Development of water rights in Indonesia

Chapter 10 Development of Water Rights in Indonesia Suharto Sarwan, Tjoek Walujo Subijanto, and Charles Rodgers — One objective of Indonesia’s 2004 Water Law is to establish a uniform system of water use rights.The law distinguishes between water usage for basic needs and noncommercial purposes, including domestic uses and small-scale “people’s” agriculture; and exploitation, including industrial, municipal, hydropower, and commercial agriculture. The former uses are entitlements requiring no formal permit, and the latter require formal licensing for specific uses of water. This chapter outlines the legal and conceptual framework for water use rights in Indonesia; describes key aspects of rights enacted in the new water law, including differences between usage and exploitation rights and prohibition of transfers of water use rights; presents an illustrative example of water allocation management in the Brantas Basin; and then looks at water use rights as property rights and human rights. R ecent social and economic developments in Indonesia have induced a paradigm shift in water resources management. Historically regarded as a social good, water has been transformed into an economic good with a social and environmental function. These developments have also affected the roles and management strategies of the law concerning water: from provider toward enabler, from centralized toward decentralized authority, from single purpose toward a multisector approach, and from narrow toward broader stakeholder participation (DGWR 2003). 238 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS Table 10.1 Indonesian total availability of surface water and groundwater Island(s) Java Lesser Sunda Islands Sulawesi Sumatra Borneo Mollucas + Papua Indonesia Area (million km2 ) Population (million) Water potential (MCM/yr) 0.133 0.071 0.186 0.475 0.536 0.493 1.894 121.4 11.1 15.0 43.3 11.3 4.2 206.3 187,000 60,000 247,000 738,000 1,008,000 981,000 3,221,000 Water potential Water demand (MCM/yr ) Per km2 (MCM/yr) Per capita (1,000 m3/yr) 83,378 13,827 25,555 25,298 8,204 589 156,850 1.411 0.839 1.327 1.553 1.881 1.991 1.700 1.54 5.40 16.53 17.04 88.96 232.93 15.62 Source: Machbub (2000); WRI (2003). Adequacy of water availability, both in quantity and in quality, greatly influences many aspects of social well-being and prosperity, including health, food security, industrial development, and environmental sustainability. Industrialization and population growth in Indonesia have caused significant impacts, and place increasing pressure on available water resources, which leads to further competition between beneficiaries and between uses. Industrialization and population growth have also caused declines in water quality and decreases in dependable flow as a result of the degradation of catchment areas. These pressures are responsible for a relative decrease in water availability over time, leading ultimately to water scarcity. Indonesia is a tropical archipelago of more than 17,500 islands, with a total land area of 19.2 million square kilometers. Rainfall variability reflects the extreme geographical diversity, which is further reflected in surface and groundwater potentials (LRI 1990; WRI 2003). Table 10.1 summarizes statistics on Indonesia’s water resources situation. World average water availability is close to 7,600 cubic meters per capita; Asia has the smallest continental average at 4,000. Indonesia as a whole has 15,600 cubic meters per person but this masks great differences within the archipelago (Machbub 2000; WRI 2003). Java, which contains 121 million of Indonesia’s 206 million inhabitants, has the lowest availability, 1,500 cubic meters per capita, extremely low relative to West Papua and the Mollucas at 233,000. The extent of water scarcity in Indonesia can be appreciated by considering the ratio of potential water availability to demand. It is predicted that by the year 2015, on some islands, this ratio will be less than one during many periods. A study conducted by the Ministry of Public Works and the Ministry of Forestry in 1995 identified a number of critical basins, including Cisedane, Ciliwung, Citarum, Cimanuk, Citanduy, Jratunseluna, Bengawan Solo, and Brantas. In these DEVELOPMENT OF WATER RIGHTS IN INDONESIA 239 basins, the water use potential index, the ratio of demand to dependable flow generally equals or exceeds 0.5. Water resources are a national resource that must be managed wisely and sustainably to secure the greatest benefit for the welfare of existing and future generations. However, water scarcity has the potential to create conflict among beneficiaries and between communities of users. Therefore, sustainable water management is considered a strategic task, essential in sustaining national development and requiring a national commitment. In the past, water resource development strategies tended to emphasize the supply side. Water was treated as a free good, and stakeholder participation was quite limited. In many basins, the current strategy for the development and management of water resources is now focusing on the demand side. To achieve efficient water allocation, it is understood that it is now necessary to establish a water use rights system. Water allocation is perhaps the most important element of water resources management. Allocation must be implemented to achieve national objectives, as guided by clear principles of rights and priorities, of which the water use rights system is of central importance. Effective management policies require a system for water allocation and water rights administration that recognizes the legitimate private uses of a public resource. As demand increases relative to an essentially fixed, limited supply, leading to intersectoral competition, public regulation based on recognized water rights will be required to achieve societal goals. In light of a series of factors including the natural characteristics of water; increasing demand; the paradigm shift from water as a social good to water as an economic good with social function; and the tide of opinion within the water resources community, a consensus has emerged among stakeholders and policymakers that the substance of water rights in Indonesia must be clarified. Determination of water rights in this context includes rights, duties, impacts on allocation, affected parties, jurisdiction (boundary), and responsibilities to the environment. The process of developing a water rights system was included in the Water Resources Reform Program that began in 1999. In this chapter, we first present the legal and conceptual framework for water resources management in Indonesia. We next discuss water rights reform as part of Indonesia’s ambitious water sector reform agenda, including some key aspects of the 2004 Water Law, brief descriptions of the planned program of pilot implementation, and anticipated outcomes of water rights reform. A description of the Brantas Basin in East Java illustrates the context of water allocation reform. We then discuss some aspects of water use rights in Indonesia as property rights and human rights. 