China and India face a water crisis unlike any that has ever been encountered.

China and India face a water crisis unlike any that has ever been encountered. In 2006, China had its worst drought in 50 years with more than 400 cities impacted by water shortages, 100 of them in serious trouble. Meanwhile, toxic spills into vital waterways have disrupted water supplies to millions of people in China and “pollution riots” have ensued.

In India, excessive groundwater extraction is depleting reserves and experts predict groundwater supplies in some areas will be exhausted in five to 10 years. It’s ironic that there are vast water resources across the country with monsoon rains flooding parts of the subcontinent several months each year, boosting the water table. However, leaky infrastructure and polluted surface water has forced farmers to drill deep in the earth, digging 21 million “tube wells,” using crude oilfield technology to irrigate farmlands, according to New Scientist magazine.

Business should take notice. Asia is home to half of the world’s population and its most populous countries, China and India, have been top beneficiaries of global outsourcing. Their economies are expanding rapidly as multinationals continue to outsource to the region. Based on water supply predictions coming from the United Nations and other development groups, there are very realistic scenarios in which their respective 1 billion-plus populations will soon see their farmland turned to desert. It doesn’t take too much imagination to see that instability will soon follow.

Overextraction and pollution of acquifers compounds an already dire situation. “The region’s fresh water resources, river basins, watersheds, wetlands and ecosystems are in peril from pollution and inadequate management,” said Haruhiko Kuroda, president of the Asian Development Bank. Although the region’s governments have failed to prioritize and manage the competing water supply needs between agriculture, industry and potable water, multinationals know they have a critical role to play given their need for local water supply. Many water-intensive industries in the region have developed water conservation strategies and water supply contingency plans because water is an essential commodity.

A team at MIT concluded in 2005 that China has sufficient water reserves to support agricultural production in its “breadbasket region.” It does not, however, have sufficient water supplies to maintain current levels of agricultural production and support other kinds of industry, as well, particularly water-intensive manufacturing. As a result, many companies have begun to negotiate water contracts with municipalities to ensure they will not be crippled by shortages. This will enable them to be in a better position to deal with future water shortages and increased regulation of future water use and water pollution.

Bangalore, India, is dubbed the Silicon Valley of India, housing more than 100 industries, including IT industry leaders such as Hewlett-Packard, Motorola and Siemens. Recently, a court ruling stated Bangalore would get less water from a key river than the neighboring Tamil Nadu state. A strike ensued and thousands of police officers patrolled roads in the city, and many multinational firms stayed indoors.

“The manufacturing loss for the industry will be about $225 million,” said R.C. Purohit, president of the Federation of Karnataka Chambers of Commerce and Industries.

In today’s ever-sensitive stakeholder environment, companies must understand the needs of the local environment to see whether they may be competing for precious resources like water. Recently, several multinational beverage plants in India became the target of vigorous popular campaigns by local governments when they were accused of overexploiting groundwater and polluting it with toxic heavy metals. The negative publicity and economic impact on the companies heightened awareness of competing factions for water use and the need to engage communities and stakeholders. Manufacturers should be aware that countries have the option to declare force majeure to address water supply and quality problems.

‘Single Most Important Issue’
The Chinese government estimates that $28 billion was lost in industrial output last year because of water shortfalls, and further glitches could disable China’s manufacturing machine entirely. Concerns about access to clean water in China are a source of political tension, and anything that either diverts or pollutes water supplies can cause unrest. The diversion of water from traditional uses in agriculture to industrial applications in some regions easily could spark new protests among poor, rural Chinese, who already are disgruntled over the government’s past emphasis on the booming coastal regions.

Nestle Corp. considers water “the single most important issue we will face as a company in the next 10 years.” Although water distress presents significant challenges for manufacturers in Asia, it presents opportunities for water technology firms. In fact, many companies have made successful business ventures out of supplying technologies for desalination, reverse osmosis and other purification techniques to governments and other clients. Businesses are investing more in water purification, delivery and management systems as a way of protecting their own interests.

Firms have found significant cost savings from more efficiently using, treating and disposing of water in their operations and reducing generation of wastewater discharges. “Water reuse is on the rise as global demand for the world’s fresh water supplies increases,” said Chuck Gordon, executive vice president of Siemens Water Technologies. “By recycling and reusing treated wastewater, communities and industries can save on the costs of clean water, ensure adequate supplies and help to preserve a diminishing natural resource.” According to a recent report by the UN, opportunities for water companies are booming around the world because of looming shortages and decades of underinvestment. Countries are placing billions of dollars of contracts out to tender to improve water supplies for their growing populations. By developing affordable technologies, firms can help the developing world while driving their own innovation and opening up future opportunities.

Municipalities in China are gearing up to address the shortages. A new government report from China shows that to meet the quantity and quality demands of water supply for 350 million urban residents in about 400 cities in China, investment of $30 billion is required by 2010. More than 1,000 water treatment plants will be built throughout China by 2010 and the market for wastewater treatment will total more than $50 billion. In India, industry sources estimate the total water market is worth more than $1 billion – consisting of approximately one-third for water supply, one-third for municipal water treatment and one-third for industrial water treatment.

Continued trends of depleted water sources, increased droughts, overpopulation, increased foreign direct investment and urbanization are all converging in Asia. Unlike the energy sector where one could find alternative sources, water is a finite commodity.

A very large part of the global water crisis is a management issue. Governments must have the political will to make water investments a priority and make the commitment to its appropriate management. Everyone has a stake. There isn’t another choice.  

Peter R. Gourlay is a former director of the U.S. Asia Environmental Partnership where he established environmental technology transfer mechanisms between U.S. industry and Asia. He can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .