Did you know? Note 11
More than half the private water projects implemented in the past decade were in China
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China accounts for more than half the water projects with private participation implemented in low- and middle-income countries in 1998–2008
(figure 1). Of the total of 552 projects, China implemented 291, representing more than US$8.6 billion in investment commitments (hereafter,
investment). China’s predominance in private water projects has increased in recent years: the country accounts for more than 70% of those
established in developing countries in 2006–08.
More than 60% of the private water projects in China are for sewage treatment plants: 183 of the 291 reaching closure in 1998–2008 (figure 2).
Among the rest, most are for potable water treatment plants (68) and water utilities (28). But water utility projects attracted most of the
investment, US$3.2 billion (figure 3). Sewage treatment plants account for US$3.0 billion, and potable water treatment plants for US$2.2 billion.
The predominance of sewage treatment plants among private water projects in China reflects the national government’s priority on
increasing the treatment of urban wastewater. A recent World Bank study on urban water utilities in China concludes that the proliferation
of private treatment plants has been facilitated by the attractiveness of this type of project for both private investors and municipal
utilities. According to the study, "treatment services are well-defined and the conditions and terms of payment, including price, can be
determined up-front to assess whether a project is feasible. The private company does not have to take the commercial risk involved with
low tariffs, but rather will be paid by the municipal utility for services the company provides. The municipal utility or government does
not have to finance the construction of the treatment plant, [and using] a private participation arrangement insulates wastewater treatment
from wastewater collection, which is often still managed as a public works program rather than a utility service. Many municipal governments
also [prefer] to have a private company responsible for wastewater treatment rather than [rely on] an often inefficient and technically weak
drainage department" 1.
Greenfield projects—build-operate-transfer (BOT) and build-own-operate (BOO) contracts—and concessions are the most prevalent
forms of private participation in water in China (table 1). Greenfield projects accounted for the largest share of water projects
and were primarily for treatment plants (179), though a few were for water utility projects (4). Concessions were mainly for
treatment plants (69) but also for water utility projects (22). Concessions accounted for the largest share of investment,
with 48% of the total (table 2). Concession contracts for treatment plants accounted for about US$1.6 billion, and those for
water utilities for about US$2.6 billion. Greenfield treatment plant projects attracted US$3.3 billion.
Table 1 Water projects with private participation in China by type of contract, 1998–2008
Year of financial closure
|
Treatment plants
|
Utilities
|
Concession
|
Divestiture
|
Greenfield project
|
Management or lease
|
Total
|
Concession
|
Divestiture
|
Greenfield project
|
Management or lease
|
Total
|
1998
|
6
|
0
|
3
|
0
|
9
|
0
|
0
|
1
|
0
|
1
|
1999
|
0
|
0
|
2
|
0
|
2
|
0
|
1
|
0
|
0
|
1
|
2000
|
4
|
0
|
2
|
0
|
6
|
0
|
0
|
0
|
0
|
0
|
2001
|
2
|
0
|
6
|
1
|
9
|
0
|
0
|
0
|
1
|
1
|
2002
|
7
|
1
|
8
|
0
|
16
|
2
|
0
|
0
|
0
|
2
|
2003
|
4
|
1
|
18
|
0
|
23
|
2
|
0
|
0
|
0
|
2
|
2004
|
11
|
0
|
15
|
0
|
26
|
2
|
0
|
0
|
0
|
2
|
2005
|
8
|
0
|
26
|
2
|
36
|
6
|
0
|
0
|
0
|
6
|
2006
|
10
|
0
|
29
|
2
|
41
|
1
|
0
|
0
|
1
|
2
|
2007
|
10
|
3
|
34
|
1
|
48
|
8
|
1
|
3
|
0
|
12
|
2008
|
7
|
1
|
36
|
0
|
44
|
1
|
1
|
0
|
0
|
2
|
Total
|
69
|
6
|
179
|
6
|
260
|
22
|
3
|
4
|
2
|
31
|
Source: World Bank and PPIAF, PPI Project Database.
