Indonesia - TRAID Wheel Country Report... · Executive Summary 4 1. Country profile 6 ... Most of...

Indonesia Positioning Survey for the Dutch water sector

Aidenvironment

Commissioned by

RVO/NWP

April 2015

Project number 2526

Aidenvironment

Barentszplein 7

1013 NJ Amsterdam

The Netherlands

+ 31 (0)20 686 81 11

[email protected]

www.aidenvironment.org

Project number 2526 2

Indonesia

Contents

Glossary 3

Executive Summary 4

1. Country profile 6 1.1 Facts and figures 6 1.2 The water situation 7 1.3 The water sector 9

2. Chances and opportunities 15 2.1 Current situation 15 2.2 Trends 22 2.3 Opportunities 24 2.4 Product-Market Combinations 32

3. Market entry strategies 35 3.1 Entering the country 35 3.2 Seeking finance 36 3.3 Sector performance 42 3.4 Successes and lessons learned 44 3.5 Drivers and bottlenecks 45 3.6 Strategies for each PMCs 48

Appendix I: Methodology 53 Appendix II: Finance 55 Appendix III: Elaborated outcomes of web survey 62 Appendix IV: Sources 66 Appendix V: Respondents 67

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Glossary

ADB Asian Development Bank

B2B Business to business

B2C Business to consumer

BTI Bertelsmann Transformation Index

CSR Corporate Social Responsibility

DG Directorate General

EIB European Investment Bank

EKN Embassy of the Kingdom of the Netherlands

GoI Government of Indonesia

GoN Government of the Netherlands

GWI Global Water Intelligence

IFI or IFIs International Financial Institute(s)

INA Indonesia Netherlands Association

IRP Indonesian Rupee

IWRM Integrated Water Resource Management

JMP Joint Monetoring Program (Unicef)

MDG or MDGs Millennium Development Goal(s)

NGO or NGOs Non Governmental Organization(s)

NRW Non Revenue Water

NWP Netherlands Water Partnership

ODA Official Development Aid

OS Ontwikkelings Samenwerking (Development Aid)

PMC or PMCs Product Market Combination(s)

PPP or PPPs Public Private Partnership(s)

PSO or PSOs Public Service Organization(s)

RVO Rijksdienst voor Ondernemend Nederland

SWF or FDW Sustainable Water Facility

USDP Urban Sanitation Development Plan

WASH Water and Sanitation and Hygiene

WB World Bank

WOP Water Operating Partnership

WTP or WTPs Water treatment plant(s)

WUA or WUAs Water Users Organization(s)

WWTP or WWTP(s) Waste water treatment plant(s)


Executive Summary

Introduction:

The aim of the water positioning survey is to identify opportunities, product market combinations

(PMCs), strategies, and approaches for the Dutch water sector in [country]. Chapter 1 gives an

overview of the current water situation and the water sector, chapter 2 provides insight in the current

activities, opportunities, and potential PMCs that are present for the Dutch water sector, and chapter

3 elaborates on the (positioning) strategies to enter and operate on the market.

Demand (pressing needs):

Prolonged droughts, increased frequency in extreme weather events, and heavy rainfall leading to

floods, and food security risks, are a few examples of Indonesia’s sensitivity for climate change

effects. In all sub sectors, pressing needs are there, the most important are:

Changing land use (e.g. urbanization, plantations), economic growth leading to industrial

expansion (e.g. food and garment industry), will increase pressure on the available water

resources (and demand for good quality water).

Increased discharge of municipal and industrial wastewater will deteriorate water catchment

areas and waterways and lead to low quality of river water.

Rapid urbanization, especially near the coasts will lead to increased peak discharges; this will

increase the risks of floods. Besides, urbanization will lead to increased use of groundwater that

causes land subsidence (leading to flooding).

The current coordination between ministries is poor and unsuccessful. Weak water management

leads to poor operations and maintenance of infrastructure.

Hard to reach areas are in need of water supply services. In order to meet the MDG 2015 targets,

GoI needs to bridge a USD 3.8 billion funding GAP1.

Current interest and activities of Dutch organizations:

Indonesia ranks number one, having a 31% share in total export to Water OS countries. The main

activity of the Dutch water sector is to provide advice / capacity building, or act as supplier on water

management and water supply and treatment (including waste water). Public sector and knowledge

institutes were and still are important client groups; however the local private sector becomes

increasingly important. The Dutch water sector has a strong presence in dredging and land

reclamation; this is a specific niche with a limited number of sector players involved. Additional

promising areas are IWRM, and water productivity (food), cross-overs of interest are water and ICT

(flood warning systems). EKN and RVO support focus on water engineering, IWRM and WASH.

Potential product market combinations:

The confrontation of local demand and Dutch interests lead to the following potential PMCs:

Capacity building of local water providers (PDAMs), knowledge exchange on wastewater, water

and industry, and sanitation, NRW reduction strategies and implementation (client: PDAMs).

Coastal protection, polder development, both integrated into urban development, combined with

ICT based products and services in flood risk management (client: divers within private and

public sector).

Design and supply of wastewater treatment technologies for specific industries and public utilities

within the urban setting (client: PDAMs, garment and food industry).

1 GWI 2014


Suggestions on positioning strategies for future activities:

Dutch companies should consider forming partnerships with the larger Indonesian companies, which

can then front offers to private companies and / or the government (preferably following an

unsolicited PPP procurement approach). Another strategy is to build consortia that aim to deliver

turnkey solutions while staying involved in the operations and finance for a longer period. Master

Plans and technology demonstration platforms are effective ways for positioning the Dutch

knowledge and products. WOP strategies proof to be effective when operating in urban areas (middle

sized urban areas: 2-3 million inhabitants) on water and sanitation.

This positioning survey is not a fully fledged marketing survey or report. This survey elaborates on

the (current/base line) activities of the Dutch water sector and flags potential opportunities and

product market combinations. The survey makes suggestions on possible positioning strategies for

Dutch sector players. To make a well balanced decision on entering or operating on these markets we

recommend organizations to perform an in-depth due diligence themselves.


1. Country profile

This chapter provides an overview of all relevant basic information on the country in general and the

water sector specifically. The chapter has three parts: 1) facts and figures on the country, 2) the

(physical) water situation, and 3) the water sector, describing the institutional setting and

framework. Part 3 ends mentioning the Dutch Government strategy on cooperation.

1.1 Facts and figures

Table 1 Facts and Figures

Stability Indonesia is a relative stable country, with a large Muslim majority

(87%). Many provinces and districts know ethnic or religious groups

that want to have more law enforcing functions. Some unrest is

visible in Papua. The country knows freedom of (expression of)

religion; however, in practice this can be disputed. In addition, there

is freedom of association and assembly in the country, which has

lead to the establishment of many labor unions, grass root advocacy

groups and women’s rights associations.

Political situation:

After a long political history under President Suharto, the country is

still transforming to a more democratic state. After the financial

crisis of the late 1990s in Asia, a number of presidents have ruled the

country. The current president is Mr. Joko Widodo, who was elected

in 2014. The president is chosen through a general election, which

occurred first in 2004. Important governmental bodies are the

House of Representatives (DPR), the Regional Representatives

Assembly (DPD) and the People’s Consultative Assembly (MPR),

which consists of members of the DPR and the DPD. The

government reaches far in the country, to local municipalities and

village levels. The power of the army is limited, but it is still

influential in the background and has it’s fingers in many economic

activities. The power of large business groups is big, having great

pressure on the political system now-a-days. Indonesia has an anti-

monopoly policy, which means that the government does not grant

monopolies to politically connected entrepreneurs.


Language Bahasa Indonesia

Population 253,609,643

Population growth 0.95%

Economic growth (GDP

growth in %)

5.3% (2014), 5.6% (2015), 5.6% (2016)

GDP (PPP) USD 1.285 trillion (2013) comparison to the world: 16

GDP (PPP) per capita USD 5,200 (2013)

Unemployment rate (in%) 6.6% (2013)

Inflation rate + forecast

2020 (in %)

6.23% (2014), 4% (2015), 3.5% (2020)

Foreign direct investments

(in % of GDP)

2.7%

ODA in % of GNI 0.0%

Imports USD 178.6 billion

Import partners (in terms of

total import)

China (15.3%), Singapore (13.6%), Japan (11.6%), Malaysia (6.4%),

South Korea (6.2%), USA (6.1%), Thailand (6%)

BTI index on banking system 8 out of 10

Doing business index 117 out of 189

WEF Global competitive

index

34 out of 144

Source: CIA Intelligence 2012-2014/BTI/World Bank Indicators/World Economic Forum

1.2 The water situation

This section describes the physical water situation (including flooding of river systems, coastal zones

and maritime areas), the influence of climate change, the effect of irrigation and the water pressure.

1.2.1 Physical description of the water situation

Rainwater:

Indonesia is located in a wet tropical region with an average annual rainfall of about 2,700 mm,

varying from 1,300 mm in East Nusa Tenggara to 4,300 mm in parts of Papua (Bappenas, 2004).

Ground water:

Most of the groundwater, an estimated 90% returns as base flow to the rivers. It is assumed that only

30% of groundwater resources are consumable, called ‘safe yield’. Over-abstraction of groundwater in

Jakarta has caused saline groundwater to reach about 10 km inland from the coastline and has led to

land subsidence at a rate of 2-34 cm/year in north Jakarta. Over-abstraction also occurs at the larger

municipalities like Semarang, Bandung, and others.

Surface water:

Most of the lakes in Indonesia are of volcanic origin. Lake Toba is the largest volcanic lake in the

world with an average surface area of 1,100 km2 and an average volume of 1,258 km3. Based on a

recent river territory inventory, Indonesia has 14 rivers that exceed state boundaries: five rivers with

Malaysia in Kalimantan island, three rivers with Timor Lorosae in Timor island, and six rivers with

Papua New Guinea in Papua island. There are no records of major issues related to these trans-

boundary rivers.


Sea water:

It’s worth noting that desalination does not have a significant role in Indonesia’s current medium-

term water sector development plan.

1.2.2 Climate and climate change

Being an Archipelago, Indonesia is very vulnerable for losses with climate change. Prolonged

droughts, increased frequency in extreme weather events, and heavy rainfall leading to big floods, are

a few examples of climate change. Indonesia will experience modest temperature increase and more

intense rainfall. Perhaps the largest concern for Indonesia is the impact on food security.

Food security has been a significant government concern starting from the world price shocks of

2008. Presidential Decree No. 5 Year 2011 calls for increased surplus rice production of 10 million

tons (about 15%) by 2015 to address food security through a policy of rice self-sufficiency. In 2011,

Indonesia produced 65 million tons of rice, production has been growing slowly (about 1% annually)

over the last ten years mainly from increases in irrigated area and cropping intensity.

1.2.3 Pressures on water sources2

Total renewable water resources 2,019 km3/yr

Fresh water withdraw 113.3 km3/yr

Total internal natural renewable water resources are around 2,018.3 km3/year. Surface water

resources are an estimated 1,972.6 km3/year and groundwater resources 457.4 km3/year.

About 70% of the water availability is on Kalimantan and Papua, which is only populated by 13% of

the total population. On Java and Bali water demand exceeds water availability, in Java and Nusa

Tenggara a water deficit occurs during the dry season (July to October, varying by the province).

Even some significantly large river areas in Java are estimated to face water deficit problems during

the dry season.

1.2.4 Irrigation

The total cultivated area in 2009 was 426,000 sq km, which is around 24% of the total area of the

country, which is 1,811,569 sq km. The irrigated land is about 67,220 sq km (2006). The irrigation

potential of the country is an estimated 109,000 sq km. Indonesia’s agriculture sector is dominated

by the cultivation of rice of which 82% is grown under irrigation.

1.2.5 Flooding of river systems

Between 1970 and 2011 3,980 flood events were recorded in Indonesia with an estimated 1.1 ha of

destroyed crop land, and 65,000 kilometer of damaged roads. Yearly on the average 150,000 people

need to evacuate, 210 people lose their lives and 11,000 houses are being damaged3.

As an example, in and around Jakarta, flooding is a major issue and a direct threat to the population

and the economical development of Indonesia’s biggest city. The capital region of Jakarta is located

on the north coast of the island of Java in the Indonesian archipelago in Southeast Asia. Jakarta is

situated in a lowland area, a delta where 13 smaller and bigger rivers try to reach the sea. About 40%

of the city, the area the furthest north near the Java Sea, is situated below sea level4. The greatest

climate and disaster‐related risk facing Jakarta is flooding, which will impose high human and

economic costs on the city.

2 CIA Intelligence 2012-2014

3 national disaster management center, http://dibi.bnpb.go.id

4 The World Bank, 2011

http://dibi.bnpb.go.id/


Besides Jakarta, parts in the North West of Sumatra, North Java, and parts of Kalimantan have been

hit by floods during the last decades.

1.2.6 Coastal zones and maritime areas

Indonesia has some 300 public ports scattered over the 54,716 km coastline of the archipelago.

Jakarta, Surabaya, Belawan, and Ujung Pandang, the four largest ports, handle most of Indonesia’s

export and import cargoes, except for special commodities such as crude oil, logs, timber, rubber,

palm oil, and fertilizer which use specialized ports. Much of the domestic traffic originates or is

destined to these four ports.

Inter-island shipping is the prevailing means for distributing goods through the ports in Indonesia.

The cargo volume carried by inter-island shipping services reaches over 300 million tons, far

exceeding international trade volume. It is estimated that inter-island shipping accounts for 60 % of

the total sea borne cargo movement in the country. Especially, for remote islands like Sulawesi and

others, the percentages of cargoes carried by inter-island shipping are even higher.

In the coming years (sea) port development will remain high on the top priority investment list of

GoI. The EKN Jakarta and the Indonesian Embassy in The Hague organize several seminars about

port development (e.g. on 30 April 2015, The Embassy of Indonesia in The Hague organized The

Third Indonesia-Netherlands Infrastructure Forum (IF III)).

1.3 The water sector

This section describes the public sector, the legislation, the spending and investment planning and

the role of the private sector, NGOs and knowledge institutes. This section ends by identifying the

pressing needs and explaining the Dutch Government engagement strategy.

1.3.1 Public sector

Indonesia does not have a centralized body that holds the responsibility for the water sector.

Different governmental bodies handle different tasks and are coordinated by the Government of

Indonesia (GoI ).

