Govt decides to stop World Bank water loan

Muninggar Sri Saraswati The Jakarta Post/Jakarta

The Indonesian government has rejected the last disbursement of financial assistance under the Water Resources Sector Adjustment Loan (Watsal), saying the conditions demanded by the World Bank for the aid are unfeasible.

National Development Planning Board irrigation department head Budhi Santoso said recently the decision was recommended by a national team comprising several ministries related to water resources management.

"The reason for our refusal is a difference in opinion between us (Indonesia and the World Bank) about who should manage the water resources," Budhi said on the sidelines of a workshop on water held by the Asia Development Bank (ADB) in Bogor, West Java last week.

He said the World Bank had urged Indonesia to adopt market- oriented programs and deregulate the industry.

The World Bank's proposal did not match the government's move toward competence-based development programs, Budhi said.

"Some people may have the capability to manage water, but some others may not," Budhi said.

The World Bank warned the government last year to cancel its planned disbursement of the remaining US$150 million of the Bank's $300 million total commitment to finance the country's water projects, if the country failed to fulfill its 1999 promise to privatize the water sector.

The first two disbursements were made in 1999 and 2001, totaling $150 million.

To comply with the World Bank's demands, Indonesia had passed the water resource Law No. 7/2004, which privatized the water sector. The government, however, has not issued the necessary supporting regulations to enact the law.

The government agreed in 1999 during the severe economic crisis to reform the country's legislation on water to allow the private sector to manage the resource.

Budhi denied speculation the cancellation was a result of the government's failure to issue regulations.

The World Bank could not be reached for comment.

Critics and environmentalists have opposed the water resource law. They say the law made the resource an economic commodity and would threaten the poor's access to safe, affordable water.

They have brought the law to the Constitutional Court for a judicial review.

The World Bank sponsored a similar water privatization program in Bolivia in 1999, but that program has sparked frequent protests.