Messrs
The World Bank
MNSSD Learning Series 1
Japanese Water and Wastewater Utility Management
Accountability and Performance Management for Better Results
Mohammed Benouahi, Lead Water Specialist
and
Satoru Ueda, Senior Water Resources Specialist
June 2008
Sustainable Development Department
Middle East and North Africa Region
Table of Contents
I. Introduction 1
II. Key Features, Status, and Issues 2
1. Country Background 2
2. Legislative and Institutional Framework 2
3. Progress of Water and Wastewater Service Coverage 5
4. User Tariff System 6
5. Unaccounted for Water 7
6. Financial Aspects: Cost Recovery 9
7. Investment-Financing Mechanism14
8. Governance Issues 15
9. Technical Aspects18
10. Water Resources Aspects22
III. Key Lessons Learned24
1. Legislative Aspects: 24
2. Institutional Aspects:25
3. Financial Aspects 26
4. Management Tool27
5. Technical Aspects27
Annexes
Annex 1: List of Persons Met for the Study30
Annex 2: Tokyo and Sapporo Monthly Water and Wastewater
Tariffs33
Annex 3: Examples of Balance Sheets of Water and Sewage
Utilities:35
Tokyo, Fukuoka, and Sapporo
Annex 4: International Comparison Cases36
Annex 5: Map of Japan and Visited Areas37
Annex 6: Japanese National Government (Ministries)37
Annex 7: Annual Renewable Water Resources per Capita38
(Japan and the World)
Annex 8: Urban Water Supply Progress and Benefits38
Annex 9: High Industrial Water Recycle Rate39
Annex 10: Historical Changes of Water Sources:39
Increasing Dam Storage Share
Annex 11: Rapidly Increasing Sewerage and Sanitation Service
Coverage40
List of Tables
Table 1: Main Features of Visited Water Utilities and the
Average in Japan 5
Table 2: Main Features of Visited Sewerage Utilities and the
Average in Japan 6
Table 3: Average User Tariff 7
(comparison of water tariff between Japan and other
countries)
Table 4: Unaccounted for Water 8
(comparison between Japan and other countries)
Table 5: Water and Sewerage Utilities Working Rations 9
(comparison between Japan and other countries)
Table 6: Income Statement of Water Supply Utilities10
Table 7: Construction and Improvement Budget Sources of
Waterworks10
Table 8: Water Cost Recovery—Unit Production Cost and
Tariff11
Table 9: Income Statement of Sewerage Utilities12
Table 10: Construction and Improvement Budget Sources of
Sewerage Works13
Table 11: Wastewater Cost Recovery: Unity Production Cost and
Tariff13
Table 12: Number of Employees per 1,000 Connections16
Table 13: Outsource Ratio of Operational Expenditures17
I. Introduction
Messrs. Mohammed Benouahi, Lead Water Specialist, and Satoru
Ueda, Senior Water Resources Specialist, visited Japan from June 18
to 29, 2007, to study the water supply and sanitation utility
system in Japan.
For information collection and interviews, the mission visited
Japan’s Waterworks Division, Bureau of Health, Ministry of Health,
Labor and Welfare; Sewerage and Wastewater Management Department,
Bureau of City and Regional Development, Ministry of Land,
Infrastructure, and Transportation; as well as the Tokyo
Metropolitan Prefecture, Shiga Prefecture, Kyoto-City,
Fukuoka-City, and Sapporo-City. The mission also visited the Japan
Waterworks Association, Japan Wastewater Works Agency, and Japan
Wastewater Works Association. Japan Water Forum provided useful
advice for conducting the study. (See Annex 1: List of Persons Met
for the Study.)
The mission met with members of the Ministry of Finance,
Ministry of Foreign Affairs, Japan Bank for International
Cooperation, and Japan International Cooperation Agency to brief
them on the Bank’s strategies and operations in the urban water
supply and sanitation sector, exchange information on the Middle
East and North Africa (MNA) water programs, and discuss possible
collaboration in the region. It also organized a seminar on the MNA
Development Report on Water, inviting the key officials and experts
at the WB Tokyo Office on June 28, 2007. About 50 specialists from
governmental offices, academia, industry, and nongovernmental
organizations participated in the seminar.
This note summarizes the key features of the Japanese water
supply and sanitation utility system as well as the relevant water
resources management with a focus on their institutional and
financial aspects. It also provides the mission’s findings and
lessons from the Japanese experience that can be applied in Bank
client countries. Most of the data is based on the utilities’
annual reports for Japanese fiscal year 2005 ending March 31,
2006.
II. Key Features, Status, and Issues
1. Country Background
The area of Japan is 380,000 square kilometers, of which 70
percent is mountainous. It has a population of 129 million, living
mostly in the coastal plain areas. The average precipitation is
around 1,600 millimeters / year, and the country is vulnerable to
heavy rainfalls from rainy fronts and typhoons. The rivers are
short and steep, and they are difficult to manage as supply water
without any reservoir storage and regulation.
The Japanese Government operates at three levels: (i) the
national Government comprises the prime minister’s office and 11
ministries; (ii) the 47 prefecture governments; and (iii) the
municipalities (cities, towns, and villages). As part of the
governmental system reform, the number of municipalities has been
greatly decreasing, from 3,232 in March 1999 to 1,804 in September
2007.
2. Legislative and Institutional Framework
2.1 General
The main water-related legislations include the following:
i. Public utility management—Local Public Enterprise Law (1952)
and Local Government Autonomy Law
ii. Water resources development and management—River Law, Water
Resources Development Promotion Law, specified multipurpose dam
law
iii. Drinking water supply—Waterworks Law (1957)
iv. Industrial water supply—Industrial Water Supply Law
v. Irrigation water—Land Improvement Law
vi. Sewage management—Sewerage Law (1958), City Planning Law
vii. Water quality and environment—Fundamental Environment Law
and Water Pollution Control Law
Both water supply and sanitation services are principally the
responsibility of local governments, such as prefectures and
municipalities. Local governments can organize and delegate their
functions to autonomous semi-governmental enterprises. These
utility entities carry out local government’s mandates and manage
the responsibilities of daily operations while reporting to mayors
and/or municipal councils. In principle, all operational expenses
of utility services are required to be fully covered by tariff.
At the national level, the Ministry of Health, Labor and
Welfare, Health Bureau, Water Supply Division, and the Ministry of
Internal Affairs and Communication (MIAC), Local Finance Bureau are
responsible for water supply. For sewerage services, the Ministry
of Land, Infrastructure, and Transportation, City and Regional
Development Bureau, Sewerage Department and the MIAC are in charge.
While national ministries establish the regulations and guidelines
for technical and service standards and review and approve
utilities’ business plans in terms of basic scope, design, and
investment schedule, they are not involved in operational aspects
of water supply and sewerage utilities. They do not approve but are
merely informed of changes in tariff levels. The ministries also
provide subsidies for prioritized infrastructure construction under
the clauses of the Waterworks Law and the Sewerage Law.
2.2 Water Supply
From the institutional perspective, the most important law is
the Local Public Enterprise Law (1952). With the purpose of
supplying water to improve the local public and residents’ welfare,
water utilities are required to operate economically as independent
and autonomous business entities / public enterprises. The expenses
of the business operations are covered based on the
beneficiary-pay-principle. The utilities collect revenues from
customers and pay the related costs of the operation. This involves
a well-developed accounting system so that assets can be separated
from other municipal accounts and charged specifically to the water
supply operation.
An independent commissioner is appointed as the head of the
utility through the nomination by the head of the municipality
(such as the mayor) and approved by the municipal council. Most
water utilities are established to serve the population/area within
a single municipality, and their main offices are housed in the
municipality office buildings. The commissioner reports to the
owners/regulators, namely, municipal councils, on key business
decision-making matters, such as annual investment/operation plans,
tariff increases, auditing, and so forth.
Water utilities are also required to follow the technical,
operational, and service standards stipulated in the Waterworks Law
(1957), which is governed by the Ministry of Health, Labor and
Welfare. The Waterworks Law stipulates the basic management of
waterworks, such as licensing for drinking-water-supply business
and operation, drinking-water quality standards, construction, and
administration of water supply systems, subsidies for investment
schemes, planned improvement of facilities, responsibilities of
utilities commissioner and personnel, and so on.
In 2006, 2,334 water supply utilities existed; out of which
1,469 were established as statutory entities under the Local Public
Enterprise Law. The remaining 885 small-scale utilities were not
subject to this law. They are, however, all subject to Waterworks
Law with no distinction being made between urban and rural
water.
2.3 Wastewater Management
In general, sewerage management is handled separately from water
supply, although there are exceptions, such as Kyoto City, which
the mission visited. As opposed to water supply utilities, most
sewerage utility offices are established as internal departments or
divisions within local governments (prefectures or municipalities)
like other general administrative departments. Thus, almost all
sewerage utility offices are accommodated within local governments’
office buildings. The head of sewerage departments/divisions are
civil servants.