240 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS Legal and Conceptual Framework for Water Rights Legal Framework for Water Management The Constitution of 1945 established the fundamental principles of water resources management in Indonesia. Article 33 of the constitution states that the earth, water, and any wealth therein are governed by the state and utilized as far as possible for the welfare of the people. The basic national law governing water resources management has been Law No. 11 of 1974 on Water Resources, supported by Government Regulation No. 22 of 1982 on Water Resources Management, Government Regulation No. 23 of 1982 on Irrigation and Drainage, and the Basic Agrarian Law No. 5 of 1960. According to Law No. 11 (1974) article 5 paragraph (1), intersectoral water uses were to be coordinated by the minister responsible for water resources. Government Regulation No. 22 of 1982 provided detail on the basis for management at the river basin level, including planning and coordination activities. A 1989 Decree of the Minister of Public Works on the Determination of 90 River Territories in Indonesia divided Indonesia into 90 river territories (Wilayah Sungai) that in turn encompass 5,590 river basins. Most river basins are small, about 87 percent cover less than 500 square kilometers (Amron 1998). River basins in Indonesia, and particularly in Java, are usually short, steep, and rainfed, with 94 percent of rivers less than 50 kilometers long. Only 15 rivers are longer than 400 kilometers. According to the 1989 decree, and a related 1990 Decree on Management of Water Resources in River Territories, regional governments manage 72 river basins, with responsibilities delegated under the concept of comanagement. Fifteen river basins are managed directly by the Minister of Public Works, because their boundaries cross provincial boundaries. Public corporations currently manage three basins: Jasa Tirta I (PJT-I) manages the Brantas river basin in East Java and the Bengawan Solo river basin in East and Central Java, and Jasa Tirta II (PJT-II) manages the Citarum river basin in West Java. Some other river basins on Java, Sulawesi, and Sumatra have already begun developing public river basin management institutions. Under the current reform agenda, new public corporations or branches of Jasa Tirta I will manage the basins of Jratunseluna, Serayu-Bogowonto, and Jeneberang. Water distribution within each basin is supposed to be based on a water allocation plan. The plan should be agreed on by the representatives of the water users and the water manager in a coordination forum called the Water Resources Management Committee, or Panitia Tata Pengaturan Air for the provincial level and Panitia Pelaksana Tata Pengaturan Air for the basin level. The kernel of Indonesian water use rights is found in the Basic Constitution of 1945, stipulating that water resources, although governed by the state, must be DEVELOPMENT OF WATER RIGHTS IN INDONESIA 241 utilized for the welfare of the people. Water use rights per se were first mentioned in the Basic Agrarian Law No. 5/1960. Water was identified as a gift of the Almighty and everyone has a right to its use, although certain uses require permission and others do not. The 1974 Water Law required corporations, associations, and individuals to obtain government approval (a license) and assigned the primary responsibility to the central and local governments to ensure that water and water resources are used beneficially. The water law also required that water allocation be subject to established priorities. Government Regulation No. 22/1982 established the principles and the basis for water management. In water management regulations, the principles of public utility, harmony, and conservation should be applied. A water right was interpreted as water use right. Moreover, the regulation stated that everyone has a right to use water for their basic needs in daily life, for domestic purposes, and for domestic livestock. This government regulation established the basis for water use permits, but did not address the process by which water rights are formally established. Indonesia has had a water licensing system applied to some specific economic uses, including urban water supply, hydropower, industry, mining, and commercial agriculture. Licensing was intended primarily as a strategic planning instrument, a guide to the allocation of water use for the purposes of meeting development goals, as distinct from short-term operational decisionmaking. In contrast to commercial uses, users could obtain water for domestic, household, and other basic, noncommercial uses without prior permission from the designated authority, subject to certain limitations. The earlier licensing was applied selectively to help regulate water use to meet development goals, but this partial system fell short of fulfilling the basic principles of fair and effective water allocation. To illustrate, during drought, water supplied for irrigation and river maintenance flow, which were not governed by licenses, might be reduced in order to secure the required quantities of water for those other beneficiaries who did have licenses to use the water. Conceptual Principles Ideally, in terms of economic theory, a structure of property rights in water that would facilitate the efficient allocation of water should include several characteristics. Universality means that all water resources are subject to some claim status, and property rights claims to water resources, including the nature and contents of these rights, are clearly identified, consistently applied, and universally respected. With exclusivity, all benefits and costs (setting aside externalities) arising from the rights are exclusively owned; and exclusively borne, respectively, by the rights-holder. Transferability allows specific components of the right to be transferred through freely negotiated, legally transparent transactions. Enforceability secures all rights 242 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS from unlawful takeover or violation, via a well-defined process of grievances and remedies. In establishing the structure of water rights, a clear justification must be provided for the initial distribution of claims. On this matter, there is no universal consensus along either historical or ethical lines. Muslim water law establishes a fundamental right of human access to water, as a gift from God, and imposes an equally fundamental duty to conserve, and to share based on priority of need (chafa: the right of thirst) beginning with water for domestic uses, followed by water for animals, then water for irrigation. Water is viewed, together with pasture and fire (fuel) as a common entitlement (waqf, usufruct or collective property) (see Faruqui, Biswas, and Bino 2001). Other systems of water rights based on notions of community or common property are also prevalent in Indonesia. An often-cited example of a communitybased water rights system in Indonesia is the Balinese subak (e.g., see Sutawan 2000). Such common property water rights systems are often characterized by relatively clear boundaries and flexible rules. However, this flexibility, potentially valuable during changing or uncertain conditions, is often difficult to realize through formal or statutory law. Broadly speaking, the evolved legal structures of property rights in water in the West tend to follow either riparian doctrine, appropriation doctrine, or some combination. Under the riparian doctrine, the landowners have the right to divert (but typically not to store) a portion of the natural flow of water through or adjacent to their land, for reasonable and beneficial use. Under an appropriation doctrine, a person may acquire a right to divert, store, and use water simply by being the first to develop a previously unallocated source of water. In some places, this right is sometimes not tied to land ownership, and may be transferred, even outside of the watershed. In contemporary Indonesian water resources management systems, many farmers (and others) typically share water that is often stored at and delivered from remote locations via public infrastructure, and use it for a wide variety of purposes. Adoption of undiluted versions of either riparian or prior appropriation-type doctrines is neither practical nor appropriate, particularly when fairness and efficiency are paramount objectives. Indonesian farmers, who traditionally were more likely to use water for basic needs and subsistence farming than for commercial purposes, typically receive water allocations that reflect the outcome of discussion and agreement with others. This suggests that allocation and issuance of water rights must apply principles of justice and fairness. Ideally, the water right will guarantee the rights-holder access to water of the proper volume and at the proper time, and as appropriate to their investment. DEVELOPMENT OF WATER RIGHTS IN INDONESIA 243 There are three basic principles guiding Indonesia’s efforts to implement water use rights. These are general use, efficiency, and sustainable supply. General use refers to an understanding that a clear, complete, and detailed water right arrangement will secure the right of parties to use the water as appropriate to their basic needs, received on time in sufficient quantity. Efficiency refers to an understanding that a clear, complete, and detailed water right arrangement will create an obligation of the water user to use the water (1) for beneficial purposes; (2) as efficiently as possible; (3) without endangering the environment, the water resources quantity and quality; and (4) without unnecessarily impairing or disturbing other users’ ability to use water. A sustainable supply refers to an understanding that a clear, complete, and detailed water right arrangement will reflect conditions specific to each basin and locality in the resulting water allocation system, including both long-term and real-time aspects of water allocation, as well as the national social and economic perspective on water resources. Reforming the Indonesian Water Rights System The Government of Indonesia is currently undertaking a program of broad reform of water resources policy to improve the national institutional framework for water resources development and management; the organizational and financial framework for river basin management; regional water quality management, regulatory institutions, and implementation; and national irrigation management policy, institutions, and regulations (DGWR 2003). Water rights play an important role in these reforms. An essential first phase of this process is the revision of the enabling legal framework for water resources management. To secure equitable and efficient water allocation, the government will establish a national framework for an enforceable water rights system for surface and groundwater. Indicators of progress toward this goal are issuance of a new Government Regulation for Water Rights and issuance of guidelines for the revised provincial water licensing regulations and allocation of water use rights. Water rights for irrigation schemes will be explicitly addressed, and prevailing customary water right concepts will be considered. The water user rights system will be supported by appropriate national regulations as well as a uniform provincial framework of water licensing for abstraction and discharges that covers all water sectors. A formal water use rights system is also essential in order to document and to protect the historical claims of existing water users within a basin, as well as to accommodate new users. Three broad roles emerge for water use rights. They should enable the government to manage the nation’s water resources more effectively and 244 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS efficiently. Water use rights provide the community, and individuals within the community, a degree of certainty concerning the availability of the water resource, so that they can invest with confidence. Rights serve as a basis for resource accounting, which is necessary both for long-term planning and for real-time water allocation decisionmaking in the basin. A formal water use rights system is currently intended as a tool for effective basin-wide bulk water allocation at all times and, in particular, during times of water scarcity, especially in the dry season. A water use rights system is a formal procedure to confer, from public ownership as managed by the government to the user, the right to use surface or groundwater in a particular basin or location. It carries out specific policy objectives of the government with regard to water use. In this process, historical water diversion and use are documented, users and uses are identified, water use is quantified, water available for allocation is determined (quantified), and the water that has been allocated is monitored with respect to its use(s). When the system is in place, clear legal and administrative procedures establish the priorities of respective rights, providing for transparent water allocation and water administration. The system also helps identify those users and uses that would be affected by proposed actions or activities that would alter or modify the quantity and quality of the water resources in the basin. Usage and Commercial Rights in the 2004 Water Law In February 2004, a new National Water Law, intended to replace Law No. 11 of 1974 on Water Resources, was passed by the Indonesian House of Representatives. The law defines a water use right as “the right to get and use or exploit water for various purposes.” The law then defines more specific categories of use rights, Hak Guna Pakai Air (usage for basic needs and noncommercial uses) and Hak