Discourse: Invest in basic sanitation to improve the economy: WB expert
Poor basic sanitation has caused an estimated Rp 5.6 trillion in losses in Indonesia. The Economic Assessment of Sanitation Interventions in Indonesia — a six-country study conducted in Cambodia, China, Indonesia, Laos, the Philippines and Vietnam — shows that economic benefits resulting from the intervention are considerable compared to the costs. The Jakarta Post’s Elly Burhaini Faizal talked to Guy Hutton, Senior Water and Sanitation Economist from the World Bank’s Water and Sanitation Program (WSP), who is also the Global Leader of the Economics of Sanitation Initiative (ESI). Below are excerpts.
Question: What does this study focus on?
Answer: The most important part of the benefits acquired through sanitation intervention is the health- care savings. I think part of reason we did the study was to point out that investment need not only be in start up costs, or the capital cost of infrastructure, but needs continued maintenance and implementation. What the study found is that up to 40 percent of the population targeted by interventions are not using it. So we look at the sustainability and for that one thing we need is financial sustainability. We need governments and financial mechanisms, such as household payments, to be able to fully cover maintenance and operation costs of the services delivered.
Why is it important to invest in basic sanitation? How can we measure the possible gains resulting from the improvements?
Sanitation improvements can bring significant economic benefits. It improves the economy. Simply by isolating waste, having improved sanitation practices such as hand-washing after defecation and before meals, you can capture significant benefits. With less disease, people spend less. The money they save can be spent on other things, such as more food, education and other household investments. At the macroeconomic level, we know it makes sense.
Sanitation shouldn’t wait for the economy to have already graduated to middle income or high middle income status. Investment in sanitation will help accelerate economic development. If people don’t get sick, they don’t need to take time off work. They don’t need to spend time looking after their children and children aren’t missing school because of diarrheal diseases. So, by investing a small amount in sanitation, you can actually raise the standard of living and reduce poverty levels.
Despite increases in per capita income, Indonesia remains one of the countries with poor sanitation. Why?
It’s true that Indonesia has poor sanitation coverage despite the country’s increasing per capita GDP. We can look at how GDP is distributed. I think there is a high level of inequality. A lot of the population in parts of the country are actually in lower income brackets than the average GPD would suggest. That’s probably one explanation. The other explanation is there is a history of septic tanks. When we talk about sanitation, it’s not just about whether a family has such facilities or not, but also how waste is managed. A lot of families in Jakarta, for example, have septic tanks and lower sewage levels. The septic tank option will limit waste management expenditures. There is, however, an impact on the city’s ground water. It becomes polluted from so many septic tanks and there is no infrastructure or system to manage that waste on such a large scale.
I think it’s taken some time for people to realize the importance of improved sanitation. That’s part of what the Economics of Sanitation Initiative (ESI) is aiming to do, saying that we lose a certain amount of welfare and financial resources every year because of a lack of proper sanitation. We need to raise awareness. Although Indonesia is advancing in so many ways, it can’t leave the sanitation issue behind. Otherwise it can obstruct the transition because people are still getting sick from diseases and water resources are so heavily polluted. It will make business development more expensive in the future, which will impact economic growth.
What kind of losses might we incur in the absence of improved sanitation?
It will heavily affect gains possibly resulting from the potential shared by other Southeast Asian countries, where you have a good climate, beautiful beaches and abundant cultural sites. If people talk about Indonesia they think of Bali. If you choose between Cambodia and Thailand, nine out of 10 tourists want to go to Thailand because they have 100 percent sanitation coverage. They generally have very clean beaches and they manage their waste well. Cambodia, meanwhile, is still really a starting point. Look at how the economy of Thailand has boomed over the last one or two decades, in which 70 percent has come from tourism.
I think we know the argument is clear, that for tourists and businesses, there is always a price factor. If a place is more expensive but it’s clean, then we will decide: Can I afford to move somewhere to have a better environment? Some companies and tourists choose lower cost destinations. But I think it’s clear that people, both businesses and individual tourists, are willing to pay a significant amount to have good sanitary experiences.