VZCZCXRO7713
PP RUEHAST RUEHCN RUEHDH RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
RUEHSL RUEHTRO
DE RUEHHK #0146/01 0260714
ZNR UUUUU ZZH
P 260714Z JAN 10
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 9476
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 1346
RUEAEPA/HQ EPA WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC

UNCLAS SECTION 01 OF 03 HONG KONG 000146 
 
SIPDIS 
 
DEPT FOR EAP/CM, EAP/EP FOR MACFARLANE, OES/PCI FOR MIRZA, 
OES/EGC, OES/ENV FOR SALZBERG 
 
E.O. 12958: N/A 
TAGS: CM ECON ENRG HK PBTS SENV SOCI TPHY KGHG
SUBJECT: HONG KONG WATER SECURITY: REDUCING DEPENDENCE ON 
GUANGDONG 
 
¶1. SUMMARY: Despite a guaranteed water supply from Guangdong 
province, Hong Kong's heavy reliance on its northern neighbor 
has driven the Special Administrative Region (SAR) to 
initiate several new water conservation measures. This new 
policy is prompted not by costs or desire to be a "good 
partner in the Pearl River Delta" but concerns over 
Guangdong's ability to meet Hong Kong's clean water needs in 
the future. Water tariff reform, a long-term water management 
strategy, and direct involvement in mainland China's water 
management are expected to help ensure Hong Kong's water 
security. END SUMMARY 
 
¶2. A recent severe drought in Guangdong province and 
well-publicized water shortages in mainland China increased 
local concerns that Hong Kong was overly dependent on 
Guangdong for its water. EconOff met with Hong Kong's Water 
Supplies Department (WSD), NGOs (Greenpeace and WWF) and a 
leading independent think tank, Civic Exchange for an 
assessment of the reliability of mainland China as a water 
source and Hong Kong's plans to reduce its dependence on 
Guangdong. 
 
Hong Kong Reliant on Mainland China for Water 
--------------------------------------------- 
 
¶3. Securing Hong Kong's water supply has always been a 
challenge for the government. Until the 1980s, annual water 
shortages were serious enough to require frequent water 
rationing. In 1950s and 1960s, Hong Kong started using sea 
water for toilet flushing, began building new reservoirs, and 
negotiated water imports from Guangdong province. Rapid 
urbanization and industrialization in Guangdong and the 
cities along the Dongjiang (East River) tributary of the 
Pearl River have increased the region's demand for water. 
Diminished water quality from agricultural, municipal and 
industrial pollution, as well as water loss from flooding, 
droughts and climate change related impacts have added to the 
pressures on regional water resources. 
 
¶4. Hong Kong currently imports 70 to 80 percent of its fresh 
water from Guangdong.  Under the current agreement, Guangdong 
guarantees Hong Kong a maximum of 1.1 billion cubic meters 
(BCM) of raw fresh water each year for a fixed price. 
According to Hong Kong's Water Supplies Department (WSD) 
Director Lee Tak Ma, Hong Kong in recent years has not 
exceeded its maximum allotment. Hong Kong's total water 
imports from Guangdong average between 0.7 to 0.8 BCM.  In 
addition to Guangdong water, Hong Kong also has 17 local 
rainfall collection reservoirs that can supply up to 0.295 
BCM of water per year or 20 to 30 percent of its annual water 
demand. 
 
¶5. In 2008, Hong Kong consumed a total of 1.231 BCM of water 
(0.956 BCM of fresh water and 0.275 BCM of sea water) or 
175.8 cubic meters (or 175.8 kiloliters) of water per person 
per year. Residential use accounts for over half of fresh 
water usage, given Hong Kong's minimal agricultural sector 
and shrinking industrial sector. According to 2007 
International Water Association (IWA) statistics, Hong Kong 
ranked fourth amongst all cities in global water consumption. 
 
