Severely, the regional fiscal artery suffers from chronic anemia. A mere 0.7% of local government budgets trickles towards waste management, only such a whisper compared to the proportion of other sectors. Meanwhile, studies have revealed a starkness: larger budgets breed cleaner cities (Kompas 2020, Fitra 2020, Kemendagri 2020).
But money alone, like a weapon without a warrior, is only half the equation. The other half? The capacity to handle waste itself not to hinder social well being. Here lies the second hurdle, local authorities, accustomed to the predictable drip of meagre budgets, lack the breakthrough to pluck the economic potential of the waste. This is a kind of economic and fiscal illiteracy that cripples the efforts, leaving apart even the best potentials.
Financial Anemia Crippling Waste Management
That was a context where in 2021 ERiC DKTI kicked off the intervention in six target regions (Jambi, Bukittinggi, Bogor, Cirebon, Denpasar, and Malang). ERiC DKTI teamed up with local stakeholders dreaming of conquering the foe: poor financing on waste. Challenges are well-entrenched where across the six regions, waste financing is a mire. Budgets, meager as a beggar’s bowl, trickled to a waste system gasping for breath. The necessary costs for waste management are significantly higher than the available funds and some of the existing funds are also difficult to access. This leads to a lack of both the capital expenditure (CAPEX) for waste infrastructure, and the operational expenditure (OPEX) for keeping waste systems running sustainably.
Initial assessment conducted by the project illuminates clearly on the weaknesses across all regions. In the first place, as the assessment elaborates, within the veins of the district and municipality, a fragility in fiscal ability emerges, rendering it insufficient for good waste financing. This fiscal inadequacy impedes the pathway towards the efficiency and effectiveness, and that an ideal condition is still far to reach. Secondly, it is improper policies that decision makers doled out funds piecemeal, like throwing peanuts to a starving elephant. Communities in urban neighbourhoods, the vital first actor in the waste management odyssey, received a small piece of fund, while final treatment in waste dump, starved for ideal resources. This eventually rendered the regional targets hard to reach. And thirdly, the missing spine in a sense that both the “polluter pay principle”, a potent weapon against waste generators, and “full cost recovery,” the shield against financial anemia, are unhoned and neglected. “The toughest challenge is when unravelling problems of waste levies, because residents are used to cheap and even free fees for their waste,” said one of the field implementation team.
In addition, a prevailing lack of public awareness casts another shadow, from the fundamental act of waste sorting to the crucial participation in paying waste management levies. The community’s contribution to financing remains minuscule. As such, the consequences are profound. On the one hand, the minimal awareness of proper waste disposal not only jeopardizes public health and the environment but also spawns a surge in diseases stemming from inadequate sanitation. On the other hand, the low consciousness of waste sorting squanders the opportunity cost for nurturing waste recycling enterprises. In addition, the low awareness in the waste reduction practices amplify the operational burdens of waste management.
Trash Talk to Cash Walk: How regional waste financing is improved
Severely, the regional fiscal artery suffers from chronic anemia. A mere 0.7% of local government budgets trickles towards waste management, only such a whisper compared to the proportion of other sectors. Meanwhile, studies have revealed a starkness: larger budgets breed cleaner cities (Kompas 2020, Fitra 2020, Kemendagri 2020).
But money alone, like a weapon without a warrior, is only half the equation. The other half? The capacity to handle waste itself not to hinder social well being. Here lies the second hurdle, local authorities, accustomed to the predictable drip of meagre budgets, lack the breakthrough to pluck the economic potential of the waste. This is a kind of economic and fiscal illiteracy that cripples the efforts, leaving apart even the best potentials.
Financial Anemia Crippling Waste Management
That was a context where in 2021 ERiC DKTI kicked off the intervention in six target regions (Jambi, Bukittinggi, Bogor, Cirebon, Denpasar, and Malang). ERiC DKTI teamed up with local stakeholders dreaming of conquering the foe: poor financing on waste. Challenges are well-entrenched where across the six regions, waste financing is a mire. Budgets, meager as a beggar’s bowl, trickled to a waste system gasping for breath. The necessary costs for waste management are significantly higher than the available funds and some of the existing funds are also difficult to access. This leads to a lack of both the capital expenditure (CAPEX) for waste infrastructure, and the operational expenditure (OPEX) for keeping waste systems running sustainably.
