The wastewater industry in Thailand

When asked what the main wastewater problems facing Thailand are, Pranee Pantumsinchai, president of the Environmental Engineering Association of Thailand, answers simply. "Look at Bangkok!"

Indeed, just metres away from her office is one of the murky khlongs (canals) that crisscross the city and empty into its major waterway, the Chao Phraya river. In the nineteenth century these khlongs earned Bangkok the moniker "Venice of the East"; today they are a glaring reminder of how quickly Thailand’s development has outpaced its capacity for wastewater treatment. "We just don’t have enough wastewater treatment," Pranee laments.

According to the World Bank, more than one third of surface water across the country is unsuitable for human consumption or agricultural use, due to a combination of domestic sewage, industrial effluents and agricultural run-off. Government sources estimate that by 2020, Thailand will need to invest up to US$5 billion to provide appropriate wastewater treatment across the country. Given current economic circumstances, that’s an investment impossible to meet without significant private sector participation.

But just what form that investment should take, and under what conditions the private sector wants to participate in, is another question. At the moment, private sector involvement is more prevalent in the provision of water supply; in wastewater, a limited number of joint ventures have been involved in designing and constructing plants but operations and maintenance (O) is largely done by local municipalities.

Private sector and government officials concur on the two major problems facing the wastewater sector: a vastly inadequate tariff regime to cover the costs of treatment, and a bewildering array of agencies responsible for that treatment.

As a result of the economic crisis, local municipalities have been required to fund their own O for more than a year (funding for capital works continues to come from the government’s central budget). The amended 1992 National Environment Quality Act and article 290 of the new Constitution both provide for local authorities to collect wastewater treatment fees. Yet according to the WMA, of the 42 facilities currently completed across Thailand, a mere two or three are operating "close to properly" – there is simply no revenue stream to sustain them.

There are two reasons for this. Firstly, there is a stubborn separation between the ministries responsible for water supply and wastewater treatment. The former falls under the jurisdiction of the Ministry of Interior, via the Metropolitan and Provincial Water Authorities (MWA and PWA) while the latter falls under the Ministry of Science, Technology and Education, via the Pollution Control Department (PCD) and Wastewater Management Authority (WMA). The latter, in particular, is supposed to take a leading role in the sector but has very little technical or financial capacity to do so.

"This tradition or hierarchy among agencies is not like in other countries," explained Chanchai Vitoonpanyakij, director of the Bangkok Metropolitan Authority’s (BMA’s) Water Quality Management Division, itself responsible for wastewater treatment in Bangkok. "If we could combine the businesses of water and wastewater within the same authority, it would be easier to manage – when you sell water, you collect the sewage charge at the same time."

But water suppliers are reluctant to tie the payment of a wastewater charge to their supply of water; informal discussions between the BMA and MWA to combine billing have not progressed very far. "There is a bit of a turf battle happening," said one source. Nevertheless, the BMA is pressing ahead with plans to implement a fee within the next year or two. "We now have the tools," said Chanchai. "Bit by bit we are trying to educate people, but before we start collecting fees we will have to institute a formal public relations program."

The second major obstacle is a belief held by government officials that the public is strongly opposed to paying any extra taxes. While on the water supply side one of the obstacles to private investment has long been the setting of commercial rather than nominal water rates, on the wastewater side, the problem is much worse. "Persuading the population at large that wastewater treatment is a service that should be paid for separately is difficult," said one industry source. "People regard wastewater as secondary to water; until that view changes, anyone in the private sector will be nervous about entering into large scale agreements here."

However, there is evidence that this unwillingness to pay is not as widespread as many in government perceive, with surveys indicating that most households are willing to pay something – around Bt60 to 100 per month is considered acceptable in Bangkok. "This is not enough, but it’s a good start," said one consultant.

Nevertheless, political will is needed to actually implement charges. That will may be difficult to find given the recent economic crisis and its impact on the population at large. And while things looked like they were improving throughout 1999 and 2000 – growth rates were 4.2 and 4.3 per cent respectively – the outlook is no longer as rosy. The predicted growth rate for 2001 has dropped to 3.5 per cent – and that’s by the optimists. The yen is weak, there are fears of an impending US slowdown and the baht has slid from an average of 37.8 against the US dollar in 1999 to 43.9 for March 2001.

