May 10, 2002 -- Already the linchpin behind water production in many regions of the Middle East and the USA, desalination is increasingly being touted as a panacea for the world water crisis in the 21st century.
Across Asia, the pressure on water resources, constituted by over-extraction, mismanagement and unnecessary pollution, as well as droughts, is exacerbated by the continent's limited fresh water resources. From unparalleled droughts in Northern China to Arsenic pollution in Bangladesh's groundwater, the need for a safe and sustainable water supply becomes ever more apparent.
With the water shortage creating opportunities galore for generating desalination plant revenues in Asia, it is of crucial importance for companies active in this market to address contemporary issues in a dynamic and innovative fashion in order to attain strategic, sustainable competitive advantage and achieve superior profitability.
Growth will further be galvanised by escalating demand due to explosive rates of population growth across Asia, accentuating the significance of safe freshwater resources for drinking and washing.
A new study by Frost & Sullivan, the international marketing consulting company, gives credence to the buoyancy of the Asian desalination plant market, projecting sales of seawater and brackish water desalination plants, currently valued at $508.7 million, to grow at a compound annual growth rate (CAGR) of 11.0 per cent between 2001 and 2005.
Rising demand for fresh water resources for both industrial and municipal use will help push sales in the Asian desalination market value to just under $1.03 billion in 2010. The study observes annual fluctuations in total market value throughout the forecast period - a direct result of the impact occasionally monolithic projects have on the overall industry.
The municipal market is gathering momentum as prices fall, the technology becomes more user-friendly and end-user confidence and understanding of desalination rises.
Matthew Barker, Industry Analyst at Frost & Sullivan, points to price constraints as the most significant challenge confronting participants in the Asian desalination plant market.
"Although the potential for developing desalination may be high in some regions, the extent and extreme level of poverty in some countries is expected to delay market take-off. Most of the Indian subcontinent falls under this classification. This region boasts enormous potential demand for fresh water delivered through desalination plants, however, lack of project funding remains a key stumbling block," he comments.
"The market has seen some degree of funding from foreign bodies to provide small plants in the most dismally poverty-stricken regions, however, desalination is perceived as an expansive extravagance in comparison with alternative options to solve water shortages. Brackish water desalination equipment generally costs up to 50 percent less than its seawater counterpart. Compared to other potable water recovery techniques, however, such as water recycling and reuse, this is an expensive option," Mr Barker continues.
The private sector's technical ability to produce large volumes of potable water through desalination at a competitive price, coupled with its operational and management expertise, has enticed governments around Asia to turn to the private sector to fund and implement desalination projects. Private participation generally include management and service concessions, asset sale, privatisation agreements and plants built on a Build Own or Build Operate Transfer (BOOT) basis.
Depending on its success, the Singapore BOOT contract - scheduled to commence in
2005 - represents the first truly large-scale desalination plant to be built in Asia and is set to become the benchmark for future projects.
This heightens the importance of relationships between equipment suppliers, foreign and local investors, commercial lenders, government authorities, contractors, insurance companies and public water utilities. Those players that exhibit a solid grounding in the BOOT process will gain a stronger foothold in the Asian market.
As the largest, most influential and most sophisticated regional market, albeit on an equal par in terms of market size with North East Asia and the Indian Subcontinent, Japan has spearheaded growth in the Asian market for desalination plants for the last four decades. Now other markets in the region are expected to become increasingly prominent and offer great opportunities to companies active in the desalination sector.
Around 100 to 120 companies, ranging from huge multinational turnkey plant suppliers to specialist small scale equipment manufacturers, are battling it out on the Asian desalination stage. The current elevated levels of market concentration are predicted to decline over the forecast period, as more companies provide bespoke products for this sector.
Code: B080, Publication Date: May 2002
Background
Frost & Sullivan is an international marketing consulting company that monitors a comprehensive spectrum of high-tech markets for trends, market measurements and strategies. This ongoing research is utilized to complement a series of research publications to support industry participants with customized consulting needs. Interviews and free executive summaries are available to the press.
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