Guna Usaha Air (commercial exploitation). Usage rights are “acquired without permit to fulfill daily basic needs for individuals and people’s agriculture located in irrigation systems.” Daily basic needs encompass what is required “to achieve healthy, clean and productive life” and include water used in religious services, drinking, cooking, bathing, and washing. Irrigated agriculture requires a permit if it involves changing the condition of the water resource, takes large volumes of water, or occurs outside of existing irrigation systems. The Elucidation to the water law states that permits are required if water use exceeds 2 liters per second per household head, and that pumping requires a permit even if for people’s agriculture. Throughout much of Java, 2 liters per second of continuous flow would service an irrigated area of one hectare or more, assuming wet transplanted paddy as is commonly grown during the first dry season. A single volumetric standard may not be DEVELOPMENT OF WATER RIGHTS IN INDONESIA 245 appropriate for all regions, as conditions governing evapotranspiration and soil percolation vary extensively throughout the archipelago. Although this is certainly the case, it is clearly possible to regionalize this standard based on soils and climatic data. Moreover, a rule based on flow volume, as distinct from cultivated area, appears preferable for many reasons, not the least of which is the incentive it provides for water conservation. In establishing this threshold, the government has taken an important step toward protecting smallholder and subsistence agriculturalists’ priority right of access to irrigation water. Commercial rights can be granted to individuals or corporations via permit, and are provisional rights to exploit water resources for specified commercial purposes. These purposes include, among others, electric power generation, municipal water supply, industrial production, and agribusiness. Licenses are highly restrictive with respect to the type of use permitted—they are not broad volumetric commercial abstraction licenses. As in the previous water law, water rights of traditional legal communities are to be accepted, as long as they are not in conflict with national interests, laws, and regulations, and as long as they actually continue to exist. The new law also states that customary rights must have been confirmed by regional government regulations. The means of resolving conflicts between traditional users and/or laws and “national interests and laws and regulations” are not made clear, however, and this suggests an interesting arena in which many issues raised in the new water law may be tested. Subsequent government regulations will specify explicit details of the implementation of water use rights, which may include the duration of rights, conditions for terminating rights, and procedures for dealing with droughts or other extreme situations. Prohibition of Transfers The question as to whether or not water user rights as specified in the new National Water Law could be transferable generated considerable debate. In the course of preparing the reform program, a right to transfer water under the framework of established use rights was envisioned. This would have enabled the transfer of water use rights from the original permit holder to a third party on the basis of a legitimate agreement that could be endorsed by responsible authorities. A transfer of a water use right might apply to all, or to only a part of the original owner’s water use rights. In case of a temporary transfer, the formal “splitting” of the water use right would not be necessary. Transfers of water rights might have occurred through private trading, or through regulated transactions established by agreement between water users in which the appropriate government authority would play a central role. 246 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS There was concern that the permissibility of water use rights transfer would introduce a potential for abuse. A negative impact of such arrangements could occur in the event that a water right were (temporarily) transferred to, and subsequently not relinquished by a pengusaha kuat (literally “strong company”) resulting in the original right holder (presumably less powerful) being deprived of their right to water. In the Water Law passed by the Parliament in February 2004, no allowance is made for the transfer of water use rights. The Law states “Water utilization right . . . cannot be leased out or transferred, partially or wholly.” The Elucidation adds: “If water utilization right is not used by the holder of water utilization right, Government or regional government can revoke the related water utilization right.” The law prohibits transfers and specifies penalties, fines, and imprisonment for violators. This would appear to settle the issue for the time being, at least with respect to private transactions. Key to understanding the proscription on water markets is the fact that under the new law, water use rights and commercial licenses are purposespecific. In Western water law, rights typically adhere either to individuals (doctrine of appropriation) or to land (riparian doctrine), each framework providing a basis for transfers as private transactions. According to the new Indonesian Water Law, however, a farmer (irrigator) is not free to transfer his water use right, for example, to an industry, since his right was derived from the use of the water in irrigation and not from his ownership of the land, riparian or otherwise. If water rights were transferable, then a clear water rights arrangement could improve the efficiency of water resources allocation by directly facilitating water right transfers. An example is the transfer of water out of irrigation to industrial and domestic uses. A transferable water right would provide farmers with an incentive to use water more efficiently, if the water saved could be transferred (sold or leased). It would provide one more alternative solution to the problem of increasing water scarcity, at a time when the construction of new dams is increasingly expensive and attended by many serious problems including resettlement and land compensation. Within the framework of the new water law, arrangements by which government reallocates water, with compensation for those whose rights are reduced (e.g., a functional equivalent of water banking, or coordinated agreements for retirement of an existing right and issuance of a new right) might be developed, but processes for reallocation are not explicitly specified. Preliminary Implementation of Water Use Rights The Government of Indonesia intends to conduct an exploratory, pilot program introducing water use rights to specific regions. The pilot program will be implemented in three locations, the Citarum River Basin in West Java, the Jratunseluna DEVELOPMENT OF WATER RIGHTS IN INDONESIA 247 River Basin in Central Java, and the Brantas River Basin in East