Table 2 Investment commitments to water projects with private participation in China by type of contract, 1998–2008
(2008 US$ millions)
Year of financial closure
|
Treatment plants
|
Utilities
|
Concession
|
Divestiture
|
Greenfield project
|
Management or lease
|
Total
|
Concession
|
Divestiture
|
Greenfield project
|
Management or lease
|
Total
|
1998
|
152
|
0
|
190
|
0
|
342
|
0
|
0
|
14
|
0
|
14
|
1999
|
0
|
0
|
153
|
0
|
153
|
0
|
108
|
0
|
0
|
108
|
2000
|
50
|
0
|
40
|
0
|
90
|
0
|
0
|
0
|
0
|
0
|
2001
|
58
|
0
|
218
|
0
|
276
|
0
|
0
|
0
|
16
|
16
|
2002
|
226
|
2
|
215
|
0
|
442
|
647
|
0
|
0
|
0
|
647
|
2003
|
73
|
50
|
168
|
0
|
291
|
477
|
0
|
0
|
0
|
477
|
2004
|
300
|
0
|
326
|
0
|
626
|
56
|
0
|
0
|
0
|
56
|
2005
|
195
|
0
|
431
|
22
|
647
|
454
|
0
|
0
|
0
|
454
|
2006
|
115
|
0
|
422
|
460
|
997
|
13
|
0
|
0
|
80
|
93
|
2007
|
300
|
50
|
551
|
0
|
901
|
929
|
32
|
98
|
0
|
1,058
|
2008
|
89
|
61
|
584
|
0
|
734
|
11
|
229
|
0
|
0
|
240
|
Total
|
1,559
|
163
|
3,297
|
482
|
5,501
|
2,587
|
368
|
112
|
96
|
3,164
|
Source: World Bank and PPIAF, PPI Project Database.
Most of the projects have been implemented in large, developed cities with populations of more than 2 million and GDP per capita
exceeding US$3,000.2 Not surprisingly, the capacity of private water projects in China adds up to a rather large total.
The 260 treatment plant projects implemented in 1998–2008 have a total capacity of more than 34.4 million cubic meters a
day (17.4 million for sewage, 13.2 million for potable water, and 3.8 million for potable water and sewage). Of the 31
water utility projects, 21 serve at least 24.6 million people, 5 have a total capacity of more than 2.4 million cubic meters a day,
and 1 represents 550,000 connections.
Nevertheless, private water projects in China are typically small when measured by investment. In 2008 the median size
was US$11.04 million, and the average size, US$21.17 million. Water utility projects are usually larger than treatment
plant projects (figure 4).
Most private water projects in China are implemented through a municipal joint venture involving a local municipal utility and a private company. For those implemented in 1998–2008, this private company was Chinese in more than half the cases (179 projects; table 3)3. Other sponsors were mainly from Singapore (42 projects), France (36), the United States (30), Malaysia (25), and Germany (11). The five main foreign sponsors were Veolia Environnement (19 projects), Suez (16), Golden State Environment (14), Asia Environment Holdings (10), and Asia Water Technology (8). The participation of local sponsors is promoted by the legal framework. Since 2002 national laws have allowed foreign companies to invest in urban water distribution and wastewater collection systems as long as they do so through a joint venture with a Chinese partner holding a majority share.4
The landscape of sponsors in Chinese water projects is diversified. The most active sponsors account for only 16 or fewer water or sewage treatment plant projects (table 4) or fewer than 7 water utility projects (table 5).