Guangdong Declines Hong Kong's "Good Neighbor Policy" 
--------------------------------------------- ------- 
 
¶6. Water shortages in mainland China in 2009 spurred many in 
Hong Kong to urge the government to temporarily halt its 
water imports from Guangdong. Lau Nai-keung, a Hong Kong 
member of the Basic Law Committee of the National People's 
Congress, Standing Committee and member of the Commission on 
Strategic Development, in an October 2009 editorial in South 
China Morning Post urged Hong Kong to adopt a "good-neighbor 
policy" by drawing on its own reservoir water before tapping 
Guangdong's supply. 
 
¶7. This "good neighbor policy" proposal gained enough 
momentum to prompt Hong Kong WSD and Guangdong's Water Supply 
Board (WSB) to meet in early November 2009. However, the 
official response from Guangdong after the meeting was that 
it appreciated the gesture but would continue water 
deliveries to Hong Kong, which only accounts for three 
percent of Dongjiang's average annual flow volume. Since 
then, Guangdong's WSB has implemented a water quality 
regulation plan to manage water output from three of its 
reservoirs to meet the needs of the cities in the region, 
including Hong Kong.  Several parties, however, opined that 
 
HONG KONG 00000146  002 OF 003 
 
 
the PRC central government was more concerned about the fixed 
HK$2.96 billion (approximately US$384 million) payment it 
gets Hong Kong and wanted to ensure that the arrangement 
continued. 
 
Future Supply Sufficient, But Conservation a Priority 
--------------------------------------------- --------------- 
 
¶8.  WSD predicted that, with a reference population of 8.4 
million and no additional water demand, Hong Kong's annual 
fresh water demand would grow to 1.315 BCM by 2030. 
Officials were confident that Hong Kong's water demand could 
be met by its current arrangement with Guangdong for the next 
20 years. Nevertheless, Hong Kong officials have recognized 
the importance of water conservation and have taken steps to 
reduce per capita consumption.  HKG enacted a Total Water 
Management (TWM) plan in 2005/2006, aimed at reducing average 
consumption of fresh water to 130 kiloliters per head per 
year.  The TWM plan aims to optimally balance water demand 
and water supply using an integrated, multi-sectoral approach 
that aims at cutting overall waterconsumption by 10-20 
percent by 2030. 
 
¶9.  On he supply side, Hong Kong is promoting the use of 
reclaimed water from sewage treatment facilities for toilet 
flshing and other non-potable uses. WS is also promoting 
water harvesting and "grey" wter recycling, such as the 
re-use of water from ashing machines and bath water, 
particularly forcommercial and industrial use. WSD completed 
pilot tests in 2007 on sea water desalination by using 
reverse osmosis technology.  These tests confirmed that the 
technology was viable for Hong Kong, however the cost of 
desalination was still considerably higher than the cost of 
fresh water imported from Guangdong. Hong Kong continues to 
look at new desalinization technology and, if viable and cost 
effective, would consider a desalinization project as a means 
to diversify its water supply. 
 
¶10.  On the demand side, HKG has been running a public 
campaign to raise awareness and to encourage voluntary water 
conservation. WSD distributed information on CDs to students 
about water saving tips and has been working with District 
Councilors to promote smart water usage. HKG established the 
Green Building Council on November 20, 2009 with the aim of 
promoting environmentally sound standards and practices in 
construction, including the installation of water saving 
devices.  The city is currently renovating its aging water 
mains to reduce water leakage by 0.085 BCM a year. 
Maintenance is scheduled to be completed by 2015.  In 
addition, WSD is planning to further expand the use of sea 
water for toilet flushing, currently used by 80 percent of 
Hong Kong's population. 
 
