Dealing with Water Scarcity in the Pacific Food System

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P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 - 2 0 0 2

MEETINGTHECHALLENGEOF WATERSCARCITY

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MEETINGTHECHALLENGEOF WATERSCARCITY

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ISBN: 0-9714610-0-7

Foreword 2

Coord inators and Forecast ing Pane l 4

Meet ing the Cha l lenge of Water Scarc i ty 6

Signs of Water Scarcity in the PECC Region 9

Pacific Food Outlook 2001-2002 13

Water Stocks and the Hydrologic Cycle 19

References 20

Websites on Water Resources 21

Pac i f i c Economic Cooperat ion Counc i l 22

PECC Members 24

Sponsor Prof i l es 26

CONTENTS

Univers i t i Putra Malays ia

Pacific Food System OutlookS P O N S O R S

The PECC Food and Agriculture Forum extends its thanks for the generous support of the sponsors of the 2001-2002 Pacific Food System Outlook.

For information about the activities of our sponsors see page 26.

This year we are doing things a bit differently. We have decided to publish only the sum-

mary and overview of our May forecasters’ meeting held in Kuala Lumpur. This report

contains highlights from that meeting. If you are interested in detailed information, you

have full electronic access to the economy-by-economy profiles and accompanying indica-

tor tables on the US PECC website: www.pecc.org/food.

This year’s focus is on the critical role of water and water resource management in the region’s food system.

Some economies in the region are entering an era of water shortage. This is important to the food system

because of all water consumers, agriculture is the biggest user of water withdrawals: about two-thirds of total

water withdrawals in the PECC region. Six economies in the region have the potential for water shortages

unless water control facilities are expanded and/or efficiencies in water use are achieved. More liberalized mar-

kets for agricultural products, and pricing of water will assure more efficient and sustainable use of water

resources in the region. This will also result in a pattern of food trade that better reflects the relative scarcity of

water now existing in different parts of the region.

This report was made possible with the generous support of the Universiti Putra Malaysia. We especially

appreciate the efforts of Dr. Mad Nasir Shamsudin, Professor/Head, Department of Agribusiness and

Information Systems and Dr. Jinap Selamat, Professor/Director, University Research Park for their leadership in

assuring the substantive and organizational success of the forecasters meeting in Kuala Lumpur, May 8-10,

2001. We also appreciate the support of the Malaysian Institute of Strategic and International Studies.

I express my sincere gratitude to Mr. Ahmad Fuad Embi, Deputy Director General, Department of

Irrigation and Drainage, Malaysian Ministry of Agriculture for his excellent stage-setting presentation on the

role of water resources and water resource management in the region’s food system.

I am most grateful to the individual economists representing the 16 economies in the PECC region for

their dedication and support for this unique multinational project, now in its fifth year. Brad Gilmour of

Agrifood Canada played a key role in developing the water theme presented in this report. A special thanks

goes to William Coyle (ERS, USDA) and Constanza Valdes (ERS, USDA) for their continued leadership in

producing this report.

I also appreciate the faithful support of the Farm Foundation and the Economic Research Service (ERS),

and the special interest and support of Praveen Dixit and Neil Conklin, both of ERS.

Thanks are due to Mark Borthwick, executive director of the US National Committee for Pacific

Economic Cooperation, for his continued support; Wilma Davis of ERS, USDA, for statistical support; Kate

Sullivan for editorial services; Joseph Yacinski, Carol Hardy and Hal Downs of Yacinski Design for design and

production; and Liz Hughes of Beach Brothers Printing.

Finally, I am grateful to the PECC member committees and the PECC International Secretariat for their

continued help in supporting and guiding this important project.