Table 3 Sponsors’ home countries ranked by number of water projects in China, 1998–2008
Rank
|
Home country
|
|
Water projects
|
Total
|
Treatment plants
|
Water utilities
|
1
|
China
|
179
|
165
|
14
|
2
|
Singapore
|
42
|
39
|
3
|
3
|
France
|
36
|
25
|
11
|
4
|
United States
|
30
|
28
|
2
|
5
|
Malaysia
|
25
|
21
|
4
|
6
|
Germany
|
11
|
10
|
1
|
7
|
Spain
|
3
|
3
|
0
|
8
|
Canada
|
2
|
2
|
0
|
9
|
Australia
|
1
|
1
|
0
|
9
|
Japan
|
1
|
1
|
0
|
9
|
Korea, Rep. of
|
1
|
1
|
0
|
9
|
Saudi Arabia
|
1
|
1
|
0
|
Source: World Bank and PPIAF, PPI Project Database.
Note: A sponsor is included in the database once it has at least a 15% stake in the project company. There can therefore be more than one sponsor per project.
Table 4 Top 20 sponsors by number of treatment plant projects in China, 1998–2008
Rank
|
Sponsor
|
Home country
|
Treatment plant projects
|
1
|
Beijing Sound Environment Industry Group
|
China
|
16
|
2
|
Chongqing Kangda Environmental Protection Co. Ltd.
|
China
|
13
|
3
|
Golden State Environment
|
United States
|
13
|
4
|
Anhui Guozhen Environmental Protection Science & Technology Co. Ltd.
|
China
|
12
|
5
|
Suez
|
France
|
12
|
6
|
Veolia Environnement
|
France
|
12
|
7
|
Beijing Herocan Environmental Engineering Tech Co. Ltd.
|
China
|
11
|
8
|
Bio-Treat Technology Ltd.
|
China
|
11
|
9
|
NWS Holdings Limited
|
China
|
11
|
10
|
Asia Environment Holdings Ltd.
|
Singapore
|
10
|
11
|
Dalian Dongda Environmental Engineering Co. Ltd.
|
China
|
10
|
12
|
China Water Group Inc.
|
China
|
7
|
13
|
Hyflux
|
Singapore
|
7
|
14
|
China Water Affairs Group Ltd.
|
China
|
6
|
15
|
Hans Technologies
|
United States
|
6
|
16
|
RWE
|
Germany
|
6
|
17
|
Sime Darby Bhd
|
Malaysia
|
6
|
18
|
Sinomem Technology Ltd.
|
Singapore
|
6
|
19
|
Asia Water Technology
|
Singapore
|
5
|
20
|
InterChina Holdings
|
China
|
5
|
Source: World Bank and PPIAF, PPI Project Database.
Table 5 Top 5 sponsors by number of water utility projects in China, 1998–2008
Rank
|
Sponsor
|
Home country
|
Water utility projects
|
1
|
Veolia Environnement
|
France
|
7
|
2
|
China Water Affairs Group Ltd.
|
China
|
4
|
3
|
NWS Holdings Limited
|
China
|
4
|
4
|
Suez
|
France
|
4
|
5
|
Salcon Bhd
|
Malaysia
|
3
|
Source: World Bank and PPIAF, PPI Project Database.
This note was written by Ada Karina Izaguirre, infrastructure specialist, and Edouard Perard, consultant, in the Finance,
Economics, and Urban Development Department (FEU) of the World Bank’s Sustainable Development Network. Victor Chen, professor in the
Department of Architecture, Building, and Planning at the University of Melbourne, Australia, and consultant in FEU, provided the data
on water projects in China as well as comments.
1Greg J. Browder, Shiqing Xie, Mingyuan Fan, Lixin Gu, David Ehrhardt, and Yoonhee Kim,
Stepping Up:Improving the Performance of China’s Urban Water Utilities (Washington, DC: World Bank, 2007), 120-121 pp.
2 Browder and others, Stepping Up.
3The PPI Project Database does not include Chinese state-owned provincial companies operating in provinces outside their initial jurisdiction. These provincial companies have been very active in the Chinese water market.
4Browder and others, Stepping Up.
|