Operation & Management : Overseas Support
Supporting developing nations with Seoul’s advanced waterworks technology
The Korean government began promoting and supporting the water industry and expansion overseas in 2010. In line with this initiative, the Seoul Metropolitan Government’s Office of Waterworks implemented support mechanisms designed to utilize its operational experience and excellent technology in helping private companies tap into foreign markets.
The Office of Waterworks has also been expanding its own global network and exchange in response to the high demand from cities for Seoul’s know-how and experience in operation of the water supply system and the related technology.
Overview of the Policy
- << Cooperating with the private sector to participate in foreign water supply tenders
- << Using Seoul’s own EDCF (Economic Development Cooperation Fund) to improve the water supply system in developing countries
- << Participating in feasibility studies of foreign waterworks projects with funding from relevant agencies
- << Establishing cooperative networks for overseas expansion in waterworks
The global water market is emerging as a “blue gold” industry, growing at 6.5% annually
Dubbed a “blue gold” industry, water is an essential part of life for all human beings. Since the 21st century, the global water industry has been growing 6.5% annually, and is expected to reach a whopping USD 689 billion in market size by 2018. As a result, there is fierce global competition.
Traditionally, water has been largely considered a public good and businesses in the industry have been state-owned. Today, however, it has become a commodity, and the industry looks promising in the 21st century. Despite the paradigm shift, Korea‘s water industry has only a 2.1% share of the global water market; even companies with advanced technology are finding it difficult to expand overseas due to trade barriers, lack of support, and hostile environments. Against this backdrop, public-private partnerships can be the answer to an industry that is currently controlled by only a few global companies.
The Korean government is adopting strategies to promote the water industry in keeping with rapid changes in the market.
Having already recognized the water industry as an engine for growth, many advanced nations have strengthened their support mechanisms and formulated strategies for promotion. At the same time, specialized private companies have expanded operations and improved management to enhance efficiency and attract investment.
In Korea, too, the Ministry of Environment has come up with a plan to make the country a water industry powerhouse. The plan’s specific targets include: a domestic water industry valued at USD 2.6 billion; 38,000 new jobs; 10 Korean water-related companies competing on the global stage; and water market exports worth USD 8 billion (1% of global market share).
More countries and cities are reaching out to Seoul to learn from its water policies and experience
Many developing countries or their cities have shown interest in learning from Seoul’s water policies and technology and have asked for support in this industry. To meet this growing demand, we have used a variety of channels to share our best practices and policies as well as the city‘s EDCF (Economic Development Cooperation Fund) to help upgrade their outdated water supply systems.
Foreign expansion has created jobs and served as a growth engine
Process of Policy Implementation
Since 2012, the SMG has made a variety of efforts to prepare for expansion in the global water market. First of all, we have laid a solid foundation for public-private cooperation, by, for example, signing MOUs with relevant organizations and holding the Arisu Globalization Forum and briefing sessions. Second, we have worked to lay a solid foundation for overseas support projects such as training for foreign civil servants in the water sector and providing consulting services through dispatches of our specialist staff. At the same time, we have also formed a consortium with private companies to submit tenders for foreign water projects and used Seoul’s EDCF to help developing countries upgrade their water supply systems.
In July 2012, the SMG, in consortium with private companies, became the first local government in Korea to win a waterworks project from the Brunei government. Seoul plans to participate in similar projects in partnership with the private sector for Indonesia‘s Bandar Lampung.
Since 2013, Seoul has been using its EDCF to help improve the waterworks of Chanchamayo City, Peru. This is the first case in which a Korean municipality has used its own waterworks technology and Korean-made materials in waterworks improvement projects in developing countries.
Seoul formed another consortium with private companies in 2014, and has been conducting feasibility studies for a purification facility improvement project in Port Moresby, Papua New Guinea, and 8 purification centers in Central Java, Indonesia.
Details of the Policy
In 2012, a consortium of the SMG and a business in the private sector won the tender for Brunei’s PMB Island Infrastructure Development Consulting Project, in which Seoul will provide consulting services without the need for financial investment.
