Flood risk management and the private sector of DKI Jakarta

Transcription

1 Flood risk management and the private sector of DKI Jakarta Market opportunities for the Dutch water sector Anne Gierveld and Robbert-Jan van der Burg 1

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3 Flood risk management and the private sector of DKI Jakarta Market opportunities for the Dutch water sector By Anne Gierveld & Robbert-Jan van der Burg University of Groningen Faculty of Economics and Business International Business Research Indonesia 2012 Supervised by Dr. E.H. van Leeuwen and Dr. B.J.W. Pennink Groningen, August 2012 Anne Gierveld Violenstraat 1c, Groningen +31 (0) anne.gierveld@gmail.com Robbert Jan van der Burg Floresplein 12B +31 (0) rh.vd.burg@gmail.com 3

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5 i. Preface This report is the result of the International Business Research (IBR) Groningen project performed in Indonesia. IBR is a student run, independent research project within the Economics and Business Faculty Association (EBF) at the University of Groningen. The Netherlands Water Partnership (NWP) has ordered this research to investigate the opportunities for the Dutch water sector in Indonesia (DKI Jakarta). The authors are two master students from the faculty of Economics and Business of the University of Groningen with a background in Strategy & Innovation and Technology management. Therefore, this research is written from a business perspective. Since we have a different background than most people working in the water sector, this research aims to give valuable insights in order to explore and exploit new business opportunities for the Dutch water sector in Indonesia. Conducting this research was a great learning experience. We are very thankful for receiving this opportunity; therefore we would like to thank NWP as organization and in specific our supervisors from NWP, Ivo van der Linden and Paul van Koppen for their support during this research. We appreciate all the time and effort they put in this research in order to support us. Of course, this research could not have provided any results without the cooperation of all the people we interviewed in both the Netherlands and Indonesia. We experienced a lot of openness and preparedness to help and are very thankful for this. Furthermore, we would like to thank Gayuh Prima, student of the University of Indonesia for her assistance during the field research period in Indonesia. Lastly, we would like to thank Dr. B.J.W. Pennink and Dr. E.H. van Leeuwen of the University of Groningen for monitoring the whole process of the research to guarantee the quality of this report. Kind Regards, Anne Gierveld & Robbert-Jan van der Burg 5

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7 ii. Executive summary Company overview The Netherlands Water Partnership (NWP) is a comprehensive network that unites Dutch water expertise. The partnership, consisting of members from private companies, government, knowledge institutes and NGOs, acts as a center of information on water expertise, policy developments and market opportunities. The NWP is providing support to the Delta Team Indonesia. The Delta Team Indonesia is coordinating and supervising the activities under the Global Water Program. Research objective The objective of this research is to identify market opportunities in the field of innovative, integrated and sustainable solutions in water management for the capital region of Jakarta. In addition, this research shows how these opportunities should be exploited and what role each of the different members of the Golden Triangle - the Dutch government, Dutch firms and Dutch educational and knowledge institutions - should play in exploiting these opportunities. A focus is made on flood risk management and the private sector of Jakarta. In this research a match is made between the products/services supplied by the Dutch water sector and the demand of the private sector in Indonesia. Results The fast growing economy results in a growing and increasingly wealthy private sector with more investment funds. Jakarta s floods cost the city on average more than USD 400 million per year. A considerable amount of these costs are located in the private sector, mainly in the productive and housing sector. Therefore, it is expected this will results in an increased demand in flood risk management at the private sector of Jakarta. In the private sector of Jakarta, a key target customer could be defined in the form of large scale property developers (LSPD). LSPD are focused on the development of large areas for purposes such as industrial estates, residential areas, recreation, etc. Often, all these purposes are combined in an integrated township (some around Ha). Demands concerning flood risk management at this key target group are more advanced and therefore very interesting for the Dutch water sector since they are strong in specialized and innovative solutions often applied in an integrated way. Solutions should contribute to a higher attractiveness of land (higher land price), and/or a more efficient use of land. This match resulted in two market opportunities which are substantiated by examples of concrete productmarket opportunities (PMC s). The first market opportunity is described as Integrated urban development with the following specific PMC s; landscape architecture, efficient water catchment & intrusion and building on water. The second market opportunity is in the field of ICT based products and services in flood risk management with the following specific PMC s; information as input for design and engineering, decision support systems & flood forecasting and flood risk assessments. Further, a strategy is developed in order to exploit these market opportunities. This strategy consist three phases; Identify demand, Formulate business cases and Implement business cases. Central in this strategy is a market approach from three sides in which a business developer at Jakarta plays a key role. Demand will be stimulated by a bottom up approach and solutions will be presented on a top down and direct way. Showcases, Dutch branding, scenario workshops etc. are tools to support this strategy. This strategy complies with the goals of the Global water program by joining forces to improve the position of the Dutch water sector and stimulate learning and innovation in the water sector. 7

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9 iii. Table of content 1. Research background Aim of the research Research methodology Scope of the Research Research process Reading manual Situational analysis flood risk management Jakarta Cause of floods Flood prone areas Cost of Floods Expected developments Conclusion Proposition of the Dutch water sector The Dutch water sector The Dutch water sector in Indonesia Conclusion Demand of the private sector Levels of analysis Demand at the micro level Demand at the meso and macro level Conclusion Market opportunities and PMC s Key target group: Large scale property developers Market opportunity Integrated urban development Market opportunity ICT based products & services in flood risk management Conclusion Implementation of market opportunities Identify demand Formulate business cases Implement business cases Conclusion Conclusion and Recommendations Conclusion Recommendations Suggestions for further research...39 References Appendices

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11 iv. Abbreviations 4P-MoU = 4- Parties Memorandum of Understanding DKI Jakarta = Daerah Khusus Ibukota Jakarta (special area of the capital city of Jakarta) CDC = Connecting Delta Cities CIWK = Covenant information chain water and climate services CSR = Corporate Social Responsibility G2G = Government to Government JCDS = Jakarta Coastal Defense Strategy INA = Indonesian Netherlands Association Kadin = Kamar Dagang dan Industri', (Chamber of Commerce and Industry) LSPD = Large Scale Property Development NWP = Netherlands Water Partnership NWPi = Netherlands Water Partnership in Indonesia P2P = Private to Private SME = Small and Medium-sized Enterprises SSDP = Small Scale Property Development ToR = Terms of Reference 11

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13 1. Research background From the perspective of the Global Water Program, which started in 2010, the Delta Team Indonesia is coordinating and supervising the activities under the Global Water Program. The Global Water Program has defined three generic objectives for its activities: 1) joining forces to improve the position of the Dutch water sector, 2) to contribute to resolving the global water problems and 3) stimulate learning and innovation in the water sector. The Netherlands Water Partnership (NWP) is providing support to the Delta Team Indonesia. In compliance with her role as provider of support, the NWP has ordered this research to investigate the opportunities for the Dutch water sector in Indonesia. 1.1 Aim of the research The capital region of Jakarta is a rapidly changing and developing Delta Metropolis. Combined with Jakarta s geographic location, the number of people living and its political and economic importance, it generates a substantial amount of challenges such as (rapid) urbanization, lack of space, traffic congestion, private and public transport issues, air pollution, (air)port development, drinking water management, wastewater management, energy supply, climate changes, floods, etc. Based on the existing position of the Dutch water sector in de public field of flood management in Jakarta and considering the different challenges, the intertwining of these challenges and the expected developments to overcome these challenges, the NWP wants to (1) identify how the Dutch water sector should position itself in Indonesia, (2) how it can benefit from its recent experience, reputation and existing networks and relationships and (3) how it can contribute to the sustainable development of the Jakarta capital region. The Dutch water sector seeks to broaden itself in Indonesia and to capitalize on her existing position with regard to the complex challenges. The Dutch water sector has a reputation for its high quality and innovative solutions and aims to find long term sustainable solutions. Therefore, the objective of this research is to identify short to medium term (1-10 year) market opportunities in the field of innovative, integrated and sustainable solutions in water management for the capital region of Jakarta. In addition, this research shows how these opportunities should be exploited and what role each of the different members of the Golden Triangle - the Dutch government, Dutch firms and Dutch educational and knowledge institutions - should play in exploiting these opportunities. The following research question has been formulated to execute this market study: What market opportunities in the field of innovative, integrative and sustainable solutions in water management exist in the Jakarta Capital Region? The sub questions as well as other background information about this market study can be found in the ToR (see appendix I). 1.2 Research methodology This research report consist two analyses. In the first analysis, the scope of this research is determined by analyzing the strengths of the Dutch water sector and water related opportunities in Jakarta (see 1.3 scope of the research). In the second analysis a match is made in order to find the market opportunities and product market combinations within the earlier made scope (PMC s) (see Figure 1: Visualization of the research methodology). During this second analysis, the factors influencing the willingness to invest in flood risk management have been investigated, in order to determine the demand for flood risk management. Besides, the supply side (The Dutch water sector) is investigated in order to find opportunities related to flood risk management for the Dutch water sector in Jakarta. Eventually, a confrontation is made between the proposition of the Dutch water sector and the demand of the private sector in Jakarta. This matchmaking process results in market opportunities and PMC s. Subsequently, it is described how these market opportunities and PMC s could be capitalized. Demand Supply Match Figure 1: Visualization of the research methodology 13

14 1.3 Scope of the Research The research phase in the Netherlands has been used to determine the scope of the research. This has been done by conducting interviews with key stakeholders in the Dutch water sector (see appendix III). During this first analysis, it became clear that the Dutch water sector is a very diverse sector with a lot of overlapping fields of work, activities and different stakeholders with specific characteristics and interests. This kind of interrelationships makes the sector difficult to comprehend. However, after a first analysis, a scope is made on flood risk management and the private sector of Jakarta based on the strengths of the Dutch water sector and expected opportunities in Jakarta. This determination of this scope will be elaborated in the sub-paragraphs below Focus on flood risk management Delta technology and specifically flood risk management is one of the strong competencies of the Dutch water sector and well known abroad (Blueeconomy and Panteai, 2010). According to the World Bank the main hazards for Jakarta relate to water management and flood control. Jakarta s floods resulting in stalling of traffic, lost productivity and property damage is said to cost the city more than USD 400 million per year (The World Bank, 2012). Flood risk management includes preventing damage caused by floods and taking measures to reduce the likelihood of floods and/or the impact of floods in a specific location (protection) Focus on the private sector Many of the business initiatives by the Dutch water sector in Indonesia are focused on public collaboration. For example, the Jakarta Coastal Defense Strategy project (JCDS) is undertaken under the umbrella of bilateral cooperation between the Government of Indonesia and the Government of The Netherlands. The aim of this collaboration is to formulate a strategic plan to improve the coastal defense of Java and in particular the northern coast of Jakarta. Other examples of a government to government collaboration is the partnership between the municipality of Rotterdam and DKI Jakarta called Connecting Delta Cities (CDC) or the Jakarta flood management projects I, II and III which had the objective to improve flood management through the use of non-structural measures. Based on the existing position and reputation of the Dutch water sector in de public field of flood management in Jakarta and the Dutch experience and knowledge in this field, it is interesting to explore other possibilities and business opportunities. As stated before, Jakarta s floods cost the city more than USD 400 million per year. A considerable amount of these costs are located in the private sector. With a fast growing private market, rapid economic development and a government yet lacking to guarantee safety of flood risk due to a lack of capacity could result in an increased demand from the private sector for investments in flood risk management. The combination of these factors provide an interesting scope and starting point for this market analysis to determine whether opportunities exist in the field of flood risk management and the private sector of Jakarta. More background information on flood risk management and the private sector of Jakarta can be found in chapter 2. Figure 2: Industry affected by Flood, Jakarta Research process The research has been divided into two phases; Research phase Netherlands: this phase has been used to determine the scope of the research by investigating the strengths and weaknesses of the Dutch water sector and interesting sectors in Jakarta. This has been done by conducting interviews with key stakeholders (see Appendix III) in the Dutch water sector and by conducting a desk research in the Netherlands. Field research phase Indonesia: this phase consist of five weeks field research in Jakarta. Information has been gathered by conducting interviews with both Dutch parties active in Jakarta and the private sector in Jakarta. The list of key stakeholders interviewed in Jakarta can be found in appendix IV. For a timetable see appendix I. 1.5 Reading manual The research report is divided in three parts (see Table 1: Design of the research report). The first part contains background information about the research. The second part contains an analysis of the demand and supply, resulting in an overview of market opportunities exist. The third part contains an advice how these market opportunities can be exploited. 14