The user-pay-principle is applied for wastewater collection and
treatment. In principle, the operational expenses are fully covered
by users’ fee. The sewage tariff is billed and collected together
with water tariff by water supply utilities and transferred to
sewerage department based on the predetermined financial
agreements.
Regarding storm-water discharge, given its public nature, all
construction and operational/maintenance costs are covered by
municipal general revenue. Storm-water discharge operations are
clearly separated from sewage collection and treatment operations.
For combined sewerage systems, local governments have established
standard formulas to divide costs between sewage and storm-water
operations. The personnel costs are also divided between two parts
based on a predetermined formula, since the single sewerage
department is responsible for both operations.
Sewerage utilities are also required to meet the technical,
operational, and service standards stipulated in the Sewerage Law
(1958), which is governed by the Ministry of Land, Infrastructure
and Transportation. The Sewerage Law stipulates the planning,
design, and operational aspects of sewerage systems (including
networks and treatment plants), licensing for construction and
operational plans, subsidies for investment schemes, water quality
standards of outflows from treatment plants, maximum pollution
level of discharges from factories/plants,
regulatory/monitoring/sanction measures, responsibilities of
sewerage utility’s manager and staff, and so forth. Sewerage
utilities/departments are also required to coordinate with the
environment department of prefectures and municipalities according
to the clauses of the Fundamental Environment Law and Water
Pollution Control Law in terms of quality and quantity of effluent
discharges in rivers and lake basins.
In 2005, the number of sewerage utilities was 3,699. Of these,
213 sewerage utilities apply the corporate accounting system under
the Local Public Enterprise Law while 3,486 utilities apply the
general government accounting system. The number of the sewerage
utilities under this Law is still small but is increasing for large
cities. Among visited sewerage offices, Tokyo, Kyoto, Fukuoka, and
Sapporo adopt independent corporate accounting systems under the
Local Public Enterprise Law while Shiga prefecture employs a
general governmental accounting system as a part of the prefecture
government mandates.
3. Progress of Water and Wastewater Service Coverage
3.1 Water Supply
In 2005, the population coverage rate of water-supply-utility
service in the country was 97.1 percent for the population of 129
million. This compares with 26 percent of population coverage in
1946. The water supply coverage significantly increased after the
legislation of Waterworks Law in 1957. Both the number of patients
with waterborne disease and infant mortality have been dramatically
reduced to almost nil, as the water supply coverage has increased
during the past 60 years (see Annex 8). Table 1 includes the main
features of water supply utilities that were visited as well as the
average data for all of Japan.
Tokyo
Sapporo
Kyoto
Fukuoka
Japan Average
Population Served
12,246,087
1,873,794
1,420,707
1,354,215
* 124,085,625
Service Coverage (%)
100.0%
99.8%
99.0%
99.0%
96.1%
Av
erage Daily Water Supply (m3/day)
4,427,100
546,925
590,151
406,393
57,644
Unaccounted for Water
5.8%
9.1%
13.9%
5.1%
8.5%
Number of Employees
4,563
713
909
403
* 58,733
Number of Employees Per 1000
connections
0.87
0.89
1.50
0.64
1.19
Water Tariff (USD/m3)
1.74
1.90
1.37
2.01
1.33
Working Ratio
63%
57%
54%
46%
49%
Note: (*) The numbers of populations and employees are not the
average of water utilities, but total in Japan.
Table 1: Main Features of Visited Water
Utilities and the Average in Japan
The average daily water consumption per capita is now around 314
liters per day. The average consumption volume increased from 169
liters in 1965 to 322 liters in 1995, but thereafter has been
gradually decreasing to around 314 liters thanks to improved
water-saving equipment and public information campaigns. If we
exclude heavy water users, such as hotels, public baths, and so
forth, the average water consumption rate of households in Tokyo is
estimated at around 244 liters.
3.2 Wastewater Management
In 2006, wastewater services covered 82.4 percent of the
population of 129 million. This compares with very low wastewater
service coverage of 6 percent in 1961. The system development was
accelerated by the legislation of the Sewerage Law in 1958. The
main features of the sewerage utilities that were visited as well
as the average of all utilities in Japan are presented in table
2.
Tokyo 23
Wards (*1)
Sapporo
Kyoto
Fukuoka
Shiga (*2)
Enterprise
National
Average
(*3)
Non
-
Enterprise
National
Avera
ge
(*4)
Population Served
8,566,594
1,858,081
1,419,262
1,359,091
1,900,358
46,336,506
86,726,940
Population Coverage (%)
99.9%
99.5%
99.3%
99.4%
94.9%
96.6%
87.4%
Sewerage treatment
capacity (m3/day)
6,244,000
1,173,800
1,384,000
671,050
747,260
28,879,213
31,037,290
Unaccounted for Sewage
9%
30%
27%
20%
6%
18%
12%
Sewage Tariff ($/m3)
1.20
0.84
1.14
1.58
1.92
1.17
1.13
Working Ratio
(Maint.Costs/Tariff)
41%
52%
35%
38%
62%
42%
67%
Number of Employees
3,238
582
637
304
285
16,102
21,516
Number of Employees Per
1,000 connections
0.88
0.74
1.05
0.48
0.38
0.87
0.62
Notes: (1*) The column indicates the information only for 23
wards of Tokyo, exclucing Tama Wester M
unicipalities.
(*2) The data of Shiga Prefecture is the average of Shiga
Prefacture Government (regional integrated sewerage system)
and 19 municipalities (regular sewerage) within the area of
Shiga Prefecture.
(*3 and *4): The former represents the av
erage of sanitation utilities employing corporate accounting
under the Local
Public Enterprise Law, while the latter represents the
sanitation utilities employing general governmental accounting.
Table 2: Main Features of Visited Sewerage Utilities and
the Average in Japan
All collected wastewater by public sewers is treated at
secondary level treatment plants About 15 percent is further
treated at the tertiary level. Tertiary treatment is required for
effluents discharged to closed water bodies, such as Biwa Lake,
Tokyo Bay, Osaka Bay, and so on. The discharged effluent quality
even from secondary level treatment is remarkably good, reflecting
the quality of the operations. In general, the measured effluents
biological oxygen demand (BOD) is around 3 to 10 mg/l, which is
well below the national effluent standards of 20 mg/l.
4. User Tariff System
Water supply and sewerage utilities in Japan are required to
fully cover operating and maintenance costs. In fact, almost all
utilities fully cover operational costs by tariff. Most of them
even generate surplus large enough to cover the capital costs
portion of their budgets, including their debt obligations, and
contribute to new investments from internally generated funds.
The combined water and sewage tariffs of US$2.5 per cubic meter,
when measured against the total household expenditure, accounts for
around 1 percent of the average household income. This compares
with around 3 percent and 2 percent for electricity and gas bills,
respectively. Table 3 includes a comparison of the combined water
and sewage tariff between the Japanese and international cases.
Tokyo
Sapporo
Kyoto
Fukuok
a
Japan
Average
Damascus
Jedda
Tunisia
Egypt
2.9
2.7
2.5
3.6
2.5
0.08
0.01
0.7
0.9
London
Berlin
Brussel
Istanbul
Johannesburg
Singapore
Philadelphi
a
Campinas
Brazil
Gunajuato
Mexico
3.2
4.8
2.8
1.8
0.7
1.3
1.9
0.3
0.4
Sources: Local Public Enterprise Database (March 2006, Ministry
of Internal Affairs and Communication, Japan);
Tunisia, London, Berlin, Brussel, Dmascus,
and Jedda (counry reports); Singapore (estimate by the PUB
website tariff table).
Other countries (Water Supply & Sanitation Working Notes
No.9, May 2006)
Note: The average tariff of the Singapore is estimated on the
tariff structure on the PUB website
.
Note: The tariff of Japanese water and wastewater are combined
for international comparison purpose with some assumptions.
Table 3: Average User Tariff (US$ per cubic meter)
A typical tariff system is based on a two-part tariff structure
consisting of minimum charges and volumetric charges. Minimum
charges are calculated based on meter diameters and use while
volumetric charges are based on progressive block rates per cubic
meter of water. Annex 2 includes examples of water and sewage
tariff tables in Tokyo and Sapporo.
Water charges are calculated based on typical bimonthly meter
readings at each household. Water utilities collect water bills
along with sewage charges. The latter is then transferred to the
sewerage system office after subtracting collection-service charges
based on an agreement. Customers can pay water bills through
account transfer or direct payment. They can pay bills at financial
institutions and postal offices and at convenient stores in some
areas.
Although water and sewerage utilities do not have complete
authority to raise tariffs—they need to obtain approval from
municipal councils—they are able to put forward proposals based on
their overall revenue requirements. The commissioners or director
generals of the utilities request tariff increases as part of their
financial policies outlined in business, investment, and financing
plans. While the proposed tariff increases are sometimes delayed or
reduced at councils due to political considerations, most utilities
seem to have been able to achieve financial balance through
periodic tariff increases every three or four years. Given the very
low, indeed, negative inflation rate, from -0.9 percent to -0.3
percent from 2003 to 2006, a lack of tariff increases did not
affect the overall performance of water and sewerage utilities.
