A new water supply arrangement between the SAR and Guangdong would help save about HK$105 million from buying Dongjiang water in the coming years.

However, the announcement made yesterday might not lead to reduction of water service charges.

Under the new arrangement, the water price for each cubic metre of Dongjiang water would remain at HK$3.085 of 2004 level; and the annual expenditure for the purchase of water from 2006 to 2008 would be HK$2.49 billion.

This amounts to a significant saving worth HK$105 million in view of the rising water prices on the mainland and projected inflation in the coming years.

Hong Kong can also achieve greater flexibility in the daily supply rate to tide over the seasonal fluctuations in the local yield. Hong Kong authorities will inform Guangdong every month the SAR demand for Dongjiang water on the basis of the requirement.

This would facilitate a better control of storage level in Hong Kong, which minimizes the overflow more effectively and saves pumping cost.

Last year from January to November, about 101 million cubic metre of water overflowed the cost of which was estimated at HK$304 million.

Hong Kong signed a water supply agreement with Guangdong in 1989, stipulating the supply of Dongjiang water would be increased by 30 million cubic metres annually from 609 million cubic metres in 1995 to 1.1 billion cubic metres in 2008.

Under the new agreement, the ultimate annual supply quantity of 1.1 billion cubic metres would be retained, but the target date for achieving the objective would be postponed and subject to further review.

It has been estimated that the date for achieving such objective will be deferred to 2044 keeping in view an average annual growth rate of 0.8 per cent on water demand.

The new agreement will also guarantee enough and reliable water supply to Hong Kong even during extreme drought conditions with a return period of one in 100 years.

Guangdong will continue protecting the water environment in the vicinity of Dongjiang and strive to upgrade the Dongjiang water quality in compliance with the latest national standard.

Hong Kong will benefit from reduced expenses in water treatment because of the enhanced quality of Dongjiang water.

However, the new agreement had caused some concern. Water demand for mainland cities, including Shenzhen and Dongguan, has been increasing, and preserving high flexibility in the water supply to Hong Kong would be at the expense of such supply to other cities.

Guangdong authorities had also reported that the province was under tremendous pressure to increase water prices in order to regulate the keen competition for fresh water in the region. Offering price reductions to Hong Kong will be contrary to the rising trend.

The Environment, Transport and Works Bureau realized that the risk associated with heavy reliance on Dongjiang water against the rising demand in Guangdong and the depleting resources of clean water must be handled carefully.

However, Water Services Department Assistant Director Bobby Ng Mang-tung said water services charge in Hong Kong might not be reduced even though a new agreement was signed. "The charge has been frozen for nine years, and we are facing inflation now," he said.

Democratic Alliance for the Betterment and Progress of Hong Kong legislator Lau Kong-wah said he hoped water services charges would be reduced, and officials could release water supply figure each month.

(HK Edition 04/14/2006 page2)

(For more biz stories, please visit Industry Updates)