Inequality and transaction costs in a community-based water supply in rural area adjacent to national park

National parks can be sensitive state-property areas since the surrounding communities generally need the parks' resources for their livelihood. This paper focuses on inequality and transaction costs in PAMSIMAS (Community-Based Water Supply and Sanitation), a water sector program in Indonesia’s rural and peri-urban areas. The method used is a case study of PAMSIMAS in Tajuk, a village adjacent to Mount Merbabu National Park in Semarang Regency, Central Java. Data is gathered from documentary studies, in-depth interviews, and observations; and analyzed using transaction cost economics and institutional analysis. This study finds that the rules of PAMSIMAS, especially water pricing mechanisms, have enhanced water availability but cannot diminish the uncertainty of water access and transaction costs born by water users. Inequalities of endowment, power, and information among the hamlets have led to how PAMSIMAS runs. Mobilization of water resources is related to property rights, which should be well-defined. Still, there is an overlapping property institution of Mount Merbabu National Park forest and its water resources; thus, the water user groups have to bear transaction costs differently. Some study implications are suggested, emphasizing rational and appropriate water usage charging, recognition of local conditions and prospects, recognition of communities’ rights on resources, and community participation. JEL Classification D23; P48; Q15