Hong Kong needs a fairer deal on Guangdong water amid rising costs
Law Cheung-kwok and Ip Ka-chai say the government must negotiate flexible and cost-effective terms when the Dongjiang water supply agreement expires in 2017
The Dongjiang in Guangdong province accounts for 75 per cent of Hong Kong’s water supply. As our economy and population develop, the cost of Dongjiang water is expected to escalate further. Thus, it is important for Hong Kong to improve the cost-effectiveness of its water agreement with Guangdong Investment Limited, which is 54 per cent owned by the Guangdong government.
Even if Hong Kong consumes less in a certain year, we are still obliged to pay the corresponding lump sum
Over the past 10 years, Hong Kong has spent 15 per cent more on Dongjiang water than if it had only been billed for the actual amount supplied. That equates to HK$4.5 billion.
The Hong Kong project accounts for over 70 per cent of Guangdong Investment’s income from water supply. It enjoys considerably higher profits from us than elsewhere. We estimate that even if the cost of supplying to Hong Kong is assumed to be 2.5 times that of Shenzhen and Dongguan, the corresponding profit margin from the Hong Kong operation is still three times higher than from those two cities.
The water agreement is mainly about risk sharing; our government has not signed a fair deal for Hong Kong in recent years.
