Gunung Kidul is a regency located in the province of Yogyakarta, on the Indonesian island of Jawa. The regency is bordered by the city of Yogyakarta to the north west, the regency of Bantul to the west, the regency of Sleman to the northwest and the Indian Ocean to the south. It is located about 550km southeast of Indonesia’s capital city of Jakarta. In earlier times, Gunung Kidul area was heavily forested, but recently most of the teak forests have been removed. Although many reforestation projects are taking place or are planned, particularly on the western edge of the regency, serious deforestation has had devastating effects on the soil and, most important, on the subsistence of the population dwelling the area. The regency has thus been subject to extensive drought and famine within the last hundred years, a situation that has visibly worsened in the last decade. The most needed necessity at the moment is an accessible and efficient water grid, the area having been rated among the most severely drought-stricken in the whole of Indonesia. This research project examines the socio-economic implications of such prerequisites, and analyses effective indigenous methods to achieve sustainable rural economic development. The divide between urban migration and increasing rural poverty is also taken into account, as an in-depth study on urban settlements in the region showed how the two backgrounds are dependently intermingled.