City of Kitakyushu is entering into international water business with private partners. The first customer is Hai Phong, the third largest city in Vietnam with population of 1.85 million. Hai Phong is reportedly planning to make four water treatment plants to cover acute demand increase, as its urbanization flourishes. Currently, water service department of Kitakyushu is communicating with Hai Phong to make detailed plan.

In Japan, water and wastewater businesses are operated only by municipalities according to historical regulations. Private sector doesn’t have experience of water business operation in domestic and international market. However, there are exceptional cases of major trading houses such as Marubeni and Sumitomo that are making success stories in South America and in East Asia.

Quality of Japanese water service is thought to be high, because non-revenue water rate and leakage rate are extremely low compared with major large cities in advanced countries. Most Japanese water service persons are boast of the fact that their water is drinkable directly from the tap. Actually, Tokyo and Osaka are selling bottled water, mostly for marketing purpose, made at their water treatment plant.

As potential of international water business market, amounting to USD hundreds of billions, is known to Japanese business society and policy makers, how to enter international market has become a theme. There are a lot of Japanese manufacturers that have excellent products for international water market, but they can’t operate long term water service. (Here, we are thinking of long term PPP scheme of water business opportunity offered by foreign government.) Municipalities have accumulated experiences, but they don’t have legal positioning to conduct business in other countries. All they need is making a new model to collaborate each other in a benefit sharing manner.

Last August, Kitakyushu made a consortium “Kitakyushu Oversea Water Business Association” which is working as a pool of private players. When a commercial entity is necessary in an overseas project, Kitakyusu would select a proper partner from the consortium. For Hai Phong’s case, major water treatment technology company Metawater was selected as its partner. Even though, when the city of Hai Phong gives a chance to make PPP deal, how they will establish a special purpose company having return and risk isn’t certain. But this is a good start for them to learn actualities.

Other Japanese municipalities, namely Tokyo, Osaka and Yokohama, also have started exploring overseas water business opportunities by different models. For all of them, if funding is necessary, Japanese government funded lending bank for international project JBIC is ready to finance.

Originally posted on Infrastructure Investment Journal authored by Daisuke Imaizumi, CEO of InfraCommons.