VZCZCXRO9883
PP RUEHAST RUEHCN RUEHDH RUEHGH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
RUEHSL RUEHTM RUEHTRO
DE RUEHHK #0007/01 0040342
ZNR UUUUU ZZH
P 040342Z JAN 10
FM AMCONSUL HONG KONG
TO RUEHC/SECSTATE WASHDC PRIORITY 9308
INFO RUEHOO/CHINA POSTS COLLECTIVE
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHBK/AMEMBASSY BANGKOK 1329
RUEAEPA/HQ EPA WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC

UNCLAS SECTION 01 OF 03 HONG KONG 000007 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/CM, EAP/EP:MACFARLANE, OES/PCI:MIRZA, OES/EGC, 
OES/ENV:SALZBERG 
 
E.O. 12958: N/A 
TAGS: CM ECON ENRG HK PBTS SENV SOCI TPHY KGHG
SUBJECT: MACAU WATER SECURITY: POLICIES EVOLVING TO LESSEN 
DEPENDENCE ON CHINA 
 
¶1.  (SBU) SUMMARY: Macau's over-reliance on the Mainland for 
its water supply has prompted the Special Administrative 
Region to adopt measures to secure long-term supplies with 
the aim of gaining greater autonomy over its water policy. 
These include conservation programs, tariffs, and new 
infrastructure projects.  While the long-term need is real, 
current measures have been introduced partly out of political 
necessity to head off concerns in drought-stricken southern 
China that Macau is playing its part.  Macau's recent 
establishment of a Working Group to coordinate policy with 
the Mainland, a new 15-year water plan, and several proposed 
infrastructure projects, however, mark a good start toward 
greater water independence and shared decision-making.  END 
SUMMARY 
 
Macau Completely Dependent on Guangdong Water 
--------------------------------------------- 
 
¶2.  (U) The severe drought in southern China has highlighted 
Macau's over-dependence on the Mainland for its water 
supplies.  According to Macau officials, 95 percent of its 
water comes from Zhuhai in Guangdong at the rate of 185,000 
cubic meters a day, most of which is from the Xijiang's (West 
River) Modaomen estuary.  In late October, Macau media 
reported that Zhuhai's reservoirs had only 12 million cubic 
meters of water, the lowest level in 10 years.  Media issued 
dire warnings that Macau could run out of water in a matter 
of weeks.  One of the causes for the alarm was that 
Guangdong's rainfall in 2009 fell to an average of 1,400 
millimeters, down around 13 percent compared to previous 
years.  The head of Guangdong's Pearl River Water Resources 
Committee (PRWC) warned that, due to relatively lower 
precipitation over the summer months and falling reservoir 
levels, the Pearl River Delta (PRD) region might face severe 
water shortages in the winter and spring. 
 
¶3.  (U) Although the Pearl River is the third-longest river 
in China and ranks second in flow volume, its Xijiang 
tributary is home to intense competition along the Pearl 
River Basin where urbanization and industrialization continue 
to expand.  This increasing competition for quality water is 
further impacted by agricultural, municipal, and industrial 
pollution, as well as flooding and droughts.  Nevertheless, 
supply is not Macau's major worry. 
 
Issue is Salinity, Not Supply 
----------------------------- 
 
¶4.  (U) Macau officials explained that the crucial issue was 
not supply but the increasing salinity of its potable water. 
Water salinity occurs when reduced river flows are unable to 
prevent high tides from the South China Sea from flowing into 
the mouth of the fresh water river.  To ameliorate concerns 
over salinity and the resulting loss of fresh water, 
Guangdong's PRWC has assured Macau that there would be no 
water shortages.  They also pointed to pledges from Beijing 
that the PRWC would release water currently held in upstream 
dams if necessary.  EconOff heard a similar message from 
senior executives of Macao Water Supply Co. Limited (Macao 
Water), a private joint venture between French conglomerate 
Suez Environnement and a subsidiary of Hong Kong-based New 
World Development Company Limited.  Macao Water signed a 
long-term exclusive supply contract with Macau in 1985 under 
which Macao Water buys water from Zhuhai, treats it, and then 
distributes it to Macau. 
 
Macau Introduces Water Conservation Initiatives But No 
Rationing 
--------------------------------------------- -------------- 
 
¶5.  (SBU) Water salinity has always been a recurring problem 
for Macau, but in recent years, salt levels have risen above 
historical norms.  Water executives speculated to us that if 
there was no rain until spring, the situation would become 
"more difficult."  They anticipated that, under such a 
scenario, Macau would have to reduce water usage by 20 
percent through lowering water pressure and rationing, as 
well as greater use of water-saving devices.  This, they 
noted, was just a starting point as more fundamental changes 
were needed.  For example, Macau officials admitted that a 
goal of 10-30 percent reduction was a "solid" target but 
would require dramatic changes in social behavior.  While it 
remains to be seen if dramatic changes will be needed, the 
public has already responded positively to new water 
 
HONG KONG 00000007  002 OF 003 
 
 
conservation initiatives, such as a water fee rebate program 
to encourage households to reduce water usage by 10 percent 
or more.  Macau officials, however, were insistent that it 
was too early to even consider a water rationing plan similar 
to that of neighboring Zhuhai. 
 
