Affected by budgetary restrictions, like many other local government authorities around the world, Japanese cities must nonetheless respond to the challenges posed by water and wastewater management. Aging infrastructure means new funding has to be found in a context of growing public debt. Cities, such as Hiroshima, therefore decided to explore new forms of partnership by opening up to the private sector.
Taking advantage of the Waterworks Amendment Acts of 2002,that allows the country's local authorities to delegate management of their water services, the municipality was swayed by Veolia's expertise in 2006. This historic cooperation meant that the operator became the first foreign partner to work under a joint venture in the Japanese water industry.
Contributing operational expertise
Veolia Water's task is to provide solutions tailored to specific needs. In particular, it has to work with the authorities to help reduce energy consumption and operating costs, and improve plant productivity. With these goals in mind, the measures and innovations introduced by Veolia Water clearly seem to have matched expectations as the contract was renewed for three years in 2009 and again for four years in 2012.
This success can largely be explained by the contractual approach adopted. Veoliais able to provide methods and expertise to the local authorities enabling them to improve the level of their services without necessarily requiring additional investment or the privatization of the local public operator.
In a period of tight finance, the local authorities pay Veolia on the basis of its performance - i.e., the savings made. It's an interesting proposition that has been clearly understood by many other Japanese cities. Following on from Hiroshima, Kyoto, for example, adopted the same contract model for its wastewater service (population of 51,000), which it too renewed for a further three years in 2012.