Java. These river basins have been chosen because their water resources have been extensively developed over long periods, each contains various categories of water users, and each possesses the potential for intersectoral conflict. The decision to conduct a pilot implementation program is motivated by the fact that the Government of Indonesia’s experience in implementing water use rights is limited to commercial licensing, so the information gathered during these trial programs will be invaluable in improving the legal framework for water use rights. The preliminary programs will focus on groups that use water primarily for commercial and irrigation purposes. The number and composition of these groups will be chosen to be representative, so that results from pilot programs can be generalized to regions outside the target basins. The experience gained through the pilot basin programs will be used to strengthen implementation of water use rights. This should be the starting point for Indonesia to adopt a uniform licensing system procedure within the framework of a national water use rights system. In consideration of the macrocharacteristics of water availability, of increasing demand due to growing population, and the increasing variety of competing water uses, and of forces of economic globalization and the liberalization of trade, all of which impact on the management of water resources, the rapid implementation of effective water use rights in Indonesia is a high priority. Anticipated Outcomes from Water Use Rights Reforms The intended outcomes include assignment of rights, improvements in water use security and efficiency, and increases in the level of responsibility of water users. The implementation of water use rights could be evaluated as successful on the basis of consistency of water rights implementation and all related laws and regulations at all stages, and improved allocation and productive efficiency achieved through the implementation of water use rights. The creation of water use rights creates a legal channel by which rights-holders can fulfill all basic needs with respect to water, while fulfilling all responsibilities corresponding with these rights. This could help avoid some conflicts related to water use, since each rights-holder will acquire an understanding of both the extent and limits to their rights. In the process, the government will have a control instrument for determining policies and decisions. Water rights-holders who understand their rights should also understand the demarcation of their rights, so that they will make efficient use of water, making more water available for use by others in support of their rights and interests. Water availability depends on many other elements beyond the structure of rights, such as the presence of reservoirs, other water resources infrastructure, and 248 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS the requirements of the environment. Water rights-holders, while exercising their rights, should also assume greater responsibilities for safeguarding and protecting the water resources system to which they are connected in order to sustain the integrity of the system. If rights-holders fail to meet these duties, they will be subject to claims by any other users harmed by their action. Case Study in the Brantas River Basin The Brantas River Basin is located in the Province of East Java. The watershed covers 11,800 square kilometers and the main channel stretches 320 kilometers from its source on Mount Arjuna to New Lengkong, where it branches into two rivers, Surabaya River and Porong River, each of which discharges into the Madura Strait. Along its main stem, many tributaries join the Brantas, including the Lesti, Ngrowo, Konto, and Widas rivers. Figure 10.1 depicts the Brantas Basin, including important water resources management features. Average precipitation in the basin is close to 2,000 millimeters/year, about 80 percent of which occurs during the rainy season from December to May. Annual surface discharge is around 12,000 million cubic meters (MCM) on average. About 3,000 MCM is subject to regulation by storage dams, a quantity constrained primarily by the limited surface storage, which currently totals only 297 MCM. Beginning in 1961, the Brantas River Basin Development Project carried out river basin development, under the authority of the Directorate General of Water Resources Development. In that year, the first Master Plan was established, with primary emphasis on flood control. Large reservoirs constructed in the upper reaches for flood control also provided water supply for irrigation and hydropower generation. In 1973, the Master Plan was reviewed and Master Plan II prepared, with a primary orientation toward supplying water for irrigation, in line with government policy that emphasized self-sufficiency in rice production. During this period, some additional reservoirs and barrages were built. Work on flood control projects continued. Having achieved relative success with rice production, the government then turned to strengthening the industrial sector in the 1980s. Consequently, the river basin development plan was reviewed again in 1985. Master Plan III emerged with the main purpose of supplying water for industry and municipalities. The need was later felt to review the master plan, to improve water resources conservation and management. The Master Plan IV, reflecting these priorities, was completed in 1998. The benefits of development under the Master Plans can be summarized as follows: DEVELOPMENT OF WATER RIGHTS IN INDONESIA 249 • flood control for events up to a 50-year return period; • water supply for 83,000 hectares of paddy fields that directly abstract water from Brantas main stem (out of a total 345,000 hectares of irrigated area within the basin) supplying up to 2,500 million cubic meters of irrigation water per year; • energy production of about 1,000 million kilowatt-hours per year; • bulk water supply for industries and municipal drinking water of about 380 MCM/year; • maintenance flow of 204 MCM/year; and • flows supporting fisheries of 41 MCM/year (PJT-I 2002). During preparation of the fourth Master Plan, it was anticipated that the Brantas River Basin would face diverse problems due to population growth and industrial development. Water demand is projected to increase significantly, while the supply will remain limited. Previous assessments of water balance in the growing urban areas of Gresik, Bangkalan, Mojokerto, Surabaya, and Sidoarjo highlighted the importance of developing new sources of surface water (such as the proposed Genteng, Kedungwarak, and Beng dams) to cope with the growing demand. Although these dams are classified as “promising” projects based on benefit-cost analysis, the unit water costs are still considered too expensive given current abilities to recover costs. The costs for the proposed Genteng, Kedungwarak, and Beng dams were 1,119; 1,090; and 889 Rp/cubic meter (US$1 = 11,300 Rp in June 2001), respectively: by comparison, the unit water cost of Wonorejo Dam (2001) was only 520 Rp/cubic meter (JICA 1998:V-32). These projects (or their equivalent) will almost certainly be required in the near future. However, water supply and demand projections within the Brantas to the year 2020 under a range of assumptions concerning supply indicate that supply augmentation alone will not provide a comprehensive solution to the pending water shortage. Demand management therefore will also be important. Supply augmentation together with improvements in irrigation efficiency, water reuse, and recycling are currently anticipated to allow the basin to accommodate growing urban demand up to the year 2020. Based on these projections and assumptions, implementation of water use rights, and possibly water right transfers, might make an important contribution toward coping with future water deficits. Figure 10.1 The Brantas Basin LOCATION MAP Y Kalimantan E 23 F Z 4 U C B 5 9 ra 26 8 2 G H 7 6 Str ait 11 LEGEND Mt. Kelud W X 13 Boundary of catchment area for Brantas River Basin Mt. Kawi 12 Railway T S J 19 K 14 15 17 Indo Project Area n esia n Oc ean Mt.Arjuno Mt.Wilis L Surabaya U 10 I 16 Java Sea Jakarta 25 A 3 27 du Ma D 1 Sumatra 24 18 M R 21 Source: Based on map provided by Jasa Tirta I Public Corporation. Mt. Semeru 23 22 20 N Indonesian Ocean Dam site O Q P Completed projects 1. Bening Dam 2. Glatik Dam 3.Widas irrigation 3200 HA 4. Mentupus rubber dam 5. Jatimlerek rubber dam 6.Warujayeng irrigation area 7. Middle Reach River improvement 8. Paparpeterongan irrigation area 9.Turi Tunggorono irrigation area 10. Mrican Barrage 11. Selorejo multipurpose dam 12. Mt. Kelud debris control 13.Tulungagung Gate 14. Lodoyo Tulungagung irrigation area 15. Parit Agung Canal 16. South Tulungagung Tunnel 17. Gulungagung Hepp 18. Lodoyo Aftgerbay 19.Wlingi multipurpose dam 20. Sutami multipurpose dam 21. Lahor Dam 22. Sengguruh Dam 23. Kepanjen Dam 24. Brantas Delta irrigation area 25. New Lengkong Dam 26. Kaliporong River improvement 27. Karangpilang Treatments Work Proposed projects A.Widas extension area 3200 HA B. Beng Dam C. Kedungwarak Dam D. Semantok Dam E. Beng irrigation area 3200 HA F. Gottan Losare irrigation area 4300 HA G.Widas South irrigation area 5500 HA H. Kuncir Dam I. Babadan Dam J.Wonorejo irrigation area K.Trenggalek irrigation area L.Tugu Dam M. Flood diversion N. Lestileft irrigation area 2300 HA O. Lesti Dam P. Genteng Dam Q. Upper West watershed management R. Sutami multipurpose dam S. Lumbangsari Dam T. Upper Brantas watershed management U. Umbulan Spring Under-construction projects W. Segawe Weir X.Wonorejo Dam Y. Suragaya Urban Development Project Z. Karangpilang Treatments Work 252 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS Industrial water recycling, such as recirculation of cooling water, can be a major source of water savings. Domestic water use can be made more efficient by steps ranging from repairing leaks in municipal systems to installing low-flow showerheads. Efficiency in irrigation water use can be enhanced by technologies including drip irrigation and microsprinklers; management changes such as the adoption of demand-based irrigation scheduling systems and conjunctive use of surface and groundwater; and institutional improvements including the creation of effective water users’ associations. Water allocation in the Brantas Basin is based on a water allocation plan, which is discussed and agreed on by representatives of various categories of water users, as well as by Jasa Tirta I Public Corporation (PJT-I), in a coordinated forum called the Provincial Water Resources Management Committee. The water allocation system currently practiced in the Brantas Basin is based on decrees issued by the governor of East Java. As described earlier, the water licensing is a form of acknowledging water use rights as well as an instrument for regulating use. The content of the water licensing system can be summarized as follows: 1. All water users shall have a license from the governor of East Java. 2. PJT-I (the river basin authority) will guarantee the supply of water, to the extent feasible considering available discharge. 3. The license will be issued following issuance of technical recommendations from PJT-I, a recommendation from chief of regency as chief of the Irrigation Committee and consideration from the Consideration Group on Surface Water Licensing. 4. Other relevant rules and regulations are fulfilled. 5. The beneficiaries shall pay a fee for operation and maintenance of water resources infrastructure. Regulation of the implementation of licenses is the responsibility of the agencies involved, including the East Java Provincial Government, Provincial Water Resources Services, PJT-I, and others. Control over the implementation of licenses is by designated agencies, which in the Brantas Basin include the Government of East Java, Water Resources Services, and PJT-I. Modeling Transferable Rights To illustrate the potential of trading of licensed water to improve the economic productivity of water resources, we present some results from modeling studies DEVELOPMENT OF WATER RIGHTS IN INDONESIA 253 Figure 10.2 Allocation scenarios with and without transfers Basin net profit (Bn. IDR) 840 830 820 810 800 790 780 770 760 750 740 Baseline WR-NT WR-B Rights Scenario WR-M Source: Rodgers and Zaafrano 2002. recently conducted in the Brantas Basin, East Java. An integrated economic-hydrologic basin simulation model (Rodgers and Zaafrano 2002) was used to compare four water rights scenarios. The first, economically idealized, scenario allocated water purely according to its highest economic return, without regard to water use rights and subject only to hydrologic and infrastructure constraints and minimum supply constraints for domestic uses and environmental flows. In the second scenario (WR-NT), with water rights and no trading, each irrigation system was assigned a volumetric right, by period, which corresponded to efficient cultivation along historical cropping patterns. In this scenario, any water not used productively at a site is simply forfeited, and flows downstream. In the third scenario (WR-B), irrigation systems could either buy additional water from or sell unused water to the river basin management authority (“the broker”) at a flat price per cubic meter, subject only to supply constraints. (This constitutes a form of water banking, in which so long as the basin authority has water to sell, it must sell it, and it must purchase whatever is offered without regard for whether or not it can be resold.) The fourth scenario (WR-M), water rights market clearing, was similar to the third, but industries and water utilities were excluded from water trading, and sales were private transactions —a buyer had to be found for every unit sold. Figure 10.2 shows that the use of a simple system of volumetric rights, based on historical cropping