Conservation Efforts Are Politically Driven for Show 
--------------------------------------------- ------- 
 
¶6.  (SBU) Macau officials shared that their conservation 
efforts were in large part politically driven, given that 
Zhuhai would perceive downstream Macau as "wasting water" if 
it did not implement measures.  Macau's water conservation 
initiatives, although environmentally sound, were mainly 
announced in reaction to complaints from Zhuhai officials. 
Our contacts reported Zhuhai was in the midst of mandatory 
water rationing, including banning all non-essential uses, 
such as street cleaning and watering of greenery, and forcing 
industrial, administrative, and service sectors to reduce 
water use by 20 percent.  In addition, Zhuhai has reportedly 
imposed penalties and even threatened to cut off water to 
organizations and sectors that did not meet the new limits. 
 
¶7.  (SBU) In response, Macau officials have reached out to 
large enterprises, including casinos and hotels, to begin 
water conservation efforts, starting with water recycling and 
water saving devices.  However, officials told us, these 
measures were primarily "for show, to counter perceptions of 
waste" and that there was no urgent concern over the water 
supply.  The officials hoped that casinos and hotels, as the 
main points of interaction with tourists from mainland China 
and Hong Kong, could showcase Macau's conservation efforts to 
Chinese consumers and counter the perception of a wasteful 
and extravagant Macau. 
 
Water Tariffs Coming Soon 
-------------------------- 
 
¶8.  (SBU) Macau's lower water costs compared to the rest of 
Asia present an opportunity for the Macau government to raise 
tariffs.  According to Macao Water, Macau's water tariffs are 
4.39MOP (US$0.56) per 100 ml and have not changed since 1997 
because of government subsidies, despite a 44.6 percent 
increase in the cost of water from the Mainland during the 
same period.  In 2008, the average household consumed 174 
cubic meters per year, or 14.5 cubic meters per month, at an 
average cost of MOP 40 (US$5.01) per month.  Macau officials 
told EconOff that they were prepared to introduce financial 
measures, such as implementing new tariffs and providing 
economic incentives, to conserve water.  As part of a new 
15-year plan introduced on November 23, the Macau government 
intends to introduce varying tariff rates for residential and 
commercial water usage.  Macau officials, however, noted they 
would not be ready to announce such a tariff change until 
mid- to late-2010. 
 
Macau Wants More Involvement in Decision Making 
--------------------------------------------- -- 
 
¶9.  (U) Industry observers say Macau and the PRWC need a 
long-term water management strategy.  Macau also needs to be 
integrated into decisions made upstream in order to 
effectively manage its own downstream water supply.  In 
December 2008, Macau established the Working Group on the 
Development of a Water Conservation Society to deal with 
water issues.  Since then, the Working Group has had several 
formal meetings with its Guangdong counterpart.  Macao Water 
executives, however, want to see Macau more involved in 
decision-making.  They also want a joint PRWC-Macau Working 
Group to coordinate the release of water from upstream dams. 
They expressed concern that such an effort was highly complex 
and required sophisticated mathematical methods to monitor 
and measure water quality at designated points along the 
Pearl River. 
 
Macau Implementing Counter-Measures, But Long-Term Solution 
Needed 
--------------------------------------------- -------------- 
 
¶10.  (U) According to Macau officials, the Macau government 
and the PRWC were addressing the salinity issue by completing 
the new 43 million cubic meters Zhuyin reservoir and the 
Zhuzhoutou pumping station upstream from the Zhuhai border. 
Both should be operational at the end of 2010.  In addition, 
 
HONG KONG 00000007  003 OF 003 
 
 
Datengxia hydroelectric dam was expected to create a three 
billion cubic meter PRD-wide waterway system by 2015. The 
PRC's National Development and Reform Committee approved the 
project at a cost around 25 billion RMB (US$3.66 billion). 
Macau has calculated that it stands to gain 3-4 percent of 
the dam's benefits and will contribute 800 million RMB 
(US$117.16 million) towards the project. 
 
¶11.  (U) Macau's new 15-year water plan aims gradually to 
decrease Macau's dependency on the Mainland by 11 percent 
from 2008 levels in 2015, by 20.3 percent in 2020, and 
ultimately 29 percent in 2025.  To achieve this, Macau needs 
new supply channels, such as expanding collection of rainfall 
and recycling water, as well as new water pricing structures. 
 As a start, Macau recently announced plans to upgrade one of 
its sewage treatment plants by end of 2011. This plant will 
produce 4,800 cubic meters of recycled water a day for 
municipal use, e.g., street cleaning, watering greenery, and 
eventually for household toilet flushing.  Macau also expects 
to upgrade its other four sewage treatment plants to produce 
recycled water by 2014. 
 
¶12.  (U) In a move for greater autonomy and control over its 
water supply, the Macau government announced on December 1 
the signing of a new 20-year contract with Macao Water under 
which it, not Macao Water, would buy water directly from 
mainland China.  Macao Water would continue to treat and 
distribute water but would now have to pay fees to the Macau 
government for the amount of water supplied.  As a result, 
Macau would be able to make decisions on whether to absorb or 
pass on water price increases.  Although the new contract 
does not explicitly limit Macao Water's profit, it 
effectively gives the Macau government control the company's 
profit margins. 
 
¶13.  (U) Lastly, Macau still needs to invest in sea water 
desalination facilities to secure its long-term water supply. 
 However, because Macau's sea water quality is "muddy" and 
therefore harder to treat, the water intake port will have to 
be further offshore, making the project be more expensive. 
Nonetheless, Macau officials say they are investigating it as 
part of a long-term option. 
 
MARUT