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SIMON SONG
A month from now, Hong Kong's main water supply will
be shut off amid the worst drought to hit the region in half a century.
Less than two weeks later, on New Year's Eve, the
current arrangement under which Hong Kong buys that water will expire.
Government spokesmen insist that come rain or shine,
river water from Guangdong province will flow into the SAR once again by
January 3 after an annual system shutdown for maintenance. But they don't know
how much will come, or at what price.
However, despite accumulated rainfall this year that
is 19 per cent below normal levels, Hong Kong has six months' supply stored in
the territory's reservoirs, more than enough to see us through until the April
rains begin.
Although Hong Kong appears likely to pass through the
present drought blissfully oblivious to the shortages killing crops and animals
across the border, the need to revisit the decision by colonial authorities two
decades ago to rely primarily on Guangdong's Dongjiang, or East River, as the
territory's main source is growing urgent.
Since that time, Dongguan and Huizhou have been
transformed from quaint riverside villages into boomtowns, as has Shenzhen, the
way- station for redirecting Dongjiang flows south to Hong Kong. The
spectacular industrial and population growth of each city has made them into
both major polluters and competing consumers over the Dongjiang's waters.
Guangdong authorities still pamper Hong Kong as their
favoured customer, but the decision to depend on the Dongjiang has washed away
the territory's bargaining position so much that, contrary to normal business
dealings, the more water Hong Kong has bought, the more it has paid.
In 1975, Hong Kong sourced a quarter of its water from
the Dongjiang and paid 10 Chinese cents (9 HK cents) for each cubic metre. By
the mid-1980s, Hong Kong was buying three times as much water and relying on it
for half of the territory's needs, but paying HK$1.03 per cubic metre.
Hong Kong's annual purchase volume has more than
doubled again since then, but the price has steadily tripled to HK$3.09,
despite declines in water quality and the presumed warming of relations
following the territory's return to Chinese rule. Hong Kong now gets more than
three quarters of its water from the Dongjiang.
Guangdong Investment, a Hong Kong-listed company
controlled by the Guangdong government, says in its annual report that it has
the exclusive right to supply Hong Kong with natural water. It says it has a
non-exclusive right to supply Shenzhen and Dongguan, a competitive situation
which, based on figures in the company's 2004 interim report, allows them to
pay just 49.7 Hong Kong cents per cubic metre on average.
Hong Kong's present supply agreement with Guangdong
dates back to the tense months after Tiananmen Square, an uneasy period when
the colonial authorities sought to take big steps to reassure a shaken populace
of the territory's post-1997 well-being.
Up to this point, Hong Kong had usually derived most
of its supply from rainwater collected in reservoirs built around the
territory. To cushion variations in annual collections, the government had
opened a HK$460 million treatment plant at Lok On Pai in 1975 to remove salt
from seawater but, within three years, soaring fuel costs made it uneconomical
to operate. Resulting supply shortfalls forced the government to impose
occasional water rationing until 1982.
The 1989 agreement with Guangdong assured Hong Kong of
a growing, plentiful supply, lulling the territory into allowing most of its
conservation efforts to lapse.
Within a few years, however, the contracted growth in
supply was well outpacing demand growth as factories moved north from the
territory to Shenzhen and beyond, and population growth here flattened to the
extent that Hong Kong drained unneeded Dongjiang supplies into the sea. This
year, Hong Kong will pay Guangdong around HK$185 million for unneeded water as
the contracted supply will exceed demand by about 8 per cent, according to
Water Supplies Department forecasts.
That's only a drop in the ocean of the waste and red
ink in the SAR's water supply system.
According to figures provided to the Legislative
Council last year, a quarter of the fresh water that goes into the SAR's supply
system never reaches customers because of leaky old pipes. Count another HK$1
billion a year down the drain.
Then there's the outsize subsidy the government grants
residential water customers. Each household is entitled to three cubic metres
of water a month free and another 7.8 cubic metres at a discounted rate.
In the fiscal year ending March 31, the government
estimates it will collect HK$2.47 billion in consumption charges, but pay
HK$2.53 billion for Dongjiang supplies and incur HK$2.69 billion in operating
costs. That puts the budget another HK$2.75 billion underwater.
All told, these watery losses come to almost 10 per
cent of the government's estimated deficit this year of HK$42.6 billion, a
hefty figure these days as the government considers imposing a sales tax or
taking other radical measures.
The government isn't oblivious to this. Chief
Executive Tung Chee-hwa announced in his policy address last year that his
administration would ``implement the Total Water Management programme in which
water conservation and water resource protection are enhanced through education
and promotion, while examining technologies for recycling and desalination
through pilot schemes.''