patterns, with no trading, has lower aggregate basin output 254 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS by comparison with the first scenario where economic returns were optimized. This occurs because at least some water resources do not move to the locations and uses where marginal net value is highest. However, if a simple water brokerage system is present (scenario three), virtually the same level of output (and implied water economic productivity) is achieved as under the first scenario. In the fourth scenario, allocation efficiency is also improved as compared to the fixed right (second) scenario, although not to the same extent as in scenario three because the rules governing transfers are more restrictive. In the third and fourth scenarios, the welfare of irrigators at any particular location would be improved through such voluntary trades, if we assume that they would never agree to trade unless trading made them better off. Models and scenarios such as these provide one tool for evaluating the impact of different rules for water use rights on the economic efficiency of water allocation. They indicate the potential economic gains from institutional arrangements that would facilitate reallocation between water uses, such as transferable water use rights, or, under the current law, arrangements that would compensate users for giving up rights that the government could then reallocate to others. Human Rights and Property Rights In moving from principle to statute and on to implementation, it is necessary to acknowledge that the intentions behind efforts to establish or to strengthen water rights simultaneously reflect two distinct sets of social objectives. On one hand, water rights may be promoted as the legal manifestation of the concept of basic human rights, in the sense of natural entitlements, as defined in documents such as the United Nations Covenant on Economic, Social and Cultural Rights (UNESCO 2002). From this perspective of distributive justice, embedded in sources as diverse as the arguments of Rawls (1971) and Moslem water law, one essentially views water rights as desirable and necessary in order to protect the interests (and perhaps the survival) of society’s least powerful against coercion and dispossession by the strong or the wealthy. On the other hand, water rights may be understood explicitly as property rights in water, reflecting a utilitarian perspective. Water rights are desirable in this context for reducing the friction in economic transactions and for reducing the risks associated with investments that enhance water productivity. Ownership is often described as a “bundle” of distinct rights. Table 10.2 compares usage and commercial rights in the new law with the framework of property rights proposed by Honore (1961). It is somewhat difficult to characterize water rights within this framework, since, among other factors, water has no stable boundaries. Honore’s system also strongly reflects Western European concepts of ownership. DEVELOPMENT OF WATER RIGHTS IN INDONESIA 255 Table 10.2 Comparison of water use rights as property rights Basic water usage rights Commercial water use rights The right to exclusive physical control of the thing owned (includes right to exclude) Yes, within confines of use allotment Yes, within confines of licensed quantities (2) Right to use The right to personal enjoyment and use of the thing (as distinct from 3 and 4) Yes, although qualified by type of use Yes, although qualified by license conditions (3) Right to manage The right to decide how and by whom a thing shall be used Unclear (limited) Yes, although qualified by license conditions (4) Right to income The right to the benefits derived from forgoing personal use of a thing and allowing others to use it No (formally prohibited) From products; but not through transfer of water use rights (5) Right to capital The right to alienate the thing and to consume, waste, modify, or destroy it. To alienate is to convey or transfer as a matter of an owner’s choice and not in the course of the state’s legal activities Right to consume, obligation to conserve Right to consume as specified in license, obligation to conserve (6) Right to security Immunity from expropriation Yes, subject to priorities Subject to allocation plans and priorities (7) Power of transmissibility The power to devise or bequeath the thing Implicit No, transfers prohibited (8) Absence of term Indeterminate length of one’s ownership right Yes, for uses not requiring license No, may be limited by term of license and renewal conditions (9) Prohibition of harmful use Duty to forbear from using the thing in certain ways harmful to others Yes Yes 10) Liability to execution Liability to having the thing taken away for repayment of debt No Unclear, but (probably) effectively yes 11) Residuary character The existence of rules governing the reversion of lapsed ownership rights. Reversion is the right of succession or future possession or enjoyment. Government holds Government holds Characteristic Description (1) Right to possess Source: Characteristics and descriptions of rights are from Honore (1961). 256 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS In many societies, an absolute “right to exclude” others would be viewed as an intolerable defect in the framework of rights, especially with respect to resources essential for life, or commonly shared or managed resources. It is thus important to recognize that a rights framework that is “incomplete” with respect to full ownership does not indicate a deficiency or flaw in that framework. Neither usage rights nor commercial rights fulfill the requirements of full ownership. This follows primarily (but not exclusively) from the “right to capital,” which corresponds most closely to the core concept of ownership, at least in the Western tradition (Becker 1977:20). To grant individuals, groups, or other institutions this right would undermine the intent of Indonesia’s constitution, which clearly establishes the state’s authority to govern water resources.1 In both categories of water use right, specific rights characteristics are qualified, sometimes heavily. Usage rights are categorically qualified in terms of what meets the definition of a basic use. Specific conditions of the license qualify commercial rights. Usage rights lie closer to the root concept of “rights” as widely understood. This follows from the conditions under which water user rights can be denied: for basic uses, the right is presumed, and such water use is assigned a high priority by law, except under unusual intervening circumstances. By contrast, the state is (evidently) not compelled to issue commercial use licenses upon request, but retains an element of discretion beyond the statutory requirements. There is clear merit in both arguments, for water rights as human rights and property rights, as well as the potential for conflicting objectives. The ambitious task faced by Indonesian lawmakers and