Figure 1 Public sector

Relevant for the water sector

GoI

Ministry of Public Works and Housing

Ministry of Health

Provincial Government

Local Government

Ministry of Finance Ministry of Home Affairs Ministry of Environment Ministry of Energy and

Mineral Resources

National Development Planning Agency

(BAPPENAS)


Source: GWI 2014

The ministry of Public Works and Housing (also referred as the Ministry of Public Works) is most

involved, this ministry is in charge of 1) the dealing with tenders, contract, and procurement

processes, which are then delegated to specific directorates, and 2) providing national-level water and

wastewater policies, technical standards and technical assistance.

Figure 2 Public sector

Relevant for the water sector

Source: Ministry of Public Works 2010

The Directorate General (DG) Water Resources deals with the management and development of the

water sector, DG Human Settlement is involved in the water and wastewater sector through two

directorates. The Research and Development Board is responsible for conducting water resource-

related research and development activities.

GoI acknowledge the need of a coordinating central body. The coordinating body is called the Water

Resources Council and is structured at different levels (e.g. National, Provincial) The board provides

service to the National Water Resources Board on the development and formulation on national

policy and strategy (water resource management), the management of river and groundwater basins,

and the development and formulation of policies on hydrological information systems. It is unclear

how this body is structured and the power of influence it has.

Besides the different Ministries mentioned above, the National Development Planning Agency

(BAPPENAS) plays a crucial role. This Ministry prepares the National Development Plan, including

project coordination and evaluation within the water sector. This agency is an advisory body to GoI .

Within the Ministry of Agriculture, DG Infrastructure and Agriculture Inputs is responsible for

farmer level irrigation management and the Water User Associations. This DG formulates policies on

land and water management and promotes responsible planning, administration and management.

Indonesian Association of Water Utilities

Water Utility

Ministry of Public Works and Housing

DG Water Resources DG Human

Settlements

Drinking Water Development

Environmental and Settlement Sanitation

Research and Development Board

Water Resources Research and

Development Center


Decentral level:

As part of its major bureaucratic reform program, the Jakarta city administration will spin off the

water resources unit from the Public Works Agency. The separation will take effect in 2015.

Currently, the Public Works Agency oversees various infrastructure sectors, including roads (Bina

Marga) and water resources (rivers and coasts). The new agency overseeing rivers and coastal areas

would focus on water resources, flood control and waste treatment, issues deemed crucial to Jakarta.

PDAMs are the local suppliers of drinking water (state-owned), with exception of a small number of

private concessions.

1.3.2 Legislation5

Indonesia is divided into 33 provinces, made up of 400 cities or municipalities (kota) and districts

(Kapupatan). Districts and cities are divided into sub-districts. Provinces, districts and cities are led

by governors, regents, and mayors. Each level of the three tier structure has an executive and a

legislature. GoI passes legislation and provides detailed guidance for implementation as Indonesia

has a highly decentralized system of government. The majority of local government is heavily in debt,

which has held back implementation and enforcement of regulations.

In 2004 GoI passed the ‘new’ water law, although not fully completed, for the first time this law

provided a framework for water legislation and governance, and included advanced concepts of

IWRM and the decentralization law. From 2004 this framework has slowly been started to fill out.

Regarding drinking water and wastewater discharge standards, the relevant legislation is:

Law No 32/2009 Protection an Management of the Environment

Government Regulation No. 16/2005 Development of Water Supply System

Law No. 32/2004 Local Government Autonomy

Minister of Environment Decree No. 51/2004 Sea Water Quality Standard

Law No. 7/2004 Water Resources

Government Regulation No. 82/2001 Water Quality Management and Water Pollution Control

Law No. 23/1992 Health (setting drinking water quality standards)

Minister of Environment Decree No.45/1996 Clean Beaches/Shores program

In the first quarter of 2015 the Water Law 7 of 2004 was declared unconstitutional by the

Constitutional Court in February and is now void in its entirety. This has far-reaching consequences

for all commercial activities that use water. The extent of these consequences requires further

research and will depend on the effectiveness of attempts by the Ministry of Public Works to repair

the legal loopholes that now exist. In any case, it will increase the pressure on companies to minimize

their extrusion of water from the environment, and recycle and reuse water as much as possible.

Regarding wastewater discharge (standards), the relevant legislation is:

Government regulation No. 16/2005

Regulation of the Minister of Environment No. 112/2003 (domestic wastewater)

Minister of Environment Decree No.51/1995 KEP-51/MENLH/10/1995 (industrial wastewater)

Specific decrees per industry sectors (e.g. Minister of Environment Decree No. 122/2004)

Specific decrees for Industrial Zones (e.g. Minister of Environment Decree No. 3/2010)

Law 32/2009 allows the provisions to strengthen the enforcement

Minister of Environment Decree No. 29/2003 (reuse of wastewater for irrigation)

Regarding Water Resource Management:

5 GWI 2014


PP No. 41/2008

PP No. 69/2014 (on water rights)

Perpres No. 33/2011 (on the national water resources management policy)

Permen PU No 04/PRT/M/2008 (on the guidelines for the establishment of Water resources

Management Coordination at the Provincial, Kabupaten and River Basin level

Specific regulation applies to use of water in industry, just as activities performed under other water

sub sector. The listing of these regulations goes beyond the scope of this survey.

1.3.3 Public sector current spending and investment plans

Water and wastewater sector funding is primarily the responsibility of the local government and the

respective PDAM in the particular area. However local budgets are not sufficient to finance the

infrastructure needed to meet demand, therefore local governments pursue alternative funding

sources. The total contribution of PDAM and local government into the common water infrastructure

is USD 62.2 million (2009) and growing 25% ever since6. The Indonesian Investment Agency (PIP)

started its operation in 2007, its assets have grown from USD 518 million to USD 1.6 billion in 2011.

The Indonesian Water and Sanitation Financing Program is expected to start its operations from

2013 and is financed by GoI , World Bank and other donors. In 2011 capital expenditure (drinking

water and wastewater) reached a level of about USD 2.1 billion. GoI has allocated a budget for Water

Supply in Urban and Rural settings of USD 6.7 billion (2011-2014), and a budget of USD 3.4 billion

for the wastewater sector (2009-2014).

Public spending on irrigation decreases slightly, but still the GoI spends about EUR 250 million on

irrigation annually, EUR 218 million through central budgets of the Ministry of Agriculture, and EUR

33 million through the so called Special Allocation Funds7.

1.3.4 Private sector

At the local level, the government acknowledges the need of private sector involvement in small-scale

private sector cooperation, large-scale PPPs and CSR projects. The potential of CSR funding is

estimated between USD 1.5 and 2 billion annually. Commercial on lending is currently possible

through the World Bank assisted Urban Water Supply and Sanitation Project, a project that allows a

selected number of PDAMs to improve their water supply infrastructure.

The Water Resource Law No.7/2004 allows a degree of water privatization by giving water

exploitation rights to individuals or businesses. So far international companies participate mostly

through PPPs (mainly concessions and BOT contracts). Progress in engaging the private sector in the

water and sanitation sector has been slow. Factors that constrain PPPs include institutional

coordination and leadership issues, land clearance problem, poor project identification and

preparation, and the continuing regulatory uncertainty (Indonesian Infrastructure Five Years and

Beyond Key Themes and Priorities for the 2015-2019 Development Plan. Ind. II, 2013).

6 GWI 2014

7 Regional fiscal balance funding is a fund, financed by the central budget and allocated to an area/region to fund area’s necessity in

decentralization implementation. This funding comprises three different funds: Revenue Sharing Fund, General Allocation Fund, and

Special Allocation Fund. Based on the Indonesian Proposed Budget 2015 the regional fiscal balance funding in 2015 is IDR 509,499.2

billion (USD 38.5 billion (1 USD = 13,245 IDR)). The amount of money pledged in the special allocation fund is IDR 35,820.7 billion

(USD 2.7 billion), IDR 496 billion (USD 37.4 million) of this fund is allocated to irrigation.


1.3.5 NGOs and knowledge institutes

In terms of Indonesian (local) NGOs who are working on water issue, there are quite a few of local

NGOs doing water programs around Indonesia especially in rural areas. These NGOs focus mainly on

sanitation and hygiene behavior. This is in line with the GOI ’s national policy on community-based

sanitation. NGOs tend to follow the donor trends, and have water and sanitation as one of their

programs, besides e.g. health or livelihood for example. NGOs focus on the areas or communities that

are left behind in GoI water programs.

Local NGOs operating in the water sector are: Yayasan Dian CD Bethesda, Yayasan Rumsram, and

Yayasan Masyarakat Peduli. Dutch NGOs actively involved are SNV, Plan Indonesia, and Simavi. The

biggest water and sanitation programs in Indonesia are those from WSP World Bank and UNICEF at

the national level, as for the international agencies working for WASH in Indonesia AusAID, and

USAID (IUWASH) play an important role as well.

Every Ministry in Indonesia has a Research and Development Institute. Besides, five non-ministerial

government institutes are in place, coordinated by the State Ministry of Research and Technology,

one of these five is worth to mention: Lembaga limu Pengetahuan Indonesia (LIPI). Indonesia hosts

the Regional Water Knowledge Hub for River Basin Organizations and Management (CRBOM) as

well. CRBOMs’ knowledge partners include local, national, regional and international institutions.

1.3.6 Dutch cooperation and priorities through EKN8

EKN Jakarta focuses on three areas: 1) water and safety, 2) water, food eco/river basin systems, and

3) sanitation and wastewater treatment.

Regarding water safety, the objective is to apply the jointly generated Indonesian and Dutch

knowledge and experience in the field of flood control, delta management and integrated water, land

and spatial management at the level of government policy and planning, and private sector

investment activities. The expected result is 1) to enhance the Netherlands’ share in the effective

implementation of the Jakarta coastal development Master Plan by private and public investments in

a substantial way, and 2) to make sure flood and water management programs are operational or

completed in similar delta or flood prone areas (Semarang, Surabaja, Bandung, Maluku river basins).

Regarding water, food and eco/river basin systems, the objective is to improve land- and water-

management on Java and Bali in such way this will contribute to higher yield level and more efficient

water use in agriculture through use of Dutch water and agricultural expertise. The expected results

are 1) firms from the Netherlands continue to play a significant role on the water and food (security)

nexus, 2) improved operation and management of irrigation systems and (irrigated) land in

Indonesia by applying the approach of the Participatory Irrigation Sector Project (PISP) in the

Indonesia Irrigation Sector Program (IISP), and 3) intensive agriculture approaches for peri-urban

areas (re-use, water efficiency) are applied.

Regarding sanitation and wastewater treatment, the objective is to 1) strengthen the role of the Dutch

water sector in sanitation programming and implementation in the public sphere as well as the

market presence in private (urban) markets, and 2) promote the use of Dutch experience in the field

of water treatment, monitoring of water quality and environmental regulations. EKN aims 1) the

Netherlands will acquire a central position in the areas of urban sanitation and water quality

management, 2) the Urban Sanitation approach (PPSP) to be applied in all 490 urban centres (policy,

plan, implementation), 3) off-site sanitation installations operational in selected cities in Indonesia,

4) (post-) MDG targets on sanitation and national STBM objectives reached in selected districts and

8 MASP 2014-2017


villages in East Indonesia and South Sumatra (persons and districts), and 5) inclusion of the

PPSP/USDP and STBM experience within the Five Year Plan 2015-2019.

Cross cutting themes are 1) climate change, and 2) capacity and institutional development.


2. Chances and opportunities

This chapter presents the results of the web survey among Dutch water sector players, completed by

the main observations derived from previous (existing) market studies and interviews with water

professionals and strategic actors within the Dutch water sector (please refer to Appendix 1 providing

an overview of the method of research). The first section describes the current situation. The second

section describes the most important trends, linking the current situation with future opportunities,

which is the topic of the third section. This chapter ends by identifying promising product market

combinations (PMCs).

2.1 Current situation

The section starts by describing the current situation, how the Dutch water sector is involved, the

type of activities performed, client groups and performance on specific development indicators.

2.1.1 Dutch sector involvement

The share of total Dutch exports in the water sector to the 12 OS-countries is estimated at 25%of total

Dutch exports in this sector, this equals about EUR 60 million9. Figure 3 shows the breakdown of

these exports over the various OS-countries. The share of Indonesia is 31% of this total.

Figure 3 Breakdown of Dutch exports in the water sector to the 12 OS-countries, in %

of turnover (N = 60)

9 This estimation is based on the sample results of the web survey. Starting from this value relative export shares of the various regions

and countries have been determined for the sample. Since the sample may not represent the whole water sector in an optimal way, the

research cannot draw any hard or general conclusions. The actual value of export will be higher, but this value can only be obtained with

sample results once the whole population is known. Getting to know the population is complex and cannot be realized in the context of

this study. Another complicating factor lies in the fact that large projects (especially those in water construction) may influence export

figures drastically and lead to large fluctuations over time. For the sample of the web survey no such ‘disturbing’ projects have been

found. The method used in this survey is in line with the method used for WEX 2014, which are also based on sample results.

0% 5% 10% 15% 20% 25% 30% 35%

Indonesia

Bangladesh

Ghana

Mozambique

Kenia

Rwanda

Ethiopia

Benin

Palestinian territories

SouthSudan

Mali

Yemen


Source: Web survey Panteia, 2014/2015

Figure 4 shows that Indonesia is a popular country for Dutch companies10 as well as for NGOs in the

water sector (see 1.3.5. for an overview of most important NGOs active in Indonesia). It appears that

33% of the companies and 50% of the NGOs in the sample are active in this country. About 33% of

the companies and nearly 20% of the NGOs in the sample are not active yet in Indonesia but

interested though. Do note, this overview does not comprise the perspective of the size of the

activities (in contrast to figure 3 that involves the monetary value of activities).

Figure 4 Popularity of OS-countries amongst Dutch parties in the water sector, % of

active or interested companies in the various countries (N=87) and NGOs (N=16)

10

It should be noted that we apply the term ‘companies’ for companies as well as for knowledge institutes and water boards unless these

latter terms are used separately in the text.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

companies

NGOs

companies

NGOs

companies

NGOs

companies

NGOs

companies

NGOs

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NGOs

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NGOs

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NGOs

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Active in Interested in



NWP drafted an overview of Dutch projects and business involvement in Indonesia. Please refer to:

http://www.ina.or.id/images/stories/download/water/12-0156-projectkaart-wt-lr-20120917.pdf

This map will be updated in 2015.

