Water is a fundamental necessity for supporting societal productivity and well-being. Unfortunately, according to the 2022 UNICEF report, 844 million people worldwide still lack access to clean water and 2 billion people do not have access to safe and adequate drinking water.
Adequate infrastructure is essential to ensure equitable access to clean water. However, the government's funding capacity for water infrastructure remains limited, necessitating collaboration among stakeholders to bridge the funding gap in the water resources sector.
Herry TrisaputraZuna, the Director-General of Infrastructure Financing for Public Works and Housing, emphasized the importance of attention and investment in the water sector during the 4th Workshop on Sustainable Finance, Road to the 10th World Water Forum in Jakarta on Monday (5/2/2023).
"It requires more attention and targeted investments in the interconnection between climate-related efforts and water, as well as sanitation and health. Currently, less than 3% of total climate financing is allocated to water-related initiatives, and only 1 in 10 investments is dedicated to meeting the water and sanitation needs of the community," said Herry.
Indonesia Water Fund
The Ministry of State-Owned Enterprises (MSEM) through Danareksa has launched the Indonesia Water Fund (IWF). This program, launched during the State-Owned Enterprises road to G-20 on October 17-18th, 2022, is one of Indonesia's efforts to increase funding and investments in clean water.
Herry stated that IWF will manage funds amounting to 1 billion US dollars or around IDR 15 trillion to finance clean water projects for over 40 million people. This funding scheme involving the private sector is expected to alleviate the burden on the national budget.
In line with Indonesia's SDGs roadmap for 2030, the IWF will support the government in achieving the goal of 100% access to safe drinking water for the entire Indonesian population. The IWF is also expected to encourage investor interest in contributing to sustainable investment.
Establishing the Global Water Fund
The success of the IWF will serve as the prototype for the establishment of the Global Water Fund, and to be discussed at the 10th World Water Forum in Bali on May 18-25, 2024. The Global Water Fund will gather funds to finance water-related initiatives in regions facing water scarcity and financial constraints.
Yadi Jaya Ruchandi, CEO of PT Danareksa, revealed that the governance and funding scheme of the IWF can be replicated by other countries. Therefore, Indonesia aims to develop the IWF into a global funding scheme through the Global Water Fund.
"We have the IWF, and we want to develop this funding scheme into the Global Water Fund. This will require a political process, so government intervention is still necessary, especially in furmulating investment-related policies," said Yadi Jaya Ruchandi.
In alignment with this statement, Julian Smith, ESG Government and Infrastructure Leader at PwC Indonesia, believes that the funding scheme of the Global Water Fund will differ from investments in other sectors due to the cross-border nature of water issues. He proposes the concept of a neutral-political fund, which means that the concerted process of water financing is free from the political interests of any country.
"The specific issue of water usually involves cross-border issues. This requires a global neutral-political fund so that the Global Water Fund can benefit everyone, and the solutions provided are not merely i the form of water resources transfer from one country to another," said Smith.