15 Part Chapter Content Background 1 Research background 2 Situational analysis flood risk management Jakarta What 3 Proposition of the Dutch water sector 4 Demand of the private sector 5 Market opportunities and PMC s How 6 Implementation of market opportunities and PMC s 7 Conclusion and recommendations Table 1: Design of the research report 15

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17 2. Situational analysis flood risk management Jakarta The capital region of Jakarta is located on the north coast of the island of Java in the Indonesian archipelago in Southeast Asia. Jakarta is situated in a lowland area, a delta where 13 smaller and bigger rivers try to reach the sea. About 40% of the city, the area the furthest north near the Java Sea, is situated below sea level (The World Bank, 2011). The greatest climate and disaster related risk facing Jakarta is flooding, which will impose high human and economic costs on the city. 2.1 Cause of floods Floods occurs when a watercourse is unable to process the quantity of runoff flowing downstream. The flood risk hazards which Jakarta faces come from two sides, the Java Sea in the north and the rainwater runoff from the upstream hills in the east, south and west of Jakarta. The first risk, which comes from the sea, is amplified by land subsidence and a rising sea level. The second risk, which comes from the inlands is caused by (upstream) rainfall and is amplified by an increase in extreme rainfall over the last years, increase of hard surface areas, land subsidence, nonfunctioning drainage systems, canal systems and insufficient upstream river management. Furthermore a lack of enforcement of laws and regulations negatively influences the flood risk as well, since laws exist but are not well pursued (The World Bank, 2011) Rising sea level The rising sea level is a long-term climate change challenge for Jakarta. The sea level is rising with about 1.8 mm per year (Pachauri et al, 2007). This is not causing the major hazard for Jakarta in the short term, however, on the long term it can have significant influences. At the end of the 21 century, it is expected that the sea level has been increased by 18 to 60 cm (The World Bank, 2012). Especially in combination with the on-going land subsidence, it will form a major threat Land subsidence Over the period of , subsidence ranging from 20 to 200 cm is evident in several places in Jakarta. In general the land subsidence exhibits spatial and temporal variations, with the rates of about 1 to 15 cm/year (Hasanuddin, 2009). A few locations have experienced subsidence rates up to cm/year (see Figure 3: Jakarta's fastest sinking areas (Jakarta Post, 2010)). Land subsidence is a result of rapid and uncontrolled urbanization and industrialization that has driven unregulated and under-monitored extraction of groundwater (The World Bank, 2012). Land subsidence could be seen as one of the most threatening amplifiers, since it has a huge impact and is not easy to stop. Figure 3: Jakarta's fastest sinking areas (Jakarta Post, 2010) Increased rainfall During the wet season, between December and February, Jakarta (and surrounded area) has to deal with extremes in down streaming river- and rainfall water, caused by heavy and long-lasting downpours. Over the last years, an increase in rainfall and intensity of showers has been noticed in Jakarta and West Java in terms of both maximum daily rainfall and average daily rainfall. The increase in the intensity and frequency of rainfall is exacerbating the problems caused by a lack of open space and the existing drainage systems across the city (The World Bank, 2012) Lack of open space With such heavy rains, it is necessary that water is given enough space to find its way to the sea or into the soil. Rapid urbanization, illegal building, weak spatial planning and changes in land use have diminished the amount of permeable surface area that allows for the natural absorption of rainwater 17

18 into the ground. Heavy rainfall on impermeable surfaces generates increased and faster run-off into the rivers and canals, which are already stressed to their maximum capacity and results in more floods (World Bank, 2012) Current drainage and canal systems Extreme weather events cause overloading of the existing drainage system. The development of new physical structures that encroach into the waterways and block the drainage capacity of the canals and rivers, has caused major issues for the already overloaded system as well (World Bank, 2011). Proper maintenance on the drainage and canal systems is missing which results in a deterioration of the functioning of the drainage and canal systems. Communities also tend to use the rivers for the disposal of their solid waste, notably plastic bags and other refuse. This causes the already overloaded and badly maintained drainage system to become clogged and therefore decrease the drainage capacity Insufficient upstream river and water management. Floods caused by heavy rain from the hinterland find their origin by poor upstream river and water management. For example due to deforestation, agricultural intensification, altering, straightening and narrowing of the river basin, insufficient artificial water storage, etc. 2.2 Flood prone areas The flood prone areas are scattered throughout Jakarta (see Figure 4: Distribution of flood affected areas in Jabodetabek (Bakornas)). The most flood prone area is the north part of Jakarta, since this is the most low-laying area. This part can be affected by flooring's from the sea as well as flooring's originated from rainfall of the hinterland. About 60% of north Jakarta is below sea level and 40% of Jakarta is below sea level (The World Bank, 2011). With the rapid urbanization and growth of Jakarta, the number of flood prone areas is also increasing, even on the more upland areas. This is a consequence of a lack of open space and by building on floodplain areas and river basins. A list of flood prone areas in Jakarta can be found in appendix V. Figure 4: Distribution of flood affected areas in Jabodetabek (Bakornas) 2.3 Cost of Floods According the World Bank, floods in Jakarta result in stalling of traffic, lost productivity and damage to property which will cost the city more than USD 400 million a year. An estimation of the costs of the flooding in 2007, which was a major one, says the total effects costs around Rp billion which is about USD 563 million (Jovel, 2007). From these total costs, about 54% could be dedicated to the industry of Jakarta. These are all private costs and mostly losses (99%) instead of damages (1%). Indemnities to housing, which are all private cost too, account for 25% of the total costs, and are all damages. For more information about the costs of floods in 2007, see appendix VI. These figures show that the private sector faces the most costs when floods occur, mainly in the productive and housing sector. This indicates an interesting key target group for this research existing of private stakeholders who are active in these sectors. These stakeholders could be industrial companies, property owners, property developers and industrial estates. The type of costs (Table 4) indicates solutions in flood risk management should mainly focus on reducing the losses which occurs during floods Costs per sector The table below shows the distribution of total costs per sector (Jovel, 2007). It is evident to see the productive sector takes in most of the costs, followed by housing. 18

19 Costs per sector Amount percentage Productive sector % Housing % Infrastructure % Cross sectorial % Social % Table 2: Costs per sector (Jovel, 2007) Owner of costs The table below shows the distribution of total costs by owner. It is clear most of the costs will end up at the private sector of Jakarta. Owner of costs Amount percentage Public costs % Private costs % Table 3: Owner of costs (Jovel, 2007) Type of costs The table below shows the distribution of total costs separated in damages and losses. It is clear the flood of 2007 mainly resulted in losses (66% of total costs). Type of costs Amount percentage Damage % Losses % Table 4: Type of costs (2007) 2.4 Expected developments Jakarta is a fast changing metropolis, with a lot of developments that can result in market opportunities related to flood risk management and the private sector. Expected developments will be elaborated below Improved transportation network Plans have been made to improve the transportation network and reachability of areas in and around Jakarta. Improvements are planned to be made on the road and mass transportation network by constructing a mass rapid transit (MRT) network, improving the Jabodetabek Commuter railway system and improving the road network (World bank, 2011) (see also appendix VII). These developments create new opportunities since an improved transportation network and reachability increases the attractiveness of Jakarta s industrial areas. This could result in more industrial growth and thus a possible demand for flood risk protection. Besides the design and construction of this mass transportation network the possible influence of floods should be dealt with. This could result in opportunities for the Dutch water sector to cooperate and support Policies related to climate change adaption The government of Jakarta set policies related to climate adaptation in their Spatial Planning for Consequences of this can be seen in the infrastructure investments, since they will increase (Appendix VIII). According the spatial plan for 2030, their goal is to increase the proportion of green space in the city and improve water catchments and groundwater recharge. The increasing attention of the government in climate adaption will probably result in more regulations for the private sector, especially for the property developers. For example; policies w.r.t. water catchment and recharge could result in opportunities for products which can increase water catchment and groundwater recharge. However, in order to be effective, such policies and regulations will have to be monitored. At the moment this is not always the case and therefore policies do not always results in opportunities yet Movement of the industrial areas The economic growth of Indonesia is expected to continue by 6.5% a year in 2013 till 2016 (agentschap.nl). Due to this expected economic growth and the lack of space available in the capital region, the industry will probably move to (new) industrial estates in the surrounding areas of Jakarta. This provides opportunities for the development of these industrial estates w.r.t. flood risk management. When industry moves from the center of Jakarta to other places, space becomes available in one of the most flood prone areas. If this will be developed by property developers, new opportunities could arise for investments in flood risk management Development of (new) ports The government is planning to build the country`s biggest port in an effort to expand and increase the capacity of the current Tanjung Priok Port in North Jakarta from 5 million to 18 million twenty-foot equivalent units (TEU) of containers (Antra news, 2012). The Kalibaru Port (New Priok) is an extension of the Tanjung Priok in North Jakarta and is expected to be totally completed in At the moment, engineers are investigating the possible solutions for hinterland connections. Besides developing new and improved harbors, plans exist to expand the Sukarno- Hatta airport and develop a new airport in the East of Jakarta (MPA3). These developments will stimulate the industrial development and will probably increase the number of industrial companies in the Jakarta area. With the port-hinterland connections, goods 19

20 from the harbor can directly be transported to the hinterland and it is expected the industry will also move away from the harbor and settle at the outskirts of the city. Opportunities for flood risk management not only arise around the harbor, but also at the outskirts of Jakarta, where flood risks also exist Township development Coldwell Banker Indonesia estimates the development of new townships will still increase and move to the west and east Jakarta areas, especially Tangerang and Bekasi. Infrastructure availability and transportation access are the main reasons developers focus on township developments in the two buffer zones of Jakarta. The development of new townships gives opportunities to integrate flood risk management into the design of these new townships at the beginning of the development. (Indonesia Finance Today, 2012). For more information about township development, see appendix IX). 2.5 Conclusion Jakarta is a rapidly changing and developing Delta Metropolis that is prone to floods. The rising sea level, increasing rainfall and other, mostly man-made causes of floods make the area of Jakarta even more vulnerable. The growing economy results in an increasingly wealthy private sector with more investment funds and possibilities to invest in flood risk management. Figures show the private productive and housing sector faces the most costs when floods occur. Interesting key target groups for this research therefore are private stakeholders who are active in these sectors such as industrial companies, property owners, property developers and industrial estates. Costs are mainly losses instead of damages which indicate solutions in flood risk management should mainly focus on reducing the losses. Developments like new and improved ports, an increasing industry, new settlements of the industry and townships and increasing activities of property developers all in a flood vulnerable area could result in increased demand for flood risk management solutions. Also new policies and regulations w.r.t. climate adaptation could result in opportunities, although, it is questionable if these will maintained by the government. 20