Examples of Dutch organizations having activities in Indonesia are:

http://www.ina.or.id/images/stories/download/water/12-0156-projectkaart-wt-lr-20120917.pdf


Table 2 Dutch water sector involvement

In Indonesia11

Organization PMC

Royal Eijkelkamp Coastal management, development, land

reclamation, urban water management

Witteveen + Bos Urban water management, coastal management,

land reclamation, port development and

management

Deltares Coastal management, development, land

reclamation subsidence and salinization,

Integrated water (resources) management

Ecorys Coastal management, development, land

reclamation

Grontmij Coastal management, development, land

reclamation

Royal HaskoningDHV Local presence in the form of an Indonesian

consultancy and engineering company, focusing

on all sub sectors and cross-overs; various

projects: Urban Sanitation, Water Management,

Coastal Development

Nijhuis Water Technology Collection and treatment of industrial

wastewater

Aqua Industrial Water Treatment Collection and treatment of industrial

wastewater

Arcadis Coastal management

Euroconsult Mott MacDonald Water productivity and food production –

irrigation, Drinking water supply and treatment

TNO Reuse of industrial wastewater

REDOX Water Technology Water and food, wastewater treatment

Unesco IHE Knowledge development, capacity building

Simavi WASH

BAM Coastal management, development and land

reclamation

IHC Water and Industry (mining), off shore vessels

WAVIN Drinking water supply and treatment, water

distribution and quality, drinking water

transport and distribution, and collection and

treatment of domestic wastewater

Basic Water Needs Drinking water treatment (B2C)

TU Twente ITC Water and Agriculture, urban planning

AAWS Drinking water treatment

Hatenboer Water and Food production

VEI WASH, drinking water supply, wastewater

treatment

Berson UV Water treatment

Source: Strategic interviews Aidenvironment / Engelsman

11 From a geographical point of view, Dutch involvement is strongly focused on Jakarta, Soerabaja, and Medan, and not ‘spread all over

the country’.


Current activities in various subsectors in Indonesia

Most companies in the sample are active in the subsector water management and water supply and

treatment, followed by wastewater and water and green. PSOs operate in the subsector water supply

and treatment, while NGOs focus on water management and water and green. See figure 5.

Figure 5 Current activities of Dutch companies (n=21), Public Service Organizations

(knowledge institutes, water boards and water providers: PSOs (n=7)) and NGOs (n=8) in the various subsectors of Indonesia, in % of total observations


Figure 5 does not include the perspective of the size of economic activities. E.g. the water

construction sector (especially land reclamation, port and coastal development) is characterized by

large (in terms of monetary value) projects.

Activity areas of Dutch parties in Indonesia

Nearly 60% of Dutch companies is active in the activity area ‘Advice’. Another substantial %age

(>60%) is supplier of goods and/or services. Capacity building / knowledge transfer is the main

activity of NGOs in Indonesia followed by technical advice / supports in projects. See Figure next

page.

0% 20% 40% 60% 80% 100%

Water supply and treatment

Wastewater

Water management

Water and green

Water construction

Companies PSOs NGOs


Figure 6 Current activity areas of Dutch companies (n=19), PSOs (n=6), and NGOs (n=8) in Indonesia, in % of respondents (more answers possible)


0% 20% 40% 60% 80% 100%

Advice

Design

Procurement

Contracting

Operations

Maintenance

Supplier

Research / knowledge development

Capacity building / knowledge transfer

Implementation

Technical advice / support in projects

Lobby / advocacy

Capacity building / knowledge transfer

Implementation infrastructure

Technical advice / support in projects

Companies PSOs NGOs


Client groups of Dutch parties in Indonesia

The public sector financed by ODA and the public sector with own finance are the most important

client group for companies in Indonesia. The public sector financed by ODA, local NGOs and

international NGOs are the important client group of NGOs. PSOs focus on water companies and the

public sector financed by own means. See Figure 7.

Figure 7 Current client groups of Dutch companies (n=19), PSOs (n=6) and NGOs

(n=8) in Indonesia, in % of respondents (more answers possible)


The strategic interviews revealed for Dutch companies, the Indonesian private sector becomes more

and more important as a client group (business to business).

2.1.2 Progress on MDGs

In Indonesia the relative poverty decreased from 16% (2005) to 11% (2014), in 2014 28 million

Indonesian people lived below the poverty line12. The progress on MDG reflects the countries results

on this specific MDG while the other relevant development indicators show the results of programs

supported by EKN.

Table 3 MDG 7 reporting

Drinking water and sanitation

MDG indicator In % of total population

Improved drinking water source total 84.9%

Improved sanitation facility access total 55.8%

Source: JMP 2014

12 World Bank Statistics 2014

0% 20% 40% 60% 80% 100%

Public sector with own finance

Public sector financed by ODA

Water companies

Contractors

Local private sectors

Industrial companies

Agricultural companies

Port authorities

Local NGOs

International NGOs

End beneficiaries

Local knowledge institutions

Companies PSOs NGOs


GoI ambition is set on 100% coverage (water and sanitation). According to the Joint Monitoring

Program, Indonesia met targets on drinking water, and is lacking behind on reaching the MDG goals

on sanitation

The result fiche of the Dutch Embassy reports on a specific set of parameters, four specific indicators

relate to the water program portfolio.

Table 4 Dutch development support

Through the Dutch Embassy program

Development indicator Units Baseline 2013 2015 (target)

Rehabilitated irrigation ha 0 142099 142443

Improved OandM costs ha 0 314777 274068

Set up of Water User Associations # WUA 0 5719 6250

Reduced risk of flooding % less risk 0 5 5

Source: Result Fiche 2013

2.2 Trends

This section describes the trends starting by summarizing the most important pressing needs

followed by an overview of government plans and the agenda of donors and funders.

2.2.1 Pressing needs

Although water resources are abundant, the seasonal and spatial variation in the rainfall pattern and

lack of adequate storage create competition and conflicts among users. The continuing urban and

industrial expansion will put more pressure on the available water resources, and will lead to

increased demands for good quality water.

Municipal and industrial wastewater is discharged virtually untreated into the waterways causing

rapid deterioration in the quality of river water. The Ministry of Environment indicates a number of

12,000 SMEs with surface water pollution potential, about 50% of the industries can be found in the

food and beverage sector, about 20% in the textile industry. Water quality standards are frequently

exceeded and the collapse of existing reservoirs’ natural purification capacity is an important threat

for the future water supply in the region. Within the urban settlements, there is a lack of public

understanding on the importance of proper sanitation and wastewater treatment, causing diseases

and environmental damages.

Especially the small islands have limited ground water resources and face acute water stress13. Deep

groundwater resources are being exploited at a rate which is not sustainable.

Rapid urbanization, especially near the coasts will lead to increased peak discharges. Together with

the large subsidence in cities like Jakarta and Bandung, this will increase the risks of floods. Climate

change will have an accelerating effect on this trend. Together with the deterioration of watersheds,

flooding causes massive sedimentation of reservoirs.

13 FAO, Aquastat 2014


The main threat to water availability is poor water management. There is a lack of a centralised body

that specifically deals with all water sector related issues, the current coordination between ministries

is poor and unsuccessful. This leads to poor operations and maintenance of the current water and

wastewater infrastructure.

Hard to reach areas are in need of water supply services. In order to meet the MDG 2015 targets, GoI

needs to bridge a USD 3.8 billion funding GAP14.

2.2.2 Government plans and agenda15

Since 2010 GoI has been using the five pillar strategic approach for the development of the drinking

water sector:

Improve of coverage and quality of drinking water

Optimalisation of multi funding development, aimed to attract financing from local governments

Institutional and regulatory development especially on water service providers’ level

An IWRM strategy to protect river basin areas

Strengthen the partnership with private sector and general public

On wastewater GoI has developed a five pillar strategy as well:

Increase access to on-site and off-site sanitation, regarding the first mentioned the aim is to reach

a 55% coverage on national level through application of individual or communal septic tanks

Increased community and private participation

Strength institutional capacity of service providers

Improving law enforcement

Improve financial capacity and increase access to alternative funding sources

GoI is focusing its efforts on reaching the MDGs, which opens up opportunities for the private sector

as GoI cannot reach these goals on their own. Especially the BOT contracts for Water Treatment

Plants and water supply pipe networks will open new opportunities. Due to the ongoing

decentralization, GoI pays attention to the capacity building of new local water service providers in

the newly developed urban areas.

Though climate change is not a key driver for policy change, the government of Jakarta set policies

related to climate adaptation in their Spatial Planning for 2030. The increasing attention of the

government in climate adaption will probably result in more regulations for the private sector,

especially for the property developers. This might become a driver for solutions that focus on e.g.

increasing water catchment and groundwater recharge. However, in order to be effective, such

policies and regulations will have to be monitored. At the moment this is not always the case and

therefore policies do not always result in opportunities yet.

During the research the plans and agenda of the new government (2015-2019) were not known yet.

2.2.3 Agenda of donors and funders

Please read the section on IFIs (section 2.3.1. and 3.2.2.)

2.2.4 Macro developments in agriculture and industry

As the manufacturing industry on Java is growing, the water use by industrial sector is expected to

increase. In 1990 this sector contributed 1% of the water consumption, in 2000 6%, in 2011 16%.

14

GWI 2014

15 GWI 2014


The fiber, textile and garment (FTG) sector is one of Indonesia’s oldest and most strategically

significant industries, employing 11% of the national labor force, accounting for 8.9% of total exports

(2010). The industry uses vast amounts of water, and is one of the major contributors of water

pollution in West Java.

The food and beverage sector grew by 176.3% during 2000-2009, the economic value in 2010 was

USD 194 billion16. Domestic consumption is expected to continue growing, this will lead to a higher

demand and increase of production capacity. The food and beverage sector is a heavy water user as

well.

Indonesia is one of the largest exporters of (thermal) coal, aluminum, nickel and tin. Like any other

country the minimization of water and energy usage is trending as prices rise. In Indonesia however

this is not directly driven by country or site-specific parameters (e.g. scarcity) but rather in the light

of climate change and an increasing demand of other users. Therefore it can be expected that the

drive for the implementation of water/energy saving techniques will be low. Water security and

supply are generally not regarded as an issue by the community but rather the pollution that may

occur as a result of mining operations17.

The agriculture sector on contrary becomes more water efficient as the water consumption dropped

from 93% (1990) to 80% (2011). However based on monitoring by GoI, a decline in conditions of

large irrigation areas (especially those managed by districts/cities) was observed, due to neglected

investments. In 2010 GoI calculated an estimated loss of 10 million ton of harvested rice. Facing this

reality and a rapidly growing population, GoI had to allocate significant budgets to finance the

rehabilitation of 3 million ha, and the construction of 1 million of new irrigated area18.

2.3 Opportunities

This section provides insight in concrete programs and projects that offer opportunities for the Dutch

water sector. Identifying examples of past and present opportunities and the way these opportunities

have been financed provide insight in product market combinations that offer potential to enter and

explore or to expand and consolidate. The web survey among Dutch sector players, the supporting

programs by Dutch Government, the planned activities of the major IFIs and GoI provided input for

this section. This section does not provide an exhaustive list of opportunities.

2.3.1 Past and current opportunities

This section focuses on the past and current opportunities derived from Dutch support programs and

the statements of Dutch sector players (through the web survey).

Dutch support programs (RVO and Nuffic)

RVO supported through the DHK a program for water efficiency in the paper industry. Dutch

based company PCF Maintenance BV was involved

RVO finances market research performed by CBI on fishery products

Nuffic runs programs on Capacity Development (PUSDIKLAT) in IWRM Education and Training

CDIET, and Capacity Building in Maritime Transportation and Logistics Education and research

at ITS MARLOG

16

Indonesia Food and Beverage Association, GAPMMI

17 ‘The Right Time to Mine, Dutch Business Opportunities in Water and Mining’, Witteveen + Bos, 2015

18 Country Water Assessment Indonesia, Deltares, January 2015 (draft)


Partners for Water (PvW), managed by RVO, financed (2014-2015) ten different projects:

Table 5 Partner for Water Program

2014-2015 portfolio

Organization Project

Aqua-Aero Water Systems B.V. Water for Water

Sarvision Global tropical wetland monitoring

Aqysta Holding BV Enhancing Food Security through hydro-

powered pumps

South Consult Final Evaluation of the SHAW program

MDF Training en Consultancy Young Water Development Program

HKV Lijn in Water NCICD technical End of Project Review

ARCADIS Nederland NV NCICD institutional End of Project Review

Rabobank NCICD financial End of Project review

HaskoningDHV Nederland B.V. TA for Program Management Unit NCICD

Witteveen + Bos Master Plan NCICD

Source: RVO

Dutch support programs (EKN)

The Netherlands supports the implementation of the five year plan for urban sanitation that was

initiated in 2010. Jakarta and the Citarum basin are of particular interest for sanitation,

wastewater treatment and water quality management. Rural sanitation will maintain its focus on

increasing access to sanitation through off site technologies. The main program is the Urban

Sanitation Development Project (HaskoningDHV), additional projects are SHAW (Simavi), and

Sanitation program Sumbawa.

Water safety is the main area where government to government cooperation will operate. This

area comprises the Jakarta coastal development program, the scaling up of the Jakarta coastal

development pilot to other areas in Northern Java, water security and catchment area

management, water purification and quality control, food security under circumstances of water

and land scarcity, capacity development and cooperation between Netherlands and Indonesian

knowledge institutes.

Regarding water, food and eco/river basin systems, the PPTA of the Indonesia Irrigation Sector

Project (IISP) is the leading program in 2013, co financed by ADB, improving land- and water-

management on Java and Bali in such way this will contribute to higher yield level and more

efficient water use in agriculture through use of Dutch water and agricultural expertise.

Dutch water sector involvement (strategic interviews)

The table on the next page provides a non exhausted list of organizations involved in the Indonesian

water sector.


Table 6 Dutch water sector involvement in Indonesia

Organization Project

Royal Eijkelkamp CO2 emission reduction and carbon trade

Kalimantan: The objective is to reduce methane

gas emissions from wetlands in Kalimantan by

managing groundwater levels (measuring and

monitoring). The project has been developed by

local partner PT. Servita Beningdo. Funding

from RABO Bank and Atradius State Business is

essential in securing this project.

Royal Eijkelkamp Masterplan Jakarta: Royal Eijkelkamp is

positioning for downstream projects in this

program. Contacts are maintained with Royal

HaskoningDHV (Project Management Unit) and

Witteveen+Bos and partners (Masterplan) to

identify possible opportunities in an early stage.

Witteveen + Bos, Deltares, Ecorys Masterplan Jakarta: in partnership with

Grontmij, Kuiper Compagnons, Deltares and

Ecorys and Indonesian architects Triple-A has

secured this project by winning the tender.

Deltares, KNMI, Alterra WU, ITC TU Twente Dutch and Indonesian research institutes

upgrade collaboration on water, weather and

climate, a new Joint Cooperation Programme

(JCP) targeting more joint research and

development in the area of systems relating to

water management.

