Supporting developing nations with our advanced waterworks technology
The Korean government began promoting and supporting the water industry and its overseas expansion since 2010. In line with the government‘s initiative, the Office of Waterworks implemented support mechanisms designed to utilize its operational experiences and excellent technology in helping private companies tap into foreign markets.
The Office of Waterworks has also been expanding its global network and exchange in response to the high demands from foreign cities to learn our know-how and experiences in the operation and technology of the water supply system.
Overview of the Policy
<< Cooperating with the private sector to participate in the foreign water supply tender
<< Using Seoul’s own EDCF (Economic Development Cooperation Fund) in improving the water supply system in developing countries
<< Participating in the feasibility study of foreign waterworks projects with funding from the 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 as a “blue-gold” industry, the water industry is an essential part of the lives of all human beings. Since the 21st century, the global water industry has been growing at 6.5% annually, and its market size is expected to reach a whopping 689 billion dollars by 2018. As a result, there is fierce global competition in the industry.
Traditionally, the water industry was largely considered public good or SOC. Today, however, water has become a commodity, and the industry looks promising in the 21st century. Despite the paradigm shift, Korea‘s water industry only takes up 2.1% of the global water market; even companies with advanced technology are having difficulties expanding to overseas markets due to hostile conditions such as barriers and lack of support.
Against this backdrop, public-private partnership can be the answer to tackling the situation wherein the industry is currently controlled by very few global companies.
The Korean government is adopting strategies to promote the water industry in keeping with the rapid changes in the market
Having already recognized the water industry as their growth engine, many advanced countries have strengthened their support mechanisms and formulated promotion strategies. At the same time, private companies specializing in the water market have expanded their business in operation and management as a way of enhancing operational efficiency and securing investment funds.
In Korea, too, the Ministry of Environment has come up with a plan to make the country a water industry powerhouse. More specifically, the plan targets the following: domestic water industry valued at 2.6 billion won; 38,000 new jobs; 10 Korean water-related companies competing on the global stage, and; 8-billion-dollar export in the water market (taking up 1% of the global market share).
More foreign countries and cities are reaching out to Seoul to learn our water policies and experiences in operation and management and to receive support
As the country‘s largest water utility provider that takes up 20% of the domestic water market, the Seoul Metropolitan Government has been on the move to expand to the overseas water market through partnership with the private sector since 2012.
Many developing countries or their cities have shown interest in learning Seoul’s water policies and technology and asked for support in this industry. To meet this growing demand, we have used various channels to share our best practices and policies as well as the city‘s EDCF (Economic Development Cooperation Fund) to help them upgrade their outdated water supply system.
Foreign expansion has created jobs and served as a growth engine
Most of the water infrastructure projects are completed in Korea, which means not much room for our companies to grow within the country. Given such lack of demand in Korea, foreign expansion provides the answer to job creation and generation of profits for otherwise struggling companies. When Korean companies participate in a tender for water projects, most of the time, they are required to partner with public entities such as the Seoul Metropolitan Government, which has several years’ operational experience in the water supply system.
Process of Policy Implementation
Since 2012, we have made various efforts to prepare for foreign expansion in the global water market. First of all, we laid a solid foundation for public-private cooperation. For example, we signed MOUs with the relevant organizations and held the Arisu Globalization forum and briefing sessions. Second, we worked to lay a solid foundation for overseas support projects such as training sessions for foreign officials in the water sector and consulting service by dispatching our specialist staff. At the same time, we also formed a consortium with private companies to enter a tender for foreign water projects and used Seoul’s EDCF to help developing countries upgrade their water supply system.
In July 2012, the Seoul Metropolitan Government, in a form of 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 in Peru. This is the first case in which a municipality used its own waterworks technology and Korean-made materials in waterworks improvement projects in developing countries.
Seoul formed a consortium with private companies in 2014, and it has been conducting feasibility studies for the purification facilities improvement project in Port Moresby, Papua New Guinea and 8 purification centers in Central Java, Indonesia.
Details of the Policy
In 2012, a consortium made up of the Seoul Metropolitan Government and the private sector won the tender for “Brunei PMB Island Infrastructure Development Consulting Project,” for which Seoul will provide consulting services without committing 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 city government is currently conducting feasibility studies for foreign waterworks projects in private-public consortium form.
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 works of the consulting service, and it has been working on this project since then.
Project involving the production, installation of water meter and construction of remote control network for Trinidad and Tobago
Production, installation of water meter and construction of remote control network project for Trinidad and Tobago
Using Seoul’s own EDCF (Economic Development Cooperation Fund) in improving 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 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 the words into action by sending technicians to Peru in July 2012 to do preliminary research. The support project kicked off in May last year, and Korean technology and materials are being transported to Peru for their waterworks construction.