Seoul is currently moving forward with the water facilities improvement project in Chanchamayo City, Peru using the city‘s EDCF.
In addition, the SMG is currently conducting feasibility studies for foreign waterworks projects through private-public consortia.
Cooperating with the private sector to participate in foreign water supply tenders
• Brunei PMB Island Infrastructure Development Consulting Project
In July 2012, Seoul signed an agreement with the Brunei government to perform auditing and operational tasks within consulting service, which it is still performing today.
Project involving production and installation of water meters and construction of a remote control network for Trinidad and Tobago
Production and installation of water meters and construction of a remote control network for Trinidad and Tobago
Using Seoul’s own EDCF to improve the water supply system in developing countries
This project first began in May 2012 when the mayor of Chanchamayo, Heung-won JUNG, the first ethnic Korean to be elected as a mayor in Peru, visited the mayor of Seoul. The two discussed Seoul’s support for the Peruvian city‘s water facility improvement project. Seoul put words into action by sending technicians to Peru in July 2012 to conduct preliminary research. The support project kicked off in May last year, and Korean technology and materials are being transported to Peru for construction of their waterworks.
Participating in feasibility studies for foreign waterworks projects with funding from relevant agencies
• Feasibility studies for projects to improve purification centers and RWR (revenue water ratio) in Central Java, Indonesia
- Scope/Expenses: upgrading 8 purification centers and a water pipe network, for a cost of KRW 120 billion
- Order placed by: Central Java Government of Indonesia
- Amount: KRW 76 million (funding from the Foreign Construction Association: KRW 68 million / private companies: KRW 8 million)
- Duration of study: May ~ Dec. 2014 (8 months)
- Executing organizations: Consortium (Roswell Watertech Glocal and other private companies, SMG)
- Role of the SMG: Increasing RWR, technical consultation on efficient operation and facility improvement of purification centers
• Feasibility study for the water facility improvement project in Port Moresby, Papua New Guinea
- Scope/Expenses: upgrading/expanding & operating/managing the Eriama purification center (Q=184,000 rf/day), KRW 16 billion
- Amount: KRW 140 million (funding from the Environment & Industry Technology Institute: KRW 70 million / private companies: KRW 70 million)
- Duration of study: June 2014 ~ March 2015 (10 months)
- Executing organization: Consortium with private companies (Dohwa Engineering, Daewoo Construction)
- Role of the SMG: Reviewing and analyzing site inspection results for upgrading/expanding & operating/managing purification facilities
Signing MOUs with foreign cities and inviting foreign waterworks personnel for training opportunities
The SMG has signed MOUs with 6 different water-related institutions around the world, including the Water Authority of Bangkok, Thailand in 2012. MOUs have also been signed with domestic institutions such as the Korea Environment Corporation.
These MOUs help form cooperative networks that will serve as the basis for the city’s future attempts to tap into foreign markets. Meanwhile, water-related officials and other personnel were also invited from Latin America, including the Mayor of Chanchamayo, Peru in 2012, to Seoul where they can learn about the city’s technology and policies as well as take a look around our water facilities. In 2013, 30 policymakers from the water sector were invited from 18 cities (in 12 countries) for 2 different training sessions, through which we established close networks.
Details of the Policy
Setting up a task force for foreign expansion of water projects
In 2012, we formed a task force to expand Arisu overseas and created a master plan, that includes manuals, for selecting target cities and support works. The following year, a dedicated department was set up for this purpose, which devoted its resources to making a professional manpower database and reviewing the relevant acts and regulations, among other activities.
Sharing Seoul’s best policies and technology with foreign personnel related to the water industry
Countries around the world are looking into and asking Seoul to share its experience and know-how in tap water production and management. In fact, more than 300 foreign guests from 30 countries, including Azerbaijan, have visited the Office of Waterworks to learn and benchmark our sites, such as the Advanced Purification Facility and the Arisu Integrated Information Center.