21 3. Proposition of the Dutch water sector This chapter will focus on the proposition of the Dutch water sector in Indonesia. Detailed strengths and weaknesses that specific counts for the Dutch water sector in Indonesia are elaborated. 3.1 The Dutch water sector The Dutch water sector in general has a lot of knowledge and experience and is strong in governance, design and engineering of large projects (water 2020). Also the innovativeness and the ability to deliver an integrated approach are seen as important competences of the Dutch water sector. These strengths are of great economic value when entering the private market concerning flood risk management solutions. Though, the products and services the Dutch companies export to other countries are relatively expensive. As the Dutch water sector cannot compete on price only, they have to focus on delivering high quality products/services and/or innovative solutions in niches where specialized knowledge and experience is required. The specialized in-house knowledge, such as censoring and modeling, application of satellite data, reputation and skills of Dutch architects and integrated solutions in spatial planning are interesting business opportunities, since they focus on niches that experience less competition. 3.2 The Dutch water sector in Indonesia The cooperation between the Netherlands and Indonesia has a long tradition and is built on many, diverse activities. For example, in the colonial period, Dutch engineers have contributed to the construction of canals, or more recently at the Jakarta flood management project I, II and III. The Dutch private companies active in Jakarta are working for both the public and private sector. However, more and more P2P collaborations take place since the demand of the private sector increases. For example with the design, development and supervision of land reclamation, engineering services for property developers. Dutch activities in Jakarta s water sector are supported by different organizations. The Indonesian Netherland Association (INA) aims to facilitate, support and encourage the business cooperation between Indonesia and the Netherlands. The embassy of the Kingdom of the Netherlands also has an important role in the Dutch water sector in Jakarta with a water resource expert, mainly focusing on public investments and developments related to water. The subparagraphs below, describes the strengths and weaknesses of the Dutch water sector active in Jakarta. The information used is gained from interviews with both Dutch and Indonesian parties Strengths of the Dutch water sector The Dutch companies active in Indonesia have a lot of knowledge and experience and use this knowledge to make profit. RoyalHasskoningDHV and Wittenveen+Bos for example are large Dutch players active in this market. These companies are strong in project management, consultancy, feasibility studies, and design and engineering of water management and sea defense structures. VanOord is a large company that is successful in a specific niche: dredging. These large Dutch companies have good track records since they are doing business in Indonesia for a long time and are involved in different smaller and larger projects. Often, these large Dutch parties are involved in different stages in the same projects. For example, Wittenveen+Bos conducted the design for a land reclamation project in Pantai Indah Kapuk and RoyalHaskoningDHV carries out the supervision for the same project. Royal HaskoningDHV is also involved in the design for two other islands offshore Pluit. Recently VanOord also got involved in the Pantai Indah Kapuk project by being assigned to a dredging project. The large consultancy and construction companies are very successful in Indonesia and there is a high demand of the private sector for their services. Since private parties of the Dutch water sector are already collaborating with Indonesian parties, it has been investigated why Indonesian private companies in Jakarta prefer to hire and collaborate with Dutch parties. The most important aspects are their track records, reputation and long term contacts. Reputation The private parties interviewed during the field research state that the Dutch water sector has a strong reputation in the field of delta technology. Besides, the Dutch have a good reputation for being reliable and the delivery of high quality in a short time frame. The Dutch water sector can use this reputation to distinguish themself from competitors. Track record and experience It is confirmed that the Dutch water sector has the advantage of being in the possession of a lot of 21

22 knowledge, experience and specialized skills. Their good track record is one of the main reasons for the private sector to hire a Dutch company for their design and engineering skills. This is in favor of the large established firms of the Dutch water sector, but makes it more difficult for SME/entrepreneurial companies to enter this market since they don t have a long track record or proven technologies. Therefore, it is necessary to stimulate the entrance of these SME/entrepreneurial companies. Long term contacts Indonesian people in decision making positions in private as well as in public organizations often finished a study in the Netherlands. This is a powerful connection that fosters goodwill and facilitates business collaboration with Dutch companies. For example, these people are familiar with the Dutch ways of working and culture, which will make collaboration much easier. Familiarity is favorable for Dutch companies and it is easier to build up a personal relation, something that is very important when doing business in Indonesia. Although capacity building will not result in short time business opportunities, it can result in business opportunities in the long term Weaknesses of the Dutch water sector The Dutch water sector also shows some weaknesses. Below, a list of the weaknesses is described that explains the reason why some Dutch water sector parties face difficulties to enter or operate in the Indonesian market. Expensive products and services The products and services the Dutch private sector delivers are expensive compared to other countries and local Indonesian parties. The Dutch private sector faces (high) competition in the more basic engineering and design phases of projects and implementing and construction phase of projects. Supply driven The Dutch water sector generates a lot of knowledge but face sometimes difficulties to commercialize this knowledge. When focusing too much on knowledge without knowing the specific demand, this lowers the chance of successful exploitation of business initiatives. For example, without knowing the specific demand (e.g. trigger for an investment in flood risk management) it is difficult to know how to approach these parties from a marketing perspective and to offer an interesting product or service. This is mainly the case for organizations that are not yet established in Indonesia and wants to enter the Indonesian market. Fragmented sector The Dutch water sector has a few large players and a lot of small players. These small players focusing on niches often lack the momentum of a large player and try all independently to enter the Indonesian market which results in high transaction costs and results in a low rate of success. Besides, Indonesian partners prefer to collaborate with equally large companies. Because of this, interesting opportunities will probably be unutilized and the Dutch water sector can face reputational damage if a lot of these attempts fail. 3.3 Conclusion The Dutch water sector has a lot of knowledge and experience, and is strong in niches such as delta technology, governance, censoring & modeling, integrated solutions in spatial planning etc. The innovativeness and ability to deliver an integrated approach are seen as important competences of the Dutch water sector. On the other hand, the products and services of the Dutch water sector are expensive. The large consultancy and construction companies established in Indonesia are already very successful in commercializing their knowledge and there is a high demand for their services by the private sector of Indonesia. However, caused by a fragmented market it seems that especially the SMEs (which are often in the possession of innovative solutions) face difficulties to enter and operate in the Indonesian market. Al lot of small players focusing on niches tries independently to enter the Indonesian market but is missing the momentum a larger player has. Further, these companies often don t have a long track record or proven technologies which make it difficult to enter or operate in this market. This will result in high transaction costs and a low rate of success. Therefore, it is necessary to stimulate the entrance and cooperation of these SMEs. Current initiatives like the Covenant Information Chain Water & Climate (CIWK) are focused to join forces and to improve this situation and create more momentum. The cooperation of smaller and larger companies could be very interesting. 22

23 4. Demand of the private sector The factors influencing the willingness to invest in flood risk management have been investigated, in order to determine the demand for flood risk management. The influencing factors could be grouped into the following three main factors: 1) risk perception of floods, 2) economic aspects and 3) governance of the investment. The concepts measured related to this factors can be found in appendix XI. 4.1 Levels of analysis In this market research, demand of the Indonesian private sector with respect to flood risk management is divided into three different levels: Micro level: Meso level: Macro level: Individual industrial companies Small scale development projects (SSDP) Large scale development projects (LSDP) Figure 6: A small scale development project (SSPD) Figure 5: An individual industrial company The micro level describes the demand of individual industrial companies (Figure 5: An individual industrial company) the core of Jakarta s productive sector, the industry. The meso level, SSDP (Figure 6: A small scale development project (SSPD)) focuses more on development of buildings and towers with purposes as shopping malls, apartments, hotels, recreation etc. The macro level, LSDP (Figure 7: A large scale development project (LSPD)) focuses more on property development projects of larger area s (largest area is Ha). Purposes are industrial estates, residential areas, recreation, offices etc. Often all these purposes combined in one single integrated township (see Appendix IX for some examples). Appendix X gives an overview of the property developers located in Jakarta. This developed land and buildings can be rent or sold from the developers. The larger property developers develop both SSDP and LSDP. Figure 7: A large scale development project (LSPD) 4.2 Demand at the micro level The individual industrial companies investigated during this research are located in flood prone areas (see appendix V) Risk perception of floods Floods are one of the major concerns of individual industrial companies. Every year different smaller and larger floods affect the industry of Jakarta. The companies are familiar with the damages and losses resulting from the floods that affected their company. Drops of about 50% in production capacity during floods are quite normal. These production losses are 23

24 the result of a lack of accessibility since the factories are out of reach for the operators and suppliers and internal production space is often limited due to water inside the factory. The companies also face damage when the water enters the company and affect their production facilities, this will especially be the case for the more high-tech companies. Heavy rain is seen as the primary cause of the flood events. Other causes and threats like the rising sea level, poor sea defense structures, etc. are mostly unknown. Some companies heard of land subsidence, but are not familiar with the details and related consequences. Because of this unfamiliarity with possible causes and threats of floods, most industrial companies underestimate the size of the problem and therefore are insufficiently protected. This is amplified because companies are unaware of the solutions to protect. They often use basic (self-made) construction solutions to protect their production plant. Building walls, bury ditches, installing pumps and make elevations inside the factory are examples of measures taken to prevent from floods, although it is acknowledged that these measurements are not sufficient to protect themselves. (SeeFigure 8: Protection wall at a company in Pulogadung industrial estate). However, despite the fact that companies are to a large extent unaware of the causes and risks of floods, there is certainly already a real concern about the possible flood related hazards and companies are interested in ways to protect themselves. Figure 8: Protection wall at a company in Pulogadung industrial estate Economic aspects The primary reason to invest in flood risk management is to prevent from damages and losses (Figure 9: willingness to invest in flood risk management (micro level)). An investment decision in flood protection is just a financial calculation of costs and benefits, which differs per company. The investment horizons are mostly very short, ranging from 1 to 5 years payback period. However, the industry of Jakarta does not have a lot of experience with investments in flood protection, which means companies actually do not really have a norm for this kind of investments. Besides, investments in operational processes, also investments in the reachability of the plant have a high priority. Flood risk measurements + Production continuity - Losses Profit Figure 9: willingness to invest in flood risk management (micro level) Governance of the investment For most of the companies, the willingness to invest is higher if the problems could be tackled together, since most believe this is more effective. Therefore, according to the individual industrial companies, the best way to organize flood risk management is by placing it with the industrial estates or the government. According the individual companies that are established in an industrial estate, the industrial estates are responsible for flood risk management of the area they control because the industry pays service charges. On the larger scale, it is the responsibility of the government. At the moment around 75%-80% of individual industrial companies are established in industrial estates. Most of the companies are prepared to pay charges to the industrial estates if they take over the responsibility of flood risk management. A plant manager once said; The best solution should be that 100% of the flood risk management is managed by an industrial estate so we can focus for 100% on production. This is revealing and important since it states how the industry wants to deal with flood risk management. Preferably, a company only wants to focus on their production (their core business), instead of focusing on other matters like the possibility of a flood event. With respect to flood risk management most industrial companies do not feel responsible for protecting other areas than their own production + - Damages 24

