Water

Country Water Action: People's Republic of China
Macau Water - Aiming Higher
June 2008

By Cezar Tigno
Web Writer, ADB

Macao residents and businesses have taps that almost never run out of water. A 25-year partnership between government and the private sector has already secured their water future. How are these private partners spreading the solution to the rest of the country?

For almost 25 years, the Macao Water Supply Co. Ltd. has been successfully providing water to roughly half a million Macao residents. No water problem seemed ever too big to overcome.

In 1985, the ex-Portuguese colony began its short and smooth journey to achieve sustainable water supply when Sino-French Holdings Ltd. (SFH) bought 85% of Macao Water and signed a 25-year concession contract with the Macao government to raise the utility’s performance and infrastructures to international standards. Macao Water then underwent successful reorganization, adopting an integration of local and international management practices for a multicultural workforce.

SFH is a joint venture between Suez Environment, the water solutions arm of global utilities giant Suez, and NWS Holdings Limited, the infrastructures and services flagship of the New World Group, one of the Asia-Pacific’s biggest conglomerates. Each owns 50% of SFH shares.

With these big corporations’ professional and financial support, Macao Water began producing a steady supply of safe drinking water in less than 5 years, benefiting Macao residents and businesses alike. By the 1990s, the entire water treatment and distribution system has been fully automated, handheld computers for meter reading have been introduced, and customer information has been encoded in a database.

A decade or so later, Macao Water shifted focus on the construction of new infrastructures, combining them with the latest technologies, specifically for future development, and has become one of the most sophisticated water supply systems in the world.

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In the early 16th century, Macao peninsula on the southeast tip of the People’s Republic of China (PRC) became known as an international trading post after Portuguese sailors claimed the land and began a settlement there, alongside the original Chinese dwellers. Up until the early 20th century however, Macao citizens relied on wells and rain for water.

Only when the Macao Water Company Ltd. was founded in 1932 did the peninsula have a formal water supply service, albeit with a very rudimentary system. Even then, the company lasted only 3 years, and was taken over by a 60-year concession between the government and the British-owned Macao Electricity Lighting Company (MELCO).

The water utility, then a subsidiary of MELCO, relied on groundwater and on water from the small Crocodile Reservoir, but these sources were very limited. It had to import raw water from mainland PRC, but the usual long droughts in the mainland often led to water rationing.

Macao’s population growth and economic upsurge through the years added pressure on the water utility, especially since it lacked investments for better treatment technologies and a more efficient distribution network. Water supply became unsafe and suffered long, frequent interruptions.

The utility achieved subtle improvements in the water supply system in the early 1980s: water quality reached World Health Organization standards, while the utility earned more profit than was expected. This, however, was not to last.

Again, the lack of investment and long-term planning caused the regression of both water quality and services. Overall dissatisfaction was expressed by the Macau government and citizens alike.

It was not until 1985, when SFH bought into the Macao Water concession, that a solution seemed plausible. The Macao Water Supply Co. Ltd., was reorganized with water professionals from Suez Environment and NWS Holdings supporting the utility’s comeback.

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The new Macao Water began its work. Besides the computerization of operations, infrastructure to revitalize the water production and distribution network was built and began operations in 2000. Treatment plants were also upgraded to deal with sludge extraction and chlorination.

Daily production capacity increased from 53,000 m³ in 1982 to 208,000 m³ in 2006, while nonrevenue water dropped from 40% to 10% in the same years. More than 90% of the distribution network laid down before 1982 was replaced. Water quality is at 99.96%, above the 99% international standard. Water tariff in 2006, at Macao Patacas (MOP) 4.4 (US$0.55)¹ per m³, is the same as it was a decade before.

Customer relations also improved with the formation of the Macao Water Customer Liaison Group in 2001. Composed of representatives from domestic, commercial, and industrial sectors, the group takes on the task of strengthening communication between the utility and its customers to better understand customers’ needs and expectations. With the help of this group, a 2001 “bi-monthly” billing policy for residential customers that set billing every two months was well-received.

To further prevent saline intrusion, Macao Water advanced HK$100 million (about US$ 13 million) in investments in 2006 for an infrastructure project to move raw water intake 20 kilometers upstream to access better quality raw water. It was completed in only 8 months. A new water treatment plant with a daily capacity of 60,000 m³ is also on the drawing board to respond to future demands, as Macao Water will invest an MOP 500 million (more than US$62 million) between 2006 and 2010.

Not unexpectedly, Macao’s handover by its Portuguese administration to the PRC government in December 1999 signaled the beginning of increased water demands. Now the second of PRC’s Special Administrative Regions (the first being Hong Kong), Macao has become one of the major gateways into mainland PRC with a booming gambling and tourism industry.

The number of visitors from both the mainland and Hong Kong rose with the relaxing of travel restrictions. International tourists and investors poured in especially after 2001 when the gambling industry became less restricted, turning Macao into Asia’s gambling center comparable to Las Vegas. Macao Water is ready to contend with the water demands these industries continue to bring.

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The Sino-French Holdings’ successful experience in Macao has become a showcase of Suez Environment’s and NWS Holdings’ water expertise in Asia and a platform for business expansion to the rest of the PRC, whose water market is now considered a development goldmine, needing more than US$60 billion worth of investments for water and wastewater services by 2010.

Taking this cue, Suez Environment and New World established the Sino-French Water Development Company Limited (SFWD), another contractual joint venture, to invest in water provision, water treatment, and industrial sewage treatment in the PRC. With a total capital investment of over RMB 4 billion (US$580 million²), SFWD has established 20 joint ventures, producing more than 4 million m³ of water a day for over 12 million people. SFWD now plans to add more major projects annually and continue perfecting partnerships and performance to benefit communities and local economies.

SFH, meanwhile, is back at the negotiating table as Macao Water’s concession contract is set to expire by 2010. Regardless of the outcome³, Macao residents will continue to enjoy the benefits of this outstanding partnership.

Macao Water’s Managing Director Chan Kam Ling says, “Macao Water pledges to continue to deliver superior quality water services to the local community—for the stability, prosperity, and health of Macao.”