5. Unaccounted for Water
5.1 Water Utility
Almost all water supply utilities have achieved a very high
efficiency in terms of unaccounted for water (UFW). The national
average of UFW is around 8.5 percent, while most competent
utilities, such as Tokyo and Fukuoka, have attained a level of
about 5 percent. This small percentage of UFW is significant
compared with losses in the range of 15 to 40 percent for water
utilities in many countries in the world, including developed
countries. Table 4 is a comparison of water utilities UFW in Japan
and other countries.
Tokyo
Sapporo
Kyoto
Fukuoka
Japan
Average
Singapore
U.K.
Philadelphia
Tunisia
Shiraz
Iran
Johannesbur
g
Campinas
Brazil
Guanajuato
Mexico
5.8
9.1
13.9
5.1
8.5
4.8
15.0
32.0
20.2
35
.0
35.0
26.0
37.0
Sources: Local Public Enterprise Database (March 2006, Ministry
of Internal Affairs and Communication, Japan); UK data on OFWAT
annual report (2005),
Iran (county report); other countries, Water Supply &
Sanitation Working Notes No.
9, May 2006.
Table 4: Unaccounted for Water (%)
To minimize physical losses, water utilities generally carry out
repair works on surface leakage on the same day on a 24-hour
operational basis and regularly detect potential underground
leakage by electronic and correlation type detectors. They have
been also upgrading distribution pipes from cast iron to ductile
iron and service pipes from lead to stainless steel.
Thanks to improved operational standards and customer service,
most utilities maintain their administrative UFW at almost nil. The
nationwide average is 1.5 percent in 2006. If required, the
utilities can easily exert their authority to cut off water supply
to defaulters, although this is very rarely required to do so.
Decisions about terminating service to defaulters are virtually
automatic and follow a standard procedure.
The Tokyo Metropolitan Water Bureau is perhaps one of the
best-run utilities in the world. UFW stands at around 5.8 percent
with 100 percent coverage of a population of about 12 million. The
average daily water supply volume is about 4.4 million cubic
meters, and the total length of distribution pies is 24,782
kilometers. The staff number is only 1.2 per 1,000 connections.
While it keeps core business management functions under in-house
career staff, the use of service contracts for routine operations,
maintenance, water billing, and customer services is
widespread.
5.2 Sewerage Utility
All sewerage utilities/departments measure the amount of treated
wastewater and compare it to the amount of sewerage for which
treatment fees are collected. They calculate the UFW using a
concept to that used for water supply. No collected wastewater is
discharged without treatment. The national average UFW is 17
percent and 12 percent, respectively, for enterprise utilities and
non enterprise utilities. The UFW of Tokyo is about 9 percent while
Sapporo is close to 30 percent. The higher UFW of the latter may be
attributed to underground water leakage into sewer networks,
erroneous connection of rain sewers to sewage sewers, and so forth.
There are very few other countries in which this level of UFW
measurement in sewerage systems is conducted and used as a
performance benchmark.
Once the sewerage system becomes operational, it is important
for utilities to connect all households to the network in a timely
manner, from the viewpoint of tariff collection and project
benefits. All households are required to install water flushing
toilets and get them connected to the sewerage system within three
years after the system is completed. Most municipalities offer
grant subsidies and interest-free loans for the installment of
house connections and flush toilet systems. The sooner a household
completes the connection to the sewerage network and begins paying
the sewage tariff, the higher will be the subsidy it can receive
for connection work.
6. Financial Aspects: Cost Recovery
The water utilities under the Local Public Enterprise Law are
required to make annual financial statements by separately
processing (i) an income statement in the current year, (ii) a
balance sheet, and (iii) documentation of the source and
application of funds. Annex 3 includes some examples of balance
sheets of water and sewerage utilities.
On the national average, the working ratio of water and sewerage
utilities ranges between 0.4 and 0.6. The working ratio is the
relationship of operating expenses to operating revenues. The
higher the ratio, the less contribution margin is available to
cover non operating costs, such as depreciation and financial
charges. The working ratio is one of the important benchmarks for
operational efficiency and the profitability of utilities. In table
5 the combined working ratio of water and sewerage utilities
between the Japanese and international cases is compared.
Tokyo
Sapporo
Kyoto
Fukuoka
Japan
Average
Singapore
Phila
-
delphia
Tunisia
Johan
-
nesburg
Campinas
Brazil
Gunajuato
Mexico
0.54
0.56
0.46
0.43
0.51
0.58
0.67
0.98
0.53
(water)
1.5
(sewage)
0.79
0.77
Sources: Local Public Enterprise Database (March 2006, Ministry
of Internal Affairs and Communication, Japan);
UK data on OFWAT annual report (2005); Tunisia (Country Report);
Water Supply & Sanitation Working Notes No. 9, May 20
06.
Note: The working ratio of the Japanese water and wastewater
utilties are combined for international comparison with some
assumptions.
Table 5: Water and Sewerage Utiliies Working Ratios
6.1 Water Supply
6.1.a Operational Costs versus Revenue
Table 6 includes the breakdown of operation and maintenance
costs of the visited water supply utilities and the national total.
The costs are clearly distinguished between (i) operational costs
and (ii) capital costs, including depreciation costs and bond
interest costs. The operation and maintenance costs of Tokyo is
around US$2.5 billion per year, while the national total is about
US$26 billion per year.
Cities
Tokyo
Sapporo
Kyoto
Fukuoka
National
Total
Personnel expenses
385
66
76
29
4,158
Energy expenses
77
3
6
4
871
Repair expenses
510
43
19
17
1,686
Chemicals/Materials
66
14
10
3
519
Outsource Fee
238
40
9
40
1,735
Bulk water purchase
0
0
0
19
1,415
Others
377
31
17
19
2,060
Operation Costs
Total
1,655
199
139
131
12,44
4
Bond
interests
195
67
52
47
3,759
Depreciation costs
609
97
81
73
7,261
Capital costs for bulk water
0
0
0
42
2,440
Capital costs
Total
804
164
133
163
13,46
0
Total
Costs
2,458
363
272
294
25,90
4
Water tariff
2,641
346
254
283
24,98
7
General & other accounts
213
28
19
6
1,357
Miscellaneous
93
5
1
20
1,347
Total
Revenue
2,947
378
275
310
27,69
1
Surplus / Deficit
489
16
3
15
1,788
Note: The exchanges rate was USD=JPY115 during the mission i
n August 2007.
Table 6 : Income Statement of Water Supply Utilities (March 31,
2006, in US$ millions)
The table also indicates the breakdown of their operational
revenue. Around 95 percent of the operational budget is provided by
water tariff. While the water tariff (about US$2.6 billion) of
Tokyo fully covers the operational costs, the tariff of three other
visited cities and the national average do not fully cover the
capital portion of the operational costs (see also 6.1.c Cost
Recovery, below). The balance of around 5 percent is covered by the
investments and subsidies from general accounts of
municipalities.
6.1.b Construction and Improvement Budget (Investment)
Table 7 includes the breakdown of investment budget sources for
the four visited utilities and the national total for the Japanese
fiscal year 2005 ending March 31, 2006. The national total
investment amount was US$9.1 billion in 2006. The share of
corporate municipal bonds varies between 20 and 70 percent while
the national average is 34 percent. While national subsidies of up
to 50 percent can be provided for large-scale construction and
renovation works, the national average share is only 9 percent.
Table 7: Construction and Improvement Budget Sources of
Waterworks
(For Fiscal 2005 ending March 31, 2006, in US$ millions)
Cities
Tokyo
Sapporo
Kyoto
Fukuoka
National Total
Enterprise bond
s
143
35
60
70
3,102
National subsidies
27
5
0
9
782
Other accounts & internal
revenue
599
46
23
40
5,272
Total Investment Budget
769
85
83
119
9,157
Note 1: USD=JPY115 in August 2007
Note 2: Other accounts and internal revenue
s include general accounts investment/subsidy, retained revenue
earnings
on profit and loss account, and other revenues.
Generally, the largest share is supported by the
investments/subsidies from the municipality general accounts as
well as the retained earnings (utilities’ revenue). The investment
budget of Tokyo was around US$770 million per year while the other
three cities investment budgets were in the range of US$80–120
million per year. It should be noted that the construction costs
are high due to the required high-level seismic design and
large-scale water storage/diversion/distribution systems,
particularly for urban cities.