regulators is simultaneously to protect the legitimate historical claims of current water users, to make explicit the hierarchy of claims on scarce water, and to permit and facilitate investment and the economic transactions that lead to greater efficiency in water use. In addition, the process of specifying and formalizing water use rights presents Indonesian policymakers with a unique opportunity to address longstanding problems associated with the maldistribution of wealth and productive resources. The process of allocating claims to increasingly scarce water could be employed as a tool for promoting the health and economic welfare of the nation’s poorest citizens. Legislation implicitly acknowledges these distinct objectives through the conceptual, as well as legal distinctions provided between basic or noncommercial users and uses (addressing arguments from natural rights and religious duty) and commercial uses (addressing arguments for economic efficiency). Some uses of water, however, do not fall neatly into either category. The irrigation of small family-owned plots, typically for paddy and polowijo (irrigated, dryfooted crop) production, is seldom either purely subsistence, or purely commercial. To illustrate, in a recent field study conducted in the Brantas Basin, East Java, where irrigated plots are on average less than 0.4 hectare, it was found that an average of DEVELOPMENT OF WATER RIGHTS IN INDONESIA 257 around 40 percent of paddy produced was consumed within the producer’s household. Much of the income derived from marketed paddy paid for basic necessities (Rodgers and Zaafrano 2002). The importance of this category of water use in Indonesia cannot be overemphasized. Surface irrigation schemes divert more than 70 percent of current water abstractions in the Brantas, the majority to large gravity schemes serving numerous smallholders (most of whom would be well below the threshold of 2 liters per second for which permits would not be required). It has been persuasively argued (e.g., Gleick 1999) that rights of access to and use of water for basic purposes are clearly and fully implicit in internationally recognized human rights to life, and to adequate food, clothing, and shelter. Indeed, it is hard to imagine how these baseline conditions could possibly be guaranteed absent a corresponding and no-less-fundamental right to water, particularly if we interpret these rights as including an acceptable level of human dignity. The case for derived rights for irrigation water use is, unfortunately, less self-evident. The U.N. Economic and Social Council (UNESCO 2002) is prepared to argue for a derived water right for food production (irrigation implicit) through “right to adequate food,” “right to health,” and “right to gain a living by work.” However, they acknowledge a distinction based on priority of right: “(Nevertheless) priority in the allocation of water must be given to the right to water for personal and domestic uses. Priority should also be given to the water resources required to prevent starvation and disease, as well as water required to meet the core obligations of each of the Covenant rights” (UNESCO 2002:2). In a similar vein, Gleick (1999) argues for the existence of derived rights to water arising from provisions of basic human rights covenants, but notes that rights to adequate health and nutrition can, technically, be satisfied through the direct provision of food. This argument is possibly more problematic when applied to rights to livelihood by work. But note that none of these technicalities preclude arguments for establishing formal priorities of allocation that favor irrigation over, for example, industrial use, particularly where irrigation is clearly not a purely commercial enterprise, but rather enables the primary means to livelihood for established communities of smallholders. Under Indonesia’s water law, basic uses, including noncommercial irrigation, are granted highest priority, but priorities in allocation of water for commercial uses are established at the discretion of government at the appropriate level. Conclusions As an important component of Indonesia’s comprehensive water sector reforms, the government passed a new National Water Law in February 2004. One objective is to establish a uniform system of water use rights. The law distinguishes between 258 SUHARTO SARWAN, TJOEK WALUJO SUBIJANTO, AND CHARLES RODGERS basic usage rights (Hak Guna Pakai Air) and commercial or exploitation use rights (Hak Guna Usaha Air). Basic usage rights are entitlements requiring no formal permit, while exploitation rights require formal licensing for specific uses of water. The law specifically precludes transfers of water rights. Experience from the pilot basin programs will be used to strengthen national implementation of water use rights. The Brantas Basin offers an example of relatively effective institutions for river basin management, which have been developed over many decades. However, analysis using a hydrologic–economic model indicates that transfers could yield substantial additional benefits, compared to establishing only nontradable rights. Under the new law, transfers between sectors could occur, but only through the agency of the government, which would reacquire water use rights when, for example, land is converted out of irrigated agriculture, commercial permits expire, license conditions are violated, or if the right is not exercised. The government would then be able to reallocate this water to different parties or sectors, subject to priority and availability. Given the interest of numerous international institutions in seeing water use rights made transferable, it is likely that the issue of water use transfers will be revisited in Indonesia’s future. It is entirely reasonable, however, to insist that the basic framework of use rights be established, clarified, and legally secure before allowing market-type transfers. The government will necessarily have an ongoing role in supervising water sector transactions whatever the form they ultimately take, in order to perform its constitutionally mandated functions, to ensure that water allocation decisions are consistent with local custom and regional development goals, and to protect the welfare and economic security of all of Indonesian citizens, particularly the weak and vulnerable. Notes 1. The equivalence of “to govern” and “to own” is not completely self-evident, although the state’s power to alienate is an important aspect of the right to capital. State ownership is qualified, however, by its duty to utilize water resources for the welfare of the people, thus negating rights to waste or destroy, which Honore included (1961) under the right to capital. References Amron, M. 1998. Basin water resources management policy in Indonesia. Jakarta: Directorate General of Water Resources Development, Ministry of Settlements and Regional Infrastructure. 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