Nijhuis Water Technology Collection and treatment of industrial

wastewater: 60 m3/day wastewater treatment

plant for cocoa butter production plant in

Gresik, near Surabaya for Cargill, 730 m3/day

wastewater treatment plant for flavours and

fragrances plant near Jakarta for Givaudan,

3000 m3/year manure treatment plant for

agroindustry near Padang.

Aqua Industrial Water Treatment Collection and treatment of industrial

wastewater for diary processing plants

Euroconsult Mott MacDonald, DHV Decentralized Irrigation System Improvement

Project II in Eastern Region of Indonesia,

supporting role to the Project Management Unit

in monitoring the work, this project is financed

by JBIC, DHV is participating as well.

Euroconsult Mott MacDonald Integrated Citarum Water Resources

Management Investment Program, financed by

ADB, Euroconsult delivers TA on option,

feasibility and design studies for bulk water

supply, and a groundwater management plan,

and upper catchment management and

development plan.

TNO TNO was involved in treatment technology for

mining of natural gas for clients Pertamina and


Exxon. The project was discontinued for political

reasons.

Simavi The SHAW Program is active on sanitation,

hygiene and water in Eastern Indonesia. The

program aims to reduce poverty by improving

the health status of rural communities, in

particular that of mothers and children, in a

sustainable way.

BAM, Boskalis, Van Oord Dredging and Land Development Works for

Pluit City off the coast of Jakarta. This project

involves reclaiming approximately 160 hectares

of new land requiring in excess of 20 million

cubic meters of dredged sand. Two jumbo

trailing suction hopper dredgers will be deployed

for the dredging and reclamation activities

sourcing sand from local borrow areas.

IHC IHC Asia Pacific, a subsidiary of IHC Merwede,

signed an agreement with Jaya Shipbuilding and

Engineering Pte Ltd, which enables IHC Asia

Pacific’s high-specification offshore vessels to be

produced by Jaya at its yards in Singapore and

Batam, Indonesia.

IHC Study delivered to mining company PT Timah in

Indonesia. This report informed the company

about viable cassiterite (tin ore) mining at larger

depths than usual, as well as potential mining

methods and tools for the purpose.

AAWS The operation of a small plant on Bali producing

bottled drinking water in combination with a

network of small scale water kiosks.

Hatenboer Delivering water treatment technology to Cargill

(Indonesia)for its water for food processing.

VEI Water Operating Partnerships

Berson UV First launching project on the demonstration of

UV water treatment products

Source: Strategic interviews Aidenvironment / Engelsman


International Finance Institutions (IFIs)

ADB focuses on reduced environmental pollution and improved water supply in urban and rural

areas through their Metropolitan Sanitation Management and Health Project and PNPM Mandiri

(community empowerment program). Besides, ADB is planning to make investments in urban

sanitation (including waste water treatment) during the period 2016-2019.

ADB Projects Indonesia

Project Description Sector Project

Period

Amount

(USD

millions)

Sustainable

Infrastructure

Assistance Program -

Capacity

Development for the

Metropolitan

Sanitation

Management

Investment Project

(Subproject 6)

Provide sewerage and

wastewater treatment

facilities within the

central districts of the

cities of Cimahi and

Jambi (North Sumatra

province), Makassar

(south Sulawesi),

Palembang (South

Sumatra) and Pekanbaru

(central Sumatra)

Waste

treatment

13 Jun 2014 2

ADB’s flood Management in the Selected River Basins Project (USD 108.7 million) has been moved

from 2013 to 2014. The Ibu Kota Kecamatan Water Supply Project (USD 50 million) is on standby in

2014. ADB’s Integrated Citarum Water Resources Management Investment Program second periodic

financing request (USD 130 million) has been moved to 2015 standby.

The World Bank supports the water sector in strengthening regulatory framework and enhancing

capacity for select water utilities (PDAMs), also in reconfiguring irrigation, dams and reservoirs to

adapt to climate change and enhance productivity. In sanitation and community based water

services, The World Bank builds capacity to plan system integration for centralized, community and

household sanitation, and to make long-term financing available to municipalities for infrastructure.

Project Description Sector Project periods Amount (USD

millions )

Additional Financing

PAMSIMAS Support

Trust Fund

The objective of

the Additional

Financing for the

Third Water

Supply and

Sanitation (WSS)

for Low Income

Communities

Support Trust

Fund Project for

Indonesia is to

increase the

number of under-

served and low

WASH April 23, 2014 44

http://adb.org/projects/46380-002/main










http://www.worldbank.org/projects/P147365?lang=en




income rural and

peri-urban

populations

accessing

improved and

sustained water

and sanitation

services.

Jakarta Urgent Flood

Mitigation Project

The development

objective of the

Jakarta Urgent

Flood Mitigation

Project for

Indonesia is to

contribute to the

improvement of

the operation and

maintenance of

priority sections of

Jakarta's flood

management

system.

Water Mgt. January 17,

2012

139.64

The Bank financed Water Resources and Irrigation Sector Program (WISMP) supports the

Government in the implementation of its reform agenda providing more stakeholder participation

and accountability in the management of water resources and irrigation.

Regarding WASH the Bank finances the Urban Water Supply and Sanitation Project (UWSSP), which

assists three local governments and water utilities (PDAMs) to improve and expand coverage of water

supply services for more than 90,000 households. The Indonesia Sanitation Sector Development

Program (ISSDP), implemented in six pilot cities under the WSP, initiated the development of the

National Sanitation Acceleration Development Program. The Bank has financed the flagship Rural

Water and Sanitation Program (PAMSIMAS), by 2015, this program is expected to provide some 7

million rural Indonesians with piped water supply and some 3.4 million with improved on-site

sanitation.

Source WB Strategy Paper 2013-2015

2.3.2 Future opportunities

The following opportunities have been identified, but the intention is not to provide a comprehensive

overview.

Flood protection:

The Jakarta city administration plans to assess cooperation on the evaluation of flood management

master plan. Cooperation on flood management evaluation is necessary, because Jakarta needs more

downstream management rather than upstream. Cooperation may take place in the form of the

construction of giant sea wall in the northern coast of Jakarta. Moreover, knowledge transfer on

water management is also necessary.

Urban drinking water provision:

According to BAPPENAS there are two construction projects in process: the development of bulk

water supplies and raw water extraction infrastructure (Bandar Lampung Water Supply) and a bulk

water supply project in Umbalun Spring. In the future three large scale projects are planned: 1) the

http://www.worldbank.org/projects/P111034/jakarta-urgent-flood-mitigation-project?lang=en

http://www.worldbank.org/projects/P111034/jakarta-urgent-flood-mitigation-project?lang=en


establishment of water supply infrastructure that spans the cities of Bekasi and Karawang (BOT

contract worth USD 189 million), 2) the provision of municipal water supply for the western part of

Semarang City (BOT contract worth USD 78 million) and 3) water supply to the southern part of Bali

(BOT contract worth USD 287 million)19. Although the Dutch water sector does not have track record

on BOT contracts, such BOT contracts might offer opportunities for Dutch water technologies

through sub contracts covering roles such as technology provider or equipment supplier.

(Waste) Water Treatment ((W)WT)

Five large scale projects are expected to be planned and executed as well: 1) the construction of a

water treatment plant (WTP) for Karian Water Supply, Banten, 2) the construction of 2 WTPs for

Jatigede Water Supply, West Java, 3) construction of WTPs for Greater Pontianak Municipal Water

Supply, West Kalimantan, 4) construction of a wastewater treatment plant (WWTP) for DKI Jakarta20.

Coastal zone management (IWRM):

Jakarta is planning the so-called National Capital Integrated Coastal Development project in

Jakarta's northern coastal areas. Phase A—the first phase of the project—which is contracted to the

Jakarta Public Works Agency and the Ministry of Public Works, has entered the feasibility study

phase. The eight-kilometer project will cost IRP 3.2 trillion, and the cost will be proportionally

divided between the central government and Jakarta's administration. The government plans to

establish a new state-owned enterprise that will be focused specifically on the development of the

project. The enterprise will involve the provincial government of Jakarta as one of the shareholders in

the giant sea wall project, and as the coordinator of the project.

Ministry of Agriculture will repair irrigation system for 3 million hectares of farm lands as part of the

program to improve the productivity of food crops. The project would be carried out by phases to be

completed in 2017. In 2015, repairs would cover irrigation system for 1 million hectares of farmlands.

View of the Dutch water sector

According to the Dutch sector players (companies and NGOs) the promising area in the Indonesian

market is IWRM, urban water management and the supply of drinking water treatment technology.

Additionally, companies specifically identify opportunities in water and industry and enhancing

water productivity in relation to food production and agriculture (as cross-overs).

Obviously PSOs identify PMCs related to drinking water supply and treatment as promising areas.

NGOs identify additional opportunities in the subsectors IWRM and drinking water supply and

treatment. NGO identified water and food (among others agriculture) as an important cross-overs,

PSOs tend to value water and ICT as a promising cross-over.

Specifically, the Dutch private sector identifies opportunities in the following niches: industrial

wastewater treatment, integrated approach toward coastal zone and flood protection (in combination

with IT modeling), and support to drinking water service providers in lowering the non revenue

water (as part of water operating partnerships).

19

GWI 2014

20 GWI 2014


Figure 8 Promising areas in Indonesia according to companies (n=9), PSOs (n=4) and NGOs (n=6) active in Indonesia, in % of respondents (more answers possible)


Figure 9 Promising cross-overs in Indonesia according to companies (n=16), PSOs

(n=6) and NGOs (n=8) active in this country, in % respondents (more answers possible)

0% 20% 40% 60% 80% 100%

Drinking water supply and treatment

Drinking water transport and distribution

Industrial water supply and treatment

Industrial water transport and distribution

Ground and surface water for water supply

Collection and treatment of domestic …

Reuse of domestic wastewater

Collection and treatment of industrial …

Reuse of industrial wastewater

Urban water management


Subsidence and salinization

Water productivity and food production …

Water distribution and quality

Dams and flood control

Coastal management, development and …

Port development and - management

Companies PSOs NGOs

0% 20% 40% 60% 80% 100%

Water and industry

Water and food (a.o. aquaculture)

Water and ICT

Urban port development

Companies PSOs NGOs



2.4 Product-Market Combinations

Based on secondary market research and the outcome of the web survey, demand and potential

supply have been matched, and the following Product Market Combinations were identified as being

‘potential’.

Table 7 Product market Combinations

Most potential from demand and supply view

Need Product Market

Inadequate retention basins, the

under-sized drainage network,

increase in non-absorptive surfaces

and land subsidence has created the

conditions for prolonged and

extensive flooding during high

rainfall events. The main factors

driving the deterioration of urban

drainage problems are the lack of city

wide drainage design, and

assessment of individual projects on

the effect on drainage, increasing

subsidence, altering drainage

patterns, and discharge capacity, and

the lack of solid waste management.

Polder development in vulnerable

coastal lowlands, responsible lowland

development

Coastal protection in combination

with land reclamation, and protection

against erosion

‘Integrated urban development’

ICT based products and services in

flood risk management

Large scale

property

developers

Ministry of Public

Works

City

Administrations

Special Purpose

Vehicles set up by

local or central

government (state

owned)

Due to the high urbanization, the

demand for sanitation facilities and

waste water treatment (WWT) will

increase. Just as important the

management of sanitation services

and WWT plants has to improve.

Priority should be given to

enhancement of the institutional

strength, which is needed to generate

(and manage) the huge investments

needed.

The design and supply of waste water

treatment technologies for specific

industries

Water operating partnership

The design and supply of waste water

treatment technologies within urban

context

Garment Industry

and Food Industry

PDAM

Due to the large discrepancy between

the PDAM capacity and the projected

population demand (especially in

urban areas), PDAMs need to

improvement management. In many

of the PDAM, especially the ones in

the bigger cities, the reduction of

Non Revenue Water (NRW) becomes

a priority in the short term.

Water Operating Partnership

Advice on NRW reduction

strategies and implementation of

NRW programs

Enhance the management of

water supply and sanitation

facilities

Knowledge exchange:

On water supply, wastewater,

industry services, and sanitation

PDAM

Local Knowledge

Institutes

Source: Aidenvironment


The local private sector as counterpart for the Dutch water sector becomes more and more important

(also refer to figure 11, section 3.1). For Dutch sector players (especially the SMEs), it is not always

easy to find entry points (for doing business) within the Indonesian public sectors.

Water engineering, IWRM: Flooding, coastal management and land reclamation

Opportunities in coastal management, flood prevention / management, and land reclamation will

present themselves on an ad hoc basis, while competition will be heavily influenced by financing

packages (regarding the development of infrastructure). There is significant Indonesian demand for

Dutch consultancy and knowledge regarding delta technologies. Specific PMCs are: ‘landscape

architecture’, ‘building with nature’, ‘efficient water catchment and intrusion’, ‘building on water’21,

‘information as input for design and engineering’, and ‘decision support systems and flood

forecasting’.

Sanitation and Waste Water treatments: wastewater treatment technologies

Due to the increasing pollution of water (lack of waste water treatment, see above), ad stricter

enforcement, the heavy water using industries are increasingly willing to invest in technological and

sustainable solutions and high quality of Dutch market players: industrial services (equipment,

design and engineering).

At present municipal sanitation projects continue to take a back seat, with most projects taking the

form of small-scale community sanitation programs, funded by international donors, providing less

opportunity for Dutch water sector players. However, the potential large-scale water treatment plant

for Jakarta (worth USD 200 million) demonstrates that this tendency may change in the near future

as the population and economy continues to grow22.

Based on the government investment program and the data on utility capital expenditure, Global

Water Intelligence calculated the market forecast below.

21 Flood Risk Management and the Private Sector of DKI Jakarta, Groningen University, 2012

22 GWI 2014


Figure 10 Projected capital expenditure

Indonesian utilities

Source: Global Water Intelligence 2014

Jakarta and the Citarum basin are of particular interest for sanitation, wastewater treatment and

water quality management. Rural sanitation will maintain its focus on increasing access to sanitation

through traditional off site technologies (e.g. septic tanks), this PMC is of limited interest to Dutch

suppliers, however there is a strong need for technical assistance23.

Drinking Water: Strengthening the capacity of PDAM

Especially from a development perspective, this PMC provides opportunities to create development

impact. This PMC is potentially interesting for Dutch knowledge institutes, NGOs and Dutch

drinking water providers (through Water Operating Partnerships24 (WOPs)). In short term, the

commercial opportunities for delivering drinking water technology will be limited due to limited

capacity at local government level. However, when this capacity improves, niche markets in drinking

water treatment (specific technologies like UV treatment), and quality monitoring systems might

become ‘potential’.

