The three-tranche, US $300 million Water Resources Sector Adjustment Loan (WATSAL) was approved by the World Bank in May 1999. WATSAL provides balance of payments assistance to Indonesia to support policy, legal, regulatory, and administrative reforms in the water resources and irrigation sector. The World Bank claims that WATSAL will help put in place a water resources management structure that promotes environmentally and socially sustainable water resources development and management through decentralization and strengthening of institutional and regulatory frameworks for river basin management, pollution abatement and water quality management, and irrigation systems.

The Government of Indonesia has been slow to meet the detailed conditionality mandated by WATSAL. Tranche disbursement has thus been delayed due to the inability of the Government of Indonesia to develop a new water law, amend certain existing laws, as well as corresponding guidelines and frameworks intended to re-vamp overall governance in the water sector.

However, the slow progress is to a certain extent a blessing in disguise for the Indonesian public who have not been given the chance to fully understand and debate the far reaching reforms, whose success or failure will ultimately trickle down to them. Several civil society groups even believe that WATSAL reforms could be paving the way for commercialization and privatization of Indonesia’s water resources. They fear that such prioritizing of the economic value of water over the social value will further undermine certain communities’ access to water, in particular the rural poor.