John Aglionby, Jakarta – Indonesia's government risks poisoning a large proportion of the population unless it alters its attitude to the environment, the World Bank warned yesterday as it launched its first environmental report on the world's fourth most populous country.

One in three of all children – about 30 million people – face permanent damage and air pollution-related illnesses were reaching "epidemic proportions in many villages".

Other issues raised by the report, Indonesia Environment Monitor 2003, included the illegal and untreated disposal of 90% of solid and hazardous waste, uncontrolled urbanisation, widespread forest fires, contamination of urban water sources and the growth of car ownership.

The losses attributable to poor domestic sewerage alone were conservatively estimated at 2.85 billion Pounds or 2% of gross domestic product.

"It's not good and it's not getting any better," said Tom Walton, the World Bank's environment coordinator for Indonesia. "There's no improving trend and that, I think, is quite distressing." He said an absence of three things – leadership, coherent environmental policy and an environment ministry with clout – were at the core of the problem. "I don't see political will [for change] from the top," he said. "The lack of any kind of enforcement and any kind of adherence to standards means people don't bother because they can get away with anything."

The biggest concern was air pollution especially in towns and cities. "Poor urban air quality affects more people than any other pollution problem," he said. "If you drive behind a city bus you can't see it half the time because of the smoke." About a million tonnes of hazardous waste were generated in Indonesia in 2000. The capital, Jakarta, generated 25,000 cubic metres of rubbish every day. That figure was expected to double by 2010.

The report noted a few improvements such as the phasing out of the sale of leaded petrol in Jakarta and the reduction in ozone-depleting substances. But with unleaded fuel costing almost twice as much as diesel there was little incentive to change.

Environmentalists agreed with the bank. Longgena Ginting, the executive director of the Indonesian Forum for the Environment, said there was a major mindset problem in government. "The environment is seen as a constraint on development," he said. "The orientation is always short term." He also accused the government of double standards. "They talk about conservation and boast that they recently arrested 119 little farmers for farming in a protected area," he said. "But then they give approval for 15 large mining companies to starting exploration projects in protected forests."

Mr Ginting also cited the abolition of the government's environmental impact assessment agency last year as another example of a lack of an environmental agenda. An environment ministry spokesman said the minister supported the World Bank's report and wanted to cooperate on the next one. He declined to comment on the lack of an environmental agenda but a former environment minister, Sonny Keraf, said the opposition was at the ministerial level rather than with the president.

"The economy is always prioritised while the environment and social problems are sidelined," he said. "But if we continued like this, in the long term we will have an even bigger economic cost." He recommended setting up a national committee on sustainable development to prevent further degradation of the environment. "It should coordinate at the policy level with all sectors," he said. "It should monitor and review all policies and their implementation."

Corruption and poor law enforcement were two other issues which needed tackling if the environment was to be helped, according to Faith Doherty of the London-based Environmental Investigation Agency, which has been working with its Indonesian partner, Telepak, to combat illegal logging. "Until the government addresses corruption and the lack of law enforcement the problems are going to continue," she said.