Thursday, October 6, 2011

No. 90: Water business in Japan and the world (9) (October 6, 2011)

The concession system
The concession system that a private company manages all phases of the water business, from the construction to the operation of a water plant, helped French water majors like Veolia and Suez enjoy the dominant power in the world market. In Japan, the Cabinet Office tries to introduce the concession system. However, no concession system has been introduced in Japan.

The concession system entrusts a private company with the right to operate and develop infrastructure for a long period, leaving the ownership of a plant to the government. That is, a private company collects water charge from the users and manages the water business with the charges under government license. The private company is expected to improve business operation and pursue efficient management with its originality and ingenuity.

However, some problems have to be solved to introduce this system in Japan. First, it is critical how to set the optimal water charge and scale of operation. The water business is primarily managed on the municipality basis, such as city, town, and village, and supposed to suffer demand decline due to falling population. For efficient management of the water business, therefore, it will be necessary to integrate it in the basin of a river, and formulate the charging system to make the cost for sustainable development of the water business reflect in the charging system, while maintaining the transparency of the system.

What is more, it will be necessary to organize the consistence of several governing laws including Water Supply Act, Local Public Enterprise Act, and Local Autonomy Act. In some situations, it may also be necessary to revise the law governing the dispatch of government employees to a private company because a government employee can work for a private company for only up to three years at present. However, these reforms will be vital for Japanese water-related companies to increase the presence in the world market. Revision of the related laws will be unavoidable in the near future. (To be continued)

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