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Seminar Sured German Alumni Water Network, Jakarta

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Mohamad Mova Al'Afghani
Mohamad Mova Al'Afghani

This document summarizes Indonesia's Water Resources Law of 2004 and discusses some key aspects of water rights and water markets. The 3-sentence summary is: The document outlines Indonesia's Water Resources Law which regulates surface water, groundwater, and other water resources. It discusses the country's agency-based water rights system and efforts to allow some market mechanisms for water allocation through pilot projects. Several challenges of establishing a water market are also mentioned, including how to incorporate externalities like environmental and social costs into water transactions.

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Anticipating Water Trade Mohamad Mova Al Afghani [email_address]
Introduction As we speak, millions of liters of water are being transported through inter-state transmission pipes or through water tankers.
Introduction Law No. 7 Year 2004 on “Water Resources” Enacted : March 18, 2004 Enforced : At the date of enactment Number of Articles: 100 Repealed : Law No. 11 Year 1974 on “Irrigation” Judicial Review : 058-059-060-063/PUU-II/2004, 13th of July 2005 (Conditionally Constitutional)
“ Water” covers basically all freshwater in any forms including sea water on land. Thus, the Water Law regulates: Groundwater (well, underground rivers) Surface Water (rivers, lakes, wetlands) Clouds (Article 38) Water supporting areas: catchments, river basins, beaches Object of regulation
Water Rights Systems in the World: Agency Based vs Market Based Agency based: allocation and reallocation is done through the agency of the state Market based: allocation and reallocation is done through market mechanism (supply/demand) Water Rights
Water Utilization Rights (Hak Guna Pakai Air): for daily needs and people’s farming. Water Commercialization Right (Hak Guna Usaha Air): for hydropower, tourism, industry, etc. Valid for 3 years and extendable Both rights cannot be leased or assigned partially or entirely (Art 7.2 of the Water Law). Hence: agency based Water Rights
Water Rights *More than 2 litres per second/family for people’s farming and more than 100 m3 per family for Groundwater
The current agency-based system will be reformed to allow market mechanism to work in the water sector. Some pilot projects on has been conducted in Brantas river Basin in East Java. Water Market
Public good vs private good Mobility Variability Transport/storage cost Not scarcity but physical supply cost Essentiality Heterogenity, depending on time, location, quality Specifities of the water sector
Social Costs Environmental Costs How can externalities be identified, defined and incorporated into transactions? Market and externalities
Existing laws on international trade may not be adequate in protecting water Institutional setting in national law still problematic (i.e. enforcement cost expensive, rights not clearly defined) Insufficient legal regime
Goals: Human rights Efficiency Environment Requires interdisciplinary approach Closing the gap
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Seminar Sured German Alumni Water Network, Jakarta

  • 1. Anticipating Water Trade Mohamad Mova Al Afghani [email_address]
  • 2. Introduction As we speak, millions of liters of water are being transported through inter-state transmission pipes or through water tankers.
  • 3. Introduction Law No. 7 Year 2004 on “Water Resources” Enacted : March 18, 2004 Enforced : At the date of enactment Number of Articles: 100 Repealed : Law No. 11 Year 1974 on “Irrigation” Judicial Review : 058-059-060-063/PUU-II/2004, 13th of July 2005 (Conditionally Constitutional)
  • 4. “ Water” covers basically all freshwater in any forms including sea water on land. Thus, the Water Law regulates: Groundwater (well, underground rivers) Surface Water (rivers, lakes, wetlands) Clouds (Article 38) Water supporting areas: catchments, river basins, beaches Object of regulation
  • 5. Water Rights Systems in the World: Agency Based vs Market Based Agency based: allocation and reallocation is done through the agency of the state Market based: allocation and reallocation is done through market mechanism (supply/demand) Water Rights
  • 6. Water Utilization Rights (Hak Guna Pakai Air): for daily needs and people’s farming. Water Commercialization Right (Hak Guna Usaha Air): for hydropower, tourism, industry, etc. Valid for 3 years and extendable Both rights cannot be leased or assigned partially or entirely (Art 7.2 of the Water Law). Hence: agency based Water Rights
  • 7. Water Rights *More than 2 litres per second/family for people’s farming and more than 100 m3 per family for Groundwater
  • 8. The current agency-based system will be reformed to allow market mechanism to work in the water sector. Some pilot projects on has been conducted in Brantas river Basin in East Java. Water Market
  • 9. Public good vs private good Mobility Variability Transport/storage cost Not scarcity but physical supply cost Essentiality Heterogenity, depending on time, location, quality Specifities of the water sector
  • 10. Social Costs Environmental Costs How can externalities be identified, defined and incorporated into transactions? Market and externalities
  • 11. Existing laws on international trade may not be adequate in protecting water Institutional setting in national law still problematic (i.e. enforcement cost expensive, rights not clearly defined) Insufficient legal regime
  • 12. Goals: Human rights Efficiency Environment Requires interdisciplinary approach Closing the gap