Walter J. Armbruster

President, Farm Foundation USA and

Chair, Pacific Food System Outlook, PECC

October 2001

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FOREWORD

MALAYSIA

Mad Nasir ShamsudinProfessor/HeadDepartment of Agribusiness and

Information SystemsUniversiti Putra Malaysia

Kusairi Mohd NohLecturer Faculty of Economics and

Management Universiti Putra Malaysia

Jinap SelamatProfessor/DirectorUniversity Research ParkUniversiti Putra Malaysia

MEXICO

Francisco Mayorga CastanedaChief Director Apoyos y Servicios a la

Comercialización Agropecuaria(ASERCA)

Secretaria de Agricultura,Ganaderia, Desarrollo Rural,Pesca, y Alimentación(SAGARPA)

NEW ZEALAND

William BaileyChair in AgribusinessCollege of SciencesMassey UniversityPalmerston North

PERU

Luis Jimenez Dean of Faculty of EconomicsUniversidad Nacional Agraria,

La MolinaLima

THE PHILIPPINES

Salvador P. CateloDeanCollege of Economics and

MangementUniversity of the Philippines, Los

Banos

CHINESE TAIPEI

Ching-Cheng ChangResearch Fellow and Division

ChiefThe Institute of EconomicsAcademia Sinica

THAILAND

Ruangrai TokrisnaAssociate ProfessorDepartment of Agricultural and

Resource EconomicsFaculty of Economics Kasetsart University, Bangkok

UNITED STATES

Mark DenbalyChief

Annette Clauson Economist

Food Markets BranchFood and Rural Economics

DivisionEconomic Research ServiceUS Department of Agriculture


P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 – 2 0 0 2

PECC COORDINATORS

Walter J. ArmbrusterChair of the Pacific Food System

Outlook and PresidentFarm Foundation USA

William T. CoyleSenior Coordinator, Pacific Food

System OutlookSenior Economist, Market and

Trade Economics DivisionEconomic Research ServiceUS Department of Agriculture

Constanza M. ValdesProject Director, Pacific Food

System OutlookEconomist, Market and Trade

Economics DivisionEconomic Research ServiceUS Department of Agriculture

AUSTRALIA

Terry ShealesChief Commodity Analyst Agriculture and Food Economics Australian Bureau of Agricultural

and Resource Economics (ABARE)

CANADA

Brad GilmourMui-heng TanLars BrinkForeign Agrifood Analysis SectionAgriculture and Agrifood Canada

CHILE

Eugenia MuchnikManager, Agroindustrial

DepartmentFundación Chile

CHINA

Hu SuquanSenior Research FellowDivision DirectorResearch Center for Rural

Economy (RCRE)Ministry of Agriculture, China

ECUADOR

Rubén FloresProfessor Faculty of EconomicsPontifical Catholic University of

Ecuador

INDONESIA

Effendi PasandaranEconomist Center for Agricultural Policy

StudiesJakarta

JAPAN

Keiji OhgaProfessorDepartment of Global

Agricultural SciencesGraduate School of Agricultural

and Life SciencesThe University of Tokyo

KOREA

Myong-Keun EorResearch Fellow International Trade and

Agriculture DivisionKorea Rural Economic Institute

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COORDINATORS AND FORECASTING PANEL

ater is the most essential substanceto life on earth. Yet it is also among the most

undervalued resources. When sup-plies of water have dwindled oraccess to fresh water declines, envi-ronmental degradation, social andpolitical instability, and economicwell-being can all be adverselyaffected. Until fairly recently, poli-cy-makers and analysts have notadequately included water ineither their modeling efforts, theo-ries of public choice, or policy dis-cussions. For example, in classical

“growth” theory, land, labor andcapital are represented as the pri-mary inputs to production. Yetland will produce nothing withoutwater. Most industrial, capital-intensive processes also requirewater. Perhaps because it is so fun-damental, water’s availability isoften implicitly assumed. But suchimplicit assumptions may lead topoor policy choices.

