Making every drop count: Rebuilding small-scale irrigation in Indonesia to counter climate change

Today, many countries face severe pressure on water resources resulting from a complex array of factors, including inadequate planning, inefficient systems, failures to recover the costs of providing this vital resource, and the accelerating effects of climate change. On the demand side of the equation, this means the world must manage water more efficiently.

In Indonesia, one of the top rice producers in the world, agriculture uses 80% of the country’s water. Small-scale irrigation continues to play an important role in production, with more than 20% of farmers—often from the poorest parts of society—using this type of system. About 40% of Indonesia’s 7.2 million hectares of irrigated land uses small-scale systems, making this method an important contributor to reducing poverty, improving food security, and supporting livelihoods.

But many of these systems, despite past investments aimed at achieving rice self-sufficiency, have fallen into neglect. In 2014, roughly 46% of irrigation systems in Indonesia were in poor condition, and almost 90,000 hectares of irrigated land are converted to other purposes every year. Although there have been improvements in recent years, the growth of national rice production, coupled with infrastructure damage and limited budgets for maintenance, has led to a vicious cycle of “build, neglect, and rebuild,” poor performance, and low productivity.

Indonesia has undergone an important shift in its water and irrigation sector toward a decentralized and strengthened system of service delivery. Local governments are now primarily responsible for the management of these systems, but they face huge capacity and resource challenges. This is compounded by Indonesia’s geography—as the world’s largest archipelagic country, there are more than 500 local governments on nearly 13,500 islands, making service delivery particularly challenging. 

Local governments rely on fiscal transfers from the central government toward operations and maintenance services in irrigation schemes, but increasing investment in one irrigation scheme reduces allocations for other schemes, which could result in infrastructure disparities. Local government-owned irrigation infrastructure is also deteriorating at a rate of between 5% and 10% each year, which compounds the problem. Allocating resources toward a particular irrigation scheme at the expense of another is a difficult decision that requires weighing up the investment against efficiency and equitable distribution concerns.

The World Bank is working with the government of Indonesia to explore how local governments' support can deliver better results and quality in irrigation systems. At a recent workshop, the Indonesian Ministry of National Development Planning, the Ministry of Home Affairs, the Ministry of Finance, and the Ministry of Public Works and Housing worked with the World Bank’s Water Global Practice to examine how performance-based instruments can be used to guide investment decisions and make small-scale irrigation more sustainable and financially viable.

The World Bank has a wealth of knowledge on how results-based financing can be used to incentivize local governments to improve the quality of their service delivery, but these experiences have predominantly operated across other sectors, such as water supply, transport, and solid waste management. This has led to many good practices which can be applied to small-scale irrigation. Replicating this instrument to irrigation might provide similar incentives to local governments to improve the quality of irrigation service delivery.

The World Bank is supporting the government of Indonesia’s National Urban Water Supply Project, which provides results-based fiscal transfers to local water companies. This innovative solution incentivizes utilities to improve their services and is having a substantial impact, provided it is implemented alongside capacity building for local stakeholders, with clear agreements on performance indicators and monitoring. This approach is also most successful when aligned with a government’s budget cycle and systems.

The efficient use of small-scale irrigation can significantly improve income and food security for Indonesia’s people. By strengthening performance-based fund transfers to local governments, small-scale irrigation can play a major role in the efforts to alleviate poverty, bolster water security, and build climate resilience.