6.1.c Cost Recovery
Table 8 includes the unit production costs of water operational
costs and capital costs in comparison with the water tariff. As the
national average tariff is US$1.33 per cubic meter against the
average production cost of US$1.37 per cubic meter, the cost
recovery ratio (including capital portion) is around 97 percent. If
we look at the four cities that were visited, the production costs
range between US$1.5 and $2.1per cubic meter. While Tokyo and
Fukuoka fully recover the costs, Sapporo and Kyoto narrowly miss
full recovery. The higher costs of these cities reflect the more
advanced nature of infrastructure construction and operation in
densely populated areas.
Cities
TokyoSapporoKyotoFukuokaJapan Average
Unit Production Costs
1.622.001.472.091.37
Unit Operation Costs
1.091.090.750.930.65
Unit Capital Costs
0.530.900.721.160.72
Unit Average Tariff
1.741.901.372.011.33
Note 1: USD=JPY 115 in August 2007
Table 8 : Water Cost Recovery - Unit Production Cost and Tariff
(March 31, 2007 in US$ per cubic meter)
Note 2: Unit Production Costs = Unit operation costs and unit
capital costs (depreciation and bond Interests)
6.2 Sewerage Management
6.2.a Operation Costs versus Revenue
Table 9 includes the breakdown of operation and maintenance
costs of the visited water sewerage utilities. For sewerage
utilities adopting the corporate financing system under the Local
Public Enterprise Law, the operation costs are clearly
distinguished between (i) running costs and (ii) capital costs,
including deprecation costs and bond interest costs. The operation
cost of Tokyo sewerage utility is around US$2.6 billion per
year.
Tokyo
Sapporo
Kyoto
Fukuoka
National
Enterprise
Total
Personnel expenses
248
41
50
13
1,058
Energ
y expenses
90
13
11
9
348
Repair expenses
211
14
6
9
481
Chemicals/Materials
13
7
4
4
120
Outsource Fee
238
56
36
65
1,058
Others
116
9
22
32
755
Total Operation Costs
915
140
129
131
3,821
Bond interests
700
104
158
150
3,697
Depreciation costs
989
137
163
140
4,250
Total Capital Costs
1,690
241
320
290
7,947
Grant Total Costs
2,604
381
450
420
11,76
8
Sewerage Service Tariff
1,487
176
230
233
6,280
Rain Storm Discharge Fee
1,215
187
177
148
4,073
Other operation revenue
57
2
7
6
209
General accounts subsidy
59
12
41
31
1,504
Miscellaneous
20
1
1
2
119
Total Revenue
2,837
378
456
420
12,18
5
Surplus/Deficit
233
-
3
6
0
417
Note 1: USD=JPY115 in August
2007
Note 2: Rain storm discharge fee is paid by cities general
account.
Note 3: Tokyo figures refer to 23 wards only.
Table 9 : Income Statement of Sewerage Utilities (March 31,
2006, in US$ millions)
The table also includes the breakdown of the operational revenue
of the four visited sewerage utilities and the national total. On
the national average, about 53 percent of the operational budget,
including both running and capital costs, is provided by sewage
tariff, while 35 percent of the budget is supplemented by the local
government general accounts.
For wastewater and storm water-combined operations, cost-sharing
schemes have been established. While wastewater collection and
treatment portion is fully covered by the sewage tariff, the
storm-water portion is covered by the municipal general budget. The
operational costs of larger city utilities are higher, reflecting
the fact that densely populated cities require advanced and
complicated system including underground tunnels and reservoirs as
well as urban flood control systems.
6.2.b Construction and Improvement Budget (Investment)
Table 10 includes the breakdown of investment budget sources for
the four visited utilities and the national total in Japan’s FY05.
The national total investment budget (both enterprise and non
enterprise) was US$21 billion. The national average bond share is
48 percent, which is higher than that of water supply. The national
average subsidy share is 38 percent, which is also much higher than
that of water supply. The balance is covered by the municipal
general account. The higher bond and subsidy rate reflects the fact
that the development of sewerage systems was historically delayed;
they were built more recently than the water systems and in cities
that were more developed. The investment budget of Tokyo was around
US$1.2 billion per year while that of the other three visited
utilities’ were in the range of US$180–240 million per year.
Tokyo
Sapporo
Kyoto
Fukuoka
National
Total
Enterprise
National
Total
Non
-
Enterprise
National
Total
Enterprise bonds
478
106
106
139
9,950
3,000
6,950
Nation
al subsidies
314
62
63
79
7,944
1,992
5,953
Other works/beneficiaries
share
68
11
5
4
1,344
266
1,078
General accounts support
and other revenue
317
6
11
21
2,205
894
1,310
Total Investment Budget
1,177
185
185
243
21,443
6,152
15,291
Note 1: USD=JPY115 in August 2007
Note 2: Tokyo figures refer to 23 wards only.
Note 3: National total is the sum of (i) enterprise national
total and (ii) nonenterprise national total.
Table 10: Construction and Improvement Budget Sourc
es of Sewerage Works
(March 31, 2006, in US$ millions)
6.2.c Cost Recovery
Table 11 includes the unit sewerage operational costs in running
costs and capital costs, as compared with the sewage tariff. This
table deals only with wastewater collection and treatment costs,
since storm-water discharge costs are fully covered by the
municipal general account.
Unit Costs
Tokyo 23
Wards
Sapporo
Kyoto
Fukuoka
Shiga
Enterprise
National
Average
Non
-
Enterprise
National
Average
Unit Operation Costs
1.02
0.81
1.00
1.76
3.33
1.29
2.4
2
1) Unit Operation Costs
0.49
0.44
0.40
0.60
1.19
0.49
0.76
2) Unit Capital Costs
0.54
0.37
0.61
1.15
2.14
0.80
1.66
Unit Average Tariff
1.20
0.84
1.14
1.58
1.92
1.17
1.13
Note 1: USD=JPY 115 in August 2007
Table 11 : Wast
ewater Cost Recovery
—
Unit Operation Cost and Tariff (US$ per cubic meter)
Note 2: Unit Production Cost = Unit operation costs and unit
capital costs (depreciation costs and bond interests)
The sewage tariff ranges between US$0.8 and 1.9 per cubic meter.
The national average operational cost is around US$1.3 per cubic
meter for enterprise utilities and US$2.4 per cubic meter for non
enterprise utilities. Based on these, the national average of the
cost recovery rate (including capital costs) is 91 percent for
enterprise utilities and 47 percent for non enterprise utilities.
The running costs are fully covered by all utilities. The working
ratios are 0.42 and 0.67, respectively, for enterprise and non
enterprise utilities. In general, large cities, such as Tokyo, can
recover all costs, including the capital portion, by the sewage
tariff. In rural areas, such as Shiga, and many other non
enterprise areas, it is not easy to collect an adequate level of
sewage tariff to fully meet operation/capital costs. The operation
costs, particularly capital costs, are much higher than that of
urban areas. This reflects the fact that those rural utilities
developed their systems in much more scattered areas with smaller
economies of scale and in recent years without a historically
developed infrastructure stock.
It should also be noted that the sewage tariff is generally set
lower than the water tariff, despite the fact that sewerage system
development costs are higher than that of water supply systems.
This is a reflection of psychology; people are more willing to pay
a higher tariff for drinking water than for wastewater. Under the
circumstances, some rural sewerage utilities have no way but to
compensate for the deficit from their municipal general account.
This is negatively affecting the municipalities’ financial status
and the provision of other public services.
7. Investment-Financing Mechanism
Most water supply and sewerage utilities mobilize external funds
in addition to internal funds. Three major external financing
sources are available.
7.1 Bonds
Utilities issue bonds with the authorization and
approval/commitments of municipal governments. Some wealthy
municipalities’ financial standing is very good. The Tokyo
Metropolitan Office’s credit rating is AAA. Although utilities do
not issue bonds on their own credentials, some of them generate
sufficient revenue to cover a substantial portion of their
investment requirements. Some good-performing utilities would be
able to secure funds on their own financial credentials if allowed
to do so.
7.2 National Subsidy
The national government ministries provide high-rate subsides
for costly investment for large-scale infrastructure development.
For waterworks, the Ministry of Health, Labor and Welfare provides
subsidies of up to one-third of investment costs for large-scale
systems development and renovation as well as for the introduction
of advanced treatment systems. For sewerage works, the Ministry of
Land, Infrastructure and Transportation provides a subsidy of 55
percent of the construction of treatment plants and 50 percent of
pipe-networks development. The subsidy rate increases to 60 percent
of the construction of treatment plants in the case of integrated
basin-level sewerage systems, which collect sewage from more than
two municipalities. The total allocated amount of national
subsidies is much higher for sewerage systems than water supply
systems as noted earlier.
7.3 National Tax Allocation to Local Governments
The Ministry of Internal Affairs and Communication allocates
block grants from national taxes to local governments. This
national tax allocation to local governments is designed to ensure
the national minimum standards of public services, particularly for
smaller rural municipalities that have few other sources of
revenue. Among many parameters of the allocation criteria, the
amount of issued municipality bonds for infrastructure development,
including water and wastewater systems, is counted for determining
the amount of the block grants. Although the grant is not directly
allocated for the accounts of water and sewerage utilities but for
the general accounts of local governments, it works as an incentive
for local governments to issue bonds for infrastructure
development.