At first glance, water mightseem to be in abundance; roughly70 percent of the earth’s surface iscovered by water. However, lessthan one percent of the earth’swater is both fresh and available.Because of the critical role waterplays in the food system—fromcrop and livestock production, tofood processing and food prepara-tion—both at home and in thefood services sector—and, ofcourse, as a life-sustaining bever-

age–it has been selected as the spe-cial theme for this year’s PacificFood System Outlook.

Water availability or waterendowment in the PECCeconomies and policy issues relatingto the allocation, distribution, andmanagement of water resources aredetermining factors in the efficiencyand competitiveness of each econo-my’s food system. This report sup-ports initiatives endorsed at the1999 Auckland APEC Ministerial,to provide all member economieswith “reliable access to safe, afford-able food supplies within an open,environmentally sustainable food

system.” (National Center forAPEC, p. 9). The PECC region isshowing signs of water scarcity andunsustainable water use and man-agement practices.

Since agriculture is the biggestuser of water in many of theregion’s economies (figure 1), farmpolicies can contribute to unsus-tainable water use. Protectionistfarm policies draw land, capital,and water resources into agricul-tural production when they wouldbe more efficiently used in othereconomic activities. Eliminatingimpediments to food trade canhelp align an economy’s food pro-duction with its economic andresource endowment, includingwater availability. Some economiesare exporting water-intensive com-modities even though their landand water resources are in shortsupply, while other, resource-rich

economies are unable to exploittheir food production potential.

Putting Water Scarcity in Perspective

The International WaterManagement Institute (IWMI)conducted a comprehensive analy-sis of the prospects for globalwater supply and demand. Thestudy covers 18 of the 22 PECCeconomies. We have used WorldWater Demand and Supply, 1990to 2025: Scenarios and Issues(Seckler et al.), along with econo-my profiles (www.pecc.org/food),

to assess the outlook for supplyand demand of water in thePECC region.

Inadequate data and method-ological issues hamper analyses ofglobal and regional waterresources. Measuring stocks andflows of water is difficult. Forexample, data for water use sel-dom include the direct agriculturaluse of rainwater—an essentialwater source for farming in manyeconomies of the PECC region,even in heavily irrigated areas.Globally, about 60 percent of foodis produced using rainwater, 40percent using irrigation. The rain-fed crop area in the region variesfrom 37 percent in Japan to 98percent in Canada.

Country aggregate data tend tomask many realities with respect towater resources. The common useof national and annual data dis-


MEETING THE CHALLENGE OF WATER SCARCITY

F i g u r e 2 PER CAPITA ANNUAL WATER RESOURCES (M3) AND THE SHARE OF WITHDRAWALS

F i g u r e 3 THE DISTRIBUTION OF WATER WITHDRAWALS

F i g u r e 1 USE DISTRIBUTION OF WATER WITHDRAWALS IN PECC

“It is widely recognized that many countries are entering an era of severe

water shortage.” —Seckler et al. WORLD WATER DEMAND AND SUPPLY, 1990 TO 2025: SCENARIOS

AND ISSUES, Research Report 19, International Water Management Institute, Colombo, Sri Lanka, 1998, p. v.


W

Japa

n

Kore

a

Chin

a

Chin

ese

Taip

ei

Sing

apor

e

Indo

nesi

a

Mal

aysi

a

Phili

ppin

es

Viet

nam

Thai

land

Aust

ralia

New

Zea

land

Cana

da

USA

Mex

ico

Colo

mbi

a

Ecua

dor

Peru

Chile

05

10152025303540

100%

80

60

40

20

0

AGRICULTURE

INDUSTRY

DOMESTIC

IRRIGATION

INDUSTRY

DOMESTIC

PER CAPITAANNUAL WATERRESOURCES

WITHDRAWALS AS SHARE OF ANNUAL WATERRESOURCES

Source: Seckler, David, Upali,Amarasinghe, Radhika de Silva,and Randolph Barker. 1998.WORLD WATER DEMAND ANDSUPPLY, 1990 TO 2025: SCENARIOSAND ISSUES, Research Report 19,International Water ManagementInstitute, Colombo, Sri Lanka;and Pacific Food Outlook.

