in particular, applying as a primary principle, transparent separation of the roles of REGULATOR and SERVICE PROVIDER:

Q All surface water permit issues should remain with provincial government assisted by Balai, which should be strengthened, should shed their operations and maintenance functions to district/town government, and become the primary focus of surface water resource management;

D Groundwater allocation plans and aquifer management plans should be prepared at provincial level, but with simple rules to allow permit issue for low-yield bores and wells to be delegated to district levels, along with bore monitoring; 159

o Operations, maintenance and management of elements of irrigation schemes not yet handed over to irrigator management, and provision of technical assistance for handed over schemes, should be handled by a limited number of well-equipped districts, or public corporations where established, and not influenced by administrative boundaries.

43) In the medium term, Balai, as they presently exist, should be completely severed from any central government direct management, and transform into full function river basin organizations, covering not just water resource management, but also related natural resource management. This means enlarging on the purely technical role and becoming the policy and regulatory body for the basin, including authority to issue and administer all water use permits including irrigation scheme CWE. In effect, the new organization would be the secretariat and executive arm of the Basin Water Resources Council. Provincial Governors would retain the overall responsibility for basin water resources management, but would exercise it through the Basin Council and its Secretariat (transformed balai).

44) Further to the generalized pragmatic principles of Recommendation 40, we recommend that where a river basin crosses provincial boundaries, means be explored, with approval from central government, to create a single Basin Water Resources Council representing both provinces and with a single river basin organization jointly managed by the two provinces, and duly authorized to carry out all resource management regulatory functions including permit issue.

D. ENFORCEMENT AND CONFLICT RESOLUTION

45) Agencies should create a culture of support for field staff engaged in compliance duties and suitably empower these field staff under provisions of the Water Resources Law 7/2004. and of the prevailing Book of Criminal Law.

46) A system of civil hierarchy of administrative sanctions should be formulated at the national level to include initial warnings, imposition of fines and through restricting access to water abstraction as a result of the permit-holder breaching conditions of the permit.

47) Every effort should be made to not lose the strength of traditional water sharing practices and the use of discussion and consensus so as to create solutions that people want to abide by. To this end, the policy of participatory irrigation management and 160

transfer should continue and be boosted as experience elsewhere also shows that community-based codes of compliance have a good record.

48) Every effort should be made to develop an established capability under the provisions of the Law in Article 88 (3) for settlement of disputes outside court as alternative dispute resolution that enables a choice between arbitration (such as a Water Tribunal) or mediation. This will require encouragement of specialist practitioners with experience and skills in applying arbitration to water use disputes. An "expert mediation" capability as described in Chapter 10 should be created. At least one such unit should exist in each province. There is also a need for further legislation on the avenues available and remedies for affected entities to assert their WUR through the court system. At present the provisions on civil proceedings under Law 7/2004 are very bare. There is a need for more detail on class actions brought by affected communities and the implications of the grant of legal standing for environmental organizations.

49) The provisions on criminal enforcement set out in Law 7/2004 should be supported with procedures setting out how enforcement proceedings can be brought, the respective responsibility of each level of government and each agency and guidelines to indicate when a prosecution is warranted.

50) Consideration should also be given to supplementing criminal enforcement provisions with civil enforcement provisions that can be implemented by government agencies and which include remedies such as injunctions and damages.

51) If the suggestion made in this report to include discharge quality standards in water use licenses is adopted, this will require improved coordination between agencies concerned with water quantity and quality in compliance and enforcement activities. There needs to be national guidelines on who has responsibility for what in environmental enforcement as between each of the agencies concerned with water resources management (BAPEDALDAs at district and provincial level, Dinas Pengairan at district and provincial level, Balai and PJT).

52) The Bank should support the development of compliance and enforcement capabilities through codes of practice within the bureaucracy, development of civil remedies, and capacity building for officials, police and civil and criminal courts.

E. RESERVING AN ENVIRONMENTAL WATER ALLOCATION

Prime Recommendation: Basin-wide water allocation and water use licensing practices should be amended to provide for an environmental water allocation.

53) As part of a comprehensive basin-wide water rights system, the appropriate water environment agency in each jurisdiction should, in addition to the necessary urgent work on river water quality improvement strategies, begin determination of acceptable 161

environmental flows as soon as possible. These flows should take into account flow dynamics as well as acceptable minimum flows at critical locations.

54) Water use permit issuing agencies should be obliged to make provision for these environmental flows as an imposed minimum river flow abstraction condition on issue of all future water use permits.

F. REDUCING GROUNDWATER USE TO SUSTAINABLE YIELDS

55) The move towards reducing groundwater use to match sustainable aquifer yields we observed in West Java is to be applauded and should be pursued elsewhere, including vigorous actions to detect and limit illegal abstractions.

56) Such use reduction strategies should include aquifer yield zoning, refusal of new permit applications in stressed areas, and progressive reduction of water entitlements associated with water use permits at rates deemed financially absorbable by the water- using enterprise until abstractions meet safe yields.

57) For areas not yet under groundwater stress, aquifer management plans should be prepared that include a water use licensing strategy based on estimated safe aquifer yields. Permitted flow rates for alluvial aquifers can be assessed proportional to land owned over the aquifer as one generally acceptable means of achieving equity in allocation.

58) Every effort should be made to link and integrate groundwater and surface water management both at planning and operational levels. This should include complementary pricing strategies designed to influence patterns of water use in the interests of sustainable development. 162

Diagram 1 - Participatory implementation of irrigation water use rights Refer to Recommendation 2

Provincial Governor of CWEsv. Provincial Water Issea Exercises water ofCEsrvica ae CWssue authority p- Resources scWeest allocation schemes

Submit for approval NOTE - This is highly Basin Water Information Resources Council Basin Community simplified and Water policy and Advisory excludes planning Committee Coordination Advice Water users forum

At Technical | Balai |studies Links to irrigation schemes for local consultation and

Diagram 2 - Quantitative elements of Certificate of Water Entitlement Refer to Recommendation 7

CERTIFICATE OF WATER ENTITLEMENT

PERMIT HOLDER: BULLAMAKANKA IRRIGATION SCHEME FEDERATION BULK RIVER ENTITLEMENT: - litres/second (the sum of all uses) Water User Use Type Purpose Max Flow Max Volume

Tertiary area A Basic Irrigation and domestic - V/s Not applicable

Tertiary area B Basic Irrigation and domestic - V/s Not applicable

Tertiary area C Basic Irrigation and domestic - V/s Not applicable

Etc

Company X Commercial Textiles - I/s - cu.m/mth

Company Y Commercial Paper manufacture - I/s - cu.m/mth

Mr Z Commercial Fish farming - I/s - cu.m/mth Etc I