¶11.  Hong Kong officials stated that the SAR's water saving 
initiatives were driven not just by costs, but also by 
concerns that future water imports from Guangdong might be 
unreliable. Officials stressed the need for Hong Kong to be a 
"good partner to the PRD" as it faced water shortages but 
were also eager to reduce Hong Kong's dependence on Guangdong 
water as much as possible. WSD Director Ma was quoted saying 
that "there is no room for complacency." NGO representatives 
and researchers echoed this concern for Hong Kong's water 
future and predicted the likelihood of future intense 
competition for water resources in mainland China. 
 
Hong Kong's Cheap Water Policy 
------------------------------ 
 
¶12.  According to 2007 IWA statistics, Hong Kong's average 
annual water tariff ranked very low compared to other major 
countries and administrative regions.  Under Hong Kong's 
current domestic water pricing scheme, the first 12 cubic 
meters of water is free, followed by a tiered system that 
ranges from HK$4.16 to HK$9.05 (approximately US$0.60 to 
US$1.17) per cubic meter. According to Civic Exchange, this 
equates to about a quarter of one percent of an average 
household's expenditures. This was considerably lower than 
other major Asian cities where the average monthly water bill 
accounted for 0.5 to 0.9 percent of household expenditure. In 
comparison, water bills accounted for 0.5 to 1.5 percent of 
household expenditures in the U.S. and Europe.  According to 
researchers, the WSD has been running a deficit and has lost 
more than HK$300 million (almost US$3.9 million) in the past 
two years. 
 
 
HONG KONG 00000146  003 OF 003 
 
 
¶13.  WSD has recognized the need for water tariff reform and 
in 2000 proposed various measures including ending free 
allowances, stopping subsidies, mandating full recovery of 
production costs, and proposing direct subsidies only for 
low-income households. However, the SARS outbreak in 2003 and 
the subsequent economic fallout in 2003/2004 prompted HKG to 
shelve the idea of raising tariffs. Hong Kong has continued 
to provide free allowances and, according to Civic Exchange, 
as a result subsidizes over half of the community's water 
charges. 
 
¶14.  Faced with doubts about future supply, the concept of 
pricing to drive water conservation is gathering momentum 
again. Industry observers believe that a rich city such as 
Hong Kong should charge more for water and that water usage 
could be reduced by a third. Officials, when asked about the 
possibility of implementing tariff reform, told EconOff that 
it "was not completely off the table." 
 
Observers Push for Hong Kong Role in Regional Water Management 
--------------------------------------------- ------------- 
 
¶15.  Industry observers want to see Hong Kong have more 
direct involvement in decisions that impact its water future. 
They criticized Hong Kong's lack of a long-term water policy, 
as it relied only on negotiations of price and quantity of 
its water supply with Guangdong. They want HKG to view its 
water supply within the context of South China and to ensure 
its place within the Pearl River Water Resources Commission 
and other relevant water management bodies. Although 
officials maintained that Hong Kong had strong links with 
Guangdong counterparts on water management issues, Hong Kong 
often ended up only playing an observer role in mainland 
China's water management activities. Observers suggested that 
Hong Kong should not only urge its own people to consume less 
water, but also urge Guangdong and the cities along the 
Dongjiang to work together to better protect the tributary 
and help transform the PRD region into a "green and quality 
living area." In addition, HKG could work with Hong Kong 
owners of Guangdong factories to improve water pollution 
controls. Observers also encouraged the government to take 
the lead by using reclaimed water within government buildings 
and public housing estates and offer developers incentives to 
install water-saving devices in new developments. 
 
¶16.  WSD Director Ma suggested two areas where Hong Kong 
could play a role in mainland China's overall water 
management system.  He speculated that Shanghai and Beijing's 
aging water networks would face problems in the future and 
that Hong Kong could play a leadership role in managing water 
supply assets, including network leakage detection, network 
maintenance and improvement, and water testing, analysis and 
certification with its modern laboratories.  In addition, 
Hong Kong's use of sea water for toilet flushing was unique 
in the world.  Sharing the latest technology and chemical 
processes developed by local Hong Kong universities could 
greatly help coastal communities in mainland China. 
 
MARUT