25 plant. However, most workers live around their production plants and some companies feel responsible to protect these employees living in the surrounding areas as well. 4.3 Demand at the meso and macro level The most property developers develop both SSDP and LSDP. Therefore, these property developers often experience the same risk perception on both the meso and macro level. However, on some aspects the specific demand for flood risk management varies between these two levels Risk perception of floods The developers are in general well aware of the causes, like land subsidence, a rising sea level etc. and risks related to floods. Some developers even admit they are part of the cause of floods, since they use all the available land to build, instead leaving space open for ground water intrusion. According to one of the property developers; 'By law, minimally 30% of the land must be used for facilities like green space. However, it is more beneficial to use it for building roads and buildings and thus the rules of the government are often not followed'. As long as the government regulations are not followed, property developers have no incentive to keep open spaces. Since developers are aware of the causes and risks, floods are seen as a major threat to deal with in their estates and therefore they already took measures to protect their land. Most developers realize they cannot solve or control the problem by their own, and only protect themselves to minimize the impact of floods. Different measures, depending on the purpose and location of the land are used. The extent to which measures have been taken to prevent from worst case scenarios is questionable. Some developers said they do not know, others said it is impossible to prevent from extreme weather events. When it is possible to better control flood risks, many developers want to invest in such solutions, mainly because of financial benefits. Other important threats besides floods are poor reachability caused by traffic congestion. Earthquakes are also mentioned as a threat, although this risk is lower than the risk of floods, since it happens less often. Meso level Especially for the SSDP, most of the measures of flood protections are basic solutions. Building on higher ground is seen as an effective solution to protect them from flood. For example, shopping malls are built around 5 meters higher than the surrounding area. Macro level The LSDP, mostly township developments and industrial areas, use besides basic measures also more advanced solutions and systems like warning systems and automatic flood gates. However, still mainly basic prevention techniques are used and most developers are interested in new innovative techniques. Developers say they are only aware of the basic solutions and are not aware of all possibilities for flood risk management. For example, a master planner of one of the industrial estates said he didn't hear of any new innovations in the field of flood risk management in the last 20 years Economic aspects Economic benefits are the most important driver for investments in flood risk management. A flood free area has value for the customers of property developers. Therefore it makes the land more attractive which result in a higher land price. Efficient use of land is very important for the developers of SSDP and LSDP since it is beneficial to use as much as possible of the land in order to make a profit. Therefore, the triggers for both SSDP and LSDP for investing in flood risk management are to increase land price and an efficient use of land since this will directly influence their profit (seefigure 10: Willingness to invest in flood risk management (meso/macro level).). Developers experience different benefits when being well protected from floods. Obviously, it will save costs from damages and losses but the most important benefit is reputation. Having a flood free reputation as a developer is a very strong marketing issue, both on the short and long term. As one of the property developers state: 'In our marketing campaigns we use the slogan 'flood free area'. However, this slogan has no legal consequences'. The investment horizon depends on the timescale and type of the investments. Most developers still have a relative short investment horizon. The payback time of an investment is often not more than 10 years and around 5 years. Although, there are some projects with an investment horizon of more than 50 years. Macro level For an industrial company, as mentioned earlier, it is very important that flood risk management is controlled by another organization, and they are willing to pay for a flood free area and service. One of 25

26 the property developers from an industrial estate said; 'A major concern of the industry is to be free from floods, it gives them a sense of security and are therefore willing to pay. After the heavy floods in Thailand in 2011, a lot of industry moved to industrial estates in Jakarta, which increased the land price of the well protected industrial estates. The main benefit of being well protected from floods (and known for this) is to make the land more attractive, which will positively affect the land price. Developers are very interested in new solutions to deal with flood risk management, however, only if there are economic benefits like an increase in land price or an efficient land use. Concerning the investment amounts, there is not really a maximum. Investments will be made if an investment results in more benefits than costs or when an investment is required if you have a polder, dikes are necessary, otherwise the land is useless, according to one of the developers. + Flood risk measurements - Losses and damages + Attractiveness of land + Land price Profit Figure 10: Willingness to invest in flood risk management (meso/macro level) Governance of investment According to the property developers, it is their responsibility to control flood risk management of their land, since tenants and buyers pay monthly service fees for services like flood protection. + + Efficient land use However, since these areas are only a relative small piece of a larger affected area, they are not able to solve the problem. Solving the problem should be done at the source, which is quite complex and influenced by many factors. According to the developers, this is the responsibility of the government and they have to take measures. Corporate social responsibility is considered to be quite important for the all developers. An important aspect is the protection of kampongs around the developed areas. People in the surrounding areas often blame the property developers for the presence of floods. As compensation for building next to a kampong area they will help these people by protecting them against floods, e.g. by dredging the rivers. This is especially the case in the more down town areas where SSD are located. However, unless developers are concerned about surrounding areas, they do not think it is their responsibility to protect the surrounding areas. As one of the developers of industrial estates said; 'It is not our responsibility to take care of the people in the surrounding areas, must it be part of our CSR because the government fails? Macro level Especially at the LSDP, integrated approaches in land developing are an important and common approach. While providing a solution to traffic jams, floods and inadequate upgrading of infrastructure in big cities, these integrated developments combine residential condominiums, commercial and entertainment areas, office space, healthcare facilities, education in a single strategic location, equipped with first class facilities, infrastructure and a green environment. Integrated approaches in flood risk management are already applied. For example the use of a golf court in the form of a retention area. Such innovative and progressive developers are interested in similar creative solutions that combine and integrate solutions in flood risk management with other opportunities that will create synergy and turn the investment into an attractive opportunity that will pay back immediately, create publicity and prestige, or solve other problems. The willingness to invest in flood risk management is even higher if the problems can be tackled together and a sustainable solution can be found. A master planner from a LSDP said: 'There is a willingness to collaborate with other developers, but the initiative has to come from a third party because there is a barrier between the different industrial estates'. Developers acknowledge the need to collaborate with the government and other developers to solve the problem. However, they state an independent party should take the lead to coordinate this process. 26

27 4.4 Conclusion There is a demand for flood risk protection since industrial companies see floods as a high risk for their production process. Since the individual industrial companies are unaware of flood related hazards they underestimate the size of the problem and are insufficiently protected. The industrial organizations believe it is the responsibility of the industrial estate or on a larger scale the government, to take care of flood risk management. The industrial companies are willing to pay service costs for handing over the responsibility of flood risk management. Therefore, the demands of the industrial companies (micro level) could best be fulfilled at the macro level, since they are better to deliver effective solutions than individual measures per industrial company. It is expected that the industrial companies that experience a lot of losses and damage caused by floods will move to an industrial estate which delivers a reliable service in flood risk management. This will be enhanced by a new law in 2013 which obligate the industrial companies to become part of an industrial estate. When the companies become better informed, they can stimulate the industrial estate to take measurements. This will enhance the demand for flood risk management at the macro level. The developers of SSDP and LSDP are in general well aware of the causes and risks related to floods have already taken some measures to protect from the impact of floods. The triggers for investing in flood risk management are to increase land price and an efficient use of land. Solutions in flood risk management solutions have to contribute to these triggers in order to make the investment attractive. The property developers don t know to which extent they are protected against worse case scenarios and are also not aware of all new innovations and possibilities available in flood risk management. Therefore it is important to make them aware and give insights in worse case scenario s and related risks, and to which extent and what way they can protect themselves, in order to stimulate investments. The property developers of SSDP have a demand for simple basic solutions like building on higher ground and efficient land use. LSDP demands for more sophisticated and integrated solutions that will pay back immediately, create publicity and prestige, or solve other problems at the same time. Besides managing flood risk inside the area of property developers, a demand arises to solve the problem with other problem owners on a larger scale. There is a demand for third parties to start and control this comprehensive process. 27

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29 5. Market opportunities and PMC s In chapter 3 the proposition of the Dutch water sector is elaborated on. In chapter 4, the demand of the private sector is discussed. In this chapter, a match is made between this proposition of the Dutch water sector and the demand of the private sector. These matches result in a key target group and related market opportunities which are substantiated by concrete PMC s. 5.1 Key target group: Large scale property developers Since the Dutch water sector is not competitive in delivering basic and low-tech solutions in flood risk management, which is particularly the demand of the micro and meso level of the private sector, these parties do not form most interesting target group. In contrast, the Marco level with LSPD is a very interesting key target group for the Dutch water sector. This key target group is focused on the development of large areas for purposes such as industrial estates, residential areas, recreation, etc. Often, all these purposes are combined in an integrated township. As described above, demands concerning flood risk management are more advanced and therefore interesting for the Dutch water sector since their strength lies in specialized and innovative solutions often applied in an integrated way. For these property developers two aspects determine the willingness to invest in flood risk management and can be seen as triggers for an investment in flood risk management. These are 1) the attractiveness of their land, which defines the land price and 2) an efficient use of their land. It is expected that the concept of township development will increase and will be more applied. The same accounts for the industrial estates, which will increase in size and number due to developments like the extension of the harbor and an increasing economic growth. Therefore, opportunities for this key target group exist on already developed areas, as well as for areas that still need to be developed. The existing LSD projects are interesting, for example to improve these estates with respect to flood risks management. Also new areas are interesting, since flood risk management could be integrated into the new urban developments. This key target group thus demands decentralized tailor made solutions in flood risk management, to protect their own estates. It is important for the Dutch water sector to keep this in mind, and adapt their product and services to such kind of solutions. The two triggers to invest, combined with strengths of the Dutch water sector, result in two market opportunities. The subparagraphs below describe these market opportunities. The market opportunities are supported by more concrete PMC's. These PMC s are detailed examples of the market opportunities but the market opportunities are not limited by these PMC s. Figure 11: A large scale property development area 5.2 Market opportunity Integrated urban development Property developers of LSDP have a specific interest in an investment in flood risk management which contribute to efficient land use, make the land attractive and preferably pay back directly. On the one hand LSPD wants to be flood free. They know retention areas and/or water catchment and recharge are needed in order to remain flood free. On the other hand, LSD wants to build as much as possible on their land and make the land attractive in order to earn money. This results in opportunities for integrated solutions where the land can be used efficient while increasing the attractiveness. Since the Dutch water sector is strong in knowledge, governance and innovative solutions, this demand results in product-market opportunities for 1) designs for integrated land use 2) innovative techniques for efficient land use such as water recharge and/or building on water and 3) integrated ways in managing and controlling urban areas with respect to water. A 29