Participating in feasibility studies for foreign waterworks projects with funding from the relevant agencies
• Feasibility studies for the purification center improvement project and RWR (revenue water ratio) improvement project in Central Java, Indonesia
- Scope/Expenses: upgrading 8 purification centers and water pipe network/120 billion won
- Order placed by: Central Java Government in Indonesia
- Amount: 76 million won (funding from the Foreign Construction Association: 68 million, private companies: 8 million)
- Duration of study: May ~ Dec. 2014 (8 months)
- Executing organizations: Consortium (Roswell Watertech Glocal and other private companies, Seoul Metropolitan Government)
- Role of the Seoul Metropolitan Government: Increasing RWR, technical consultation on the 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=184,000rf/day), 16 billion won
- Amount: 140 million won (funding from the Environment & Industry Technology Institute: 70 million, private companies: 70)
- Duration of study: June 2014 ~ March 2015 (10 months)
- Executing organization: Consortium with private companies (Dohwa Engineering, Daewoo Construction)
- Role of the Seoul Metropolitan Government: Reviewing and analyzing the site inspection result for upgrading/expanding & operating/managing purification facilities
Signing MOUs with foreign cities and inviting foreign officials in waterworks for training opportunities
We signed MOUs with 6 different water-related institutions around the world, including one with the Water Authority of Bangkok, Thailand in 2012.
The MOUs help form cooperative networks that will serve as the basis for our future attempts to tap into foreign markets. We also signed MOUs with domestic institutions such as Korea Environment Corporation as part of our future attempts to expand to foreign water markets together.
Meanwhile, we invited water-related officials from Latin America, including the Mayor of Chanchamayo, Peru, in 2012 to Seoul where they can learn about our technology and policies as well as take a look around our water facilities.
In 2013, we also invited 30 policymakers in the water sector from 18 cities (12 countries) for 2 different training sessions, through which we established close networks.
Details of the Policy
Setting up a task force for the foreign expansion of water projects
In 2012, we formed a task force for Arisu‘s foreign expansion and formulated a master plan that includes manuals for selecting target cities and support works. The following year, we set up a department dedicated for this purpose, which devoted all resources to making a database of professional manpower and reviewing the relevant acts and regulations, among others.
Sharing Seoul’s best policies and technology with foreign water-related officials
Countries around the world are looking into and asking Seoul to share its own 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 excellent examples such as “Advanced Purification Facility” and “Arisu Integrated Information Center.”
Forming a network for public-private partnership
Since 2013, we have led various meetings and discussions to share our thoughts regarding the trends in the water industry at home and abroad, water supply situation in Seoul, and technology with the private sector to encourage them to participate in public-private partnership. On top of this, we launched the “Arisu Globalization Forum” in November 2012 as the advisory body in the water business. Consisting of 25 members from the academe, government, private sector, and other agencies, the forum has provided valuable research and advisory input for our common objective.
Policy Outcome & Future Challenges
We have been supporting private companies in the water sector and which are interested in tapping into foreign markets by offering them our own experience and technology in operation. We ourselves are also making efforts to make inroads into overseas markets to strengthen our competitive edge at the same time.
In addition, we have been offering our own funds (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 such efforts, the Seoul Metropolitan Government became the first city in Korea to win a contract for the "Brunei PMB Island Infrastructure development consulting project," which is an opportunity for Seoul not only to support the private sector but also to export to other countries its own operational know-how and prowess in waterworks. Furthermore, with Seoul’s EDCF, we are implementing an ODA project in Chanchamayo, Peru with their water facility improvement project. By lending a helping hand to places suffering from water shortage, Seoul is enhancing its overall image on the global stage and helping citizens all over the world live in a cleaner place with enough tap water to go around.
Despite the considerable progress, however, there are still many challenges that need to be overcome.
First, there is a general lack of law and regulation or system needed to implement foreign projects, which has delayed the authorization process for personnel dispatch or business trip. The lack of such system and inflexible response have delayed or hindered some projects from moving forward.
Second, financing and participation to projects are limited. For the development project in general, financial investment is required from the feasibility study stage; under our current system, however, any development project without specific plans cannot get its budget appropriated, thereby making it difficult to participate in the project. Even if we form a consortium with private companies to win a tender, our role is limited to operation due to lack of financing.
Third are the lack of information and vulnerability in risk management. 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 the local situation also makes us vulnerable to risks.
Under the current legal system, local government officials are not allowed to be dispatched to private for-profit corporation in a foreign country. To deliver the Brunei PMB Island project that we won earlier, however, we are required to dispatch our officials 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 an agreement.
Applicability of the Policy
Under the current legal system of Korea, only municipalities and K-Water are authorized to operate and manage water supply. Due to such limitation, private water companies in Korea had considerable difficulties 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 them tap into foreign water markets. Other municipalities in Korea can also do the same by providing their operational experiences 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 Kitakyushyu had already begun ODA projects. After having built trust in the recipient countries, they have since turned their businesses into profit-making ones and have earned sizable profits. To facilitate foreign expansion, some big municipalities in Japan have established subsidiaries under the Waterworks Bureau, formed a cooperative mechanism with the private sector, and signed MOUs with investment fund companies for financing.
How could Seoul’s Waterworks Office help other countries with its experience and technology in water supply?
The Office of Waterworks has invited various officials from different countries to participate in training opportunities on Seoul’s policies and advanced technology as well as form a friendly network with us.
We have also signed MOUs with developing nations whose water facilities are obsolete and have dispatched our professionals to teach them specialized technology on site selection, design and construction of purification facilities, and purification process and management, among many others.
In addition, we are opening our doors to officials from various countries who visit our office to learn and benchmark Seoul’s system, including our advanced purification system, purification facilities, direct water supply system, integrated information center, remote metering, etc.
Furthermore, we are actively forming consortia with private companies to win water project tenders as well as providing support to developing nations with obsolete water facilities.