Source: WRI, (see table. pp. 16-17)

Source: Seckler, David, Upali,Amarasinghe, David Molden,Radhika de Silva, and RandolphBarker. 1998. WORLD WATERDEMAND AND SUPPLY, 1990 TO 2025: SCENARIOS AND ISSUES,

Research Report 19, InternationalWater Management Institute,Colombo, Sri Lanka.

New

Zea

land

Peru

Colo

mbi

a

Cana

da

Chile

Mal

aysi

a

Indo

nesi

a

Ecua

dor

Aust

ralia

Phili

ppin

es

Viet

nam

Thai

land

USA

Mex

ico

Chin

a

Japa

n

Chin

ese

Taip

ei

Kore

a

100,000

80,000

60,000

40,000

20,000

0

40

30

20

10

0

Per capita annual water resources, m3 Withdrawals as share of annual water resources, %

PECC ROW

24.5%

11.5%

64.1% 79.1%

14.1%

6.8%

withdrawal to annual waterresources as a relative measure ofscarcity, the PECC region uses 9percent of its available waterresources, compared to 6 percentin the rest of the world. While thisnumber may not seem high,according to Seckler et al., in sixof the PECC economies, water useis nearly 20 percent or more ofavailable supplies. These are:Korea (41 percent), Singapore (33percent), Mexico (21 percent),China (19 percent), Thailand (19percent), and the United States(19 percent) (table, column 9).Singapore is an anomaly. As a city-state, it depends on water-richMalaysia for most of its supplies inmuch the same way that HongKong is dependent on southernChina. The study treats Chinaseparately both because of its sizeand because of the dramatic geo-graphic disparities in water supplybetween the water-poor north andthe water-rich south. In theSeckler study, 1996 WorldResources Institute data are used.With more recent data from the

same source plus our own ChineseTaipei data, we get a slightly dif-ferent set of relatively “water-scarce” economies: Korea (36 per-cent), Chinese Taipei (23 percent),Japan (21 percent), China (19 per-cent), Mexico (19 percent), andthe USA (19 percent)(figure 2).

Water supply in the PECCregion, as in other parts of theworld, comes from net inflows ofwater from rivers and under-ground sources minus outflows;changes in stocks such as reservoirsor aquifers; runoff (precipitationminus evaporation); and desalin-ization. Inflows from outside thePECC region are limited. Fewmajor river systems cross into thePECC region. Six of theeconomies are islands and thus areself-contained: Australia, NewZealand, Philippines, Indonesia,Chinese Taipei, and Japan. TheUnited States shares a number ofimportant rivers with its neigh-bors: with Canada, the US sharesthe Mississippi, Columbia, St.Lawrence, and the Yukon Rivers,and the US shares the Colorado

and Rio Grande Rivers withMexico. Major Chinese river sys-tems are largely contained withinChina’s political boundaries(Yellow, Yangtze, Pearl, BlackDragon, and so forth). Colombia,Ecuador, and Peru provide a rela-tively small share of the Amazonsystem’s headwaters. The Mekongis the largest river system in thePECC region shared by more thantwo economies (China, Vietnam,Thailand, Laos, and Cambodia)(Gleick, p. 219-247).

The single most importantsource of water in the region isrunoff from precipitation, whichvaries from 700 mm/year inMexico to 3,000 mm/year in thetropical economies of Colombiaand Malaysia. Aquifers, under-ground reservoirs that are fed byinfiltrating water from the surface,are also important. The aquiferbeneath the Huang-Huai-Haiplain in eastern China suppliesdrinking water for nearly 160 mil-lion people. Some of the largestcities in the PECC region, includ-ing Jakarta, Lima, and Mexico