23

MASP 20174-2017 and GWI 2014

24 It should be noted, as evidence is lacking, the questions remains unanswered how and if WOPs will create opportunities for the Dutch

water technology sector, local water professionals are not convinced business opportunities will arise.

$0,0m

$200,0m

$400,0m

$600,0m

$800,0m

$1.000,0m

$1.200,0m

2011 2012 2013 2014 2015 2016 2017 2018

Capex Utilities

Wastewater networks Wastewater treatment plants Sludge management


3. Market entry strategies

To convert market opportunities into business requires a plan: a market strategy. Strategic interviews

and results from the web survey, completed with desk research on existing market studies provided

valuable insight in different market (entry) strategies. The chapter starts by describing how Dutch

organizations cooperate with parties, projects and programs. The second section describes how

activities within the water sector are being financed. How Dutch organizations operate on the market

is part of section three. Section 4 describes lessons learnt, while section 5 describes the major

bottlenecks and drivers. The chapter ends by suggesting specific positioning strategies per potential

product market combination (PMCs).

3.1 Entering the country

After a thorough assessment of the market and the feasibility of the business case / project,

organizations have different ways to enter the country. Finding the right local partner and building

up a relationship by working together is the first step.

Figure 11 provides an indication of the status and intensity of the cooperation of Dutch parties with

various other parties in Indonesia, such as private sector/other companies, knowledge institutions

and government (bodies). Cooperation with private sector/other companies appears to be the most

intensive: 27% of the companies state that cooperation with these parties is (very) intensive.

Figure 11 Intensity of cooperation of Dutch companies with various parties in

projects and programs in Indonesia, in % of respondents (n=22)


A number of NGOs are involved in financing water supply and sanitation projects, mainly in

relation to poverty reduction in rural areas. These organizations include UNICEF, Canada-

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Private sector/other companies

Knowledge institutions

Goverment(bodies)

NGOs

Other Dutch parties

Totally not To some extent On average Intensive Very intensive


Care Indonesia, Simavi, Mercy Corps, Plan and the Red Cross.

The Indonesia Netherlands Association (INA) is a good entry point for Indonesia to get information

on how to do business in Indonesia. INA facilitates a special working group on water, this working

group consists of 35 INA member companies and is open for INA members/companies that operate

(or would like to operate) in the Indonesian water sector.

Indonesia has various state owned companies active in sectors like energy (Pertamina/PLN), port

development (Pelindo), real estate, construction, etc. The current government has given state-owned

companies in the water sector a strong role, and substantial budgets, to invest in infrastructure and

development. State owned companies are interesting partners to engage with, however these

companies are often bound by the same procurement regulations as the government.

3.2 Seeking finance

Finding appropriate financial means needed to start up the business (or project) is a critical success

factor when starting up. In this section most interesting financial sources have been analyzed and the

results from the web survey on how the Dutch water sector finances its activities in the various OS

countries have been published. Please refer to Appendix II for getting an overview of Dutch financial

instruments, applicable for the water sector.

Most Dutch sector players financed the past and current activities using full Dutch funding (43%), or

a mix of Dutch funds and foreign funds (27%), as can be seen in figure 12.

Figure 12 Sources for current or realized projects in the various OS-countries, in

% of total number of projects mentioned by respondents (N = 70)


Looking at future opportunities, the perception of Dutch water sector players on the different type of

funds is quite divers. The combination of own means (36%), donor funding (12%) and government

subsidies (14%) are the main funding sources. The Dutch water sector is clearly looking for (a

combination of) different funding opportunities, which increases the complexity of getting a full

coverage of budgets.

Full Dutch finance

43%

No Dutch finance

30%

Mix of Dutch and foreign

finance

27%


Figure 13 Sources for funding perceived opportunities in the various OS-

countries, in % of total number of sources mentioned by respondents (N = 47)


3.2.1 Dutch supporting programs

Appendix II provides an overview of the most important Dutch programs providing (financial)

support. Besides these financial programs (often managed by RVO), the Dutch Embassy in Jakarta

provides financial support as well. The programs managed centrally by the Dutch Ministry of Foreign

Affairs (often managed by the IGG/DGIS) do not provide opportunities.

Figure 13: RVO financed programs

Program budgets per July 2014

Source: RVO (July 2014)

Own financial sources

36%

Donors

12%

Government subsidies

14%

Consortium partner

8%

Private sector

2%

Other sources

10%

No sources available

8%

Unknown

10%

-

1.000.000

2.000.000

3.000.000

4.000.000

5.000.000

6.000.000

7.000.000

8.000.000

9.000.000

FDOV DHK PSI FOM PUM Agri Pro Focus

ARF CBI NUFFIC FNV CNV PVW

Pro

gram

bu

dge

t in

EU

R

RVO instruments


The Partners for Water (Partners voor Water: PVW, colored blue) program is the main instrument

used for financing water related activities. Second is the Nuffic program (colored light blue), EUR 1.5

million of this program finances the capacity development PUSDIKLAT in IWRM Education and

Training CDIET. Third is the DHK instrument (colored light blue), financing activities geared

towards water efficiency in the paper industry. Surprisingly the FDW (Sustainable Water facility)

instrument is not being used to finance PPP related activities.

Taking these three instruments as starting point for further analysis, the RVO instruments finance

mainly water engineering and IWRM activities. The NCICD project (Jakarta Flood Protection) is the

major project financed (sub sector water engineering)25.

Figure 14 RVO financed programs

Program budgets per July 2014 per sub sector

Source: RVO (July 2014)

EKN financed programs (spending in 2013)

Sanitation is part of WASH programs; however EKN Jakarta finances programs that specifically

target on improving access to sanitation. The EKN spending (2013) focuses on sanitation to a large

extend (60%), WASH projects come second (21%).

25

Strictly speaking, the RVO managed programs are being financed by the Foreign Affairs Development Cooperation Budget, with

exception of the PvW funds (Water Mondiaal) that are financed by several Ministries. The PvW funds (about EUR 1 million per year) are

relatively seen limited to the Foreign Affairs Development Funds (EUR 8-10 million per year). Source: EKN Jakarta.

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

4.500.000

Water engineering IWRM Water supply WASH Water and Industry

Pro

gram

bu

dge

ts i

n E

UR

Sub sectors


Figure 15 EKN financed programs

Spending in 2013 per sub sector

Source: EKN result fiche 2013

Quote:

The OS funding support in projects like Master plan Protection and Development of Jakarta is very

positive to position Dutch expertise/companies in a potentially very interesting market. However

companies from countries with large funding programs for capital investments such as Japan, South

Korea or China, may benefit most from the large down-stream projects. It would be very beneficial

for Dutch companies if such funding could be matched by Dutch funding sources.

Anonymous #3

3.2.2 International Finance Institutions

ADB has allocated USD 2.28 billion of ordinary capital resources for public sector lending to

Indonesia during 2014–2016. The non lending program is set at USD 39.45 million over the 2014–

2016 period. Project loans will continue to support urban water infrastructure, the ADB private

sector programs will continue to focus on urban water supply and sanitation.

The ADB finances programs related to climate resilience and sustainability to enhance freshwater,

marine, and forest resources management for improved food security (irrigation component), and

activities related to improved water and sanitation supply.

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000

4.000.000

Water Engineering

Water Management

Irrigation WASH Sanitation Aquaculture

Spe

nd

ing

in E

UR

Sub Sector


Table 8 Lending and non lending

ADB in the water sector in Indonesia (in USD millions)

Sub sector Program Lending Non lending

Irrigation Integrated Participatory Development and

Management of Irrigation Project for

Western and Eastern Indonesia Phase

200

Water Supply IKK Water Supply Project 50

Second Water Supply and Sanitation Sector

Development Assistance 1.5

IWRM Capacity Development for Water Resources 1.5

IWRM Integrated Citarum Water Resource

Management Investment Program, PFR2

130 standby

130 firm

Source: ADB Country Operational Plan 2014-2016

The World Bank is an important financier in Indonesia as well. World Bank commitments (in the

fiscal years including IBDR and IDA) ranged from USD 2.4 billion (2011), reaching a 4 year

maximum of USD 3.3 billion (2012), and slowing down to USD 1 billion (2015).

Regarding water the actual spending and future commitments are hard to capture as a

comprehensive overview was not made available to us. As an example the following is worth to

mention. Co financed by JICA (Japan), World Bank invest significant amounts in the irrigation

sector, the MRT project and WISMP-2 project count for USD 184 million. These funds are often

matched by GoI funding, however in a modest way.

The EIB is not a major player within the water sector in Indonesia. In the beginning of 2015 no water

related projects were part of the pipeline of projects to be financed. The only link to water is the

priority EIB has on the finance of activities linked to climate change, however the link is indirect and

the size of activities applicable to Indonesia is very small. The same counts for the EU cooperation

and development program.

3.2.3 Local Finance

After the financial crisis late 1990s, the Indonesian banking system has recovered well and is now

stable. The Financial Services Authority (OJK) has been established (or will be soon) which will have

the supervisory functions of the Central Bank and the function as watch dog. Despite oppositions of

such institution, it will probably bring continuity of the current banking system. The current banking

system allows foreign banks to have a 99% share in Indonesian banks. An increased demand for

reducing the %age to max 49% is currently visible26.

The Indonesian banking sector is quite small (domestic credit amounts to around 50% of the GDP),

however the sector improved significantly over the last decade. State-owned banks account for only a

third of the total banking sector and the %age of non-performing loans has decreased over the last

couple of years to 6%. However, state-owned banks are still highly exposed to state-owned

enterprises (like PDAMs).

Both ING and Rabobank have branches in Indonesia. Rabobank International opened its office in

Indonesia in 1990. Rabobank has 90 branches in Indonesia, employing 1,510 FTE. Rabobank

International strategy focuses on Food and Agriculture, the water sector is not a specific market niche

26

BTI 2014


of interest. Rabobank provides local banking services, local credit lines can be made available often

structured under a guarantee provided by the Rabobank branch in the Netherlands.

3.2.4 Dutch commercial finance

As an example, Rabobank is involved in financing the dredging, water engineering and construction

sector, and does provide export finance (often in combination with Atradius) to its clients. Looking at

the 12 Water OS countries, Rabobank mentions the dredging opportunities for Dutch Water sector as

a specific market of interest. Out of the strategic interviews, one company specifically mentioned the

Rabobank as a financier of its local activities in Indonesia.

Quote:

Local private clients often request for financing, to avoid high local interest rates. RABO is only

interested in projects above EUR 3-4 million of investment. Smaller projects are more difficult to be

financed. The Danish, Italian and German governments have better funding facilities for such smaller

projects.

Anonymous # 3

Atradius activities regarding Indonesia are worth to mention as well. The export credit insurance

portfolio related to the Water OS countries (outstanding exposure February 2015) provides a

representative overview (see figure below) of Atradius’ business involvement.

Figure 16 Export Insurance

Exposure on Water OS countries

Source: Atradius

Atradius is not able to provide sector specific information regarding its Indonesian business

activities; the exposure within the water sector (with exception of the Maritime sector and Port

development) is not significant.

3.2.5 Government budgets

Please refer to the section 1.3.3. in chapter 1, in addition to this the following is worth to mention.

-

200,0

400,0

600,0

800,0

1.000,0

1.200,0

1.400,0

1.600,0

Exp

osu

re in

EU

R 1

00

0

Water OS countries


The Indonesian government will soon release a five-year infrastructure improvement plan worth over

USD 400 billion aimed at stimulating economic growth. While fiscal reforms will help fund the

improvement plan, Indonesian President Joko "Jokowi" Widodo is in favor to centralize

authorization procedures to encourage private sector investment and speed up administration of the

projects. The National Development Planning Agency (BAPPENAS) is putting the final touches on

the budgets. The project outline will cover a broad array of works. Projects will include improving 24

ports as well as construction of roads and water treatment facilities27.

3.3 Sector performance

After finding the right local partner and the appropriate financial means, Dutch organizations follow

different strategies to represent themselves in the country. NGOs prefer to work within one to one

partnerships and through a local representation or branch. The preferences of companies is quite

divers. Companies represent themselves in different ways. PPP is a less preferred option. (see figure

18).

Representation characteristics of Dutch parties in Indonesia

Figure 28 Current representation characteristics of Dutch companies (n=16),

PSOs (n=6) and NGOs (n=8) in Indonesia, in % of respondents (more answers

possible)


Current strategies of Dutch parties in Indonesia

Following their clients, international expansion, and contributing to the development of a country are

the main drivers behind the strategies Dutch companies when entering and operating on the

27

http://asia.nikkei.com/Politics-Economy/Economy/Government-to-spend-436B-on-infrastructure

0% 20% 40% 60% 80% 100%

Local agent / representation

Local branch

One or more PPPs

One or more strategic alliances with same partners

Temporary coalitions

One to one partnerships

Contacts with key players

Companies PSOs NGOs

http://asia.nikkei.com/Politics-Economy/Economy/Government-to-spend-436B-on-infrastructure


Indonesian market. NGOs strategies are geared towards the formation of partnerships (‘one to one

partnerships’ is the most common option).

From the seventies of last century many Dutch water sector players set up a business in Indonesia

and often opened a local branch office, as a way to enter the market and further develop business.

However during the ’90-’00, many companies closed offices due to political issues between GoI and

the Government of the Netherlands (GON), decreasing GON funds for development programmes and

projects. Soon after, more strict European and National laws and regulations on transparency and

integrity had further downward effects on international operations of Dutch companies. Since the

dramatic events in Aceh/North Sumatra following the Tsunami in December 2003 relations have

tremendously improved, GON development budgets have been on the rise again and selected

companies are returning and expanding under rather prudent business approaches.

Learning from this experience, organizations on the average take an approach following 5 steps: 1)

find a launching client or project (through tendering), 2) project based presence through a project

office, 3) build up a portfolio of multiple projects, 4) open a REP office, and 5) establish a local

branch.

Knowledge institutes enter the market by establishing long term relationships with local knowledge

institutes first, and jointly acquire research of knowledge driven projects that focus on solving

complex issues by offering integrated solutions.

Quote:

Opportunities are generally found in niche markets and products for which local capacity is in short

supply. For new comers, access requires a combination of the following:

Expertise and products that are internationally competitive

Good and reliable local partners

Understanding of local market conditions

Good relationship with clients

International references and track record

Good reputation

Anonymous #2


Figure 39 Current strategies Dutch companies (n=20), PSOs (n=6) and NGOs

(n=8) in Indonesia, in % of respondents (more answers possible, N=56)


3.4 Successes and lessons learned

Through desk research and web survey, a list of best practices and important lessons learnt were

identified and discussed during the strategic interviews with relevant Dutch water sector players. In

this section we elaborate on a limited overview of best practices and capture the lessons learnt.

