The Asian desalination market – worth its salt?

The international market research company predicts that this industry’s profits will increase from US$162.1 million within1990 –1994, to through the US$1 billion barrier towards 2010 (see related story). In an interactive briefing analysing the Asian desalination market, Barker pointed out the key challenges to companies with a view to operate in this area and advised on market strategies to be adopted in order to succeed.

According to Frost & Sullivan, extreme poverty in Asia induces price constraints and may hinder development in the market – despite the huge demand for fresh water the perception of desalination as ‘lavish and expensive’ discourages investment in such projects. Financing capabilities are also a factor in allowing the market to progress, where countries in Asia cannot fund desalination projects – here the Build, Own, Operate/ Transfer (BOO/T) system works well, companies who cannot offer this facility exclude themselves from certain areas of the Asian market, suggest Frost & Sullivan. Political and economic instability also make long term, financially demanding projects vulnerable.

Attendants of the web cast briefing were invited to vote on which they thought was the most significant challenge: 58% of attendees thought price constraints are the greatest challenge; financing capabilities received 27% of the vote and only 15% of the participants, ranging from engineers to economists and marketing executives, felt that political and economic instability posed the greatest problem to this market.

However despite having to overcome these key difficulties Barker pointed out that there are key drivers which will accelerate the market potential such as water shortages, economic development, population growth and tourist development.

Although the market may vary over the next decade, given that it is a price sensitive market and prices of plants are expected to fall, Frost and Sullivan has given a series of market strategies that they see will maximise companies’ potential to thrive in this market. These include:

• adhering to business etiquette which may vary from region to region in Asia, noting the differing cultural, legal and developmental characteristics of the continent as a whole;
• operating in decentralised offices, having offices located within the country of interest – this allows companies to gear operations to local situations and achieve optimal size and operating costs; and
• private participation in schemes such as BOO/T, which involves companies’ funding and operating desalination projects temporarily, before transferring it to local authorities to operate, the analysis predicts a prosperous future for companies who can grasp these projects.

“With the total desalination plant market currently in the growth stage of its life cycle it offers potentially great opportunities to companies that are active in, or entering the market,” says Barker. However, he warns that companies who fail to meet the market challenges will “find themselves being squeezed out of an increasingly complicated and complicated marketplace”.

Story by Sorcha Clifford