The Diet on Thursday enacted a controversial law allowing private companies to run water supply services as many public suppliers fall into the red and struggle to update aging facilities amid a shrinking population.
But critics are worried that the revised Water Supply Act, which paves the way for local governments to sell the rights to manage water services for as long as 20 years, will effectively lead to privatization, a move that could lead to higher water bills and prove unsuitable for coordinating reliable responses in times of disaster.
According to the Health, Labor and Welfare Ministry, one-third of municipal governments managing water supply services were unable to cover operating costs with water bills, and the situation is expected to worsen further due to the declining population.
In the year through March 2017, 15 percent of the total water pipes in use had exceeded the maximum durable life of 40 years set by law. At the current pace of replacement, it will take 130 years to complete the renovation of all pipes. The law will encourage cooperation among local governments and introduce the concession system — a private finance initiative in which facilities owned by public entities are run by the private sector.
Six governments including Miyagi Prefecture and the city of Hamamatsu are already considering introducing the system.
In other countries, privatization of water supply businesses has often led to higher bills and poorer water quality. According to a survey by a private Dutch research group, at least 267 cities in 33 countries decided to resume public water services after privatization.
According to Yoshiki Seki, a professor of environment policy studies at Takushoku University, water bills tend to rise after privatization as distribution facilities are often monopolized by the supplier.
Paris concluded a concession contract in 1984 with major French water suppliers Veolia and Suez, but water bills saw an over threefold increase over about 25 years, according to Seki.
Opposition parties criticized the welfare ministry for not studying the law’s potential impact well enough, arguing it has researched only three cases abroad of privatized water supply services that eventually returned to being public.
Mizuho Fukushima of the opposition Social Democratic Party also claimed the government is engaged in “unfair practices” because a female policy research member in the Cabinet Office’s unit dealing with the matter was seconded from the Japanese arm of Veolia.
The opposition camp argued the government “is trying to sell off (public) water businesses for the profit of a foreign company.”
A woman in her 70s who joined a citizens’ rally against the legislation said the de facto privatization of public facilities is “problematic as taxpayers’ money has been spent on them.”
“We should not seek efficiency in matters which are directly linked to our lives,” she said of the privatization push.
Prior to enactment, the bill cleared the House of Councilors on Wednesday, and the ruling bloc railroaded it through a Lower House panel later in the day.
During a news conference Thursday, Chief Cabinet Secretary Yoshihide Suga defended the enactment of the law.
“This is designed to strengthen the foundation for government-private sector collaboration and wide-area cooperation to provide safe water in a stable manner,” Suga said.
The legislation is also designed to “prevent a sharp hike in tap water charges” and secure sustainability of the system,” he said.