8. Governance Issues
8.1 Key Features and Merits of Semipublic Utilities
The arrangements of the semipublic autonomous utility seem to
have established a mechanism combining the merits of both private
and public entities: (i) the high economic efficiency and financial
autonomy of the private sector and (ii) the strong ownership and
oversight functions of the public sector. Most utilities in Japan
set well-defined targets for key performance indicators, including
total revenue, water production, drinking-water quality, customer
service, financial performance, water consumption, new connections,
and so forth. The commissioners of water supply utilities are
accountable to the municipal councils for achieving the targets,
while the director general of sewerage utilities/departments report
to the heads of municipalities, such as mayors.
The municipal councils or mayors are kept informed of the
utility operation by the commissioner or director general and
review the annual/quarterly operational reports, but they do not
interfere in the daily operations. Most municipalities have
established strong reporting frameworks, including financial audits
and annual and periodic performance status reports, which are
incorporated in the annual reports and are made available at public
offices and on websites.
All utilities operate under sound financial management and
procurement rules to ensure competitive prices and flexibility in
the acquisition of needed inputs or services from the market. They
generally follow public procurement rules. They also use internal
and external auditors to enhance fiduciary responsibilities.
Auditing procedures and techniques are applied to technical and
operational areas other than those related to the financial
statements.
8.2 Human Resources Management
The commissioners or director generals of utilities are
appointed by the mayor of municipalities on the basis of expertise
and experience. Some of them are selected from in-house career
officers who are respected and possess long experience of different
positions in the institutions. The commissioner / director general
of water supply utilities reports directly to local councils, and
assumes responsibility for overall human resources management.
It should be highlighted that the number of utility staff per
household is about 2 per 1,000 connections if both water supply and
sewerage utilities are combined. Each utility maintains the staff
level of 1 per 1,000 connections. The rate is much smaller than
that of competent utility companies even in advanced countries. In
table 12 is a comparison the staff level per 1,000 connections
between the Japanese and international cases.
TokyoSapporoKyotoFukuoka
Japan
Average
Singapore
Phila-
delphia
Tunisia
Johan-
nesburg
Campinas
Brazil
Gunajuato
Mexico
1.71.62.51.11.92.94.48.04.74.18.0
Sources: Local Public Enterprise Database (March 2006, Ministry
of Internal Affairs and Communication, Japan), Tunisia (Country
Report)
Other countries (Water Supply & Sanitation Working Notes
No.9, May 2006)
Note: The number of Japanese water and wastewater utilities
staff are combined for international comparison. The household
connections are counted
as one for both water supply and sanitation although they can
physically counted as two, i.e. one for water supply and another
for wastewater. The
number of outsouced workers are not included as the number of
regular staff for the Japanese utilities.
Table 12: Number of Employees Per 1,000 connections
Staff salary and promotions are based on performance, academic
credentials, and seniority reflecting overall experience. The
latter provides incentives for staff to stay with the same utility.
The average service duration of career staff of water and sewerage
utilities is about 25 years. Staff is rotated within the
organization to enable members to obtain wider experience and
perspectives, and those who display high potential are groomed for
promotion. Staff turnover is very low and mostly due to mandatory
retirement.
Most utilities provide ample career development and training
opportunities to their staff, which also contributes to the low
turnover rate. Staff skills are regarded as a critical input for
improving performance. An extensive training plan covers
professional skills development and corporate culture with an
emphasis on frontline staff who come into direct contact with
customers and/or contractors. The utilities provide various kinds
of training programs for their staff as part of their annual
performance review.
8.3 High Outsourcing Ratio
While most utilities keep core business functions in-house, they
have engaged private contractors for (i) routine operation and
maintenance of treatment plants and network pipes; (ii) checking
and execution of repair works; (iii) engineering design and
construction supervision; (iv) information and telecommunication
technology services; and (v) metering and billing, among others.
The average outsourcing ratio for water supply utilities is around
15 percent while that of sewerage utilities is around 30 percent.
The high out-sourcing rates are reflection of the aforementioned
slim personnel structure of the utilities. The utilities are
gradually increasing the outsource percentage through natural
attrition of in-house career staff. In table 13 is a comparison of
the outsource percentage of operational expenditures between the
Japanese and international cases.
Types
Tokyo
Sapporo
Kyoto
Fukuoka
Japan
average
Type
Singapore
Johan
-
nesburg
Campinas
Brazil
Gunajuato
Mexico
Water
14%
20%
7%
30%
14%
Wastewater
26%
40%
28%
49%
28%
Source
s: Local Public Enterprise Database (March 2006, Ministry of
Internal Affairs and Communication, Japan);
Water Supply & Sanitation Working Notes No.9, May 2006.
Note: The Japanese average of wastewater is based on local
autonomous enterprise entities b
y law.
Combined
25%
10%
21%
20%
Table 13: Outsource Ratio (%) of Operational Expenditures
Some utilities are piloting innovative large-scale privatization
schemes for building and operating specialized facilities, such as
cogeneration power plants, sludge treatment and recycling plants,
and so forth. Several utilities have begun trials of privatization
schemes and market testing with national and international private
partners. The Private Finance Initiative Law in 1999 has motivated
all types of public and semipublic entities to test private sector
participation for such functions, which used to be managed
exclusively by the public sector.
However, most utilities have not commissioned major packages
covering full operation of water supply or sewerage treatment, but
rather have limited themselves to some specific elements of
operations. Given the heavy loan repayment for some sewerage
utilities, they may continue or accelerate pursuing privatization
initiatives in order to gain further operational costs reduction.
However, given the already high level of operational efficiency,
they seem to be carefully testing new arrangements.
8.4 Customer Service
Although water supply and sewerage utilities are monopolistic
service providers, they are concerned about customer satisfaction.
Important measures of customer orientation include friendliness of
the customer billing and collection system, orientation toward
seeking customers’ opinions, timely information to customers on
water service disruptions/changes, and response to customers’
complaints. Many utilities operate a one-stop call center for
customers with regard to water service disruptions, relocation, new
subscriptions, payment, and so forth. Some utilities open customer
windows for extended times, for example, to 8:00 p.m. on weekdays
and open hours on Saturdays. They also establish water repair
squads to conduct emergency repair and interrupted service recovery
within 24 hours.
Those water utilities usually offer multiple options for their
customers to pay their water and sewage bills, such as electronic
fund transfer and payment at commercial banks, postal offices,
convenient stores, and so on. Some service requests can be made on
the utility’s website. These efforts have contributed to the
reduction of administrative losses of water to almost nil. In other
words, good customer services have enabled utilities to secure
adequate water tariffs to recover water production costs from
customers.
8.5 Nationwide Water and Sewerage Utilities Benchmarking
The Ministry of Internal Affairs and Communication, which
administers the Local Public Enterprise Law, has led a standardized
national benchmarking exercise for all water supply and wastewater
utilities. The benchmark database of all utilities for every year
is established and disclosed on the website of the ministry and
municipalities. The total number of benchmarking items is more than
100, including service quality, financial efficiency, water losses,
energy costs, revenue collection, financial performance, and other
operational efficiency and performance indicators.
The national benchmark exercise provides an opportunity for
municipalities and utilities to monitor their performance status
and improvements across the country, thus making them more
accountable to their constituents as comparative results can be
made available to the public on a regular basis. This report has
benefited from the national benchmark database in addition to the
information directly collected from visited utility offices.
8.6 Other Semipublic Supporting Agencies and Associations
Some technical support agencies and associations have been
established with the endowment from local governments, which in
turn have support from the national government. For sewerage works,
Japan Sewerage Works Agency provides technical support for
construction, maintenance, and management of main facilities, such
as wastewater treatment plants and pumping stations, based on
prefectural or municipal utilities’ requests. The agency also
conducts experiments, research, and training sessions. This agency
is particularly important for small municipalities that manage
sewerage projects, as they do not have an adequate number of staff
who possess management and technical skills.
Japan Waterworks Association and Japan Sewerage Works
Association carry out surveys and research related to water and
sewerage systems. The associations also provide support for raising
public awareness and disseminating information. In particular, the
Japan Waterworks Association serves as a think-tank to the Ministry
of Internal Affairs and Communication and municipalities in
preparing various kinds of technical design manuals and guidelines
while organizing technical conferences and workshops.
9. Technical Aspects
The mission visited water and sewerage treatment plants and
learned that they are well operated and managed with advanced
systems and that the level of water quality and wastewater
treatment is quite high. The mission also observed that all visited
plants are clean and that there is very little odor even in sewage
treatment plants. Due to their proximity to residential
neighborhoods, all facilities are built underground or are fully
covered. Some important features on the technical aspects are
summarized below.