Perhaps the public’s reluctance to pay is warranted, given the continuing concerns over the environmental impact of, and corruption involved, in the US$755 million Samut Prakarn wastewater treatment plant project, due to be completed by 2004. Dr Yuwaree In-na, director of the PCD, says that much has been learned from this project, which will be Southeast Asia’s largest wastewater treatment facility. "Our public relations strategy wasn’t so good. From now on in any big project we will encourage more community participation; there needs to be user-friendly documents, the project needs to be clearly explained."

The problem of payment is less pronounced among industries located in industrial estates in Thailand. A joint venture between the Industrial Estate Authority Thailand and Vivendi Napa, Global Utilities Services Co (Gusco) was formed in 1999, and now provides management of water and wastewater facilities in eight of the country’s 28 industrial estates. Wastewater charges are based on the volume of water used and the quality of water discharged; the system works.

Otherwise, polluters are in theory forced by law to treat their own waste. But there is inadequate enforcement – although some say it is improving – and even if the polluters want to pay someone to treat their waste, there are limited facilities.

The second major problem facing the wastewater industry – of fragmentation – has led to a situation where the roles of policy-making, regulation and operation are blurred, resulting in concerns about conflicts of interest that make the private sector wary.

Two reports will soon await government consideration; how they are interpreted will be important in determining the future course of the industry in Thailand. The Sierra West Consulting Group completed the first, specifically related to wastewater, in 1999. This report recommends that the government implement two user charges; one on a national basis, to be used for capital works, and the other charged to units living in an area served by a functioning wastewater management facility, to pay for O. Charges would be based on metered water consumption, and be collected with bills for water supply.

The report also recommends that O be contracted out to the private sector, and larger systems be privatised through concessions; the WMA could then be repositioned as a central coordinating and management body to provide assistance to municipalities in this process, rather than undertaking contracts themselves. While these recommendations are clearly sensible, the problems in implementing them, discussed above, remain.

The second report is a World Bank-funded study on overall water sector reform, led by Tasman Asia Pacific and due to be released by June 30. Focusing chiefly on options for reform and privatisation for the MWA and PWA, rather than the WMA, the report will nonetheless have an impact on what happens in wastewater. "We have our own separate plans, but they should complement the study," Suchai Janepojanat, chief of the coordination division in the WMA said. "A study is just a study – we still have to consider what is good for Thailand."

Over the next six to seven years, the WMA is proposing to expand its operations across the country by partnering with local municipalities to assist them in contracting out their O. Suchai says the authority hopes to sign agreements with around three to four local municipalities over the next fiscal year. "We would eventually look for private sector participation in all 42 facilities," he said. The proposal, however, awaits Cabinet approval.

In the meantime, Sansuk municipality’s wastewater treatment plant in Chonburi province – run by the WMA and local municipality – is being used as a potential model for introducing a tariff structure. A rate of Bt2 per cubic metre is likely to be introduced over the next few months, pending final approval. While politically more palatable, setting such a low rate could pose problems for other plants wishing to implement a tariff, as nobody will want to set a tariff higher than any other municipality has already set. "At Bt2 per cubic metre, it’s really questionable whether it’s even worthwhile trying to collect the bill," said one source. "The total bill for a typical household would be around 40 baht per month. With stand-alone billing and collection, the cost of printing and delivering the bill and collecting the money would eat up about half of this, so the incremental revenue is only 20 baht. Many municipalities may conclude that trying to collect 20 baht is not worth the trouble – and, therefore, not actually apply the tariff."

Only two other municipalities currently implement user charges – Pattaya and Patong, in Phuket – for 3,000 and 35 customers respectively. Although it’s low, how the charge in Sansuk is received by the public could be an important harbinger of things to come – including whether Bangkok’s khlongs will ever be something for the city to be proud of again.

/ Finance