30 way to capitalize on this market opportunity is to combine specific products with the accompanying designing and engineering skills PMC 1: Landscape architecture and flood risk measures Landscape architecture can be used to design a LSDP, for efficient land use that can increase the value of the land and minimize the impact of floods. The key target group demands well-known top (landscape) architects to design their land since aesthetic is very important. A beautifully designed area gives property developers a lot of exposure, which makes the land more attractive. When top (landscape) architects and engineering companies specialized in water/flood risk management solutions combine their strengths and integrate their competences, an interesting business case for large scale developers could arise. This gives opportunities for Dutch landscape architects and engineering companies to cooperate and to design and engineer areas on an integrated way, in which aesthetics and flood protection measures are both taken into account. It has value for large scale developers if flood risk management solutions could be incorporated in an attractive and beautifully designed area. For example, retention areas could be incorporated into the design of an area to make it effective for flood risk protection and aesthetically pleasing as well PMC 2: Artificial ground water recharge Since it is most beneficial for developers to build as efficient as possible on their property, there is often no or not enough open space for water to infiltrate into the ground. This is one of the influenceable causes of floods, which is also known by the developers. Therefore, an interesting opportunity exists for smart solutions that improves and facilitates ground water recharge in order to reduce the occurrence of flood problems. This subsequently has a positively result on an efficient use of land, which makes such an investment interesting. These kinds of solutions could be applied in the form of innovative techniques and products that could be sold and tailor made for a specific area or integrated in the design of an urban development area. This PMC could be interesting for companies with specific knowledge and techniques about ground water recharge and engineering companies, who can tailor make such techniques for specific situations PMC 3: Floating construction techniques Building on water is another integrated solution that combines flood risk management with efficient use of land. Retention areas are an effective solution to protect from floods, however often a lot of space for these areas is needed in order to be effective. Floating construction techniques is an example of an opportunity that combines efficient land use with flood protection. Building on water can also increase the attractiveness of the land since it is a new way of building in Indonesia which probably generates exposure/publicity. The Dutch water sector already has experience with floating construction techniques. For example, Dura Vermeer developed together with Unidek the float FlexBase, which is specifically designed for carrying large buildings. Opportunities for exploiting these PMCs exist for companies in the possession of this knowledge about floating constructions, further engineering and design skills are needed to apply these techniques in specific cases. Collaboration with landscape architects could also be interesting, since floating constructions and water retention areas could be incorporated into the larger landscape design. Integrating such different competencies could strengthen each other within this market opportunity. This PMC gives opportunities for design and engineering companies, (landscape) architects, and construction companies. 5.3 Market opportunity ICT based products & services in flood risk management Gathering and using information about environmental factors that influence the process of designing, engineering and controlling are important in order to create a livable delta area. Especially in a fast changing delta metropolis like Jakarta, up to date information is important to make the right decisions as a property developer. Systems are needed to generate all kinds of interesting information. For the Dutch water sector, it could be very interesting to focus on this kind of information gathering in combination with a subsequent step, in which this information is applied. The information generated with such systems could be applied in all different kind of applications for different purposes like integrated master planning, flood protection and mitigation, flood early warning systems, design and engineering, decision support systems, flood risk assessment etc. For these systems, specialized knowledge is needed about ICT systems and delta technology. Different smaller and larger companies in the Dutch water sector for example Deltares or Fugro are in the possession of such information gathering systems. Therefore, there are opportunities to make this knowledge and information available for LSDP by transforming this into interesting products and 30

31 services. It is important to use the information in a specific solution in the form of a service or product, which has value for the key target group; the property developers. Below, some examples of specific PMC s are provided which are interesting within this market opportunity PMC 4: Information as input for design & engineering companies Tailor-made environmental information can be used as input for designers and engineers. In an environment where design, engineering and consultancy companies face heavy competition, the use of such specific tailor-made information could generate a competitive advantage over such companies that do not have access to such information. If Dutch designer and engineers are trained to interpret and use all kinds of information within their designs and engineering constructions and solutions, they are able to create more value for the end customer (the LSPD) compared to competitors who do not have access to this information or knowledge to use this information. The information is not direct sold to the end customers like Indonesian property developers, but to Dutch design and engineering companies who can apply this information in their services. Therefore, a market for the use of this information systems and output is found. And designers and engineers could use all kinds of specific information in order to develop better (urban) planning s, designs of urban water systems and cycles, specific solutions for flood risk management etc. For example, information gathered by companies like Deltares, or Fugro, and others could be used as input for Dutch design and engineering companies. The CIWK is a cooperation of smaller and larger companies which is a perfect example in which smaller and larger companies together try to enter the market with information as input for subsequent steps, which could be very interesting for the key target group. By establishing such a chain in which smaller and larger companies collaborate together, the export position of knowledge-intensive companies will be improved. This is one of the objectives set by the top sector water policy PMC 5: Decision support systems and flood forecasting Flood forecasting decision support encompasses the processes of flood monitoring, flood forecasting, flood warning and real-time decision making (Rahm, 2006). A flood forecast decision support system is useful when it is applied in planning studies and real-time flood management. A decision support system must supply information in a flexible, efficient and easily understood manner to operational users and decision makers, whom could form the target group, as well as the engineers who develop the land for this key target group. Real-time flood forecasting systems, which link weather forecasts, the state of the river catchment, river discharges and water levels, can be used to respond to floods as they occur and to reduce costs in terms of damage and losses. When the occasion of a flood event is expected, decision makers have to decide what the most appropriate reactions are: closing flood gates, reinforcement of dykes, filling retention areas, etc. Flood forecasts must be known so that decisions can be made and actions taken to reduce the impact of the possible event. In this way, it has value for the key target group. Subsequently, the Dutch water sector can deliver systems who anticipate on actions recommended by the flood forecasting systems, such as smart dikes, which become active when floods try to occur. The Dutch water sector can sell such decision support systems as a product to large scale property developers. For example, the actual decision support system program software can be sold at a low price or even given away for free, in order to make customers make use of this product. When customers use this product, they need up-to-date information. The Dutch water sector can earn money by delivering these updates. Besides, specialized companies who develop all kind of models based on specific information could add applications to this program, which makes it more interesting for the key target group PMC 6: Flood risk assessments Property developers use the slogan free from floods as marketing slogan, although these slogans do not contain any real value yet. There is an expected demand for flood risk assessments to give these slogans real value since no official certificate from a professional flood risk assessment exists. Investments in flood risk management also become more interesting when it provides tangible benefits. Opportunities exist in providing reliable and recognized assessments and certificates. This can help industries for example to select an estate for their production based on reliable assessments and information. The industrial estates could subsequently use this assessment and certificate for marketing activities, which could lead to a direct increase of their land price. The Dutch water sector has a good reputation on Delta technology and is seen as a reliable party. Therefore, there is a business opportunity for the Dutch water sector to execute these kinds of assessments. In order to judge an industrial estate or township with respect to their extent of flood protection and risk management, a lot of tailor made information about 31

32 specific environmental factors related to floods is needed. The assessment can subsequently be used as input for further improvements and solutions in flood risk management where Dutch parties can be involved. A label or certification has to be developed, for example in cooperation with an independent organization to give it a more reliable status. Assessments could be conducted by Dutch consultancy companies, making use of information and models provided by other Dutch companies. 5.4 Conclusion The market opportunities described above are the result of the match between the proposition of the Dutch water sector and the demand of the private sector in Indonesia. The market opportunities Integrated urban development and ICT based products and services in flood risk management are supported by more concrete product market combinations. The PMCs are examples of solutions that can increase the attractiveness of property developers land and and/or makes the land use more efficient. These PMC s are detailed examples of the market opportunities but the market opportunities are not limited by these PMC s. It is decided not to prioritize these PMCs since more research is needed in order to determine the chance of success for each of the PMCs. The PMCs can enhance each other. For example floating construction techniques and efficient solutions for ground water recharge can be integrated in the landscape architecture in order to generate extra value. Besides, to combine the two market opportunities could add value since information and ICT based products could also be input for the creation of the first three PMC s. 32

33 6. Implementation of market opportunities In this chapter a general strategy is developed to capitalize the market opportunities and associated PMC s described in the previous chapter. This strategy comprises 3 main stages: 1. Identify demand 2. Develop business cases 3. Implement business cases Each stage consists of some concrete examples how to implement and pursue this strategy. Identify demand Formulate Business cases Implement business cases 6.1 Identify demand First of all, it is important to have a clear view of the demand of the potential customers. Using a market pull approach instead of a technology push approach can facilitate the process of commercializing the knowledge and skills of the Dutch water sector. There are different institutions that can help to identify the demand of the private sector. For example, keeping close contact with relevant umbrella organizations like the Indonesian Chamber of Commerce and Industry (Kadin), Real estate Indonesia (REI), Indonesian Industrial estate association (HKI) and possible target groups can be very interesting and beneficial since they can help to find the right investment partners, preparing tailored information about investments and business opportunities. Also for the opportunities found during this market analysis, it is important to further investigate specific demands, in order to exploit and capitalize the business opportunities. Below, an approach is formulated that can help to further explore the demand of the private sector in order to find other new opportunities for the Dutch water sector and to make the currently found opportunities more specific Focus on business development in Jakarta How: Establishment of an independent business developer of the Dutch water sector Why: Facilitate capitalization of business opportunities Who: Dutch government, PvW, NWP, INA, Dutch water sector An independent person representing the Dutch water sector is advised to investigate the demands of the (private) sector and to find business opportunities that fits this. A way to achieve this is to establish a business developer in Jakarta. The business developer can help the Dutch water sector to commercialize their products and services by analyzing the market, thinking about market opportunities, manners to capitalize these opportunities and to maintain contact with key target groups. For example, in the case of the results of this market analysis, this could be the LSPD and other interesting stakeholders like REI, HKI, Kadin, etc. Results of analysis and opportunities and specific demands could be communicated to the NWP in The Hague in order to develop business cases. In a later stadium, the business developer can also help to find a partner/ customer for Dutch business cases. This business developer will act as a central coordinator, situated between demand and supply. This coordinated approach can prevent that a lot of small businesses enter the Indonesian market on their own which can help to lower the transaction costs. This independent business developer results in the following advantages; investigate new opportunities, reduction of transaction costs and facilitation of entrance to this market and a less fragmented water sector. (See Figure 12: Hourglass model of demand and supply and the role of the business developer for a visualization). As said, this person should be an independent developer from the Dutch water sector with knowledge of water management and the Indonesian market. The INA could play a role, since they are also an independent organization, with a wide network and a lot of knowledge on doing business in Indonesia. This business developer could be stationed as a specific department of the INA complementing each other. This position could for example be financed from a public private partnership 33

34 Individual private companies LSDP Umbrella organizations Business developer Indonesia The Netherlands D e m a n d NWP Consortia s Private companies Knowledge institutes S u p p l y Figure 12: Hourglass model of demand and supply and the role of the business developer in which the Dutch government (partners for water, since this position aims on improving the international position of the Dutch water sector) will contribute and other funds will be generated by companies making use of this business developer. It could for example be made recurrent with a revolving fund: only possible successes are charged for continuity. If successful business is made, the companies have to pay back. Or information generated could also be sold and charges could be raised for matchmaking services. 6.2 Formulate business cases From The Hague, NWP could support the development of business cases and consortia s specific for the Indonesian market based on the information generated by the business developer in Jakarta. The Indonesian platform could facilitate with the establishment of these new business cases in the Netherlands by coordinating and matching Dutch companies who complement each other and create an interesting supply for the specific demand that exists. A lot of interesting business cases already exist in the Dutch water sector, mostly focusing on the Dutch domestic market. These business cases could sometimes be interesting as well for the Indonesian market if they are adapted to the local specific demands and triggers to invest Workshops and matchmaking events Why: Stimulate innovation and business case development for specific market demands How: Organizing workshops and matchmaking programs Who: NWP, Dutch (water related) companies, knowledge institutes, relevant governmental agencies, key target group, Indonesian umbrella organizations Presentation by the business developer and Indonesia platform about opportunities and demands of the Indonesian market to all kind of representatives from companies, knowledge institutes, banks etc. of the Dutch water sector. After such a presentation, workshops have to be organized in which all representatives of the Dutch water sector try to find interesting partners and develop interesting business cases which meet demand of the Indonesian market. For example, a number of companies with different backgrounds could be placed together and asked to find a solution for a specific demand of a problem. After all, all solutions/ business cases could be presented or made available online. Especially to facilitate and improve the development of integrated solutions, it is important to invite companies from all different kinds of fields of work related to water. 6.3 Implement business cases When business cases have been developed based on the needs of the local private demand in Jakarta, these business cases have to be promoted to the key target customers and the business developer who can help to make the match with possible local partners and customers in Jakarta and the supply of the Dutch water sector. To capitalize the business opportunities found during this market research, a market approach from three sides is advised. It is recommended to create awareness in a bottom up approach at the micro level of demand by making the individual industrial companies more aware of the risks they face. 34