guises significant regional andinter-annual variations. In truth,the most reliable data and informa-tion are at the basin level, sincethat is the level at which waterscarcity or abundance can truly bemeasured. It may also be the levelat which water resources are bestmanaged. It may even be thatwater is scarce, say, within a partic-ular city or locality in a basin. Orit can be scarce for groups, like thepoor, within a relatively water-richarea, even if it is in abundance for

others within the same area.Some examples illustrate these

enormous regional and temporalvariations. Two-thirds of Mexico isarid or semi-arid. The availabilityof water in the south and south-east is eight times greater than it isin the rest of the economy.Seventy percent of annual rainfallis concentrated during fourmonths of the year. Contrary towhat the national numbers show,

water use in the arid westernUnited States exceeds half of therenewable water supplies undernormal precipitation conditions.In drought years, water use oftenexceeds renewable flows. Even inCanada, where water availability isgenerally not a problem, watershortages occur in the semi-aridwest. Chile, which has generallyfavorable water resources, facescycles of dry and wet periods innorthern and central areas. Waterdemand in Indonesia’s Java far

exceeds demand on the sparselypopulated outer islands, but abouttwo-thirds of the economy’s sus-tainable groundwater supplies arein the sparsely populated areas ofIrian Jaya and Kalimantan.

Japan, Korea, Chinese Taipei,and China experience the mostintense precipitation during themonsoon season, June throughSeptember. In Korea, precipitationduring this period accounts for

two-thirds of total annual precipi-tation. A similar share falls duringthis time in Chinese Taipei; on theother hand, water shortages some-times occur between February andMay.

About 85 percent of the pre-cipitation in northern China and70 percent in the south fallsbetween June and September.About 60 percent of China’s farm-land is located in areas where theannual surface runoff is less than18 percent of total run off. Most

parts of northwest China, includ-ing the provinces of Xinjiang,Ningxia, Inner Mongolia, Qinghai,Gansu, and Shaanxi, are drought-prone and short of water. With apopulation of 90 million, north-west China covers about 30 percentof the total land area in China,while its water resources accountfor only 10 percent of the total.

Malaysia’s water supplies areinfluenced by the southwest (Mayto September) and northeast(October to March) monsoons.Rainfall varies from2,420mm/year in PeninsularMalaysia to 3,000-4,000 mm/yearin Sabah and Sarawak.

Water Supply — Scarcity or Abundance?

Many PECC economies—likeother regions of the world—areshowing signs of water scarcity.Depending on the yardstickemployed, there are a number ofwater-stressed economies withinthe PECC region (Seckler, et. al.1998). Using the ratio of water



“The three most important priorities are water, water, and water.”

—FAO Director General, Jacques Diouf as quoted in George McGovern’s THE THIRD FREEDOM, 2001, p. 113.

SIGNS OF WATER SCARCITY IN THE PECC REGION

� A recent World Bank Report calls for China to make a ”much more significant, comprehensive, and sustainedcommitment” to addressing the acute water shortage and pollution problems in north China or face seriousconsequences for future generations (June 2001).

� Nine years of drought, with agricultural interests and municipalities from both the United States and Mexicodrawing from the Rio Grande, have reduced the river flow to a mere trickle by the time it reaches the Gulf ofMexico. Other rivers—the Yellow River of China and the Colorado River in the US and Mexico--are similarlydepleted by the time they reach the ocean for large parts of the year (August 2001)

� Recent analyses suggest that Western Canada, and the Pacific Northwest in the United States (and possiblyother regions at similar latitudes) may be in for a period of prolonged drought. Rusak et al. (2000) find evi-dence suggesting that an extended period of "dustbowl" type conditions exceeding the 1930’s in severity couldoccur before 2025.

� Large areas of Western Canada and the Pacific Northwest of the United States are experiencing recorddrought conditions.

� In North Korea, a close PECC neighbor, a protracted dry spell, lasting from March to mid-June, has depletedrivers and reservoirs and crippled irrigation systems (July 2001).