The administration is also fixing and replacing leaky
pipes and protecting and upgrading Dongjiang supplies through separate
initiatives. Meanwhile, officials are holding out for a new agreement with
Guangdong that would lower the required supply amount and price for Dongjiang
water.
It's a broad but shallow agenda.
The programme to plug leaks is scheduled to take 20
years to complete and even afterwards, the government estimates 15 per cent of
supplies will continue to leak out. Officials claim that rate is quite
acceptable by world standards.
Last year, Guangdong completed construction of an
83-kilometre closed aqueduct to channel water for Hong Kong through urbanising
Dongguan and Shenzhen. The SAR underwrote HK$2.37 billion of the HK$4.1 billion
cost via an interest-free loan.
The government estimates that sealing off Hong Kong's
supply from contamination along that stretch will cut annual treatment costs by
HK$9 million. The SAR spent HK$160.9 million on water treatment in the fiscal
year before the aqueduct was finished.
In the meantime, Shenzhen has leapfrogged Hong Kong by
investing 3.8 billion yuan (HK$3.57 billion) to move the intake for its own
water supply upstream above the polluted stretch of the Dongjiang around
Huizhou.
Shenzhen and Dongguan have also launched major
publicity campaigns to promote water conservation, out of necessity. Each city
is running short of more than 500,000 cubic metres of water a day, according to
Chinese press reports.
Here, Tung's vaunted Total Water Management
conservation programme so far consists of periodic open days and field trips to
water treatment works, roving exhibitions and talks at housing estates,
community centres and schools, according to a spokeswoman for the Environment,
Transport and Works Bureau. Web surfers can also download posters from the
Water Supplies Department's site that show various ways to conserve water.
``Thousands of students and adults have already
visited various water treatment works annually,'' the spokeswoman said.
Environmental groups are not impressed. Says Albert
Lai, chairman of the Conservancy Association, ``We have not seen any kind of
water conservation campaign in Hong Kong while our brothers and sisters are
suffering from this water shortage.''
Lister Cheung, the Conservancy Association's chief
executive, says the group may launch its own campaign to promote conservation
on behalf on Guangdong residents. ``We have to share our responsibility as
well,'' she says. ``We want [the public] to stop wastage and cut usage.''
By acceding to development limitations along the
Dongjiang and allowing the closed aqueduct to divert water that would dilute
pollutants, Guangdong residents, she says, ``have sacrificed quite a lot for
Hong Kong''.
When they have to, territory residents have shown they
can scrimp too. During a 1963-64 drought, schools cancelled physical education
classes so students wouldn't have to shower, residents donned coloured clothes
that would show fewer stains from repeated wear and profligate consumers went
to prison for their insolence.
That was also when the government first began looking
into desalination as a serious supply alternative. Although the Lok On Pai
plant eventually proved a financial disaster, the technology has since improved
significantly.
Singapore, Israel and other countries are now
investing heavily in desalination. Singapore, for example, this year began
construction of a S$200 million (HK$944 million) desalination plant that is to
process enough seawater by next year to meet 10 per cent of the country's daily
needs.
By contrast, the HK$10 million desalination plant that
opened this month in Tuen Mun as part of the Total Water Management programme
is capable of producing just 200 cubic metres a day. Believing it faces a
sceptical public, the government is using the plant only to demonstrate and
test the technology.
This caution is a long retreat from the initiative the
government showed in the mid-1950s when it began promoting the use of seawater
to flush toilets. Later it required such systems and now 80 per cent of
households use seawater for flushing. Because of this, Hong Kong's water
consumption is 20 per cent lower than it would be otherwise.
But with the Total Water Management programme, the
government will roll out a new test flush water supply source next year at
three public toilets along the Lantau cable car route to the Big Buddha:
Treated sewage.
The government plans to set up an education centre
around these showcase toilets, which will draw 600-900 cubic metres of recycled
water a day. Talks are continuing with the MTR Corp about also using the
treated sewage in landscape irrigation, cleaning, air-conditioning and
fountains within the cable car project.
Singapore, again, is plunging ahead much more
forthrightly. Since last year, it has opened three processing plants that now
direct 76,000 cubic metres of recycled water, or NEWater as the government
there prefers to call it, each day to factories and commercial buildings as
well as into the country's reservoirs where it mixes with rainwater to later
emerge as tap water. The first two plants cost a combined S$91 million to
build. Within two years, the government plans to use NEWater to meet 10 per
cent of the country's daily needs.
``Hong Kong does not need to experiment,'' says Albert
Lai. ``The technology is very mature.''
