Saturday, August 13, 2005

Water Prices in Taiwan

The Taipei Times had an absolutely wonderful commentary on the problem of Taiwan's absurdly low water prices.

The average Taiwanese person uses 350 liters of water per day, while the average person in the US or Europe uses 150 liters per day. The price of one unit of water in the US and Europe is NT$40, while in Taipei City it is NT$7, and for Taiwan overall, NT$9.

Taiwan prides itself on being a developed country with a GDP of more than US$14,000. Water usage, however, stands at twice that of the US and Europe, and the price of water is equal to that of third-world developing countries. Even prices in China are twice as high as in Taiwan. Not everyone may know that the development cost for a new water reservoir currently stands at NT$22 for one unit of water, while the cost for sea water desalinization is NT$40. This comparison makes it even more obvious that Taiwan's water prices are unreasonable. The Water Resources Agency has on several occasions suggested to the Cabinet that water prices should be adjusted upwards, but all such suggestions have been waved off. The fact is that a reasonable rise in the cost of water would not be much of a burden for the general public.

The importance of water for Taiwan has always been underestimated in the development literature. Rarely is Taiwan's abundance of water mentioned, yet industrial civilization is essentially founded on the use of water's amazing capacity to store heat and act as a solvent. Thus water policy, which few people in urban areas ever think about, is one of the key policies for any nation.

There's a wonderful scene in Frank Herbert's Dune, when the local people are awed that Paul cried for the dead -- "Usul gives water to the dead!" -- that really captures how aware one becomes of water in areas where there isn't any. When I lived in Kenya in the Peace Corps in the mid-1980s I developed a kind of water consciousness. Getting water was a struggle sometimes, and when I got it, it often wasn't clean. I had no shower, and water for bathing and drinking had to be heated somehow. Each time I interacted with water I had it drummed into me how much we in industrialized countries take water for granted. Yet I lived at a site whose water line was the only private one in Kenya, run by the Catholic Church, and water arrived relatively clean at my site when it came. My situation was good, compared to volunteers who lived in the desert, and saw a water truck only once a week. And to locals, who could never leave the lifelong struggle to obtain and preserve an assured supply of water. When I left Kenya I traveled across South Asia and SE Asia, and stopped in Bangkok. Thailand was just starting to boom at that time, and I visited a glitzy new shopping mall to breathe some of that good consumption atmosphere. I went into the restroom, and there, the water taps were all on and running full blast. I didn't realize until that moment how much awareness of water had become a part of me, for standing there watching all that lovely clean fluid pouring out of the faucets, I burst into tears. Later, as a student at RPI I read many books on water policy and water history, including my favorite, Cadillac Desert, one of the best books on the water policy ever written.

As an assignment for my undergrads I always have them prepare an essay on why there is a water shortage in northern Taiwan. I have been assigning this essay for 6 years now, and no student has ever mentioned the problem of Taiwan's absurdly low water prices. Most of the time the explanations run:

Not enough rain
Not enough dams
People waste water

Sometimes betel nut overplanting is mentioned, and the low quality of the water piping system here in Taiwan. Also mentioned are things like global warming, El Nino, and the lack of rational government policy -- but criticism of the government is reflexive here. It's not like any of my undergrads have any idea what Taiwan's water policies are, which is one reason I give this assignment. How are Taiwan's water policies in reality? The sad truth....

Here in Taiwan, the government has advocated water conservation for the past 20 or 30 years, but has restricted its actions to moral exhortations. Neither the public, industry, nor even government organizations themselves want to cut down on water use. At the same time, overly low prices mean that the Taiwan Water Corp lacks funds to renew infrastructure. Leakage rates in Taiwan's water pipelines exceed 30 percent.

The low cost of water has caused the public to become accustomed to wasting it. Yet when a typhoon strikes, they are faced with a shortage.

Complaints about water shortages in the Greater Taipei area abound. The government normally deals with these by letting some official shoulder responsibility by stepping down. This time, Taiwan Water Corp chairman Lee Wen-liang (李文良) has requested that Premier Frank Hsieh (謝長廷) dismiss him from his post.

I've blogged on water policy before and will continue to do so. As the author of the essay above notes, every typhoon leads to water shortages, and as any economics prof would tell you, shortages are essentially a creation of public policy. In Taiwan they are the result of too many consumers chasing after what is essentially a free good (our water costs NT$240 bimonthly, fixed rate). When price is $0, demand is more or less infinite, a problem that is also repeated in another wasteful and inefficient area, automobile policy. There is no shortage of water in Taiwan -- the island is blessed with abundant water resources. Rather, prices are much, much too low, offering no incentive to save or conserve, no price signal for the public to listen to.

The government needs to embark on a campaign to increase public awareness of this issue, and prepare the public for an increase in water prices, as well as mandate recycling and conservation at home and in the factory. Such a move will increase Taiwan's available water resources, as well as promote upgrades of the island's industrial technology. With looming water problems in China, knowledge of how to implement water recycling and conservation in a Chinese cultural setting may also enable Taiwanese companies to get a leg up on their competitors in the China market from the green industry abroad. Regrettably, because of the damage it will do to re-election prospects, it is unlikely that any of the local parties will take the necessary steps to save Taiwan from the water crisis that doesn't have to happen.


Jonathan Benda said...

A few years ago, a student in my composition/oral practice class (a guy who had lived in Latin America for a few years) brought up the very problem of ridiculously low water prices. He recommended raising the rates as part of a solution to the water problem. His classmates, of course, thought he was nuts...

wayne said...

When I was taking developmental economics back in college, I got into arguments all the time with the anti-globalization types who'd argue that the free-market water policies in South America (I think Peru was cited as a particular problem) were impoverishing the indigent and that the government should be seriously subsidizing/providing people with free water. In practically the same breath, they'd talk about how people in developed countries are too wasteful with natural resources. Hello people, if you provide people (even angelic indigenous tribes in South America) with something free or extremely cheap, they're going to use it wastefully.

Sean said...

I see a parallel between the low water prices in Taiwan and its wasteful use and the low prices of energy prices in North America. As long as prices of these critical resources are held at artifically low levels by the government, the public will not develop a sense of the resources' value and scarcity and thus continue to waste them mindlessly.

Yes, I like cheap gas, electricity, and water, but if increasing the prices will promote their conservation, then I'm all for it.

Michael Turton said...

Well, as oil prices continue to climb thanks to that idiotic war in Iraq, and the upcoming one with Iran, I think we can look forward to the development of a new consumer consciousness in the US.....