Hong Kong : A Role Model of Public-Operated Water Supply Services


By Government Waterworks Professionals Association

Hong Kong water supply had commenced its history of 150 years of public-operated service since the mid-nineteenth century.

During 1854 to 1859, Hong Kong Government had proactively urged the private sectors to invest in various public services.  Apart from water services business that has always been unattractive to the private sectors, other public services such as the gas supply, telecommunication, electricity, cross-harbour ferry etc had attracted the British enterprises and local private investors.Despite the population boom, lack of nature water resources, limited land supply, shortage in funding and the unwillingness of the private investor to invest in water supply, Hong Kong Government resolutely taken up the responsibility to provide water supply to Hong Kong.  During the 150 years of public-operated water supply service, Hong Kong has successfully transformed into a world-class metropolis.  Today, over 99.9 % of the population is able to receive a safe, stable and reliable supply of potable water.  Successful schemes to increase natural water resources, perfection of the supply systems and the ability to maintain excellent water quality standard proved that the public-operated water supply services of Hong Kong is comparable with other World Class Metropolis.  This marked the success of the ‘public-operated water supply services’ in Hong Kong.

Drinking water is not a commodity; it’s a fundamental necessity to daily life

Hong Kong Government invested enormous resources and manpower to develop a sophisticate water supply system.  Rely solely on the water charges collected from the Hong Kong citizen could not cover all the expenditure needed for the infrastructure development and the water supply operation.  The major source of income in the past has come from the property rates and taxes collected by the Hong Kong Government.  In another word, the property owner of Hong Kong and the taxpayer had always been the financial supporter to the Hong Kong water supply systems and operation.  The cost structure for water supply in Hong Kong is similar to the ‘Social Tariff’ adopted by the European countries and America.  Every household can enjoy the first 12 m3 water usage free of charge for every 4 months. Any other usage after the first 12 m3 will be categorized into 3 incremental tiers.  This type of cost structure embraces the idea of high usage to compensate the low usage households.  The low usage households are usually those of the elderly and the low-income families.

Considering the majority of the water charges are taken care of by the property owner and the taxpayer, and the high usage compensate the low usage strategy, one can deduce: The Hong Kong government do not consider drinking water as a commodity but a daily living necessity of the public and shall be accessible by all citizen at a reasonably lower cost.  Even though Hong Kong’s economy takes flight in the 70’s and 80’s of the 20th century and greatly improved the living standard, the fundamental principle remain the same.  This reflects that the protection of the basic rights of the public is a vital element and the key to the regional prosperity and stability.

Water supply services in Hong Kong is under the threat of privatization

Since the reunion of Hong Kong with China in 1997, Hong Kong citizen is guaranteed to sustain the original rights given by the Basic Law, which includes the basic ways of living being remained unchanged.  Unfortunately, the 1998 financial turmoil created a tremendous financial pressure onto the Hong Kong Special Administrative Region Government (HKSARG).  In order to reduce the investment and operation cost of the water supply, HKSARG considered to completely privatize the Hong Kong water supply service.  The options include contracting out part of the services to private business, ‘corporatization’ (a transition to privatization) or completely privatization.  These suggestions however, were met with strong objection from the Hong Kong civil servant at the time.  The public also worried the changes were to go-ahead, the quality of water supply may be lowered and the water charges will be increased.  In the end, the privatization proposal could not gained support from the majority of the public, the HKSARG have to, with no option, but to abort the proposal altogether.

The threat of privatization of HK water supply service did not come to an end at this point.  Foreign governments, international private water companies as well as local private sectors continued to lobby and persuade the HKSARG about the advantages of privitization.  In the fall of 2003, HKSARG suggested adopting the use of “ Public Private Partnership” (PPP) as the mode of renovation and operation of the largest potable water treatment works in Hong Kong – the “Sha Tin Water Treatment Works”.  This PPP proposal requires the private operator to take up the responsibility for the design, the investment, the building of, the operation and the future hand-over to the water treatment works.  The PPP contract, if awarded, will last for 20 to 30 years.  In early 2004, the PPP feasibility study was further extended to cover the water distribution network from the south of Sha Tin, including the Kowloon peninsula and the majority of the supply networks in the Hong Kong Island.  Up to 3 million Hong Kong citizen will be affected by this proposal.  However, the promoters in the HKSARG conducted not even the most basic public consultation or staff consultation!  As the study was gradually unveiled the civil servants in the Water Supplies Department of Hong Kong strongly oppose to the proposal.   They were of the view that this would be the first step towards corporation or privatization.  In May 2004, in the special meeting of the “Panel on Environment, Planning, Lands and Works” under the Hong Kong Legislative Council, the members of the Panel also strongly oppose to the PPP approach and requested the HKSARG to re-study the PPP’s feasibility and to conduct public consultation.

At present, Sha Tin Water Treatment Works is vital to Hong Kong as it accounts for as much as 40% of the overall treatment in potable water in Hong Kong.  If PPP were to apply to the Insitu Reprovisioning of the Sha Tin Water Treatment Works” and operation, it would certainly open the gateway to the complete privatization of the water supply services.  It is very likely that all the treatment of potable water in H.K. will be delivered to the private enterprise for operation.  The water supply services may extend to distribution network, customer services, users account application and eventually all the water supply services will become completely privatized.

HKSARG argued that the PPP could bring in innovative ideas in technology and administration, promote new technology transfer, accelerate progress of the project and reduce the administrative procedures.  Consequently, PPP is not only a means to reduce HKSARG’s investment in the water supply services but also as a tool to enhance control, efficiency and productivity.

In the past 150 years of water supply in Hong Kong, it demonstrated the success in the public-operated water supply services.  Its contribution to the livelihood of the society  is unquestionable.  For the past one and a half century, despite the severe shortage in water resources and the huge expansion in economy, HKSARG continued to shoulder its responsibility to provide drinking water to the public – as a basic human right instead of  a commodity.  As always, HKSARG was keen to inject resources to bring in new technology to maintain it’s world class water supply system to benefit the Hong Kong citizen and its economy.  Yet, the HKSARG begins to shed its goverance and try to radically change the present public-operated mode by bringing in the ultra high risk PPP experiment.  Evidences of failed cases of PPP and privatized water supplies are seen everywhere.  We should not blindly trust that the private sector would definitely provides better but cheaper water supply services.  HKSARG should not rejected the valuable experience and contribution given by the public-operated water supply.  As a matter of fact, Hong Kong Water Supplies Department have self initated over a hundred items of enhancement to the water suupply services during the past 15 years from 1990 to 2004 and still continue to do so.  The high quality of the water supply services in Hong Kong already breeded a team of trustworthy water supply professionals in the public services.  We believes that the public-operated water supply organization in Hong Kong has the capability to provide the utmost outstanding water supply services comparable to any private organisation. (END)