Wednesday, August 11, 2010

No. 59: Increase Japanese presence in the world water service market (August 11, 2010)

The world water service market was once dominated by four European companies, namely Veolia Water, Suez, and SAUR of France, and RWE of Germany. However, their combined share decreased from 60% to 30% in the past eight years because of the increasing presence of Asian companies including Hyflux of Singapore and K-Water of Korea. Japanese companies are also accelerating their efforts to increase the presence in the world market in collaboration with local governments.

Toyo Engineering, one of Japan’s leading engineering companies, and a subsidiary of Panasonic collaborate with Osaka City to construct and operate a small-scale water facility in Ho Chi Minh City of Vietnam in 2011. Furthermore, Osaka plans to take the initiative in building a consortium and constructing a large-scale water service facility with an investment of seven to eight billion yen on a Build-Operate-Transfer (BOT) contract.

Tokyo is also energetic to market its water supply technology to foreign countries. The leakage rate of water supply is said to be 10-20% in advanced countries and 50% in some developing countries, but Tokyo can take pride in the leakage rate as low as 3%. Tokyo’s technology seems to have a good prospect in the world market, but what matters most in the world market is the water supplied population. Veolia Water has 139 million water supplied population, whereas Tokyo has only 12.5 million.

There are about 8,000 public water suppliers in Japan, and each supplier is managed by a local government. Nearly 80% of the suppliers are very small with a water supplied population of less than 5,000. As a matter of fact, Japan is far behind England and Germany in privatizing the water supply business. This is why local governments need to collaborate with private companies to market their technologies.

Japanese membrane technology
Japanese presence in offering the water supply business as a system is low, but it has a big share in water treatment membrane market. Nitto Denko has 32% share and Toray has 27% share in the world. But a radical change is going on in the Chinese market. A Chinese maker originating from a university laboratory has been growing at an increasing rate of 80% per year for the past three years. It now accounts for 30% share in the Chinese domestic market using the low-price strategy. Toray built a mass production plant of its membranes in Beijing with an investment of 7.5 billion yen. With this new plant in Beijing, Toray increased the production capacity of its reverse osmosis membrane by 50%. Korea is also emerging a rival in the world market. Korea is reported to launch a substantiative experiment of the membrane treatment technology with an investment of 19 billion yen under the government’s leadership.

To compete with Chinese and Korean companies, a project attended by 27 universities and companies including Tokyo University and Toray has been launched in Japan. The leading authority in water treatment membrane from Toray takes the leadership. The project tries to develop a system named the Megaton Water System. As the name indicates, it tries to desalinate one million tons of sea water per day. With the help of a government subsidiary amounting to 2.9 billion yen, it tries to half the desalination cost by virtue of generation that uses salinity difference between pure water and sea water. The project team plans to put the technology into practical use in 2013.

With the growing population in emerging countries, the world water supply market is expected to grow 2.5 times as big as in 2007 to 86 trillion yen in 2025. Japan has been exerting lots of energy to make the water treatment technology as a star export product like railway and nuclear power generation.

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