Thursday, October 13, 2011

No. 96: Water business in Japan and the world (15) (October 14, 2011)

The world water market
Demand for water increases not only with population growth but also with improved living standard due to economic growth. As water demand increases, the water business grows. The research team of the global development of the water business affiliated with the Ministry of Economy, Tradeand Industry estimated that the world water market will grow from about 25 trillion yen in 2007 to about 87 trillion yen in 2025. Of the 87 trillion yen, waterworks and sewage have a combined market of 74 trillion yen, and the remaining 13 trillion yen goes to highly promising business fields, such as desalination of seawater, cyclic use of industrial water, treatment of industrial sewer, and reuse of sewage. In terms of operation, construction and supply of materials has a market of 49 trillion yen, while management and maintenance has a market of 38 trillion yen.

Because the water and sewerage business is mostly managed by the central government and local governments worldwide, the privatized water market was 7.5 trillion yen in 2007. However, with an expected increase of the infrastructure business under the public-private partnership, private companies will increase presence in the water business. The research team predicted that the infrastructure-related business will increase to 31 trillion yen in 2025 with an annual growth rate of 8.4%, 3.7% higher than the growth rate of 4.7% estimated for the total market.

Water is indispensable to all human activities, and no products can replace it. In addition, the water market is stable because demand and price do not fluctuate as much as other resources including oil. Contracts on the water business usually extend as long as 30 years, during which the water charge can be collected to cover the investment. However, projects in developing countries cannot be free from the risk of exchange fluctuations because water charge is paid in the local currency, while loans should be repaid in dollars. Despite this risk, the water business is rather promising, and an increasing number of companies are expected to enter into the water business. (To be continued)   

No comments:

Post a Comment