Water Supply and Sanitation in Indonesia - Economic Impact of Inadequate Water Supply and Sanitation

Economic Impact of Inadequate Water Supply and Sanitation

The economic costs associated with inadequate water supply and unsanitary conditions represent formidable obstacles to the improvement of living standard. The enormous economic costs resulting from chronic ill health can contribute to poor nutrition, poor school performance, reduced productivity, and permanent disability and thus represent a drag on economic development.

One of the key findings from the Economics of Sanitation Initiative with a Water and sanitation program study from Southeast Asia revealed that in 2006, Indonesia lost an estimated USD 6.3 billion due to poor sanitation and hygiene, equivalent to approximately 2.3% of its gross domestic product (GDP). Of the impacts evaluated, health and water resources contribute most to the overall economic losses estimated in the study. These impacts are expected to cause financial losses to populations who have to pay for health services or who pay more to access clean water supplies, or who may lose income due to poor health. Poor sanitation also contributes up to USD 1.2 billion per year in population welfare losses due to additional time required to access unimproved sanitation,USD 166 million per year in tourism losses, and USD 96 million in environmental losses due to loss of productive land.

Efforts to provide adequate water supply and sanitation facilities in Indonesia is also challenged by the country's population increase that led to postponement of investment in the infrastructure required for the provision of urban water and sanitation. Such challenge can lead to greater costs in the future.