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Boosting Investments in the Water Sector and Strengthening Collaboration Between ADB, People's Republic of China, Singapore Through the Asia Training and Research Initiative for Urban Management Project Facility Company

Address by
Bindu N. Lohani
Vice President, Finance and Administration
Asian Development Bank

15 April 2008
Singapore

Honorable Mrs Lim Hwee Hua, Senior Minister-of-State for Finance and Transport, excellencies, Ladies and Gentlemen, Good morning. On behalf of the Asian Development Bank, I extend greetings, congratulations and sincere thanks to our partners from Singapore government and the three shareholding companies on the launch of the Asia Infrastructure Project Development Company (AIPD). ADB initiated discussions with IE Singapore on the Asia Training and Research Initiative for Urban Management (ATRIUM) in August 2006. In March 2007, we signed the memorandum of understanding. I personally had the privilege of contributing to the MOU in my earlier role as Director General of ADB's Regional and Sustainable Development Department. I thank Ms. Siew Juan Aw, Alternate Executive Director at ADB, who played a significant role in finalising the MOU, and Mr. Alphonsus Chia, CEO of Singapore Cooperation Enterprise (SCE) for his untiring support in the activities leading to the formation of AIPD.

I am honored to represent ADB at the inauguration of the first joint venture company, which corresponds to the third arm of ATRIUM, on innovative demonstration projects. Under the first two arms of ATRIUM, which focus on knowledge transfer and capacity development, forums were held last year on urban water management for senior policy makers in the People's Republic of China and India. Both were very well received. Another similar forum was held early this year for senior government officials and urban utility operators from Gansu province in the PRC. We also partnered with the Singapore Public Utilities Board to set up a regional network of knowledge hubs on water, under the auspices of the Asia Pacific Water Forum. I thank Mr. Khoo Teng Chye and his colleagues from PUB who have worked untiringly to take this forward. We will be partnering with the Lee Kuan Yew School of Public Policy to deliver an executive leadership program on urban and water management for local government representatives from the Asian region.

The equity investment in AIPD by ADB and the three Singaporean companies will catalyze private sector participation in China's water supply and wastewater treatment sector. AIPD will provide services ranging from feasibility assessment and planning to preliminary design. This will enable successful identification of water supply and wastewater treatment projects among private sector investors. By expediting the delivery of urban water supply, sanitation and wastewater services in our developing member countries, AIPD will also accelerate the achievement of target 10 under the Millennium Development Goals which aims at halving the proportion of the population without access to water supply and sanitation by 2015.

ADB's recently approved long-term strategic framework - "Strategy 2020" - identifies infrastructure as one of the most important core priority areas, and water and urban development are reflected as high priorities in our program for our developing member countries. For China, whose urban population is forecast to exceed 800 million in 2015, this is a major challenge. Increased urbanization has already placed pressure on water supply and wastewater treatment, and had a negative impact on water quality. Inadequate facilities for treating municipal wastewater have led to pollution of already scarce water sources. In 2006, drinking water coverage reached 83% of China's population, and sanitation coverage 56%, and only about 56% of China's urban wastewater was treated.

The Chinese government is doing a lot in this sector. The national government accords priority in the 11th Five-Year Plan (2006-2010) to resolving water pollution and improving water supply, especially in urban areas. This is integral to the government's plan to develop small- and medium-sized cities to absorb surplus rural labor. The targets are ambitious: by 2010, extending water supply coverage to 95%, and wastewater treatment coverage to 70%. Particular attention will be paid to investments in wastewater treatment plants and recycled water facilities. Estimated total investment in the sector is expected to be $140 billion by 2010.

The responsibility for developing water and wastewater infrastructure falls on local municipalities. However, funding in municipalities can be constrained by limited budgets and overall infrastructure needs, lack of direct access to multilateral or other external financing sources, or inability to meet the Government's counterpart funding requirements.

The AIPD will help municipal governments attract private investments with minimum budget spending to deliver better services to the public. It will link infrastructure financiers to projects in urban water supply, wastewater, and sanitation, thus accelerating China's overall economic development process. The projects will meet international standards, thereby expanding and diversifying the investor base for local governments and municipalities, and lowering their capital costs. I am confident that the involvement of the Singapore-based companies and Singapore public sector through SCE will give AIPD a firm footing for it to achieve these goals given Singapore's credibility and track record in water and environmental management. The initiative ties in well with ADB's strategic agenda, which identifies infrastructure a core area of operations, and emphasizes private sector participation as one driver of change.

In this context, ADB's Water Financing Program 2006-2010 is also highly relevant to ATRIUM and specifically the AIPD. As we announced in March 2006, the Water Financing Program aims to double investments in the water sector. We envisage boosting the total investments in urban water supply and sanitation from $8.7 billion as of December 2007 to $13.2 billion by end of 2010-more than a $1 billion annually. The Water Financing Program seeks concrete outcomes, such as providing access to safe water and sanitation to 200 million people. Already, we are seeing measurable progress. The new water investments made in 2006-2007 will provide such access to 54.2 million people. Last year, ADB also established the Water Financing Partnership Facility, to provide grants up to $100 million, to mobilize cofinancing and investments from development partners, including the private sector, to support the program.

ADB's partnership program with China includes financing and knowledge transfer, and assistance in establishing public-private partnerships. We believe there is tremendous potential for the private sector to invest in urban infrastructure, with strong returns fuelled by China's strong and sustained economic growth as well as increasing urbanization. China's private sector now accounts for more than 40% of gross domestic product, 60% of growth, and 75% of the new jobs being generated. Private sector funding can help to overcome some of the limitations facing China in both the water supply and wastewater treatment sectors. Private sector participation can also lead to more use of new technology, and enhance efficiency. Thus, the continued expansion of the private sector is vital to alleviating poverty among China's remaining poor people.

Clearly, the partnership of the Singapore government and Singaporean companies in AIPD will be of significant value. Singapore is a success story in many ways, especially demonstrating the importance of cities and dynamic urban areas to the economies of nation states and to future economic growth. For example, despite a lack of sufficient internal water resources, Singapore provides top quality drinking water to its population, and its non-revenue water is among the lowest in the world at 5%. It has developed not only desalination, but most importantly, what is known as "NEWater", water of great quality obtained from purification of recycled water. Singapore brings tremendous experience in water supply and wastewater management systems which will be extremely useful to the region.

Before closing, I would like to draw your attention to two large, upcoming events that ADB will support as a strategic partner: the World Cities Summit and the Singapore International Water Week, both to be held in Singapore in June. It is heartening to know, and we at ADB are very pleased, that water provision remains an utmost priority throughout the international community.

I hope the activities catalyzed by AIPD will also result in opportunities that will further expand collaboration between ADB, the People's Republic of China, and Singapore. We look forward to continuing our important work with you to resolve water issues for people across the Asia and Pacific region.

Thank you.