Anticipating Water Trade Mohamad Mova Al Afghani [email_address]
As we speak, millions of liters of water are being transported through inter-state transmission pipes or through water tankers.
Law No. 7 Year 2004 on “Water Resources” Enacted : March 18, 2004 Enforced : At the date of enactment Number of Articles: 100 Repealed : Law No. 11 Year 1974 on “Irrigation” Judicial Review : 058-059-060-063/PUU-II/2004, 13th of July 2005 (Conditionally Constitutional)
“ Water” covers basically all freshwater in any forms including sea water on land.
Thus, the Water Law regulates:
Groundwater (well, underground rivers)
Surface Water (rivers, lakes, wetlands)
Clouds (Article 38)
Catchments, river basins, beaches
Object of regulation
Water Rights Systems in the World:
Agency Based vs Market Based
Agency based: allocation and reallocation is done through the agency of the state
Market based: allocation and reallocation is done through market mechanism (supply/demand)
Water Utilization Rights (Hak Guna Pakai Air): for daily needs and people’s farming.
Water Commercialization Right (Hak Guna Usaha Air): for hydropower, tourism, industry, etc. Valid for 3 years and extendable
Both rights cannot be leased or assigned partially or entirely (Art 7.2 of the Water Law). Hence: agency based
*More than 2 litres per second/family for people’s farming and more than 100 m3 per family for Groundwater
The current agency-based system will be reformed to allow market mechanism to work in the water sector. Some pilot projects on has been conducted in Brantas river Basin in East Java.
Public good vs private good
Not scarcity but physical supply cost
Heterogenity, depending on time, location, quality
Specifities of the water sector
How can externalities be identified, defined and incorporated into transactions?
Market and externalities
Existing laws on international trade may not be adequate in protecting water
Institutional setting in national law still problematic (i.e. enforcement cost expensive, rights not clearly defined)