Market News

 February 09, 2009
Indonesia: Water Supply and Distribution Systems Industry


The Indonesian Statistics Institute (BPS) estimates the value of the water supply industry at $440 million rupiahs in 2006 thus registering over 43% growth since 2003. Indonesia currently has over 300 municipal owned water enterprises (PDAMs), comprised of 8 large-scale PDAMs (over 50,000 house connections) and 77 medium-scale PDAMs (10,000 to 50,000 house connections). The balance is made up of small-scale PDAMs serving fewer than 10,000 house connections.

Water tariffs generally do not cover operating and maintenance costs, and average loss of water to non revenue use is high. Many PDAMs are too small and inefficient to maintain controlling staff. Many do not have an asset management system and 30% have no accountant. There has been no significant asset investment over the past 10 years. Responsibility for water supply and sanitation rests with the regional governments, but new lending is blocked by PDAM and regional government loan arrears. Although PDAMs can increase water tariffs, local politicians often control tariffs for political ends, with PDAMs frequently used to finance local projects.

Jakarta and a number of other larger systems provide exceptions to municipal operation in the form of private sector concessionaires, PT Aetra Air Jakarta (Aetra) formerly PT. Thames and PT. PAM Lyonnaise Jaya (PALYJA). They each supply potable water and are responsible for all treatment, distribution, recording and billing.

The best sales prospects for U.S. products in water supply and distribution systems are valves, pumps and meters. Indonesia’s water and industrial pumps market represents growing potential for U.S. exporters. U.S. firms generally lose their competitiveness in the market of pipes and fittings due to the price differences. The types of pipe currently in use in Indonesia are asbestos cement (AC) pipes, mild steel pipes, ductile iron pipes, cast iron pipes, Polyethylene (PE) pipes and PVC pipes.

The 2006 total domestic market for water and industrial pumps was $862 million, with a total import of $778 million, local production of $213 million and exports of $129 million. If the domestic and export markets remain stable, it is predicted that the growth of total domestic demand will increase by 10 to 15 percent annually over the next five years.

Market Demand

Treatment and distribution of clean water in urban areas is the responsibility of about 318 water enterprises (PDAMs) under the ownership/jurisdiction of local government. In Jakarta, Batam and 20 other locations in Indonesia (BPP SPAM, 2005), concessions for water supply have been awarded to the private sector. Elsewhere,

the role of the private sector in piped water is limited to that of supplier or contractor. The PDAMs supply water to customers through house connections (presently about 39% of the urban population). About 61% of the population receives water through informal distribution networks and various water vending operations. PDAM distribution in rural areas is estimated at 8%. Approximately 40.15 million people live in the urban areas served by the PDAMs. Based on 2005 data, only about 40% of the urban communities are served. The remaining 60% of the urban population, of which many are low-income, rely on other sources of water that includes self-provision and commercial on-selling .