9.1 Water Supply
9.1.a Drinking Water Quality Management
It is known that tap water is drinkable anywhere in Japan. Water
utilities adopt advanced water treatment methods, such as ozone
treatment and biologically activated carbon-absorbing treatment, in
some areas, to eliminate odor, trihalomethane-precursor, and other
objects that cannot be sufficiently removed by such conventional
treatment processes as rapid sand filtration. To maintain strict
drinking quality standards, water utilities prepare and execute
water quality examination plans. The plan specifies the parameters
to be analyzed and the frequency of analysis. The analyzed results
are disclosed in the annual reports and/or posted on the Internet
on a regular basis. As part of regular water quality monitoring,
water utilities have installed automatic quality monitoring devices
at various points in water supply areas for continuous monitoring
of residual chlorine. In addition, regular water quality analysis
is conducted at rivers and reservoirs.
9.1.b Water Distribution Optimization and Leak Detection
Most utilities have developed extensive water distribution pipe
networks to ensure that stable and flexible water supply treatment
plants and transmission pipelines are connected with each other to
supply water through various alternative transmission and
distribution routes in wide areas. The water supply system is
monitored on a round-the-clock basis at the operation center in
order to adjust to the changing water demands. The utilities have
developed and utilized various kinds of operation systems, such as
water distribution planning support systems, dam inflow simulation
and reservoir operation optimization system, and so on.
Water utilities typically develop water supply operational plans
that consist of (i) a water intake plan; (ii) a water main networks
operation plan; and (iii) a pumps operation plan. The utilities
also have developed water demand forecast programs with various
parameters, such as weather conditions, time, the day of the week,
holidays, and so forth. These plans apply to both ordinary days to
emergencies, accidents, and drought periods.
Some advanced utilities, such those as Fukuoka and Tokyo, have
developed more advanced water distribution systems in order to
regulate pressure and flow in distribution pipes to promote the
effective use of water and to minimize water leaks. This system
uses pressure gauges and flow meters that have been installed
throughout the city to monitor conditions within the pipes on a
24-hour basis from the Water Distribution Control Center via
telephone lines. Based on the information obtained from the gauges
and meters, the motorized valves can be opened and closed remotely
to regulate the water pressure and flow. This helps to reduce
excess pressure, which, in turn, helps reduce the occurrence of
leaks within the system. The system can automatically detect pipe
bursts by checking the rate of flow and pressure changes and their
correlation. If the abnormality continues above set thresholds, the
system gives warning to the operation center and site offices.
9.1.c Seismic Design and Preparedness
Japan is prone to earthquakes. Water utilities have taken
various measures to ensure the best possible water supply for
citizens immediately after earthquakes. They have set high
antiseismic design criteria for physical infrastructure and
established emergency operation systems. They have also built
auxiliary power plants and emergency water supply basins and tanks
to secure water supply during emergencies.
9.2. Wastewater, Storm Water, and Water Quality Management
9.2.a Wastewater Treatment Standards
The water quality of discharged effluent from sewerage treatment
plants is regulated by the Sewerage Law. Amongst many parameters,
BOD of effluents is set at 20 milligrams per liter. For most
sewerage treatment plants, BOD of treated effluents outflow is
below 5 milligrams per liter, which is much lower than the
regulatory limits. BOD of inflowing raw effluents typically ranges
between 100 and 200 milligrams per liter.
9.2.b Basin-wide Water Quality Control Plan
The Water Pollution Control Law requires local governments to
set the environmental quality standards for each control point of
rivers and lakes in order to meet the water quality requirements
for the environment and human health. A comprehensive basin-wide
water quality management approach is employed to meet the required
water quality level and pollution load reduction. Based on the
required amount of pollution load reduction, local prefecture
governments prepare a Comprehensive Basin-wide Sewerage System
Development Plan, which includes the basic parameters of sewerage
collection and treatment systems in the basin. Close coordination
is made between sewerage utilities and environment departments for
preparing the plan and monitoring water quality.
9.2.c Advanced Wastewater Treatment
Standard activated sludge treatment plans are most common in
Japan, while oxidation ponds and other primitive treatment plants
are very few, due to expensive and limited land. For closed water
bodies, such as Biwa Lake, Tokyo Bay, Osaka Bay, and so forth,
tertiary treatment systems have been introduced to effectively
remove nitrogen and phosphorous and prevent eutrophication
problems.
9.2.d Industrial Pollution Control
The Sewerage Law also stipulates the water quality standards of
effluents discharged by specified industrial factories/plants to
sewerage treatment plants. In most cases, the maximum values of BOD
and suspended solid (SS) are set at 600 milligrams per liter, while
heavy metals are strictly controlled. The specified factories and
other commercial facilities, such as hotels, livestock pens,
cleaning businesses, and so forth, are required to install
pollution control facilities/equipment onsite in order to meet the
maximum threshold of effluents discharged to sewerage treatment
plants or public water bodies.
The Sewerage Law and Water Pollution Control Law require local
governments to conduct onsite inspections and compliance monitoring
without notices, and if required, to provide administrative
guidance and improvement order. The owners could face imprisonment
of up to six months and/or up to a $2,500 penalty. Local
governments provide grant subsidy and interest free loans for the
owners to install required pollution control
facilities/equipment.
One of the most important factors of industrial pollution loads
reduction is the significant increase of internal water recycling
of plants and factories. The information in Annex 9 indicates that
the average recycling rate increased from about 20 percent to 80
percent during the past forty years. The water of rivers and lakes
in Japan was heavily polluted from the 1960s through the1980s due
to rapid economic development. The water quality has been
significantly improved over the past 20 years thanks to the
increase in industrial water recycling in addition to rapid
development of sewerage management systems.
9.2.e Treated Wastewater Recycling System
The direct recycling rate of sewage effluent is very low (about
1.4 percent) except for toilet-flushing water use and environmental
flow augmentation in small rivers and canals in some urban
districts. However, indirect recycling through river systems is
quite common in most urban areas. Treated sewage effluent
discharged to rivers is quite important for augmenting the river
environment flows and maintaining the ecology and scenic
environment of rivers. This is also important for supplying water
for downstream water users. Historically, many cities and towns
have been developed along rivers and rely on this kind of natural
water recycling system between the upstream and downstream of
rivers. In some urban rivers, more than 50 percent of river water
flow originates from treated effluents from sewerage treatment
plants in the upstream sections of rivers.
9.2.f Sludge Treatment
Most sludge from treatment plants is dehydrated and incinerated
to ashes, reducing the amount to about 1/40–1/50 of the original.
On the national average in 2003, sludge was used for (i) landfill
materials after incineration to ashes (about 40 percent), (ii)
construction materials after melting of incinerated ashes to sludge
(about 40 percent), and (iii) agriculture soil improvement
materials after dehydration/drying of sludge. These operations are
conducted mainly due to the environmental recycling reasons with
governmental subsidies rather than commercial reasons.
9.2.g Storm-water Discharge
One of the important roles of a sewerage system is to prevent
urban storm discharge and prevent floods. A comprehensive
flood-prevention master plan is prepared to define the required
flood runoff storage and reduction capacity by sewerage and river
systems. In some flood-prone areas, underground storm-water storage
pipes and reservoirs are constructed under roads. Permeable road
pavements, onsite storage, and retarding ponds at schools, parks,
and so forth are also constructed to reduce flood peak volume.
Technical coordination is established for urban flood control
between sewerage utilities and river administrators in order to
ensure the proper operation of drainage pumps and other flood
control facilities.
Some sewerage utilities have built rainfall radar systems to
collect real time rainfall data to operate the storm water
discharge systems in an optimized manner. The operation of
treatment plants and pumping stations are carried out based on the
information from the radar and telemetry water-monitoring systems.
Citizens can access the information on the websites of utilities
for emergency preparedness.
The combined system for both wastewater and storm water were
established in bigger cities in historically earlier years. There
were 23 combined sewerage systems and 1,873 separate systems out of
total of 1,896 in March 2005. A combined system sometimes allows
untreated wastewater to be discharged to public water bodies during
flood periods. The combined system needs to be upgraded in order to
reduce heavy pollution loads from the first flush of flood water by
building flood-storage facilities. Shield tunneling is used to
build large tunnels and storm water pipes.
9.2.h Electronic Sewer Registration Database
Some advanced utilities have established electronic
data/information systems for managing assets, procurement,
performance, and so on. Tokyo Sewerage Utility has developed an
electronic sewer mapping system in 1/500 indicating all sewers
location, depth, diameter, types, and so on in all service areas.
All users can access the information on the Internet. This is
useful in coordinating with other underground utility lines and
assisting contractors in adjusting their designs and schedule.
10. Water Resources Aspects
10.1 Inadequate Water Resources Availability
The annual average precipitation in Japan is about 1,600
millimeters per year, and the average annual renewable water
resource is about 3,337 cubic meters per capita. However, some
regions are faced with much scarcer water resources due to high
population density. The renewable water resource of the Kanto area,
including the Tokyo metropolitan area, is only 905 cubic meters per
year per capita, which is equivalent to that of Egypt. (See Annex
7).