Initial assessment conducted by the project illuminates clearly on the weaknesses across all regions. In the first place, as the assessment elaborates, within the veins of the district and municipality, a fragility in fiscal ability emerges, rendering it insufficient for good waste financing. This fiscal inadequacy impedes the pathway towards the efficiency and effectiveness, and that an ideal condition is still far to reach. Secondly, it is improper policies that decision makers doled out funds piecemeal, like throwing peanuts to a starving elephant. Communities in urban neighbourhoods, the vital first actor in the waste management odyssey, received a small piece of fund, while final treatment in waste dump, starved for ideal resources. This eventually rendered the regional targets hard to reach. And thirdly, the missing spine in a sense that both the “polluter pay principle”, a potent weapon against waste generators, and “full cost recovery,” the shield against financial anemia, are unhoned and neglected. “The toughest challenge is when unravelling problems of waste levies, because residents are used to cheap and even free fees for their waste,” said one of the field implementation team.
In addition, a prevailing lack of public awareness casts another shadow, from the fundamental act of waste sorting to the crucial participation in paying waste management levies. The community’s contribution to financing remains minuscule. As such, the consequences are profound. On the one hand, the minimal awareness of proper waste disposal not only jeopardizes public health and the environment but also spawns a surge in diseases stemming from inadequate sanitation. On the other hand, the low consciousness of waste sorting squanders the opportunity cost for nurturing waste recycling enterprises. In addition, the low awareness in the waste reduction practices amplify the operational burdens of waste management.
Building scenario model for financing
The project invited relevant parties of the regional government to onboard on the above problems. Some agendas were implemented in each region including, first, more precise calculation of operational, maintenance, and investment costs associated with waste management over a 20-year span, utilizing the Waste Management Retribution Calculator as stipulated in Permendagri No. 7/2021. This calculation yields a waste management retribution rate harmonized with or surpassing the cost recovery principle while adhering to the polluter pay principle.
In the beginning many members thought that calculations based on Permendagri 7/2021 are difficult to digest as the budget requirements are unaccounted for and cannot be adjusted to regional needs. The calculator is a new but important tool for local governments. “It is a layman for us to understand Permendagri and to use the calculator. But we thank, after the assistance process, we were able to understand it and transform it to district levy regulation,” said Ismambar Fadli, Environment Unit Head of Bogor Government.
Secondly, harnessing the results derived from Permendagri No. 7/2021 calculations as foundational data, the project team collaborates with the local actors to further refine using supplementary tools provided by the experts provided by the project. This process enabled stakeholders to distill the data and subsequently produce robust recommendations for a tailored financing model for each region.
The project intervention continued with establishing a cross sectoral unit team in each region, comprising personnel across agencies relevant to waste management issues such as the Department of Environment (DLH), Regional Development Planning Agency (Bappeda), Finance Agency, and Public Works and Public Housing (PUPR). Concurrently, the team undertook a thorough collection of secondary data essential for the calculation of the actual cost incurred in the current fiscal year. “The methods used by the team during the process are really good and provide two-way discussions of opinions from diverse stakeholders,” said Tri Iwansutanto, Unit head of Infrastructure and Natural Resources Jambi.
In collaboration with the experts provided by the project, the team was on board to on-the-job training activities. The process resulted in the more robust calculated waste handling costs and retribution rates for the ongoing fiscal year. To ensure methodological rigor, consultation and revision sessions were held with the across agency heads of the government. Eventually, procedure/guideline and report delineating the calculation of optimal waste handling costs and retribution rates customized to existing contextual conditions were produced.
Polluter pays, full cost recovered: securing the key wins
The achievement thus far included an agreed waste retribution tariff designed to align with the fundamental principle of Full Cost Recovery (FCR). Equally noteworthy is the commitment demonstrated by city and regency governments to uphold the Polluter Pay Principle, reflecting a conscientious effort to enforce fairness and accountability in environmental responsibility. The translation of these changes and results into regional regulations across all six regions transpired through extensive deliberations and consultations involving various agencies, including the Regional People’s Representative Council (DPRD). Four (4) regions, BUkittinggi, Bogor Regency, Cirebon and Malang already issued the regulation for the waster retribution tariff. This regulatory framework serves to institutionalize changes and outcomes, strategically mitigating potential political risks associated with the prospect of leadership transitions in the future.
“With this assistance, financing concepts can be explained in detail and on a basis so that the quality is much better than conventional methods usually used by regional governments,” said Tri Iwansutanto, the Economy and Infrastructure Unit head of Bappeda Jambi.
Link to Further Materials
Emission reductions through improved waste management infrastructures – giz.de
Contact Person
Makhdonal Anwar
Key Buzzwords
Waste Financing, Waste Retribution Tarriff, Waste Management Cost, Polluter Pay Principle