35 Individual industrial companies are often not or only partly aware of the hazards in this field. If the individual industrial companies become aware of all hazards, they can stimulate the macro level (property developers/industrial estates) to take measures to protect, which will increase a demand suitable to the supply of the Dutch water sector. The creation of this awareness can be done in different ways, for example using mediums as news (papers and television), trade journals, information sessions at trade unions etc. Subsequent, to promote the developed business cases, it is advised to use a top down approach to inform the key target group. This could be done by using umbrella organizations like the Kadin, Real estate Indonesia (REI), Industrial estate organization (HKI) or even public ways. They can help to inform the individual estates. Besides, the key target group can be approached in a direct way. The business developer can play a central role in this strategy. To further facilitate the process of promoting the Dutch water sector and specific business cases at the key target groups, some helpful tools will be elaborated below Marketing of the Dutch water sector How: Use a recognizable label and branding for supply of the Dutch water sector Why: Making the Dutch water sector more visible and recognizable Who: Dutch embassy Jakarta, INA, business developer, consortia s of business cases Since the key target group is not aware of innovations and specialized knowledge and products and services of the Dutch water sector, exposure has to be generated. It is advised to use one clear branding of the Dutch water sector (which already exists) by promoting the business cases to the key target group and show how the business cases have contributed in the Netherlands and other countries. To attract and make the key target group aware, it is advised to make use of high placed and or well-known authorities in Jakarta to get publicity. From the Dutch side, this could be well-known architects and engineers, the Dutch ambassador or even the prince of Orange. It is even more important to make use of well-known Indonesian partners like a Kadin, to make the private sector of Jakarta aware of the Dutch water sector. Why: Facilitate innovation and learning and improve the position of the Dutch water sector Who: Dutch government, NWP, Dutch water sector, LSPD A good track record is very important for property developers when choosing to cooperate with other partiers. However, small innovative companies with specialized products, techniques and solutions in generally do not have an extensive track record. In order to promote the innovations it is interesting to start a pilot project with an Indonesian developer. In this pilot project the Dutch water sector integrates all kinds of techniques they possess. With such a show project, the Dutch water sector could show to other developers what interesting possibilities exist in flood risk management and at the same time, they gain experience with applying such business cases and solution at the key target group. The role of the Dutch government can be to provide funding, for example in the form of a (soft) loan, subsidy, etc. because it can improve the position of the Dutch water sector in Jakarta and improve business opportunities. The NWP can coordinate this project by bringing together different Dutch parties like entrepreneurial SME s and large companies, in order to develop a business case for an integrated water management solution. The business developer could investigate if interesting partners exist and can coordinate from Jakarta Scenario workshops How: Make key target group interactively aware of supply of the Dutch water sector Why: Make key target group aware of possibilities and benefits to stimulate business opportunities Who: INA, Business developer, Dutch water sector Invite key customers to meet and make them become acquainted with all different types of business cases the Dutch water sector possesses. Let them interactively experience the benefits of the offerings of the Dutch water sector business cases with scenario workshops. Make them aware of the possibilities, how it could be applied at their specific property development projects and most important; what their benefits are when using these products and services. Workshops could be organized for example at the Dutch Embassy during an event specifically aimed at water, or flood risk management etc. of which the key target group is invited Showcase How: Generating exposure of the Dutch water sector by a showcase project. 35

36 6.4 Conclusion The proposed strategy for the business opportunities and PMC s found during this market analysis is to stimulate demand with a bottom up approach and to enter the market with a direct and top down approach. The combination of a business developer in Jakarta and the NWP in the Netherlands fulfills a key role. This strategy and approach has several benefits in order to exploit the business opportunities. The combination of a business developer in Jakarta and NWP in the Netherlands who coordinates and tunes demand and supply improves coherence of the Dutch water sector and creates synergy. Business cases are developed that fit the demand of the private sector in Jakarta, which increase chance on success. Besides, a business developer can carry out the Dutch Branding in the water sector. By promoting these business cases as a country, it can improve the position of the Dutch water sector and helps to lower transaction costs. 36

37 7. Conclusion and Recommendations This chapter provides a conclusion that will answer the main research question of this research: What market opportunities in the field of innovative, integrate and sustainable solutions in water management exist in the Jakarta Capital Region? In addition, some general recommendations will be made for different parties of the Dutch water sector and suggestions for further research are made. 7.1 Conclusion Jakarta is a rapidly changing and developing Delta Metropolis that is prone to floods. The growing economy results in an increasingly wealthy private sector with more investment funds and possibilities to invest in flood risk management. The private productive and housing sector faces the most costs when floods occur and a demand exist for decentralized, tailor made solutions in flood risk management who protect and control specific (private) areas against floods. At the private individual companies demand exist for flood risk protection because they see floods as a high risk for their production process. The industrial organizations believe it is the responsibility of the industrial estate or the government, to take care of flood risk management, however they are willing to pay service costs for handing over the responsibility of flood risk management to industrial estates. When the companies become better informed about risks, they can stimulate industrial estates to take measurements. This will enhance the demand for flood risk management at the macro level. Property developers are in general well aware of the causes and risks related to floods and have already taken some measures to protect from the impact of floods. The property developers with small scape development projects mainly have a demand for simple basic, but effective solutions. The property developers with large scale development project demands for more sophisticated and integrated solutions that will pay back immediately, create publicity and prestige, and solve other problems at the same time for their whole area under development. Key target group A key target group for the Dutch water sector arise from the large scale property developers who focus more on property development projects of larger areas (largest area is Ha) since this kind of demands meet the strengths of the Dutch water sector. The Dutch water sector has a lot of knowledge and experience, and is strong in niches such as flood protection, governance, censoring & modeling, integrated solutions in spatial planning etc. The innovativeness and ability to deliver an integrated approach are seen as important competences of the Dutch water sector. On the other hand, the products and services of the Dutch water sector are relatively expensive, especially in markets as Jakarta. Purposes of developed land at LSPD are industrial estates, residential areas, recreation, offices etc. Often all these purposes are combined in one single integrated township. For these property developers two aspects determine the willingness to invest in flood risk management and can be seen as triggers for an investment in flood risk management. These are 1) the attractiveness of their land, which defines the land price and 2) the (efficient) use of their land. Solutions in flood risk management solutions have to contribute to these triggers in order to make the investment attractive. Decentralized opportunities could be applied in already developed areas, as well as in areas that still need to be developed. Opportunities Two main market opportunities for decentralized solutions in flood risk management are formulated both substantiated with some concrete PMCs. The first one focuses on Integrated urban development with the following PMCs: Landscape architecture and flood risk measures, Artificial ground water recharge, and Floating construction techniques. The second market opportunity focuses on ICT based products & services in flood risk management with the following PMCs: Information as input for design & engineering companies, Decision support systems and flood forecasting and Flood risk assessments. These PMC s are detailed examples of the market opportunities however, the market opportunities are not limited by these PMC s only. Strategy A strategy is developed in order to exploit the market opportunities which comprise 3 phases: Identify demand, formulate business cases, and implement business cases. Different tools like workshops, matchmaking programs, Dutch branding, showcase and scenario workshops have to support the execution of these phases. Within this strategy, the market will be approached on 3 sides. Demand needs to be stimulated with a bottom up approach and the key target group will be entered with a direct and top down approach. The combination of a business developer in Jakarta and the NWP in the Netherlands fulfills a key role. Besides, it is advised to make use of the large established firms in Jakarta. 37

38 The large consultancy and construction companies established in Indonesia are already very successful in commercializing their knowledge. However, caused by a fragmented market it seems that especially the SMEs face difficulties to enter and operate in the Indonesian market. These companies often don t have a long track record or proven technologies which make it difficult to enter this Indonesian market. Therefore, it is necessary to stimulate the entrance and cooperation of these SMEs. The cooperation of smaller and larger companies could be very interesting, something in which already initiatives have been started at the Dutch water sector like the CIWK. This strategy and approach has several benefits in order to exploit the business opportunities. The combination of a business developer in Jakarta and NWP in the Netherlands who coordinates and tunes demand and supply improves coherence of the Dutch water sector and creates synergy. Business cases are developed that fit the demand of the private sector in Jakarta, which increase chance on success. Besides, a business developer can carry out the Dutch Branding in the water sector. By promoting these business cases as a country, it can improve the position of the Dutch water sector and help to lower transaction costs. The cooperation between smaller and larger companies can facilitate innovations and specific knowledge of SME and/or entrepreneurial companies. This strategy complies with the goals of the Global water program by joining forces to improve the position of the Dutch water sector and stimulate learning and innovation in the water sector. Another goal of the Global water program is to contribute to resolve the global water problems. The market opportunities described in the report are shortmedium term decentralized solutions that can improve the situation in Jakarta, but will not solve the problem on a large scale. Therefore a large scale solution is needed. 7.2 Recommendations This paragraph aims to give an overview of the general recommendations and next steps to execute, specified by the different parties active in the Dutch water sector Recommendations for the Dutch private sector This research recommends focusing on private market opportunities, since this group faces a lot of problems and is willing to invest in flood risk management. For the Dutch water sector it is recommended to develop business cases which anticipate on the market opportunities described in this report. When offering solutions, it is important to communicate the benefits when promoting products and services. The opportunities are not limited to solitary flood risk management solutions, integrated solutions with other cluster e.g. water technology and/or other sectors e.g. spatial planners are very interesting as long as the solutions result in financial benefits. SME s are often in the possession of specialized knowledge and innovative solutions. However, the private sector of Jakarta prefers to work with companies with respectable size and proven technologies. Entering the market without a convincing track record and respectable size can result in a low chance on success. Therefore, it seems important to work together with established companies, or to participate in for example a market demonstration project in order to be successful. SME need to collaborate with the larger established companies in Jakarta. For both type of parties this could be very interesting Recommendations NWP In order to capitalize the market opportunities and PMC s described in this report, it is necessary to investigate the PMC s more thoroughly at the key target group. Besides, it is necessary to communicate the possibilities and opportunities in order to mobilize the Dutch water sector. Further, coordination is needed in order to actually exploit these market opportunities. A coordinated approach can prevent that a lot of small business enter the Indonesian market on their own which can help to lower the transaction costs. It is necessary to stimulate the entrance and cooperation of SME s together with the larger companies in Jakarta. The cooperation of smaller and larger companies could be very interesting, something in which already initiatives have been started by the Dutch water sector like the CIWK. The NWP is the party that can facilitate this kind of coordination and therefore stimulate the entrance of SME companies by developing for example scenario workshops and showcases Recommendations for the Dutch government The Dutch government can co-finance in the form of a public private partnership projects or initiatives like a showcase or business developer to support business activities of the Dutch water sector in Indonesia. Supporting a showcase or business developer can help to improve the position of the Dutch water sector, stimulate learning and innovation and join forces in the water sector. In this way, the Dutch water sector will contribute to the Global water program. 38