In the early 1960s, Tokyo faced chronic water shortages and had
to cut about 45 percent of water supply up to nearly a million
households. People used to call the area during the scarcity the
“Tokyo Desert.” Moreover, because of steep terrain / river bed
slope and a high fluctuation of rainfall among different seasons,
river flows, and water resources are difficult to regulate and
manage without storage dams in the upstream reaches of rivers.
10.2 River Management: Water Rights and Discharge Permits
The River Bureau of the Ministry of Land, Infrastructure and
Transportation (formerly the Ministry of Construction) has played a
pivotal role in water resources management. The River Law covers
(i) flood control, (ii) water use, and (iii) the water environment.
The River Law designates the ministry’s regional river bureaus and
river management offices as “river administrators” and requires
them to issue water rights and discharge permits based on the
current and future water balance of river basins. The river
administrators are also responsible for issuing permits for the
installment/construction of any hydraulic structures and land use
in rivers.
10.3 Comprehensive Water Resources Development
The Specified Multipurpose Dams Law and Water Resources
Development Promotion Law were legislated in 1957 and 1961,
respectively. The former law stipulates the procedure for the
execution of multipurpose dam projects, including cost allocation
among participating parties. The latter law requires the
preparation of comprehensive water resources development master
plans for five (then six) major basins, including Tokyo,
Kyoto/Osaka, Nagoya, Fukuoka, and so on. It also established the
Public Water Resources Development Corporation in 1962 for
executing major multipurpose dam projects in the designated basins.
In 1973, the Dam Reservoir Resettlement Area Special Measures Act
was enacted to provide stronger support for the residents in upper
watersheds who were to be relocated by dam reservoir
inundation.
10.4 Critical Roles of Dams
Thanks to those legislative initiatives, drinking water sources
for municipalities have been significantly augmented and secured.
On the national average, water sources for municipal water comprise
natural surface water (34 percent), dams (45 percent), and
groundwater (21 percent). The share of water resources from dams
has increased from 19 percent in 1970 to 45 percent in 2005 (see
Annex 10). In 2005, the number of dams with a height of more than
15 meters was 2,897, out of which 627 dams whose functions include
storing water for drinking water supply purposes, while others are
for flood control, irrigation water supply, hydropower generation,
and so forth.
III. Key Lessons Learned
The mission was quite impressed with the overall performance of
the Japanese water and sewerage utilities. The staff members who
provided briefings and accompanied the mission to sites were very
professional and efficient. The mission witnessed that they are
working very effectively in their offices. The mission visited only
four water and five sewerage utilities but confirmed findings with
the national utilities benchmark database to ensure that those
utilities were not isolated cases. Throughout the country, around
6,000 utilities of similar level operate under the same framework
and provide water and sewerage services to a population of about
120 million people.
In many developing countries, the privatization of water sectors
in the 1990s and early 2000s did not always bring success and, in
fact, often resulted in dismal failure. The mission felt that the
Japanese model may serve as a potential for the Bank’s technical
assistance and policy advice for the water supply and sanitation
sector in developing countries. The Japanese model adopts a
semipublic corporate institutional framework under the Local Public
Enterprise Law. The operational and technical standards are
regulated by the Waterworks Law and the Sewerage Law.
The Japanese model possesses the following key features:
(i) enhanced public welfare though a stable water supply and
sanitation service,
(ii) financial autonomy achieved through tariff and sound
management system,
(iii) large-scale investment for infrastructure development on a
long-term plan,
(iv) strong trust relationships with customers, and
(v) municipality-based utilities suitable for unique local
settings.
Although those features are commonly required for water and
sewerage utilities in developing countries, most typical
privatization schemes have not fully addressed these points.
Foreign firms and experts may not be in the best position to help
developing countries create the utilities that can address those
points.
The mission felt that the water utility systems in developing
countries could be strengthened by introducing the semipublic
management framework used in Japan. In this sense, the lessons the
mission learned in Japan may give Bank staff and client countries
some guidance when discussing the sector reform and recommend
tailor-made recipes for each developing country based on its own
experiences and lessons learned.
1. Legislative Aspects: Statutory Semipublic Utility
The Japanese statutory semipublic water utilities are
established by the Local Public Enterprise Law. Some sewerage
utilities also adopt a corporate financing procedure under this
Law. The law requires the utilities to perform corporate management
efficiency while pursuing the enhancement of the public welfare. It
also requires the utilities to maintain financial autonomy by
recovering operational costs, including running and capital costs,
from tariff.
The performance of the utilities is outstanding. The national
average of UFW in Japan is about 8.5 percent. The national average
number of staff is 1.2 per 1,000 connections and the working ratio
average is 0.49. What is remarkable is that these numbers are not
the figures of the most competent utilities in large metropolitan
areas but the national averages of 1,469 water utilities that
supply water for 124 million people. Some urban water utilities,
such as those in Tokyo and Fukuoka, where there have been
considerable further improvements, have achieved even better UFW
figures: 5.8 percent for the former and 5.1 percent for the
latter.
Therefore, the model is not an isolated success case but rather
a typical achievement in water utilities in Japan, which possess
all the hallmarks of a major breakthrough in much improved
efficiencies in the water supply and sewerage systems. It is hoped
that these elements may be replicated in developing countries where
the Bank has such projects. The legal framework provides for a
balance between the strong public ownership and oversight functions
and the private sector’s financial autonomy and operational
economic efficiency. While the designs and operational standards of
the utilities are regulated by the national laws for waterworks and
sewerage systems, the utilities enjoy considerable autonomy for
their daily operation and are relatively insulated from political
issues. The utilities are not merely private entities seeking only
economic gains but are designed to promote public welfare. These
Japanese legal regulatory frameworks for semipublic corporate
utilities can provide some useful models for developing
countries.
2. Institutional Aspects: Effective Personnel Management and
Client Connection
The utilities’ personnel management is generally effective and
contributes to their overall high performance. The number of
utility staff per household is around 2 per 1,000 connections if
water and sewerage utilities are combined. This number is much
smaller than the world average. The slim personnel structure
enables utilities to treat those staff members in a manner
comparable to that of private sector.
The staff is given adequate motivation and incentives to
accomplish target performance goals. They are provided with good
career prospects and training, with salaries comparable to those of
the private sector. The average staff salary level is in the range
of US$60,000–100,000 per year and attractive enough for qualified
personnel, particularly in rural areas. The turnover rate is very
low and basically attributed to mandatory retirement. The average
length of career of a staff member is about 25 years. They are
rotated among different posts to accumulate experiences and are
gradually promoted on merit and seniority bases. The merit and
seniority basis of promotion encourages the staff’s effort and long
commitment to the institution.
The utilities also prioritize maintaining a strong front-line
staff for operations and customer service. The utilities pay close
attention to the provision of dedicated customer service and
minimize any service disruption. The utilities provide tariff
payment options and other service information for customers through
window services, the Internet, and other information dissemination
activities.
While utilities keep core business and strategic functions under
the competent career staff group, they have increasingly been
outsourcing daily operational tasks to further improve competition
and efficiency and to reduce costs such as operations and
maintenance, inspection, repair works, designing works,
construction supervision, metering, billing, laboratory tests, and
so forth. The outsource ratio of the operational budget is
relatively high, at around 15 percent for waterworks and around 30
percent for sewerage works. Moreover, some urban utilities have
begun commissioning the BOD/BOT schemes for some special segments
of the water supply and sewerage system, such as cogeneration
energy system at treatment plans. No full BOT/concession schemes
have been tested for entire treatment plants. The local governments
seem to be carefully testing some new arrangements to see if they
can achieve more economic efficiency by inviting the private sector
to participate. The approach seems quite reasonable. One of the
important differences from privatization schemes in developing
countries is that the Japanese utilities have adequate number of
competent staff who can analyze new arrangements and effectively
negotiate with private entities in the public interest.
3. Financial Aspects: Sound Financing Mechanism and Cost
Recovery
All water and sewerage utilities are required to fully recover
all operation costs from user fees. Indeed, most water utilities
recover all costs through the tariff, providing strong financial
autonomy for them. Most urban sewerage utilities that adopt
corporate financing procedures also recover most operational costs,
including the cost recovery of capital.
This self-sustaining mechanism has disciplined both water and
sewerage utilities to closely review investment plans and their
budgetary impacts and operational efficiency. Even sewerage
utilities, which are generally considered to be more public than
water supply utilities, can control financial aspects very
effectively by adopting independent accounting systems. The
national average of 3,699 sewerage utilities’ UFW is about 15
percent and the working ratio is about 0.6. The mere calculation of
UFW by sewerage utilities itself reflects their efforts to closely
monitor system operations and performance improvements.
