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Why is the water industry important?

A vital resource, water is also a lucrative business.

Nov 06,2007
Chuncheon Dam in Gangwon opens its floodgates to release water. [JoongAng Ilbo]
An old Korean fable centers on a scheme hatched by Bong-yi Kim Sun-dal. To make an easy buck, he shakes down people by charging a fee for water from the Daedong River, which is actually easily accesible to anyone. He even charges river merchants a toll for traveling along the river of about 4,000 nyang [Korea’s old currency], which was a great amount of money back in the day.
This story about Korea’s biggest trickster is based on traditional recognition that water is free and intended for everyone’s use.
This fable, however, deserves a second look from today’s point of view. The water business in Korea is rising as an emerging market and considered a higher value-added business than the oil industry. In short, the water industry is transforming into a cash cow. If you take a look at the price of bottled water on store shelves, some brands are the same price as soft drinks and others are even more expensive. In an era of water scarcity, the water industry is cementing its position as a lucrative resource with high potential.
The world’s freshwater resources are dwindling at a brisk pace while the available water supply is increasingly contaminated. Thus water scarcity is a serious issue today.
According to the United Nations, 2.7 billion people in the world may lack access to clean drinking water by 2025, and one out of five countries could face water scarcity by the same year.
Water pollution has surfaced as a critical issue. About 1.1 billion people have no access to safe drinking water across the world, while 5 million people die of water-related diseases every year. The figure is 10 times higher than the number of people who die in wars every year.
With these figures, experts say the world may have to say goodbye to the good old days when people used to use water freely.
“Most of the wars in the 20th century were oil-oriented, but people who wanted to end up on the right side of history valued water,” said Yoo Hyo-hyun, a senior researcher of LG Economic Research Institute.
The water industry encompasses a broad range of water-related businesses, such as sewage treatment systems, saltwater conversion and bottled water manufacturing.
Sewage treatment systems make up to 80 percent of water processing, the biggest share. Manufacturers of water-related facilities, chemicals and technologies are also classified as water businesses in a broader sense.
The growth rate of the water industry is staggering. The world’s water industry is said to grow 5 to 6 percent every year, even though the figures vary among experts. LG stated that the world’s water business is estimated at around $365 billion this year, up from $250 billion in 2005, and the volume of the water market is expected to reach $495 billion by 2012.
The world’s water market is highly dominated by a few big companies from developed countries, which found business potential in water and entered the industry early. Among the world’s top 10 water companies, nine, such as France-based Veolia, Germany-based RWE and Spain-based Agbar, are located in Europe.
Veolia, the biggest, conducts water business in 100 countries across the world, including Korea, by offering water to more than 100 million people. The French company’s annual sales of water reaches $16.4 billion.
Of course, other countries don’t just sit back and watch. U.S. industrial conglomerate General Electric Co., and Germany’s largest electrical engineering and electronics company, Siemens Corporate, are ready to cash in on water through aggressive mergers and acquisitions of water-related companies. “We’ll definitely record up to $11 billion in total sales in the water business by 2010,” GE CEO Jeff Immelt declared recently.
Korea, once standing on the edge of the water market, has started to step into the spotlight. For instance, Doosan Heavy Industries & Construction has secured the No. 1 spot in transforming seawater into freshwater. However, domestic water industries still have a long way to go before they master technologies of their own and take more shares in the world market.
Experts say that Korean companies should put more efforts into aggressive merger and acquisition strategies as well as research and development to keep pace with developments in the world’s water industries.
Armed with knowledge about this emerging industry, Koreans are starting to take more conservation measures, saving water down to the last drop.


By Pyo Jae-yong JoongAng Ilbo [ebusiness@joongang.co.kr]


Here’s a rundown on Korea’s water industry today


The water industry has started turning heads in the Korean government and among domestic companies. The Ministry of Environment launched its Water Industry Promotion Division in June, and ministry officials announced their five-year plan for the development of the water industry last February. Under the plan, the ministry aims to nurture the water industry as a key sector. Part of the sewage treatment system has been put under private management, while water supply facilities are set to open to private companies.
Under these plans, private companies will move toward a new type of industry. Kolon Industries Inc. has set particularly high goals. “We will create revenue worth 2 trillion won [$2.2 billion] and hope to be among the world’s top 10 water companies by 2015,” said Lee Woong-yeol, a Kolon chairman. The group seeks to capitalize on water resources as a driving force of company growth.
The company hopes to adopt diversified approaches to water, such as construction of water supply and drainage facilities. Kolon acquired Environmental Facilities Management Corporation (EFMC) last November to run a privatized sewage treatment system. Currently, EFMC manages 20 percent of domestic sewage treatment systems.
Kolon is not the only company that wants to stand on the front lines of the water business. Samsung Engineering, Daewoo Engineering & Construction, Taeyoung Engineering & Construction and GS Engineering & Construction have expressed interest in the water market and provided investment.
Since building water supply and drainage infrastructure is very expensive, it is hard for developing countries to tackle such projects. When technology-rich companies build these infrastructures in developing countries, these companies are given the right to collect water bills for 30 to 50 years. For example, France-based Veolia built water supply facilities in Shanghai and gained the right to run a business there for the next 50 years.







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