October 11, 2010 / 5:28 AM / 9 years ago

Treat water supply as a business: ADB

MANILA (Reuters) - Running water utilities, whether public or private, on viable business models is the best way to tackle surging demand, looming shortages and counter stress on supplies caused by climate change, an industry expert said.

Arjun Thapan, Asian Development Bank's (ADB) Special Senior Adviser for Infrastructure and Water gestures during an interview with Reuters at the ADB headquarters in Manila October 7, 2010. REUTERS/Romeo Ranoco

“If any major dents are to be made in closing the forecast 40 percent gap between water demand and supply in 2030 in Asia, this is where most of the gains will have to come from: demand management,” says Arjun Thapan, the Asian Development Bank’s Special Senior Adviser for Infrastructure and Water.

Demand management ranges from utilities fixing leaking pipes, curbing theft and improving storage to treating and reusing waste water to pricing water to encourage thrift by large users such as industry and energy firms without excluding the poor, Thapan told the Reuters Global Climate and Alternative Energy Summit in an interview at the bank’s headquarters in Manila.

“It’s very simple, and this is exactly what we have been saying at the ADB. Set your water agencies free in Asia,” Thapan said.

“Give them autonomy; hold them at arm’s length. It doesn’t matter then whether they are public or private or anything in between. You then have the beginnings of an efficiency drive.”

“You then have what Phnom Penh has today, you then have what metro Manila has or what Singapore has,” he said.

In the Cambodian capital, the water authority is publicly owned but autonomous. It provides uninterrupted supply with 100 percent coverage, billing and collection, Asia’s lowest rate of water loss and the lowest staff-to-1,000 connections ratio.

“They’ve been making money. Net profits of between $6 and $9 million for a city of 1.5 million people for the last nine years — so this is no flash in the pan. It’s a proven experience,” Thapan said, adding it had led to lower costs for the poor, who could otherwise be exploited by private vendors.

“In Phnom Penh we have numbers which tell us that a poor household in fact is saving today between $18 and $30 a month just because of having been connected to public system.”


The need to reform water use is urgent. On a “business as usual” scenario, a report by the Water Resources Group has estimated the world could face a 40 percent supply shortfall in 20 years.

For a report on the future of water use from McKinsey&Company, see: r.reuters.com/wuq57p

More people than ever live on an increasingly industrialized planet, and their diets include more meat and dairy products that consumer water at 10-20 times what is needed for other staples.

Globally, 70 percent of fresh water usage is for irrigated agriculture. In Asia, the figure is 80 percent and efficiencies are some of the lowest in the world, Thapan said.

On top of that, climate change brings uncertainty about future weather and rainfall, and that underscored the need for better collection and distribution infrastructure.

A lack of usable water would be a heavy break on economic activity, and the much of the impetus for change will come from business, which will then drive the political will, Thapan said.

“The paradigm now has to be efficiency of water use and a shrinking of the water footprint in industry and energy. Unless efficiencies are brought in through essentially demand management techniques, we are going to have very serious difficulties.”

Asia, home to more than half the world’s population, faces great water stress. But it also has many businesses at the forefront of areas such as micro irrigation and treating waste water. In Singapore, treated waste water is returned to the city-state’s reservoirs for public and industrial consumption.

For example, Singapore’s Hyflux (HYFL.SI) and Darco Water Technologies (DRWT.SI) have expanded into the lucrative Asian market for waste water treatment and water management.

On a broader scale, Australia, afflicted by severe droughts, has introduced water markets, where industry buys to meet its needs and the government buys for ecological reasons. It was a fairly painful process, Thapan said, but the markets do work.

“Australia I must say has engineered a water reform that is close to miraculous, in the sense that today Australia survives on 30 percent of the water it had 10 years ago,” he said.

On a smaller scale, wine makers in Nashik in the Indian state of Maharashtra have got around the irregular public supply by using storage and then injecting water into the roots of the vine when needed, reducing wastage, Thapan said.

A micro-irrigation industry worth nearly $1 billion a year now is forecast to become a $53 billion business by 2030, he said, showing an environmental gain can be driven by business motives.

“If you have a corporate outlook and you have a business incentive, you can work wonders with your system no matter how broken and ancient it is. You can revive it.”

Editing by Ed Lane

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