� A prolonged drought in Korea is threatening its rice harvest (June 2001).� Australia’s water resources are under considerable pressure from users, and some land is being damaged by

rising salt levels. Government studies have found a third of the nation's groundwater reserves are being over-used and 44 million acres of farming land will be hit by salinity within 50 years. (April 2001)

Sources: FAO, Water On Line (www.uswaternews.com/ homepage.html) and Rusak et al.

APEC Asia Pacific Economic Cooperation Forum

AWR Annual Water Resources

FAO Food and Agriculture Organization of the United Nations

GNP Gross National Product

IMF International Monetary Fund

IWMI International Water Management Institute, Sri Lanka

NASA National Aeronautics and Space Administration

OECD Organization of Economic Cooperation and Development

PECC Pacific Economic Cooperation Council

PEO Pacific Economic Outlook

PFO Pacific Food Outlook

UNESCO United Nations Educational, Scientific and Cultural Organization

USDA US Department of Agriculture

WRI World Resources Institute

Abbreviations used in the Pacific Food System Outlook

perverse. Leaders and administra-tors have recognized that water isarguably the most importantresource and, in some economies, ascarce resource. Yet, in their effortsto make the resource accessible toall, they have either inadvertentlyor purposefully priced it as thoughit were in abundance. Rather thanpromoting efficient use and theestablishment of priorities forwater’s use, water policy typicallyencourages overexploitation andexacerbates shortages. The World

Bank estimates that governmentsrecover only about one-third of thecost of providing drinking waterservices in developing countries.With irrigation, the rate of costrecovery is even worse: typically,only 10 to 20 percent of the cost.

There is often a plethora ofinstitutions from several levels ingovernment involved in dealingwith water-related issues, and thismay undermine proper gover-nance and accountability.Cooperative management using a

basin-by-basin approach might gosome way to ensuring that theincentives are correct and thatthere is a correspondence betweenauthority and responsibility inmanaging water resources.

Empirical work suggests thatthere are environmental payoffswhen prices for water use are tied tothe volume used, or when prices areapplied in incremental tiers. In agri-culture, for example, a 10 percentincrease in price might trigger adrop in demand between 15 and

City, depend on aquifers for muchof their water supply. Aquifers alsosupply a significant share of theirrigated area in the United Statesand China. The Ogallala aquifer isunder parts of eight states in themid-United States (Postel, 59).While the Ogallala still sufferswater depletion, use of more effi-cient irrigation methods hasslowed this trend (Postel, 185-89).Worldwide groundwater depletionis estimated at 200 km3 per year,about 10 percent of total waterwithdrawals for irrigation

(Sampat, p. 11-13). Desalination capacity in the

PECC region represents aboutone-quarter of the global total,with the United States, Japan, andKorea as the region’s leaders.However, this capacity is a veryminor source, potentially meetingthe water needs of just a few mil-lion people (Gleick, p. 288).

Water Demand Situation

Water demand is difficult to esti-mate: the concept of “with-drawals” is commonly used as aproxy for consumptive use.Consumptive use includes water“lost” to the system, at least in theshort run, through evaporation,absorption and transpiration byplants; consumption by people;and loss of water to the ocean.This is a short-run loss becausewater is constantly being recycled.

Withdrawals include water that isconsumed but also “excess” waterthat is returned to an originalsource where other users down-stream can use it.

In the PECC region, a largershare of water withdrawals is allo-cated to industrial uses than in therest of the world, 25 percent com-pared to 14 percent (figure 3).This is due to the fast pace of eco-nomic growth and urbanization inthe region.

Nevertheless, production agri-culture in the PECC region still

takes the lion’s share of the watersupply, 64 percent compared with79 percent in the rest of theworld. This varies across theregion, tending to be lower in themore developed economies likethe United States (40 percent),Canada (7 percent), New Zealand(55), and Japan (64). Withdrawalsare higher in Asia, where irrigatedrice production is a large user ofwater. The PECC region accountsfor about 40 percent of global irri-gated area, about 110 millionhectares, with China, the UnitedStates, and Southeast Asiaaccounting for about 80 percentof the region’s total (figure 4).Irrigation continues to expandacross most of the region with theexception of East Asia, where areain rice production, the predomi-nant user of irrigation, has slowlybeen declining. In other parts ofthe PECC region, irrigated area is

still expanding, but into non-riceproduction (figure 5).

