Monday, October 3, 2011

No. 88: Water business in Japan and the world (7) (October 4, 2011)

Increasing presence of PFI and DBO
Private finance initiative (PFI) has been increasing the presence as an approach for the operation and maintenance of various public facilities. The water business is basically managed on a stand-alone basis with revenues from the users, and management approach prevailing in the private sector like PFI is agreeable to the water business. However, PFI is introduced mostly for the renewal and renovation of part of related facilities instead of the whole of a water purification plant. In fact, PFI was introduced in major prefectures including Tokyo, but it was mostly for effluent treatment facilities and power generation facilities. This is presumably because of the necessity to prevent PFI from getting involved in water quality management.

Design Build Operate (DBO), which covers from facility construction to operational management, is an approach to cover the whole part of a water purification plant. Two prefectures in Kyushu jointly operate a water purification plant astride their boarder and entrust a private company with the operation and maintenance. This is a good example of utilizing the funds and initiative of the private sector, and a noteworthy example as a method for wide area supply. DBO gives the same benefits as PFI except that latter uses private capitals.

Both PFI and DBO are helpful to increase operational efficiency and reduce operational cost with the help of clear burden sharing between the public and private sectors and know-how accumulated in the private sector. In addition, private companies can get business opportunities. Lately, the situation is changing. PFI was introduced for several water purification plants inside the same area and for the whole of a water purification plant in Yokohama. The presence of the two approaches is expected to increase with various arrangements and modifications. (To be continued)  

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