Privatization to increase competitiveness but could raise costs and further alienate rural residents
The government plans to begin privatization of the water supply and sewage system next year.
Five related ministries including the Ministry of Environment and the Ministry of Industry, Commerce & Energy have decided to submit to the National Assembly a law in connection with a five-year plan for promoting the water business.
According to the plan, the water business, which is currently under the control of 164 local governments, will be divided into approximately 30 parts, which will then be privatized with 2012 as the target year for completion. The status of the water business operators, which so far has been granted only to local governments and the state-affiliated Korea Water Resources Corporation, will now be extended to private companies. In addition, the government plans to reduce tax on the water business to promote privatization.
A government official said, “As 164 local governments are now involved in water business operations, the business itself has been losing competitive power due to various problems related to investment in facilities and profitability.”
Charges for the water supply will inevitably be raised, however, as the water business becomes privatized. As of 2005, the nation’s water utility fee was an average of 563 won (US$.61) per ton, accounting for 82.8 percent of the production cost of 680 won (US$.74) on average. It is much cheaper than that of most advanced nations, which have already privatized the water business. For example, in the United Kingdom the fee is 1,820 won (US$1.98), Germany 2,446 won (US$2.66), Japan 1,804 won (US$1.96) and Italy 1,124 won (US$1.22).
Yoon Ung-ro, an official of the Ministry of Environment, said, “If the nation can reduce water leakage by more than half, which currently accounts for a 570 billion-won loss (US$620 million) each year, and can cut the cost of the system change, there will be no significant increase in the fees.”
Yeom Yeong-cheol of the Korean Federation of Environmental Movement, however, pointed out that residents in rural areas who now suffer from a lack of facilities will be more alienated from public services than ever once the change occurs, due to the fact that private businesses are likely to focus only on profitability.
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