39 7.2.3 Recommendations knowledge institutions Individual industrial companies are often not or only partly aware of the hazards in this field. Knowledge institutions can help to make this information available for the private sector of Jakarta. If the individual industrial companies become aware of hazards like the increasing rainfall and the land subsidence, they can stimulate the key target group to take prevention/protection measurements which can be beneficial for the Dutch private sector. Another finding is that Indonesian people in decision making positions often finished a study in the Netherlands. This is a powerful connection that fosters goodwill and facilitates business collaboration with Dutch companies. 7.3 Suggestions for further research This paragraph describes interesting suggestions for further research. These suggestions are found during the execution of this research but not taken into account because it is beyond the scope of this research. of Jakarta in order to investigate if opportunities exist in protecting surrounding areas Using private sector to solve the problem on a large scale The market opportunities described in the report are mostly decentralized solutions that can improve the situation in Jakarta, but will not solve the problem on a large scale. However, demand exists for the property developers to solve the problem on a large scale and to tackle the problems together with other problem owners like the government and competitor developers. The willingness to invest in flood risk management is higher when the problems can be tackled together. They will contribute since they are problem owners, but they cannot solve the problems on their own. It could be interesting to further investigate this intention of the property developers to solve problems on a larger scale and to find out what kind of opportunities exist for the Dutch water sector. Probably specialized knowledge is needed to solve the real problem in an integrated way Opportunities for water technology at the key target group The growing economy in Indonesia results in an increasingly wealthy private sector with more investment funds. Interesting opportunities exist for the key target group in the field of flood risk management. However, also opportunities could arise in the water technology sector for this key target group. For example clean process water for industry or sanitary facilities in townships. Integrated solutions in flood risk management and water technology could also be interesting solutions for the Dutch water sector. It is recommended to investigate the possibilities for the Dutch water sector in the field of water technology for this key target group Possibilities for collaboration between NGO s and the private sector Corporate social responsibility is something quite important for all developers. An important aspect is the protection of kampongs around the developed areas. People in the surrounding areas often blame the property developers for the presence of floods. As a compensation for building next to a kampong area developers will help these people by protecting them against floods, for example by dredging the rivers. It is interesting to investigate the opportunities for collaboration between NGO s and the private sector 39

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41 References Blueeconomy & Panteai (2010), Het Nederlandse Deltatechnologie-cluster: Economische waarde, internationale concurrentiekracht en arbeidsmarktperspectiven. Dahm, R (2006), Usefulness of flood forecasting decision support systems: A brief report, UNESCO- IHE course: Flood modelling for management Hasanuddin, Z., H. Abidin, I. Andreas, et.al. (2009), Land Subsidence and Urban Development in Jakarta (Indonesia), Spatial Data Serving People: Land Governance and the Environment Building the Capacity, Hanoi Vietnam Jovel, R. (2007) Revisiting the 2007 Jakarta Flood Disaster: Assessment of Damage and Losses. Linden, van der, I. (2009) Cooperation on institutional aspects between the Netherlands and Indonesia in the field of flood management in Jakarta. MPA Joint study team of Japan international cooperation agency (2011). Master Plan Study for Establishing Metropolitan Priority Area for Investment and Industry (MPA) in JABODETABEK Area From: NWP (2011), Water 2020, Wereldleiders in Water: De toekomst visie van de Nederlandse watersector. Pachauri, R.K. & A, Reisinger (Eds.), (2007), Climate Change 2007: Synthesis Report. Contribution of Working Groups I, II and III to the Fourth Assessment Report of the Intergovernmental Panel on Climate Change. Cambridge, United Kingdom: Cambridge University Press. Texier, P. (2008), Floods in Jakarta: When the extreme reveals daily structural constraints and mismanagement, Disaster Prevention and Management. Topsector Water (2012) Internationaliseringsstrategie; Kernteam Export & Promotie. The World Bank (2011), Climate change, Disaster risk and the Urban poor: Cities building Resilience for a Changing World The World Bank (2012) Climate Change, Disaster Risk and the Urban Poor: Mayors' Task Force on Climate Change, Disaster Risk and the Urban Poor. Online information Agenschap.nl, Ministerie van Economische zaken, Landbouw en Innovatie, From: [Accessed by 14th of June, 2012]. Antara news, (2012) RI`s biggest port to be built in N. Jakarta. From [Accessed by 9th of May, 2012]. Jakarta post, (2010), Jakarta sinking up to 10 cm per year, Jakarta Post. From: [Accessed by 1st of August 2012]. Official website of Indonesia's Agency of Meteorology, Climatology data. From: [Accessed by 28th of July 2012] Official website of Indonesia s National Disaster Management Agency (Bakornas). From: [Accessed by 20th of August 2012] Official website of BSD city. From: Official website of Lippo Karawaci. From: Official website of Summarecon. From: Official website of Jababeka. From: Official website of Indonesian Industrial Estate Association 41

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43 Appendices 43

44 I. ToR International Business Research Indonesia 2012 Economics and Business student Faculty Association Groningen Opportunities in Indonesia for the Dutch water sector Research proposal February 3 rd,

45 Context In October 2011, Ivo van der Linden of the Netherlands Water Partnership (NWP) contacted International Business Research (IBR) following an advertisement of IBR on the website of the NL EVD International. Following up on this interest, IBR Indonesia sent information about the project to the NWP and an appointment was made for an introductory meeting on the 19 th of October. At the request of the NWP IBR sent two example reports of research conducted earlier by IBR. Moreover, Thijs van der Linden and Susanne Roelofsen attended the Landenplatform Indonesië on the 9 th of November. On the 19 th of December another meeting took place to discuss the research questions, context and set-up. Indonesia is one of the partner countries for Dutch development assistance; it is one of the five focus countries within the Global Water Programme and it is listed by the Ministry of Foreign Affairs as one of the 15 partner countries for development cooperation (under profile 3: growth countries with a healthy economy). The cooperation between the Netherlands and Indonesia has a long tradition and is built on many, diverse activities. Water is a central theme in this cooperation, in its widest meaning of water management, water supply and sanitation. Currently, the formal and strategic cooperation between the governments of Indonesia and the Netherlands in the field of water management is based on a Memorandum of Understanding between 4 Parties (the so-called 4P-MOU, which was signed in 2007 and will be updated in 2012). From the perspective of the Global Water Programme, which started in 2010, the Delta Team Indonesia is coordinating and supervising the activities under the Global Water Programme and ensures an alignment of objectives and activities with the prevailing 4P-MoU. The Netherlands Water Partnership (NWP) is providing support to the Delta Team. The Global Water Programme has defined three generic objectives for its activities: 1) joining forces to improve the position of the Dutch water sector, 2) to contribute to resolving the global water problems and 3) stimulate learning and innovation in the water sector. The partnership under the 4PMoU is focusing on 4 themes: 1) Water for food and ecosystems, 2) Water and Climate, 3) Implementation of MDG-7c and 4) Integrated Water Resource Management. The Global Water Programme focuses on water safety, water for food and ecosystems, drinking water and sanitation and (the preconditions) Water Governance and Climate Change. Netherlands Water Partnership (NWP) The Netherlands Water Partnership or NWP is a public-private network organization that acts as an independent information source and point of coordination for the Dutch water sector. The aim of the organization is to organize a solid Dutch water network. For more than 10 years the NWP has been stimulating cooperation and fine tuning between the different parties in the Dutch water sector. This enables The Netherlands to contribute more to solutions to international water issues and strengthens the Dutch position on the international water market. The NWP offers the following services: Facilitation of innovations in delta and water technology. Organization of market adjustment, trade missions and fairs. Promotion of the Dutch water expertise. Facilitation, organization and establishment of the exchange of information and news that is relevant to parties in the Dutch water sector. In compliance with her role as provider of support to the Delta Team, the NWP has ordered this research. The NWP asked International Business Research Indonesia 2012 to write a research proposal with regard to the opportunities for the Dutch water sector in Indonesia (i.e. Dutch organizations active in the water sector). Aim of the research / thematic scope The capital region of Jakarta (DKI Jakarta) is a rapidly changing and developing Delta Metropolis. Combined with Jakarta s geographic location, the number of people living in the capital region and its political and economic importance this generates a substantial amount of challenges such as (rapid) urbanization, lack of space, traffic congestion, private and public transport issues, air pollution, flooding, (air)port development, drinking water management, wastewater management, energy supply, climate changes etc. Given these challenges, the NWP wants to (1) identify how the Dutch water sector should position itself in Indonesia, (2) how it can benefit from its recent experience, reputation and existing networks and relationships and (3) how it can contribute to sustainable development of the Jakarta capital region. The Dutch water sector 45

46 seeks to broaden itself in Indonesia and to capitalize her existing position with regard to the complex challenges which demand new, innovative, integrated and sustainable solutions. Therefore, the objective of this research is to identify market opportunities, in the field of integrated and sustainable solutions in water management for large metropolitan Delta cities. In addition, this research should show how these opportunities should be exploited and what role each of the different members of the Golden Triangle - the government, Dutch firms and Dutch educational and knowledge institutions - should play in exploiting these opportunities. The Netherlands already has a good image and position in Jakarta concerning the management of water issues. This is especially the case in terms of solving flooding problems. This research not only aims at identifying the market opportunities for solitary water problems and -solutions (problems solutions that focus only on solving the water problem focus) but especially seeks to identify where solutions are required at the interface of water and other sectors, for example spatial development, housing, healthcare, energy supply, transportation, etc. etc. The result of this research will be an overview of the market areas where demand may be expected for Dutch services in integrated, innovative and sustainable solutions which provide opportunities to the Dutch water sector. This overview will also state what these opportunities are and provide an advice of what role the above mentioned members of the Golden Triangle (the different stakeholders of the broad water sector: public organizations, private organizations, knowledge institutes and NGO s) should play in order for the Dutch water sector to exploit these opportunities. Possible extensions (to be considered during the process) 1. The research will focus on the opportunities in the metropolitan area of greater Jakarta (DKI Jakarta). At the same time we know that other delta cities in Indonesia face similar development challenges. However, if findings during the initial research or during the field research provide strong indications that research in another city or region is also very important then it will be discussed with the NWP whether the research can be extended. 2. The Indonesian government (DKI Jakarta) has plans for land reclamation in the bay of Jakarta. This development, combined with strong Dutch involvement in this master planning process, may offer possibly opportunities for additional research, to be discussed and decided with the NWP. Research description In order to be able to determine the practical implications of the research questions, IBR has divided the water sector into several main categories, being: - flood protection, - land reclamation - supply of clean (drinking) water - management of (waste-)water - water infrastructure/transport (rivers, channels, etc.) - harbor development - shipbuilding - water recreation. Naturally, some of these categories are interlinked. The starting point of this research will be the challenges which are being faced by the Indonesian delta cities. Based on information provided by the Economische Voorlichtingsdienst (EVD), the Worldbank and the NWP the most significant challenges regarding the water sector in the Jakarta Capital Region (DKI Jakarta) appear to be: 1. flood protection 2. supply of clean (drinking) water 3. management of (waste-)water 4. the development of its harbors (which are currently too shallow) Since the aim of the research is to describe opportunities for the Dutch water sector to provide sustainable and profitable business solutions for the currently existing problems in Jakarta, the focus of the research will be on 46

47 these four categories. However, since this research not only aims at identifying the market opportunities for solitary water problems and -solutions and especially seeks to identify where solutions are required at the interface of water and other sectors, these four challenges will be used as a starting point. Challenges identified during the research to which solutions lie at this interface will be mapped and investigated with respect to market opportunities. Research questions and sub questions Main research question: What market opportunities in the field of integrated, sustainable solutions in water management exist in Indonesia, focusing on the Jakarta Capital Region (DKI Jakarta)? For each of the four above mentioned challenges - flood protection, the supply of clean (drinking) water, the management of (waste-) water and the development of Jakarta s harbors the following research question and sub research questions will be answered: Research question: What sustainable business opportunities regarding this challenge exist in the Jakarta Capital Region and how can these opportunities be described? 1. What is the current situation with regard to this challenge and what are the expected (autonomous) developments? a. Exact problems (including the possible damage they do) b. Covered area c. Number of people involved d. Organizations involved e. What is the expected (autonomous) development with regard to this challenge and the characteristics mentioned in RQ 1a to 1d? 2. What need and demand do this challenge and the complex developments with regard to this challenge generate in terms of integrated, sustainable and innovative solutions? 3. What is the expected market demand with regard to these solutions and who exercise this demand (e.g. government organizations, firms, the public)? 4. What could be the benefits for Dutch organizations, companies and institutes? 5. Which experience, knowledge and skills does the Dutch water sector possess and what products can it provide that could be applied to this demand? (including but not restricted to a S.W.O.T. analysis) Note: The research couple should also provide model case examples of the application of these strengths. 6. What could the Dutch water sector do to profit from this expected market demand and exploit these benefits? 7. Which things are still needed in terms of knowledge, information, innovation, financing and organization to make these opportunities suitable for exploitation, and what limitations exist in Indonesia regarding these things (also including legal restrictions imposed by the Indonesian government)? 8. Which type of institutions could provide these necessities? (e.g. universities, scientific institutions, consultancy firms, investment banks, etc.) 9. What role should the Dutch government play with regard to these business opportunities, considering the objectives of the Global Water Programme? 10. What are the next steps (in practical terms) the NWP and the Dutch water sector should take with regard this challenge? Note: the answer to question 8 will be an advice. The answers to the four research questions will have the following structure: Business opportunity Etc. Firm type 1 Firm type 2 47