National Capital Integrated Coastal Development (NCICD)

During this project a consortium of several Dutch water sector players developed a Master Plan for

the development of flood protection, land reclamation, sanitation, and road and port development in

the Jakarta region. In addition Dutch water experts drafted an operational plan for a Project

Management unit and a financing strategy. The implementation of this plan is subject to further

decision by the GoI and GoN. The consortium recommended the set up of a separate development

company to oversee the implementation.

Quote:

The most important success factors for the coastal protection project in Jakarta are:

Innovative power of the Dutch water sector

Collaboration of Dutch companies

Relations with the Indonesian authorities at the highest levels

Availability of seed money from the Dutch government (using the “Orange Card”)

Anonymous #1

0% 20% 40% 60% 80% 100%

International expansion

Contributing to development of the country

Following clients

Following tenders

Formation of PPPs

Formation of strategic alliances with …

Formation of temporary coalitions

Formation of 1 to 1 partnerships

Cooperation within programmes

Other strategies

Companies PSOs NGOs


Providing drinking water to the local communities

Two Dutch based companies provided the technology to treat drinking water. Company A provided

the equipment to the local public authority, supported by a local agent, company B set up its own

company in a joint venture with a trusted partner that sells bottled drinking water and supports the

set up of small water kiosks.

Company A initial intention was charity. The company initiated a project and the local agent was

hired to provide local support (networks). The local agent did not see any significant business

opportunity and worked as being assigned for a specific task, his commitment was modest. The

public authority involved lacked capacity to execute the tasks assigned (operating and maintaining

the equipment, drilling a well). Trying to succeed the company had to manage the project from a

distance, which was rather difficult and expensive.

Company B initial intention was to start a (social) business. The company raised a JV together with a

partner out of its own Dutch network. Both believed in the business opportunity. Finding the right

manager to run the operations was difficult; this hampered the operations in a severe way. At present

a manager is running the operations and the ‘water factory’ is operating according expectations. The

entrepreneurs invest part of the profit in supporting local entrepreneurs in setting up a small water

kiosk. After a promising start, the first entrepreneur left business as he had the opportunity to set up

an alternative business earning more money.

The central lesson learnt is the importance of a strong local partner or manager. To secure long term

commitment the business case (or benefits) to the local partner must be clear and attractive

compared to other alternatives.

Important learning from previous (market) research:

Good planning and follow up on a set of services/products: knowledge exchange -> institutional

development -> capacity building -> construction or products.

As cooperation and mutual strengthening are identified as important success factors, it is

recommended to implement any PMC as a group of partners, public and/or private. The most

appropriate and logical relationships between Dutch market players and the Indonesian

subsectors are in the fields of institutional development, capacity building and knowledge transfer

through training.

Learn from past and current projects, hook into existing initiatives.

Focus is identified as one of the success factors of current Dutch involvement in the water sector

of Indonesia. Effectiveness of Dutch water involvement in Indonesia greatly benefits from focus.

Demand and needs are endless, means and opportunities are limited.

Source: Market Scan on the Indonesian Water sector, Witteveen+Bos, 2010

3.5 Drivers and bottlenecks

This section describes the drivers and bottlenecks, entering (and operating on) the Indonesian

market (water sector). This section does not intend to provide an exhausted list, the section combines

insights from the web survey and secondary market research.

Ambitious and fast rising—these words aptly describe modern Indonesia. Amidst a global economic

slowdown, Indonesia was the third fastest growing economy among the G-20 for 2009 and it

continues to post strong economic growth, at a projected rate of 5.6% for 2016. This growth is an

important driver for many companies to become active in Indonesia. Besides, the Dutch have a long


tradition in ‘doing business’ in Indonesia, the Dutch governments has long term trade and aid

programs in place that support Dutch organizations in entering in and operating on the Indonesian

market. However when entering the market, organizations have to face challenges too.

Finding financial means and the right partners are the main challenges for companies to scale up

their activities. NGOs share the first challenge and add to this the lack of institutional funding for

program management and coordination. NGOs seem not to have any challenge in finding the right

partners to scale up their activities.

Figure 20 Top 5 challenges for scaling up activities in Indonesia for companies

and NGOs, in % of respondents (more answers possible)


More specifically former market studies and respondents of the web survey mention:

Poor governance and capacity within the public water sector, current coordination between

different ministries is unsuccessful, there is a lack of a centralized body within GoI coordinating

all efforts on water.

Distribution of mandate, tasks and responsibilities between central and regional governments are

often not clear; this is partly caused by mechanisms of de-concentration rather than

decentralization (a method of central government to stay de facto in power at the regional level).

Various regional governments have not yet the capacity and capability to implement development

plans; development budgets are being stocked up in bank accounts at regional levels; regional

authorities evade risks of transparency and integrity issues causing several delays in economic

development.

Interpretation of Indonesian laws and regulations is complex, especially regarding rules for

participation in and the set up of legal entities, and the arrangement of working permits

Severe competition with respect to conventional solutions, approaches or products, leading to

competition on price and the selection of ‘cheap solutions’

The government procurement procedures especially at local levels, are still often in-transparent at

best and rigged in a number of cases, and usually focus on the lowest price

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

get to financial rescources

realisation of the right contacts

formation of strategic alliances with same partners

improvement of current results

succesfully dealing with the culture

get to local financial rescources for implementation

get to institutional funding voor progamme management and coordination

scaling up current programmes

formation of PPPs


Top 5 Challenges Companies (N=47)

Top 5 Challenges NGOs (N=13)


Quote:

The cycle of large scale water infrastructure projects exceeds the political cycle; this jeopardizes the

continuity of our business. This is why we prefer to build on existing networks that have a clear link

with The Netherlands, e.g. the Unesco IHE Alumni Network.

Anonymous #37

Companies and PSOs seeing opportunities but are not active (yet) in Indonesia do not prioritize this

country within their strategies, NGOs on the other hand lack the resources to become active.

Figure 24 Reasons why companies (n=20), PSOs (n=5) and NGOs (n=5) are not

active in Indonesia, in % of respondents


Most respondents, who are not active in Indonesia, are not willing to invest until a specific

opportunity arises. When willing to invest, most respondents tend to invest in finding the right

contacts, by participating in a trade mission.

0% 20% 40% 60% 80% 100%

We see opportunities but this country is not our priority

We see opportunties but we do not have the means to pick these up

We see opportunties but the political situation is too unstable

We see opportunties but it is too dangerous and unsafe in this country

We do not see any opportunities in this moment

Companies PSOs NGOs


Figure 22 Willingness to invest, in % of respondents (N=21)


3.6 Strategies for each PMCs

Based on secondary market research and the outcome of the web survey, demand and potential

supply have been matched, and the following Product Market Combinations were identified as being

‘potential’. In addition to section 2.4, per PMC entry strategies are being suggested in combination

with finance and possible partners.

More in general the current government aims to give more opportunities to domestic companies and

develop domestic technical and managerial capabilities. Especially the large Indonesian companies

are placing more emphasis on quality and sustainability, and are more willing to pay higher prices.

Foreign companies should therefore consider forming partnerships with domestic companies, which

can then front offers to the government.

Opportunities exist in the supply of technologies, but more so in the offering of complete solutions, in

which a group of companies provides turnkey solutions and remains involved in the operations and

finance for a number of years : Dutch companies should consider forming such consortia. The same

applies for water management: a joint approach of Dutch companies offering integrated water

solutions to potential clients in Indonesia is more effective than individual approaches by companies

offering only a part of the solution.

The private sector as entry point for doing business becomes increasingly important for the Dutch

water sector. Not based on evidence but more on experience, Dutch water sector players do not

always find the right entry points at governmental level (public sector), this applies especially for

Dutch SMEs.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

yes, participating in a trade mission

yes, by approaching local parties and

building up networkcontacts

yes, by realising a trade representation

yes, by finding a local partner

yes, by starting a local branch or joint

venture

no, we wait for specific opportunities

for an assignment

other actions


Table 9 Entry strategies

For selected PMCs: drinking water supply, IWRM and water engineering, sanitation and waste

water treatment

Product Market Strategy Finance Partners

Water Operating

Partnership

Advice on NRW

reduction strategies and

implementation of NRW

programs

Enhance the

management of water

supply and sanitation

facilities

Knowledge exchange:

On water supply,

wastewater, industry

services, and sanitation

PDAM

Local

Knowledge

Institutes

Capacity

Building

Increasing

access to

additional

financial means

Center of

expertise,

demonstration

platform

Dutch

drinking

water

companies,

Dutch ODA

(SWF), ADB

interlink

WOP facility

Local NGOs,

local

knowledge

institutes

Polder development in

vulnerable coastal lowlands,

responsible lowland

development

Coastal protection in

combination with land

reclamation, and protection

against erosion

‘Integrated urban

development’

ICT based products and

services in flood risk

management

Ministry of

Public Works

City Authority

Special Purpose

Vehicles set up

by local or

central

government

(state owned)

Large scale

property

developers

Unsolicited

(and solicited)

PPP

procurement

methods

Co creation in a

strategic

program

lifecycle

approach

(integrated

planning

through the

project

lifecycle)

TA funds

(grants), PPP

instruments,

private

finance in

combination

with

concessional

loans, credit

insurance

coverage

Consortium

Local public

sector

commitment

and buy in is

key

Water operating partnership

(sanitation component)

The design and supply of

waste water treatment

technologies for specific

industries

The design and supply of

waste water treatment

technologies within Urban

Context

PDAM

Garment

Industry and

Food Industry

The B2B

procurement

model (PDAM)

B2B acquisition

or procurement

model (private

sector)

Demonstration

projects

Local public

sector funded

by GoI

through IFI

programs

Private sector

Local partner

providing a

local legal

entity and

relevant track

record

Local agent

Source: Aidenvironment, Web survey Panteia, 2014/2015, GWI 2014


Drinking Water: Strengthening the capacity of PDAM

For Dutch water sector, the water operating partnership (WOP) is a common strategy to provide

support to local water provider services (including sanitation and waste water treatment). The WOP

contract describes the way a Dutch drinking water company provides capacity building geared toward

improving the operations of the local water service provider. An efficient and effective operation

improves access to additional financial means. Combined with the showcase of Dutch innovative

technologies and solutions, this might open up windows of business opportunities.

Vitens Evides International is the leading provider of WOP support, this organization finances its

activities by investing own means (% of collected water fees) in combination with ADB funding

(10%), EIB (10%), EU grants (20%), Dutch ODA (SWF, EKN programs and ORIO: 40%).

The backbone of the WOP is a strategic alliance between the Dutch drinking water company, the local

water service provider and additional NGOs providing support to the program.

Knowledge Institutes providing support to the exchange of knowledge could be an interesting

alternative approach. Most of these contracts are won as tenders.

Quote:

The positioning strategy of our knowledge institute is built upon the following elements:

Long term relationships with local knowledge institutes

Jointly develop and acquire projects in the public and private sector markets

Focus on complex problems, requiring an integrated approach

Opportunistic approach to good opportunities with limited risks

The change to free and open source use of software

Use of alumni networks

Independent status is recognized by clients as an important asset

Anonymous #11

Water engineering, IWRM: Flooding, coastal management and land reclamation

A proven way to position for an integrated delta approach is to support the writing of a Master Plan.

The aim of supporting a Master Plan is to bring in and showcase Dutch expertise and to create a

strategic advisory position for The Netherlands. The positioning instrument used here is capacity

building (TA support). The advantage of continuing this TA support is the less funding needed and as

a result the reduced risk, the disadvantage is the lack of commitment from GoI and lesser control on

future execution. An alternative would be to offer a program management and support package

structured as a PPP, or structured by the set up of a contracting authority / development company.

Quote:

In the coastal protection project in Jakarta, Dutch companies are currently very well positioned. This

early involvement is positive to be prepared for the significant future investments, however in the

follow up phase strong competition is expected from countries with richer loan programs such as

Japan.

Anonymous #1

A strategic partnership with a country having funds (but not the expertise needed) could mobilize

large amounts of (concessional) finance. Investments from the Dutch site will be needed to trigger

these funds and to c0-finance Dutch involvement during the different stages of the project (master


plan, concept, feasibility, design and procurement, implementation and operation and maintenance).

In parallel Dutch efforts should be focused on getting strong buy in by the GoI .

Sanitation and Waste (Water) Treatment: UDSP project on sanitation28

Sanitation in Indonesia comprises three elements: drainage, fecal sludge management and solid

waste management. In 2011 GoI ambition to realize 100% sanitation coverage in 2019 became part

of a fast track program. EKN decided to support this ambition through the Urban Sanitation

Development Project (USDP). The support of USDP focused on capacity building (training and

methodology design) and was let by DHV, the project formally ended in 2014. Based on an evaluation

of USDP EKN considers continuing the support (USDP2).

Although a final decision has not been made yet, USDP2 is intended to comprise two work streams:

1) TA support (continuation USDP1, financed by ODA), and 2) involvement of the Dutch water sector.

Regarding the second track the evaluators of the program identified two PMCs: 1) solid waste

management (niche: composting and plastic recycling), and 2) faecal sludge management (niche:

innovative treatment techniques, business development support to local informal waste collectors).

Public sector dominates both PMCs. Only in waste collection, informal private sector plays a role.

Still donor driven programs exist, especially let by Germany (ODA) and ADB (concessional loans).

The contracting parties (direct clients) are the local ministries of public works and local planning,

USDP1 (and probably 2) will cover 500 cities and municipalities for planning and programming

stages; the USDP evaluators have identified a list of 10 frontrunners for implementation works.

The strategy for Dutch water sector for positioning would be to set up a demonstration platform and

center of expertise for innovations. Although a platform should be set up separately, such a platform

would ideally link to a water operating partnership. Dutch sector players should be willing to co-

finance the demonstration of their product, which must fit within the plans of the local authorities.

Waste Water treatment: the B2B procurement model

The B2B model is the best route for companies to enter the Indonesian Water PPP market, this model

is a form of direct negotiation between a PDAM and a private party for a project.B2B models are not

labeled as public procurement and do not need to follow the procurement procedures. In order to

participate a company needs to raise a legal entity, rep office or project office, or a subsidiary.

The process starts with a PDAM identifying a need for extended water treatment capacity not covered

within the master investment plan. Finding out about these upcoming projects requires significant

efforts, companies that are already established and known for other projects have a clear advantage.

After assessing the PDAMs needs, the company proposes the project and conducts a feasibility study.