Forming a network for public-private partnerships
Since 2013, we have hosted a variety of meetings and discussions to share our thoughts regarding water industry trends at home and abroad, the water supply situation in Seoul, and technology, to encourage the private sector to participate in public-private partnerships. On top of this, the Arisu Globalization Forum was launched in November 2012 as an advisory body in the water business. Consisting of 25 members from academia, government, the private sector, and other agencies, the forum has provided valuable research and advisory input for our common objective.
Policy Outcome & Future Challenges
The SMG has been supporting private water sector companies interested in tapping into foreign markets, offering them our own experience and technology in operation. The SMG too, is making inroads into overseas markets to strengthen the city’s competitive edge at the same time.
In addition, the SMG has offered its own funding facility (the EDCF) to help developing countries upgrade their obsolete water facilities, thus contributing to making the world a better place to live for all.
Thanks to efforts such as these, the SMG became the first city government in Korea to win a contract in Brunei for its PMB Island Infrastructure Development Consulting Project, which is an opportunity for Seoul to not only support the private sector but also to export its operational expertise to other countries. Furthermore, the EDCF is also being used to implement ODA in Chanchamayo, Peru, with that city’s water facility improvement project. By lending a helping hand to places struggling with water shortages, Seoul is enhancing its overall image on the global stage and helping people around the world live in a cleaner place with enough tap water to go around.
Despite considerable progress, there still remain multiple challenges that need to be addressed.
First, is the general lack in Korea of legal and regulatory systems needed to implement foreign projects, which has delayed the authorization process for personnel dispatches or business trips. This lack and inflexibility have delayed or hindered some projects from moving forward.
Second, financing for and participation in projects are limited. For development projects in general, financial investment is required from the feasibility study stage. Under our current system, however, any development project without specific plans cannot get funding, thereby making it difficult to participate. Even if a consortium is formed with private companies to win a tender, our role is limited to operation due to the lack of financing.
Third is the lack of information and poor ability to manage risk appropriately. Since we cannot open an overseas office or dispatch expats, our understanding of the business practices and water environment in the target country is extremely limited. Such lack of professional manpower and information on local situations also increases our exposure to risk.
Under the current legal system, local government personnel are not allowed to be dispatched to private for-profit corporations in foreign countries. To deliver the Brunei PMB Island project that was won earlier, however, the SMG was required to dispatch our people in 2015 for 2 years to a for-profit corporation established in Brunei. To address this issue, we are currently working with the Ministry of Safety and Administration to amend the relevant law but have yet to reach agreement.
Applicability of the Policy
Under Korea’s current legal system, only municipalities and K-Water are authorized to operate and manage water supply. Due to this limitation, private water companies in the country have had considerable difficulty winning contracts in foreign countries that are looking for operational experience. To compensate for their lack of eligibility, we have cooperated on several occasions with the private sector to help such companies tap into foreign water markets. Other municipalities in Korea can do the same by providing their operational experience to private companies that are otherwise qualified to win tenders placed by foreign countries.
In Japan, where foreign expansion was pursued earlier than Korea, many cities, including Tokyo, Nagoya, Yokohama, and Kitakyushu, have already begun ODA projects. After having built trust in the recipient countries, they have since been able to turn a sizable profit. To facilitate expansion overseas, some large municipalities in Japan have established subsidiaries under the Waterworks Bureau, formed cooperative mechanisms with the private sector, and signed MOUs with investment fund companies for financing.
How can Seoul’s Waterworks Office use its experience and technology in water supply to help other countries?
The Office of Waterworks has invited various government personnel from different countries to participate in training opportunities on Seoul’s policies and advanced technology as well as to be a part of a friendly network with the SMG.
The city has also signed MOUs with developing nations whose water facilities are obsolete and has dispatched its professionals to teach the specialized technology on site selection, design and construction of purification facilities, and the purification process and management, among many other items.
In addition, we are opening our doors to our counterparts in other countries who wish to visit our office to learn and benchmark Seoul’s system, including its advanced purification, purification facilities, direct water supply system, integrated information center, and remote metering, etc.
Furthermore, we are involved in forming consortia with private companies to win water projects.