There's something in the water
Today Online 5 Dec 07; also in Business Times 5 Dec 07;
Andy Mukherjee
The commodity that poses the biggest threat to long-term prosperity in Asia isn't oil, it's water.
It isn't the likelihood of Asian cities running out of fresh water that should bother the region's policymakers as much as the bigger danger of being overwhelmed by waste water.
The capability to treat discharged water before it is allowed to flow into lakes, rivers and oceans isn't growing quickly enough. Unless this crucial shortcoming is immediately tackled, it may end up being a deterrent to urbanisation.
"Continuation of the present trend will make available water resources increasingly more contaminated and will make provision of clean water more and more expensive as well as more complex and difficult to manage," the Manila-based Asian Development Bank said in a recent report.
The countries that rise to the challenge will create more livable cities for their people as well as exciting, new opportunities for investors; those who squander the initiative will pay a heavy price.
The problem would have been easier to tackle had it been restricted to a few large cities. That, however, isn't the case. Between now and 2025, Asia's urban population will swell by 60 per cent.
The first step toward efficient management of water is to price it correctly. It's also the most difficult thing to do.
"There is no question that the era when drinkable water could be provided to everyone free or at highly subsidised rates on a long-term basis is now over," says Mr Asit Biswas, president of Mexico City-based Third World Centre for Water Management and one of the authors of the ADB report.
Subsidised water does nothing for the poor. The utilities that aren't able to recover the cost of their services can't raise money to expand their networks or improve the management of waste water. After a while, they even fail to maintain their existing service standards.
At the behest of the Beijing government, cities in China have shown a willingness to improve the pricing. Between 1949 and 1985, the municipality of Tianjin in north-east China charged residents an unchanged fee of 0.08 yuan (less than 2 cents) per cubic metre of water. Once the city understood that these heavily-subsidised rates were a hindrance to both producing and conserving water, it raised the tariff eight times over the next 20 years.
This has seen Tianjin win much-needed investments in water treatment and distribution. In September, Paris-based Veolia Environnement, the world's leading operator of water services, won a 30-year, 2.65-billion-euro ($5.6-billion) contract to supply drinking water to 3 million people in the city. Hyflux, Singapore's largest water treatment company, is building a plant in Tianjin to recycle waste water.
India, which will need US$37 billion ($53.5 billion) over the next decade to give city dwellers access to safe water and sanitation, is also aware of the need to make tariffs more realistic.
In advocating that the state-owned utility in New Delhi allow the private sector to use its infrastructure to deliver water in the city, the World Bank recommended that tariff increases be linked to improvements in service.
The project never took off; in fact, it became a rallying point for social activists to condemn the World Bank for pushing privatisation through back-door methods.
But what other option is there? How does one even begin to fix a state-owned utility that distributes only 60 per cent of the piped water it produces and collects just 80 per cent of the bills it issues? And without such efficiency gains, how does one win popular support for price increases in a city where the utility can at best supply water for a few hours every day?
The time to answer these questions is now.
Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.