When positive the company and PDAM enter into negotiations29.

IWRM and water engineering: the unsolicited PPP procurement model

According to the NWP Market Scan (Witteveen + Bos, 2010), as the government of Indonesia is

attempting to promote PPP programs, this is the preferred business form for market. Companies can

prepare unsolicited projects and offer them to the government. The projects technical feasible to

integrate in the master plan, economically and technically feasible, and do not require financial

government support (GWI 2014).The procurement of such projects follows the so called ‘Swiss

Approach’. Other competitors are invited to improve the original bid. The initiator is often entitled to

28

interview Paul van Koppen 18-02-2015

29 GWI 2014, note the EKN Jakarta questions the mandate of the PDAMs regarding waste water treatment, e.g. the mandate in Jakarta is

allocated within the Jakarta Municipality (local government) and NOT at the PDAM


get additional points in the evaluation, to match the offer of the preferred bidder, or to receive

financial compensation30.

30

GWI 2014


Appendix I: Methodology

The Water OS positioning survey is part of the Water OS program: a facility of the Ministry of

Foreign Affairs. The Water OS program aims at providing support to the Dutch Embassies in 12

partner countries in the formulation and implementation of their water programs. Central element of

the program is the involvement of the Dutch water sector, i.e. companies, NGOs, knowledge

institutes and governmental organizations.

In order to generate more evidence for effective continuation of the Water OS Program and to

‘trigger’ Dutch water sector players, RVO contracted Aidenvironment, in collaboration with Panteia,

Chris Engelsman and Jan Oomen, to conduct a “Positioning Survey”. This survey identifies

opportunities, strategies and approaches for the Dutch water sector, and more specifically seeks high

potential Product/Market Combinations (PMCs) in the 12 Water OS countries included in the Survey.

The final deliverables of the survey are twelve positioning survey reports (one for each country) and

one overarching management summary. Primary target group for the Positioning Survey Reports are

the Technical Experts (TDs) at the Netherlands Embassies in the 12 OS countries, with all Dutch

water sector players as secondary target group.

The methodology comprises desk research, a web survey and additional strategic interviews:

The desk research studied the most essential reports and documents per country (market scans,

market reports, strategic papers of Embassies and International Financial Institutions). The Key

Advisors within the Water OS program played an important role in rendering accessible and

prioritizing the data available.

In the period November 2014 – January 2015, Panteia carried out a web survey. Two different

questionnaires have been applied, one for companies, knowledge institutions and water boards,

and another questionnaire for NGOs. Despite the length of the survey and thanks to a considerable

effort of the project team and NWP, the response rates were not disappointing and for a web survey

in general above average: NGOs: 16 out of 48 implying a response rate of 33,3%, and companies

(including knowledge institutions and water boards): 87 out of 531 implying a response rate of

16,4%.

Based on the outcomes of the desk study and web survey, Aidenvironment selected 27 companies, 3

(semi) commercial financiers, 7 NGOs, and 8 knowledge institutes (including Water Boards

(‘waterschappen’) and water service providers) to be interviewed on strategic topics focusing on

market opportunities and applicable market entry strategies (and business models). Through these

strategic interviews, the research team gained more detailed information on projects of front

runners. These projects gave more information on lessons learned, success factors, and

opportunities for up scaling.

Regarding the web survey, two important remarks can be made:

Value and limitation of the survey results

The web survey results have provided very useful data for this study. The value of the results

especially lies in the provision of relative figures on various aspects enabling comparisons between

countries, opportunities, bottlenecks, groups or respondents, etc. and to monitor the developments in

these figures over time. The limitation of the study lies in the inability to provide reliable absolute

figures on for instance turnover values.

OS-study versus WEX

For the web survey a similar methodology has been applied as is done for the WEX (Water Export

Index) – study, which is carried out twice a year. A sample of companies and institutions is asked to

provide data on national and export turnover in the water sector and the division of this turnover

over regions and over subsectors. The samples do not have the same composition. Also over time the


samples may differ in the WEX, but never provide a bottleneck though to assess the WEX and to

make reliable comparisons over time. Like in the WEX, the estimation of the export turnover is based

on the sample results of a survey. Starting from this value relative export shares of the various

regions and countries have been determined for the sample. Since the sample may not represent the

whole water sector in an optimal way, we cannot draw any hard or general conclusions about the

export turnover figure and division of this figure over subsectors, regions and countries. The real

value will be higher, but this value can only be obtained with sample results once the whole

population is known. Getting to know the population is difficult and cannot be realized in the context

of this study nor in the WEX-study. Another complicating factor for generalizing study results lies in

the fact that large projects (especially those in water construction) may influence total and regional

export figures drastically and lead to large fluctuations over time. For the sample of the web survey

no such ‘disturbing’ projects have been found. The sample results of the OS-study regarding relative

export shares of regions are in line with the results of the WEX 2014.

The average budget per country positioning report is EUR 7,000. Therefore, the positioning survey

cannot be seen as a fully fledged market research. An in-depth assessment of the markets (the OS

Water countries) was not part of this research, instead the research relied on secondary information

(reports available) and expert opinions (Key Advisors Water OS program, TD staff on Embassies,

YEP network, and a network of ‘water professionals’).

An important disadvantage of the web survey – in contrast with a telephone survey for which a

stratified sample has been selected - is that the characteristics of the total population are unknown.

By lack of a stratified sample, the outcome of the web survey does not offer the opportunity to level

up the sample results to the total population and to calculate absolute figures for turnover and export

volumes for each subsector and region. Despite this limitation of the web survey, it does provide very

useful information for the positioning studies.

Additionally to the country specific positioning reports, a management summary was drafted. The

management summary elaborates on the overall findings and provides overall conclusions.


Appendix II: Finance

The Dutch Government is able to support activities performed by the water sector in developing

countries (in this case the 12 Water OS countries) in different ways. On a strategic level, financial

support can be labeled as:

Bilateral support (country to country)

Multilateral support (to different countries often funneled through International Financial

Institutes or UN related organizations)

Specific instruments (e.g. managed by RVO or commercial organizations like Atradius and FMO)

The financial support from Dutch Government related to the 12 Water OS countries aims to combine

trade and aid perspectives. The policy focuses on three key points: 1) improved management of water

catchments and safe deltas, 2) efficient use of water, especially in the agriculture sector, and 3)

improved access to clean drinking water and sanitation.

This appendix provides an overview of the support provided on different strategic levels: bilateral,

multilateral and specific instruments. The content is structured following the most important

organizations involved in funneling these funds starting with the Ministry of Foreign Affairs, The

Dutch Embassies, RVO, Dutch (Semi) Commercial Players, and the most relevant International

Finance Institutes. At the end, the appendix provides a non exhausted list of foundations financing

water related projects and activities.

Centralized programs managed by IGG/Water DGIS/Ministry of Foreign Affairs

DGIS (within the Ministry of Foreign Affairs) focuses on the Dutch international cooperation with

partnering countries. The cooperation involving the water sector is mandate of the section water

within the department of DME (future: IGG (Inclusive Green Growth)). This section manages the

water related portfolio of programs providing regional and multilateral support. The funding is often

labeled and does not provide direct opportunities for the Dutch water sector.

Decentralized programs managed by Embassies:

The Multi Annual Strategic Plans (MASP) is the nucleus of Dutch bilateral support to a country.

Projects, programs or businesses being part of the Embassies’ program to implement the MASP fit

into the country specific strategy and are aligned with the overall water policy of Dutch government.

The funding of Dutch Embassies provides opportunities for the Dutch water sector.

Specific Instruments: RVO

RVO has developed different type of instruments depending on the phase the

project/program/business is in, starting at the development of an idea, testing the concept in a pilot,

scaling up the pilot to significant size to start building a business or self financing project on. We

follow this structure when presenting the different instruments.

To finance the development of an idea, innovation or RandD:

VIA water:

This is a relatively small fund (EUR 10 million over 4 years) to finance out of the box ideas and small-

scale innovations using grants. Aqua for all manages the fund, which started operating in 2015.

Maximum size of the grant is EUR 200,000 per project.


To finance a pilot:

Partners for Water:

This is a funding program (grants) financed by different Ministries runs from 2010 till 2014. After

2015 the program will continue following the same strategy. In 2015 the facility is not open for new

application. The program financed 80 projects of which 50 included a pilot. The average subsidy size

was EUR 200,000 financing 20-80% of the budget. The new program will start with a total budget of

EUR 10.5 million.

DHK:

This instrument provides grants and aims to finance demonstration pilots, feasibility studies and

acquiring of knowledge. The program has a specific EUR 3 million window for DGGF countries of

which EUR 1 million is allocated to the least developed countries. This facility is specifically

applicable for projects in fragile states.

DRR:

DRR finances the Dutch Risk Reduction Team, a database of Dutch Water Experts that are available

for solving water related issues with respect to disasters. DRR is not a facility financing disaster

response or aid, though DRR provides knowledge that can be used to e.g. avoid disasters. RVO in

close cooperation with NWP manages the facility.

To finance the scale up of activities or pilots:

ORIO / DRIVE:

ORIO was cancelled in 2014. ORIO used to be a grant facility financing investments related to the

development, implementation and operation of infrastructure in developing countries. Governments

of these countries submit the applications and the private sector is involved in the development and

execution of projects.

DRIVE is the successor of the ORIO program and provides concessional loans to governments of

developing countries to develop, construct and operate infrastructure. DRIVE will be launched in

April 2015 and has an available budget of EUR 100.000.000 annually expecting to finance 10-15

projects. The facility aims to actively involve the Dutch Water sector and contribute to development

of the receiving country.

G4AW:

G4AW stands for Geodata for Agriculture and Water and finances projects, programs and businesses

aiming to improve food security in developing countries by using satellite data. Netherlands Space

Office (NSO) is executing this program, commissioned by the Dutch Ministry of Foreign Affairs. In

2014-2015 the facility has EUR 30.5 million available to provide grants (EUR 0.5-5.0 million)

financing up to 70% budgets. Proposals and partnerships should be based on a business plan geared

towards satellite data at the start of the information chain.

FDW/FDOV and GWW:

RVO developed three facilities to finance Public Private Partnerships (PPP) in the water (and

agriculture) sector. These facilities aim to: 1) increase access to drinking water and sanitation, 2)

enhance efficient and sustainable water use (especially in the agriculture sector), 3) improve

management of catchment areas and safe deltas, and 4) (specifically for FDOV) improve food security

and private sector development. GWW (Ghana Wash Window) is a specific window financing water

related PPPs in Ghana.


The three facilities are in place since 2012, in 2014 FDW and FDOV launched and closed its second

call, the GWW second call for proposals closes in February 2015. The facilities are planning the third

call to be executed in 2016. Because the facilities just started operating, (impact) results have not

been reported yet.

The facilities provide grants and have different modalities. The facilities received many applications

and resulted into the finance of new initiatives. The application process is being perceived by a

significant group of applicants as complex, and requires a clear business case, or theory of change

aiming to enhance the enabling environment as part of the proposal, plus a significant contribution

by the private sector. The facilities are especially applicable for large applications fitting into

investment agenda’s or strategic objectives of the private sector players involved.

DGGF:

The Dutch Good Growth Fund started operations in mid 2014 and aims to combine aid and trade

goals. DGGF is a revolving fund, providing finance (not grants) to initiatives with a ‘healthy risk

profile’. DGGF focuses on 66 countries (called the DGGF countries), including the Water OS

countries. DGGF is build on three pillars: 1) a fund financing activities of Dutch SMEs in DGGF

countries (managed by RVO), 2) a fund financing local SMEs and banks in DGGF countries

(managed by PWC and Tripple Jump), and 3) a fund financing export credit insurance and export

finance activities (managed by Atradius).

In Pillar 1, RVO works closely together with Dutch banks. The fund is equipped to provide guarantees

to banks up till 60% of the credit risk, loans to banks and investment funds (equity). The maximum is

EUR 10 million per project or business. A TA facility will be in place to provide assistance on

improvement of the business plan or investment proposal.

Pillar 2 is under construction; this pillar will provide fund to fund investments up to EUR 175,000.

Pillar 3 provides export credit insurances covering non-market risks up till a maximum claim amount

of EUR 15 million. Besides insurances, this fund provides export finance instruments. Products focus

on Dutch SMEs needs, covering small and large transactions.

Besides these above mentioned programs and facilities, the following instruments can

be useful and applicable for financing water related activities.

PSI:

PSI was grant program available for non-Dutch and Dutch companies wishing to make an innovative

investment, in cooperation with a local partner in one of the PSI countries. This program stopped

operating mid 2014.

MMF:

MMF is a match making program, aiming to establish a long term business relationship between a

Dutch entrepreneur and an entrepreneur from a developing country.

OS Partner Countries:

This program finances the projects, managed by the local Dutch Embassies. These projects fit into the

Multi Annual Strategic Plans of the specific Embassies.

TDs / economic diplomacy:


This program finances the so called thematic experts working at the Dutch Embassies in a limited

number of OS Partner Countries.

TMEA:

Managed by DDE / DGIS, this large program focuses on the East African region financing initiatives

contributing to the enhancement of trade relations within the region. The facility is applicable for

financing initiatives linked to port development.

Water Mondiaal:

Water Mondiaal is a program launched by the Dutch government to cooperate actively with countries

in low-lying delta areas, protecting them against floods and ensuring sufficient, clean water. Partners

for Water is managing this program, the program aims creating long lasting cooperation agreements

between the public and private sector , and civil society and knowledge institutes. Water Mondiaal

focuses on five deltas: Egypt, Bangladesh, Indonesia, Mozambique and Vietnam.

(Semi) Commercial Organizations managing funds on behalf of Dutch Government

The following facilities or organizations are in some way closely linked to RVO or the Ministry of

Foreign Affairs.

Atradius:

Atradius offers a comprehensive range of credit management solutions that protect businesses of all

sizes against the commercial and political risks inherent in domestic and global trade. Atradius

provides credit insurance, debt collection services, bonding, reinsurance and a range of special

products.

Atradius Dutch State Business performs different facilities on behalf of and for account of the Dutch

State. There is no direct link with the RVO organization, though Atradius products can be combined

with RVO instruments (e.g. ORIO/DRIVE).

Atradius does not specifically focus on the water sector. However dredging, waste management, port

development and the maritime sector are important sectors from a business perspective. Atradius is

not actively involved in all Water OS countries; the table below provides an overview of the

outstanding volumes of credit insurance products per January 2014.