The dietary shift away fromrice in Asia is driven by incomegrowth, which has been rapid inrecent years except during the1997-99 financial crisis. Asincomes rise, consumers diversifydiets, consuming less rice andmore wheat, meats, and otherproducts. While calorie for calorie,wheat requires less water than riceto produce, production of meatsrequires much more. Thus, theimpact of westernizing diets in

East and Southeast Asia has had amixed impact on water consump-tion to the extent that foods areproduced locally (figure 6).Currently, the North Americandiet uses more than twice theamount of water of a typical dietin East and Southeast Asia (figure7). One can expect that the water-intensity of diets in East andSoutheast Asia is likely to increase,despite less rice, while in NorthAmerica, with a leveling off inmeat consumption and with somesubstitution of chicken for beef,the diet is likely to become slightlyless water intensive.

Existing Water ResourceManagement — Publicly SubsidizingUnsustainable Development

In many of the economies dis-cussed, water policy appears to be



“Despite legitimate concerns about whether cropland will be sufficient

to meet agricultural demand, the resource base that may pose the most

serious threat to future global food supplies is water.” —Mark Rosegrant and Peter Hazell. TRANSFORMING THE RURAL ASIAN ECONOMY: THE UNFINISHED

REVOLUTION. ASIAN DEVELOPMENT BANK, Oxford University Press, 2000, p. 294.

F i g u r e 5 HARVESTED RICE AND IRRIGATED AREA IN PECC

F i g u r e 4 DISTRIBUTION OF IRRIGATED LAND IN PECC REGION

P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 – 2 0 0 2 1 1

Mexico 5.7%

Canada 0.6%

Russian Federation 4.0%

South America 4.1%

Australia 2.0%New Zealand 0.3%

China 47.1%

United States 19.7%

Korea, Rep. 1.0%Japan 2.3%

Southeast Asia 12.7%

Chinese Taipei 0.4%

Source: FAO, (see table, column 12, pp 16-17)

1961 1966 1971 1976 1981 1986 1991 1996 2001

120

100

80

60

40

Million hectares

Source: FAO and USDA

IRRIGATIONAREA IN PECC

Asia PECC 63.5%

North America 26.0%

Other 10.5%

IRRIGATED AREA

HARVESTED RICE AREA

20 percent. Cost-conscious farmersare less likely to overuse water,reducing the risk of water erosion,salinization, and waterlogging. Theunderpricing of water has led to theoverexploitation of aquifers, andoverapplication of irrigation waterin a number of PECC countries,including some of the largest, e.g.,Australia, Canada, China, Mexico,and the United States. As a result,some of the aquifers and water sys-tems in question could soon be pastthe point of no return and, in otherareas, problems with salinizationhave become extreme. For example,10 percent of the irrigated land inMexico is damaged by salinity.More than 20 percent of the irrigat-ed land in China and the UnitedStates is damaged by salinity.

There is a misconception thatwater subsidies are necessary tosupport the poor. Underpricing,when it occurs, typically leads torationing. When access to publiclyfunded water is limited, the poorare excluded more often thanwealthier members of society.

Work done by The WorldBank and others suggests that sub-sidies for drinking water favor therich, as they have more readyaccess to public water supplies.Typically, 80 percent of the richestfifth of the population in a devel-oping economy will have access tothe public water supply, comparedwith only 30-50 percent of thepoorest fifth of the population.Similar observations have beenmade vis-à-vis rich and poor farm-ers and the availability of publiclyfunded irrigation water. The con-sequences are that the rich benefitwhile the poor still have relativelyhigh water expenses.