48 Together with the research couple (the two students performing the research) the NWP should determine the trade-off between broadness of the research (investigating all sub sectors/business opportunities) and depth of the research (limited amount of investigated subsectors/business opportunities, but more information per subsector/business opportunity). This also concerns business opportunities in other than the 4 above mentioned categories. Initial Research The two researchers will work on the company specific initial research from February 2012 up to and including April 2012 (from November 2011 up to and including January 2012 the students are gaining knowledge and insights of Indonesia in general and receive extra training in the practical matters of doing research). During the initial research the researchers will firstly gather information that can be accessed from the Netherlands through desk research and interviews in the Netherlands, and secondly, they will prepare themselves for the field research in Indonesia. The parties interviewed in the Netherlands will be interviews with parties which are active within the NWP network. There will be intensive contact with the NWP in order for the research to correspond to the wishes and needs of the organization and to assure proper feedback. The research couple will work at the NWP office at the Bezuidenhoutseweg 2 in The Hague on a regularly base. This will be taken into account in the selection of the research couple by the IBR Indonesia Executive Board. Field Research The field research in Indonesia will take place in May and June During the research in Indonesia interviews will be conducted with the informants (companies, government agencies, etc.). If the NWP requests so, this can include contacts the NWP already has in Indonesia. Moreover, a shortlist will be made with all the contacts which were encountered during the research. The Dutch State Secretary of the Ministry of Infrastructure and Environment (Staatssecretaris van het Ministerie van Infrastructuur en Milieu), Joop Atsma, has planned to visit Indonesia in the form of a trade mission during the second week of May. The NWP will inform the research couple about the exact date of this visit. The research couple will try to attend the activities of this mission and gather information from the involved parties. Report Based on the gathered information, the final report will be written in English. The report will answer the mainand sub research questions. The research will be finished before September 1 st, The report will be presented in person to the NWP (unless the NWP indicates that another method of presentation or no presentation at all is preferred). In addition, the research couple will also provide the NWP with an executive summary of the research report. Planning The NWP Indonesia research will be conducted by 2 students; the research can be described by the following time frame: November January: general preliminary research, the students will devote themselves to IBR Indonesia for an average of 10 hours a week. They will do this by gathering information on Indonesia, for example by writing an extensive country report. February April: firm-specific initial research, the students will devote themselves to IBR Indonesia and the NWP research for an average of 20 hours a week. They will do this by gaining a better insight into your organization, your specific research questions and into the information needed to answer these research questions. Appointments will be made to operate as efficient as possible during the next phase: The field research period. May June: field research, the students will be in Indonesia for 5 weeks and dedicate approximately 40 hours a week to the research. Interviews in the field will be taken, contacts will be visited and other necessary information shall be gathered. In addition, the students will try to attend the trade mission of State Secretary Joop Atsma. July September: report, the students will process the information gathered and complete the research for the NWP. This will take about 10 hours a week. The research will be refinished to a manageable report and presented to the NWP. 48

49 Phase 1: Preparation Phase 2: Research Phase 3: Reporting Sep Okt Nov Dec Jan Feb Mrt Apr Mei Jun Jul Aug Student selection Literature study Specialization courses on research Research proposal & framework Initial research Field research Final Research Report Presentation Pre-conditions The research will be conducted by two carefully selected and highly motivated senior students. They are specially trained in conducting research in the IBR educational program. Dr. B.J.W. Pennink and Dr. E.H. van Leeuwen of the Rijksuniversiteit Groningen (University of Groningen) will monitor the whole process of the research to guarantee the quality. Furthermore, they will guide the students during the initial research, the field research and the report phase. It is essential for the progress of the research, especially during the initial research phase, that the NWP supplies the two researchers of IBR Indonesia with information available at the NWP, which is necessary to answer the research question. The field research will last 5 weeks and will take place in May and June During these weeks the students are working on the research fulltime. The research will be finished before September 1 st 2012 and the final presentation of the research will take place in consultation with NWP. The research couple will also provide the NWP with an executive summary of the research report. The research will be conducted at cost price, which is 8000,- (excl. VAT). 49

50 III. Stakeholders interviewed in the Netherlands 1 Peter van der Steen Unesco-IHE 2 Bert Satijn Fund NWB/ NWP 3 Chris Zevenbergen Dura Vermeer/ Unesco-IHE 4 Jules van Lier TU-Delft 5 Leanne Reichard HydroLogic/ Covenant information chain water & climate 6 Hans van Leeuwen Geocycli/Covenant information chain water & climate 7 Lies Jansen NWP 8 Michiel de Lijster Ministerie I&M 9 Rusnandi Garsadi TU-Delft 10 Sybe Schaap NWP/ 1e kamer 11 Suryadi Unesco-IHE 12 Arris Schellinkhout NL EVD/ Partners voor Water 50

51 IV. Stakeholders interviewed Jakarta 1 Jurjen Wagemaker HKV Consultancy 2 Hans Zewald DHV Consultancy 3 Wouter de Hamer Royal Haskoning Consultancy 4 Louis Braam Rebel group/ Bappanas Central government, planning 5 Hubert Gijzen Unesco United Nations 6 Giuseppe Arduino Unesco United Nations 7 Eveline Buter Witteveen Bos Consultancy 8 Elmar Bouwma INA Chamber of Commerce 9 Peter de Vries Dutch embassy Jakarta Government 10 Hajo Provo-Kluit Dutch embassy Jakarta Government 11 JanJaap Brinkman Deltares Applied knowledge institue 12 Steve Senduk Podomoro/ Seasons city Property development 13 Rian Erlangga BWM Astra International Industry 14 As Ary Summarecon Property development 15 Budi Norwono PT Kapuk Naga Indah Property development 16 Stephan Bambang PT. Multi Artha Pratama Property development 17 Nuki Hartanto Kadiman Jababeka Private industrial estate/ township development 18 Laurens Schokking Decorient Constructor 19 David Iman Santosa Lippo Cikarang Property developer/ Private township development 20 Hadi Satyagraha Agung Podomoro group Property developer/ Private industrial estate 21 Torsina Redikon PT. Torsina Redikon Industry 22 Edmond Chairul Johnson Industry 23 Harry Johnson Industry 51

52 V. Flood prone area s Jakarta Jakarta Utara (North) Jakarta Barat (West) Jakarta Pusat (Central) Jakarta Selatan (South) Jakarta Timur (East) Flood prone areas Cilincing Kelapa Gading Koja Pademangan Penjaringan Tanjung Priok Cengkareng Grogol Petamburan Kalideres Kebon Jeruk Taman Sari Cempaka Putih Gambir Kemayoran Menteng Sawah Besar Senen Tanah Abang Cilandak Kebayoran Baru Mampang Prapatan Pancoran Pasar Minggu Tebet Pesanggrahan Cakung Cipayung Ciracas Jatinegara Kramat Jati Makasar Pulo Gadung Source: official website of Indonesia's Agency of Meteorology, Climatology data for January

53 VI. Costs of floods 2007 Item Damage Losses Total Public Private Housing Rp 1.298,90 Rp - Rp 1.298,90 Rp - Rp 1.298,90 Infrastructure Rp 328,00 Rp 525,80 Rp 853,80 Rp 533,80 Rp 320,00 Transport Rp 271,10 Rp 330,20 Rp 601,30 Energy Rp 22,80 Rp 175,60 Rp 198,40 Telecommunications Rp - Rp 18,00 Rp 18,00 Water and Sanitation Rp 15,40 Rp 2,00 Rp 17,40 Irrigation Rp 18,70 Rp - Rp 18,70 Social Sectors Rp 44,10 Rp 4,90 Rp 49,00 Rp 49,00 Rp - Education Rp 9,40 Rp 4,90 Rp 14,30 Health Rp 0,20 Rp - Rp 0,20 Religion Rp 34,30 Rp - Rp 34,30 Social institutions Rp 0,20 Rp - Rp 0,20 Productive Sectors Rp 28,10 Rp 2.867,40 Rp 2.895,50 Rp - Rp 2.895,50 Industry Rp 14,20 Rp 2.775,00 Rp 2.789,20 Trade Rp 1,00 Rp 61,30 Rp 62,30 Tourism Rp - Rp - Rp - Agriculture, livestock, fishery Rp 12,90 Rp 31,10 Rp 44,00 Cross Sectorial Rp 66,80 Rp 20,60 Rp 87,40 Rp 66,80 Rp 20,60 Government Rp 0,30 Rp - Rp 0,30 Security and order Rp 66,50 Rp - Rp 66,50 Banking and finance Rp 20,60 Rp - Rp 20,60 Total Rp 1.765,90 Rp 3.418,70 Rp 5.184,60 Rp 649,50 Rp 4.535,00 Source: Jovel, R. (2007) Distribution by damage & losses 66% 34% Damage Losses 56% 25% Distribution losses and damage by sector 2% 1% 16% Productive sector Housing Infrastructure 53

54 VII. List of Potential Fast-Track Projects for the Jabodetabek MPA 1. International Port 1.1 Improvement and expansion of Tanjung Priok Port 1.2 Development of a new international port 2. Upgrading the Industrial Area to the East of Jakarta 2.1 Smart Community (including a pilot project of the Smart Grid ) 2.2 Improvement of road network within the industrial area to the east of Jakarta 3. Mass Transportation Network 3.1 Jakarta Mass Rapid Transit (MRT):S-NI, S-NII, E-W 3.2 Improvement of the Jabodetabek Commuter Railway System 4. Road Network 4.1 Improvement of road network in Jabodetabek Area 5. Airport and Related Infrastructure 5.1 Construction of access railway to the Soekarno-Hatta International Airport 5.2 Expansion of the Soekarno-Hatta International Airport 6. Water Supply and Sewage System 6.1 Water supply project to the Jabodetabek Metropolitan Area 7. Waste Management System 7.1 Construction of the West Java Regional Solid Waste Treatment and Final Disposal 8. Flood Management System 8.1 Reconstruction of East Pump Station at Pluit 9. Electric Power / Energy Infrastructure 9.1 Construction of Jawa-Sumatra Interconnection Transmission Line 9.2 Construction of Indramayu Coal-fired Power Plant 9.3 Construction of Banten Coal-fired Power Plant 9.4 Development of Gas-fired Power Plant and FSRU (Floating Storage Regasification Unit) 9.5 Development of Rajamandala Hydroelectric Power Plant 54

55 VIII. Infrastructure investments Source: The Worldbank,