Serious investment in these alternative supply sources
would shore up Hong Kong's bargaining position with Guangdong. As it stands,
the SAR has difficulty making any demands. The 1989 agreement was amended in
1998 to cut the annual increase in Dongjiang supply from 30 million cubic
metres to 10 million, but officials entered the talks seeking an absolute
reduction.
After an audit investigation in 2000, Legco lashed the
administration for its poor negotiating record in both the 1989 and 1998 talks.
In addition to backing down on overall quantity, the government in 1998
abandoned a proposal for setting a flexible supply range under which it would
notify Guangdong each November how much water it would need for the year,
starting the following May, to adjust for rainfall and actual demand growth.
The government also dropped demands that the water
supplied by Guangdong meet national standards adopted by Beijing in 1988, that
a monitoring system be put in place and that penalties be put in train for
supplying substandard water.
Talks with Guangdong have been deadlocked since 2001.
That means the HK$3.09 price Hong Kong has paid for each cubic metre of
Dongjiang water in the interim could still be raised. Under the 1989 agreement,
the price is to be adjusted to account for increases in system operating
expenses, inflation in Hong Kong and Guangdong and changes in the yuan-Hong
Kong dollar exchange rate.
Pointing to persistent deflation, the SAR kept pushing
for a price cut but Guangdong has held out for a rate hike on the grounds of
rising operational costs. Guangdong has spurned requests to set a flexible or
lower supply amount, saying that would cause operational difficulties and
affect the return on its investment in the supply system.
Under the 1989 agreement, the supply amount was to
reach 1.1 billion cubic metres a year by 2008. That milestone was pushed back
indefinitely in 1998.
Hong Kong officials expect to need 760 million cubic
metres this year and see demand growing just 1.3 per cent annually for the next
decade, putting off the need for that 1.1 billion cubic metres until perhaps
2019.
Guangdong is likely to demand compensation for such a
postponement, but it is questionable whether Hong Kong will still want
Dongjiang's water by then. Secretary for the Environment, Transport and Works
Sarah Liao said in 2002 that the polluted stretch of the river was extending
upstream so fast that she expected the usable supply to the SAR to run short
within 10 years unless the trend is checked.
``Every year pollution moves up a hundred metres and
the Dongjiang is not that long,'' she said. ``One day we'll reach the head.''
Four years before, Guangdong spent HK$300 million to
move the intake for Hong Kong's supply upstream just 350 metres. Hong Kong
officials say they have considered moving the intake all the way up to the
massive Xinfengjiang Reservoir, 200 kilometres north of Shenzhen, but are
worried about setting off a nasty scramble with Guangzhou, Shenzhen, Dongguan
and Huizhou and cutting the Dongjiang's flow so much that it impacts on
transport and agriculture.
Hong Kong might be able to look elsewhere in
Guangdong. The spokeswoman for the Environment, Transport and Works Bureau says
that the SAR is ``at liberty to look for alternative [mainland] water sources''
despite Guangdong Investment's claimed exclusive, but she says the department
sees other sources as probably too costly ``in view of geographical
constraints''.
Here again, Shenzhen is acting more boldly. The city
announced this month that it is negotiating with Huizhou to buy one of its
reservoirs.
Given the lack of lakes or underground water in the
territory, Hong Kong officials have considered expanding the SAR's reservoir
system by extending the area from which rainwater is gathered, but preliminary
studies showed the cost would exceed that of desalination or water recycling.
So the SAR plods along. Lai says a key reason
Singapore and Shenzhen have acted more decisively is that both cities have
created unified water authorities. He proposes Hong Kong similarly break down
bureaucratic boundaries by merging key functions of the Water Supplies,
Drainage Services and Environmental Protection departments.
Besides spurring broader strategic thinking, Lai says
such a move would save the government HK$1 billion a year in staffing and other
operating costs, with greater potential savings if functions are privatised.
Such a dramatic move to cut costs would give the
government more credibility to ask the public to pick up more of the tab for
water use. Currently 17 per cent of households pay nothing for water and
another 30 per cent pay less than HK$25 a month.
This price structure encourages waste by putting
negligible value on water, says Cheung. Given the need to assure the
impoverished of adequate water to maintain health and hygiene, Lai suggests the
government subsidise water supply for the poor via the comprehensive social
security assistance scheme (CSSA). That could provide a financial incentive for
conservation by allowing frugal consumers to pocket the difference between
their bill and their CSSA allotment.
So far the government is showing little appetite for
the outcry that would greet any move to raise rates. But here again, it could
take courage from Shenzhen which earlier this year raised rates by 20 per cent
after a five-year price freeze and doubled water fees for saunas, car washes
and other heavy users. Will Tung take the plunge?
zach.coleman@globalchina.com
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