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The Honolulu Advertiser
Posted on: Tuesday, June 1, 2010

Water woes hamper growth in China, India

By Cherian Thomas, Unni Krishnan and Sophie Leung
Bloomberg News Service

Hawaii news photo - The Honolulu Advertiser

A woman carries water from a government supply tank in South New Delhi, India. The demand for water in India will double to 1.5 trillion cubic meters in the next two decades.

PANKAJ NANJIA | Associated Press

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NEW DELHI, India A fight breaks out as student Vikas Dagar jostles with dozens of men, women and children to fill buckets from a truck that brings water twice a week to the village of Jharoda Kalan on the outskirts of New Delhi.

Almost 2,000 miles away, near Xi'an in central China, power-plant worker Zhou Jie stands on the mostly dry bed of the Wei River, remembering when he used to fish there before pollution made the catch inedible.

Dagar and Zhou show the daily struggle with tainted or inadequate water in India and China, a growing shortage that the World Bank says will hamper growth in the world's fastest- growing major economies. It also is pitting water-intensive businesses such as Intel Corp.'s China unit and bottling plants of Coca-Cola Co. against growing urban use and the 1.6 billion people in China and India who rely on farming for a living.

"Water will become the next big power, not only in China but the whole world," Li Haifeng, vice president at sewage- treatment company Beijing Enterprises Water Group Ltd., said in a telephone interview. "Wars may start over the scarcity of water."

About 2.4 billion people live in "water-stressed" countries such as China, according to a 2009 report by the Pacific Institute, an Oakland, California-based nonprofit scientific research group. Water scarcity and pollution reduce China's gross domestic product by about 2.3 percent, the World Bank said in a 2007 report.

Water demand in the next two decades will double in India to 1.5 trillion cubic meters and rise 32 percent in China to 818 billion cubic meters, according to the 2030 Water Resources Group, a research collaboration between the World Bank, management consulting firm McKinsey & Co. and industrial water users such as Coca-Cola.

That will produce returns of 12 percent or more from investments in companies that treat or process water, said Arnaud Bisschop, who oversees $3.27 billion investments in the Water Fund run by a unit of Pictet & Cie in Geneva. The fund included stocks such as Beijing Enterprises Water and Hong Kong- based environmental protection company China Everbright International Ltd., according to data compiled by Bloomberg.

China's 1.33 billion people each have 2,117 cubic meters of water available per year, compared with 1,614 cubic meters in India and as much as 9,943 cubic meters in the U.S., according to the Food and Agriculture Organization of the United Nations. The 1.2 billion people in India, where farmers use 80 percent of available water, will exhaust their fresh-water supplies by 2050 at the current rate, the World Bank estimates.

For Dagar, 21, and the 200 other villagers in Jharoda Kalan, that dearth is already a daily fact of life.

"This is for our drinking and cooking," he said, pointing to four bucketfuls he won from the fight. "I've been waiting for the past hour."

Southwest China had its worst drought in a century this year, prompting Premier Wen Jiabao to say that the country would face a test to meet its grain output target. The drought affected 24 million people and 16 million acres of arable land, Liu Ning, vice minister of water resources, said on March 31.

China, with 20 percent of the world's population and 7 percent of its fresh water, has contaminated 70 percent of its rivers and lakes, while half the cities have polluted groundwater, according to the World Bank. By 2030, China will have a supply shortfall of 201 billion cubic meters unless the government takes steps to control demand, McKinsey partner Martin Joerss in Beijing wrote in an April report.

The Wei river was rated "severely polluted" by the government in 2009, according to a March 2 report in state-run China Daily.

The pollution and shrinking rivers are partly a result of China's rapid industrialization. Economic growth accelerated to 11.9 percent in the first quarter, the fastest pace in almost three years. It is set to reach 10.5 percent this year, according to Citigroup Inc.

"Water scarcity is probably one of the biggest risks for investors in China and India," said Lucy Carmody, executive director of Singapore-based investor advisory firm Responsible Research.

"There is a lot of potential for border conflicts."