Friday, October 7, 2011

No. 91: Water business in Japan and the world (10) (October 7, 2011)

Approaches to promote wide area supply
In 1977, the Water Supply Act was revised to promote the construction of water facilities for wide area supply. Based on this revision, the policy to promote wide area supply was formulated to improve the hardware vital to water supply. Water supply companies supply water to water service companies, and they are mostly made up of local governments and multiple municipalities. It is true that they played a certain role to secure water resources and implement stable water service in a wide area. In the retail market, however, efforts to promote water facilities for wide area supply hardly made progress, and a medium- and small-sized regional water service companies is operating in each city, town, and village. Since each water service company is small, it is doubtful that old facilities will be renovated and water technology will be inherited.

Under the above circumstances, the Ministry of Health, Labor and Welfare published the “Water Service Vision” in 2004 to modify the existing policy that placed too much emphasis on hardware and laid down a policy to strengthen the operational infrastructure by introducing various management systems for wide area supply. It promoted the vertical integration of water supply companies and water service companies and the horizontal integration of water service companies in the retail market. Saitama Prefecture, for example, plans to divide the prefecture into 12 blocs and integrate all companies involved in the water business horizontally for the integration of the whole water business scheduled for 50 years later. In Osaka, discussions are in progress on the vertical integration of water supply companies and water service companies. However, the fact remains that the approaches shown by the above two local governments are not widespread.

The alliance between the public sectors still prevails in the planning and designing integration. However, it is necessary to get the private sector involved to promote wide area supply from the management and financial viewpoints because of the necessity to pursue economies of scale. The alliance between the public and private sectors and the promotion of wide area supply have to go hand in hand for better water business. (To be continued) 

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