Table 10 Atradius business in Water OS countries

Credit Insurance outstanding risks

Country Risk Volume (EUR million)

Mali 1

Yemen 1.2 South Sudan 0

Palestine 0

Ethiopie 0

Mozambique 105

Benin 0

Rwanda 0.1

Ghana 182

Kenya 118

Indonesia 1,373

Bangladesh 0

Source: Atradius January 2015


Atradius manages the third pillar of DGGF. In the first six months Atradius received 7-8 requests,

one of these came from the maritime sector. The DGGF facility provides support on smaller

transactions; therefore this product is applicable for Dutch small and medium enterprises.

FMO:

FMO manages three funds relevant for the Dutch water sector.

FOM-OS

The first pillar of the DGGF program will replace this fund. The fund offered loans to private sector

players investing in non (commercially) bankable projects or businesses in developing countries.

Innovative Finance Fund for Development

This fund aims to catalyze private sector investments.

IDF

IDF stands for Infrastructure Development Fund. The IDF is aimed at creating reliable infrastructure

in many sectors, ranging from potable water and mobile telecommunication services to roads and

power. By providing risk capital through the IDF, FMO takes on definite risk while acting as a

gateway for other financers.

IDF offers finance through equity, mezzanine and debt products that can be used even in early stage

of projects. The fund has the following fund limits:

Individual transaction amounts maximized at EUR 25 million

Financing about 25% of total project investment

Shareholding maximum 25%

Maximum tenor of 20 years

Convertible contributions are selectively available for financing during the development phase of

projects (up to 49% of total development cost)

About 8% of the portfolio is allocated to water related projects (mainly water related to energy:

dams). IDF hardly finances projects in other sub sectors of the water sector, this is due to: 1) the

limited willingness to pay (drinking water), 2) the strong involvement of a weak public sector, 3) the

limited role of the private sector, 4) the lack of involvement by Dutch water sector as a strategic

operator or investor.

Within the FMO organization the department NL Business manages the IDF fund and provides

(financial) transaction advisory support to Dutch businesses aiming to become active in developing

markets. NL business brings in the financial perspective when Dutch businesses want to develop a

consortium. Regarding consortium development within the Dutch water sector, port development,

dredging and waste (water) treatment are potential sectors. Thinking along the lines of so called

corridor concepts (infrastructure connection points like transfer utilities) seems to be a promising

market entry point.

EP - Nuffic:

EP-Nuffic is the main expertise and service centre for internationalization in Dutch education, from

primary and secondary education to higher professional and academic higher education and

research. EP – Nuffic runs several programs, the NICHE program is relevant for the water sector.

The Netherlands Initiative for Capacity development in Higher Education (NICHE) is a Netherlands-

funded development cooperation program. By sustainably strengthening higher education and


technical and vocation education and training (TVET) capacity in partner countries, it contributes to

economic development and poverty reduction. The program focuses on four policy priorities: 1)

Water, 2) Food security, 3) Sexual and Reproductive Health and Rights (SRHR) and 4) Security and

the rule of Law.

Dutch Commercial Banks:

Looking at the global networks of the larger Dutch international operating banks (ABN AMRO, Rabo

bank and ING), the Rabobank has the most visible overall presence in the 12 Water OS. In the

strategic interviews, this bank was the only commercial bank mentioned a couple of times as being

active in the international water sector.

The water sector is not a specific priority sector for Rabobank. From an international perspective

Rabobank focuses on the agriculture sector. However Rabobank is involved in financing the Dutch

water sector in The Netherlands. From this perspective, Rabobank ‘follows its clients abroad’

(especially the dredging and water engineering sector plus larger consultancies are being mentioned).

Rabobank has branches in Kenya and Indonesia, participations in Rwanda and Mozambique and

operates in partnership with e.g. Standard Charter Bank in Mali, Ghana, and Bangladesh.

Export finance, guarantees and currency risk management are the most common services/products

offered to international operating clients.

International Financial Institutes (IFIs):

The so-called multilateral aid program of governments is being managed by IFIs like the Worldbank,

ADB, AfDB and EU (EU grant program and EIB). The following IFIs play an important role financing

water sector related projects, programs and businesses.

World Bank (WB):

In 2014 WB announced reorganization. The new structure has five relevant departments focusing on

water: GP14 Water, GP1 Agriculture, GP3 Energy and Extractives, GP 4 Environment and Natural

Resources, GP12 Transport and ICT, and GP13 Urban and Rural Social Development.GP14 Water

department integrates WASH, irrigation, and Water Resource Management. One global staff pool is

in place to partner with outside organizations. More weight is put on knowledge into operations. WB

offers loans to developing countries, projects have to fit the multiyear WB strategy, and the fund

receiving countries lead the tender procedure. About 20% of the annual budget is allocated to water

projects of which 53% WASH, 13% irrigation, 24% water and energy, and 10% flood protection and

delta technology.

The Asian Development Bank:

Programs of ADB are complementary to other donors and have the starting point to promote

inclusive water policies (including the poor). Focus on mainstreaming water efficiency in supply and

use and enhanced cooperation with the private sector. From 2010-2020 the budget is USD 20-25

billion.

The African Development Bank (AfDB):

Looking at the AfDB strategy 2013-2022 paper, the 10 year focus will be on inclusive growth and

green growth. The bank identifies five operational priorities: 1) infrastructure development, 2)

private sector development, 3) governance and accountability, 4) regional economic integration, and

5) skills and technology. In implementing its ten-year Strategy, the Bank will pay particular attention

to fragile states, agriculture and food security, and gender. Supporting the water sector is specifically

part of the agenda on infrastructure and agriculture and food security.


In view of its important contribution to the achievement of all the MDG goals and therefore its

unique contribution to poverty reduction on the continent, the water sector has received major

attention as a strategic priority of the Bank. Since 2000, following the adoption of its Integrated

Water Resources Management (IWRM) Policy, the Bank has increased its focus on the water sector,

especially on drinking water, sanitation and hygiene, and the promotion of integrated management

of water resources.

The African Water Facility is an interesting facility that can be used to finance WASH related

activities.

The EU:

These funds are the main source of EU development aid for the African, Caribbean and Pacific (ACP)

countries and the overseas territories (3% of the annual EU budget in 2008-13). The funds are

connected to the Cotonou Treaty. The European Investment Bank invests significant amounts in the

water sector. The grant programs do not have a specific focus on water related projects, the EU Water

Facility, one of the grant programs focusing specifically on water will be cancelled.

Foundations:

Especially for development related activities within the water sector, foundations provide interesting

opportunities to finances projects and programs. Below an unexhausted list of foundations provides a

first entry point to seek for funds. As each foundation has its own finance policy, we refer to the

individual websites for more information.

Blood:Water.

Blue Planet Network Foundation

Charity Water

ExxonMobil Foundation

Global Water Challenge

Millennium Water Alliance

Project Concern International

ActionAid International USA

Alcoa Foundation

Boeing Company Charitable Trust

BP Foundation

Global Green USA

Habitat For Humanity International, Inc.

Lemelson Foundation

McKnight Foundation

Prem Rawat Foundation

Water 1st International

Water Environment Research Foundation

Wateraid America, Inc.

World Vision, Inc.


Appendix III: Elaborated outcomes of web survey

The Comext database of Eurostat includes trade statistics for a limited number of water sector related

products. Table 1 demonstrated the development of the exports of these products for EU-28 in total

and for some EU-countries during the 2010-2013 period. The Dutch share in total EU-28 exports to

Asia is only 2% on average , far lower than the share of Germany (53%) and also lower than the share

of France (11%).

Table 1 Exports from EU28-countries to Indonesia (in mln. EUR ) in total and for water

sector related products and export shares of some EU-countries, 2010-2013

2010 2011 2012 2013 Total 2010-2013

Total EU-28

exports to

Indonesia

6.405 7.399 9.738 9.701 33.243

Water sector

related products

203 208 350 465 1.226

Shares in EU-28 exports of water sector related products

- Netherlands 3% 3% 1% 2% 2%

- Germany 38% 28% 51% 73% 53%

- France 13% 20% 11% 5% 11%

- Denmark 0% 1% 1% 1% 1%

Water sector related products:

TUBES, PIPES AND HOSES, AND FITTINGS THEREFOR, OF PLASTICS

TUBES, PIPES AND HOLLOW PROFILES, AND TUBE OR PIPE FITTINGS, OF IRON OR STEEL

STEAM TURBINES AND OTHER VAPOUR TURBINES AND PARTS THEREOF, N.E.S.

PUMPS FOR LIQUIDS, WHETHER OR NOT FITTED WITH A MEASURING DEVICE; LIQUID ELEVATORS; PARTS

FOR SUCH PUMPS AND LIQUID ELEVATORS

Source: Comext Eurostat


Figure A.1 Promising areas in Indonesia according to companies and NGOs interested in Indonesia, in % of respondents (more answers possible)


Figure A.2 Promising cross-overs in Indonesia according to companies and NGOs interested in Indonesia, in % of respondents (more answers possible)


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Drinking watersupply and treatment

Urban watermanagement

Waterproductivity and food production - irrigation

Industrial watersupply and treatment

Groud and surface water for watersupply

Reuse of domestic wastewater

Water distribution and quality

Drinking watertransport and distribution

Reuse of industrial wastewater

Industrial watertransport and distribution

Collection and treatment of domestic wastewater

Collection and treatment of industrial wastewater

Subsidence and salinization

Dams and flood control

Coastal management, development and land reclamation

Port development and - management

Companies (N=34) NGOs (N=5)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

water and industry

water and food (a.o. aquaculture)

water and ICT

urban port development

companies (N=57) NGOs (N=10)


Figure A.3 Development opportunities in Indonesia according to companies and NGOs interested in Indonesia, in % of respondents (more answers possible)


Figure A.4 Challenges for scaling up activities in Indonesia according to Dutch

companies, water boards and knowledge institutions, in % of respondents (N=47)


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

WASH

Water management and safe deltas

Higher waterproductivity in agriculture

Other developmentgoals

companies (N=55) NGOs (N=10)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

get to financial rescources

realisation of the right contacts

formation of strategic alliances with

same partners


succesfully dealing with the culture

formation of 1 to 1 partnerships

formation of temporary coalitions

formation of PPPs

start a local representation or agency

other challenges

start a local branch


Figure A.5 Challenges for scaling up activities in Indonesia according to NGOs, in % of respondents (N=13)


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

get to local financial rescources for implementation

get to institutional funding voor progamme management and coordination

scaling up current programmes

formation of PPPs


formaion of 1 to 1 partnerships

finding the right partners


start a local representation or branch

formation of temporarily coalitions

dealing with social and cultural aspects in cooperation


Appendix IV: Sources

Help Jakarta Zinkt! Mag Nederland het Probleem Oplossen?

Grontmij, 2014

Indonesia Contextual Analysis in Water Supply and Sanitation Sector

The Water Dialogues Indonesia, 2009 (?)

Quickscan Indonesia G4AW Facility, 2014

From Aid to Trade in the Lowlands Opportunities for the Dutch Water Sector to Cooperate with the Productive Sector in the Lowlands in Indonesia

Van Marwijk Advies, 2014

MASP 2014-2017 EKN Indonesia

Air Belanda Indonesia - Cooperation between Indonesia and the Netherlands in the Field of Water

NWP, 2012

Projectkaart Indonesië 2012

Water Mondiaal Jaarplan Indonesië 2014

NWP, 2013

Partnership for a new perspective- De Nederlandse propositie voor de Integrale kustontwikkeling van Jakarta

Topsector Water, 2014

Flood Risk Management and the Private Sector of DKI Jakarta. Market Opportunities for the Dutch Water Sector

Groningen University, 2012

Market scan on the Indonesian Water sector - ‘Opportunities and niches for the Dutch Water sector’

Witteveen + Bos, 2012

Concept note - Vision of the Dutch Water Sector in Indonesia

NWPI, 2013

Partnership Indonesia Netherlands for Greater Jakarta

Topsector Water, 2013

‘The Right Time to Mine, Dutch Business Opportunities in Water and Mining’

Witteveen + Bos, 2015

Indonesia Country Partnership Strategy 2013-2015

WB, 2012

Indonesia Country Partnership Strategy 2012-2014

ADB, 2012

Indonesia Country Strategy Paper 2007-2013 + mid term review

EU, 2007


Appendix V: Respondents

NWP/Core Advisors:

Ivo van der Linde

Paul van Koppen

Dutch Embassy:

Peter de Vries

Local water professionals (YEP, peer reviewers):

Anton Sanjaya

Lourens Meijer

Aditya Reymonza

Arthur Geilvoet

Dwi Wanna

Anna-Marthe Sessink

Elmar Bouma (peer review)

Simon Warmerdam (peer review)

Web survey:

Not disclosed

Strategic interviews:

Name organization Contact person

Alkyon + ARCADIS Ferry Vis

Aqua for All Sjef Ernes

Aqua Industrial Water Treatment Marik Beerten

AquaAero Water systems Martijn Nitzsche

Atradius Oscar Boot

Bam International Maikel Jagroep

Bam International Henk van Veen

Basic Water Needs Martijn Smits

Berson UV Paul Buijs

Boskalis Bastiaan Lammers

Bucon Industries Peter Bulsing

Colubris Environment Marco Moekardanoe

Deltares Ron Thiemann

ECORYS Nederland Viek Verdult

ECORYS Nederland Ilse van de Velde

Euroconsult Mott Macdonald Pieter van Stuijvenberg

Euroconsult Mott Macdonald Hero Heering

FMO Roel Messie

Genap Dick van Regteren

Groasis Pieter Hoff

Grontmij Nederland Ernst Malipaard

Hatenboer-Water Peter Willem Hatenboer

ID Consultancy Dick Konijn


IHC Merwede Sergio Ooijens

IRC Stef Smits

ITC Victor Jetten

ITC Dinand Alkema

Landustrie Sneek Arie van Steen

MetaMeta Simon Chevalking

Nijhuis Water Technology Christiaan Beuzel

Norit Jan van den Dikkenberg

Rabobank International Alexander Hoogendoorn

Redox Water Technology Maurice Nijrolder

Royal Eijkelkamp Fons Eijkelkamp

Royal Eijkelkamp Frank Tillmann

Royal Haskoning DHV Nederland Harrie Laboyrie

Safisana Holding Aart van den Beukel

Simavi Ewout van Galen

SNV Leendert Bos

TNO Albert Jansen

UNESCO-IHE Pieter van der Zaag

Vitens-Evides International Marco Schouten

WASTE Jacqueline Barendse

Waterschap Aa en Maas Paule Dobbelaar

Wavin Overseas Giles Crofts

Wetlands International Chris Baker

Witteveen + Bos Polite Laboyrie

WUR Ivo Demmers

ZOA Harm Bouta

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