Because of their excellent service and customer support, the
utilities’ tariff increase proposals are generally accepted by
municipal councils and constituents. The national average of the
administrative UFW is about 1.6 percent. Water and sewerage
utilities tariff are metered and billed together. Both of them have
clear two-tier progressive tariff rates.
For new investment and major renovation projects, most utilities
issue bonds with the approval and commitments from municipalities.
Major urban utilities can easily mobilize funds thanks to the good
financial standing of the municipalities. This is part of the
reason why they have not conducted private financing initiatives
for major investment projects. The utilities have adequate numbers
of staff who can effectively process financing and procurement
procedures. For developing countries, it is very important that
water utilities establish strong financial bases for satisfactory
operations and mobilization of funds for investment programs.
However, some sewerage utilities, mainly in rural areas, face
difficulties in raising the sewage tariff to the level of fully
recovering the capital portion of operational costs. They had to
build sewerage networks in rather scattered, thus less economic,
areas and in recent years without historical stock of
infrastructure. In those cases, the national government provides
grants from national taxes to local governments to assist in major
infrastructure development. It also provides subsidies of up to 55
percent of investment costs for large-scale development and
renovation works. These kinds of supplementary supporting measures
may be more needed for rural utilities in developing countries.
4. Management Tool
Most water and wastewater utilities have developed an integrated
information management system using electronic database and
geographic information system (GIS) maps for data monitoring,
operational support, performance review, and reporting. The system
is also linked to procurement and contractual and financial
management. Some utilities, such as Tokyo Sewerage Utility, post
the GIS maps indicating the location, depth, and size of all sewer
network pipes on the Internet for the use of contractors and
general public.
All water utilities and some urban wastewater utilities employ
corporate financing systems using income statements, balance
sheets, and cash flow statements. They prepare annual budgetary
plans and financial management reports to submit to local councils,
mayors, and auditors.
Most importantly, all Japanese utilities conduct extensive
benchmarking exercises to review their performance and improvement
status and compare them with other utilities. They check various
kinds of benchmarks in terms of physical, financial, and
institutional aspects with more than 100 items. Annual reports are
posted on their respective websites and reported to the national
central database administered by the Ministry of Local Affairs and
Communication.
The benchmarking reports have significantly increased the level
of public review of utilities performance and service level. These
tools should be disseminated to the developing countries that
borrow credits and loans for projects.
5. Technical Aspects
The utilities have made significant efforts to ensure the
quality of the water supply and sewerage system development and
operation. It is remarkable that most secondary wastewater
treatment plants keep the effluent quality of BOD below 5 mg/l
while the effluent standard of BOD is set at 20 mg/l by the
Sewerage Law.
Some sewerage utilities have introduced tertiary treatment
plants to reduce nutrients, such as nitrogen and phosphorous, to
prevent eutrophication of closed water bodies, such as Lake Biwa
and Tokyo Bay. They have adopted state-of-the-art technologies in
infrastructure design, construction, and monitoring. They utilize
information technology such as integrated circuit (IC) tags, optic
fiber cables, and telemetry networks for infrastructure operation
and maintenance, including data collection, monitoring, and remote
control.
In particular, the water utilities have developed
water-distribution optimization systems from reservoirs, intakes,
water mains, pumping stations, and treatment plants depending on
various parameters related to weather conditions, temperature, the
day of the week, and so on. Water utilities have also developed
effective leak detection systems and procedures using water and
pressure valves at major locations to monitor any abnormal changes
on a 24-hour basis. Warning signals are automatically provided to
site offices and emergency operational teams. Some utilities have
developed pressure control systems to remotely control valves and,
for example, lower water pressure in order to minimize leaks while
ensuring a stable water supply to all households coping with ground
elevation differences.
For water pollution control of major basins, prefecture
governments have prepared basin-wide water pollution control plans,
including point and nonpoint sources, and set the pollution loads
reduction targets for each sewerage utility and other pollution
sources. This is instrumental in coordinating various sewerage
investment and pollution control programs on a basin-wide scale.
The plans are made in close coordination with water utilities,
environmental departments, and river administrators for covering
sewerage system development and operational programs. The
operational programs cover the required actions during drought and
water quality accidents.
A similar type of technical coordination is made for urban flood
control between sewerage utilities and river administrators in
order to ensure the proper operation of flood control facilities,
including drainage pumps. They also discuss flood mitigation master
plans for basins to define their respective responsibilities and
action programs while exchanging hydrological information on a
constant basis. Some urban sewerage utilities have established
radar networks to forecast rainfall patterns and operate their
flood control systems in an optimized manner.
One of the most important factors observed in the Japanese
utilities is that the staff shares the culture of valuing
technological development to improve their daily operations. They
prioritize their own technical development from the field and their
own ingenuity. Staff members are given ample opportunities to
continuously improve their technical skills. They are encouraged to
participate in seminars. Some utilities plan technology development
projects on a pilot scale and even obtain patents for successful
ones. Other utilities have built their own training facilities and
field stations. Furthermore, the government-affiliated agencies and
associations, such as Japan Waterworks Association, Japan Sewerage
Works Agency, and Japan Sewerage Association, have contributed
studies for developing new technologies and disseminating technical
guidelines and manuals. This is particularly useful for smaller
utilities in rural areas that do not posses adequate numbers of
technical staff.
This Japanese cultural aspect of valuing the technical capacity
of in-house engineers may be relevant for developing countries.
Although foreign consultants can bring some useful technologies and
skills from abroad, they may not be fully familiar with unique
local settings and existing staff capacity. It is quite important
for local utilities to establish their own technical teams and to
examine the suitability of any new systems and tools for their real
needs.
Annex 1: List of Persons Met for the Study
Ministry of Health, Labor and Welfare
Health Bureau, Water Works Division
· Mr. Sombo Yamamura, Director
· Mr. Akira Nitta, Deputy Director
· Mr. Seki Kato, Chief of Technical Section
Minister Secretariat, International Affairs Division,
International Cooperation Section
· Jyunichi Hioki, International Cooperation Deputy Director
Ministry of Land, Infrastructure and Transport
City and Regional Development Bureau, Sewerage and Wastewater
Management Department
· Mr. Ryuji Uematsu, Planning Senior Deputy Director
· Mr. Takaaki Ito, Deputy Director
Tokyo Prefecture
Bureau of Waterworks
· Mr. Tomoyuki Tanimoto, Team Leader, Facilities Planning
Section
· Mr. Tomohiro Ebizuka, Team Leader, Financial Affairs
Section
· Mr. Yutaka Yamagishi, Senior Researcher, General Affairs
Division
· Mr. Masahiko Nagasaka, Team Leader for PFI Project, Facility
Section
· Mr. Masatoshi Mokuda, Team Leader for Leakage Prevention,
Water Supply Division
Sewerage Works Bureau
· Mr. Yoshiaki Kon, Deputy Director for Master Planning,
Planning Division
· Mr. Jyunya Koike, Planning Chief, Planning Division
· Mr. Tooru Oda, Chief, Planning Division
· Mr. Masayoshi Utsugi, Deputy Section Chief, Facility Control
Division
Shiga Prefecture
Biwa Lake and Environment Department
· Mr. Manabu Tsukuda, Director
· Mr. Yoshio Tainaka, Director, Sewerage Works Division
· Mr. Masahiro Yoshizawa, Staff Chief, Sewerage Works
Division
· Mr. Katsumi Koi, Director, Syonan-Chubu District Management
Office
Kyoto City
Waterworks and Sewerage Works Bureau
· Mr. Hideo Suzuki, Director
· Mr. Shuji Tatsumi, Deputy Director, Planning and Coordination
Division, Waterworks Department
· Mr. Hideichi Ishida, Deputy Director, Planning Division,
Sewerage Department
· Mr. Tetsuya Nakanishi, Section Chief, Planning Division,
Sewerage Department
· Mr. Satoru Hashimoto, Section Chief for Project
Administration, General Affairs Department
Fukuoka City
Waterworks Bureau
· Mr. Yoshihiko Nishizawa, Director, Planning Division, Planning
Department
· Mr. Tetsuji Ono, Section Chief for Survey, Operation Division,
General Affairs Department
· Mr. Yuki Tokutomi, Technical Control Division, Planning
Department
· Mr. Seiichi Koga, Planning Section, Planning Department
· Mr. Takashi Kondou, Planning Section, Planning Department
· Mr. Takao Yamanaka, Head, Water Management Center, Water
Purification Department
Sewerage Works Bureau
· Mr. Tsuneo Hitaka, Director, Construction Department
· Mr. Tadanobu Yanagibashi, Director, Planning Division,
Construction Department
· Mr. Takanori Matsuo, Section Chief for Technology Development,
Planning Division
· Mr. Shuhei Yamaguchi, Planning Division
· Mr. Ryota Himeno, Head, Chubu Wastewater Treatment Center
Sapporo City
Waterworks Bureau
· Mr. Hi