Raising water price is inevitable for Hong Kong in order to manage water resources better. So far, the HKSAR Government hesitates to increase water tariffs because of expected resistance from legislators.
Non-profit think tank Civic Exchange believes it is time for officials to disclose the full picture of the risks Hong Kong faces and what it takes to ensure long-term supply for the whole of the Pearl River Delta (PRD) to which Hong Kong socio-economic circumstances are intricately tied.
Civic Exchange’s research shows:
- When looking at water, Hong Kong must consider not only the Dongjiang (which supplied 76.1% in 2009) but the whole of the Pearl River Basin because the health of the basin affects agriculture, husbandry, power generation and industry in the PRD – an area of vital socio-economic importance to Hong Kong.
- As regards the Dongjiang, its water is shared by many under an allocation plan (figure), and with rising demand among the users, everyone (including Hong Kong) will have to become much more efficient in the use of water. Households make up the largest group of water users in Hong Kong.
- China’s national policy is to promote demand management and water tariffs are being raised continuously to show the true value of water and the cost of delivering water services. The price for water in Hong Kong should not remain at current levels1 when mainland cities continue to raise tariffs otherwise Hong Kong (China’s richest city) will become an anomaly.
“Hong Kong people need to understand users on the mainland will be paying more and more for water as a result of policy to improve water resource management. When the current water supply contract is renegotiated in 2011, the amount will likely be higher and the price further in the future will be higher still” said Christine Loh, CEO of Civic Exchange. 2
Under pressure from political parties, legislators and vested interests, the HKSAR Government may continue to heavily subsidize water charges 3 although for a city as rich as Hong Kong, it would be more appropriate for tariffs to reflect their true costs that include scarcity, as well as delivering and treating raw water.
Comparing water tariffs between Hong Kong and mainland cities, Hong Kong’s tariffs look high by comparison but with 12 m3 of free (subsidized) water every accounting period of 4 months, 17% of household in fact pay nothing for water. This same group also pays nothing for sewage treatment as well. Moreover, among developed economies, Hong Kong charges very low tariffs.
- There is a 4-tier tariff system in HK where the 1st tier of 12 m3 is free, rising to HK$4.15, HK$6.45 and HK$9.05 calculated on a 4 months basis. Sewage charges are added on top, where also the 1st 12 m3 is free. Current payment is HK$1.57 m3, rising to $2.92 in 2017.
- Under the current contract that runs from 2009 to 2011, Hong Kong receives an annual guaranteed maximum quantity of 1.1 billion m3 at an annual cost of HK$2.96 billion, HK$3.14 billion and HK$3.34 billion. These charges represent a cumulative increase of HK$1.96 billion more than for the period 2006-2008. This increase has been attributed to a stronger RMB but also price inflation.
- The government currently subsidizes water use – 17% of domestic accounts pay nothing because the first 12 m3 of water is free, and 30% pay only HK$1-HK$25/month.