These observations do notnecessarily mean that water subsi-dies are bad. Rather, it does indi-cate that they must be carefully

designed if they are to better targetthe needs of the poor and be morecost-effective. For example, differ-ent approaches to targeted micro-credit and issuing subsidized waterstamps for the poor have workedwell in some locations.

Meeting the Challenge of Water Scarcity in the PECC Food System

According to the IWMI report(Seckler, et al.), with significantimprovements in irrigation effi-ciency, projected water demand inthe PECC region could be met bya 10 percent increase in supply by2025. Without those efficiencygains, the increase in supply need-ed would be much greater, closerto 40 percent more than the 1990base period. The more efficientscenario in the IWMI studyassumes sharp increases in irriga-tion efficiency in the largesteconomies in the region—theUnited States and China—as wellas in other heavy irrigators likeMexico, Thailand, Indonesia, andthe Philippines (Seckler, et al).

More Efficient Water UseRequires Institutional Change

A key factor to increasing irriga-tion efficiency in the region is theadoption of market-orientedapproaches. If water is a free good,there is little incentive to use itsparingly. With the developmentof market institutions (such as asystem of water rights, tradablewater entitlements, and pricesreflecting the marginal cost of sup-plying water), there are greaterincentives for more widespreadadoption of efficient storage, deliv-ery, and application systems. Insome economies, water resources,once controlled by the central gov-

ernment, are being privatized andturned over to local irrigationassociations and other entities,which tend to be more efficient inmanaging water resources.

Water serves many public andprivate purposes, including drink-ing, bathing, irrigation, powergeneration, recreation, and envi-ronmental and waste disposal.Applying market principles towater use is not easy, and will varydepending on unique local valuesand circumstances, but willbecome more common in areaswhere competition for its use ismost intense. Administration of awater market requires a stronglegal tradition with provision foradjudicating disputes, low transac-tion costs for trading water, and aprocess to take account of unde-sirable impacts on those notdirectly involved. For example,water diverted upstream in awater basin system can adverselyaffect downstream users by thequality and quantity of waterreturned to the system.

Around the Pacific Rim, thedevelopment of water markets hasbeen slow with a few exceptions.Chile, for example, enacted legisla-tion 20 years ago to create a mar-ket system in which water rightscould be traded freely under a reg-ulatory framework, a unique sys-tem for a developing economy.Chile’s system has been studied bymany countries in the region andby multilateral organizations suchas The World Bank. Water mar-kets have developed much moreactively in the river basins wherewater scarcity is greater. Waterrights, which were provided free ofcharge on the basis of previoususes and auctioned to newcomers,can be traded, transferred, or rent-ed, and there is total freedom inthe use of the water under one’s



Serious drought in the Korean

peninsula, northern China,

Southeast Asia, and parts of

the United States and Canada have

raised concerns about the short term

impact on agriculture, particularly

cereal crop production. Overall grain

production in the region is expected

to be down 3 percent in 2001. Most

of the adjustment will be in lower

area and yields for coarse grain and

wheat; rice production will remain

stable. Declines in China, Canada,

and the United States will be partially

offset by increases in Russia. As sup-

ply and demand balances tighten

slightly, international prices for

grains, oilseeds, and livestock prod-

ucts will continue their slow recovery.

The value of food and agricul-

tural trade is expected to continue

its upward trend in the region, with

a continuing shift in the composi-

tion to consumer-oriented products.

North America has become a rela-

tively more important market for

food and agricultural products since

the Asia financial crisis of 1997-99.

Income growth always has an

important influence on the region’s

food system, particularly away-

from-home food services and con-

sumption of income-elastic foods

such as meats. After strong growth

in 2000, the PECC region is forecast

PACIF IC FOOD OUTLOOK 2001-02

to grow more slowly in 2001 and

2002, driven partly by sluggish per-

formances of the leading economies

of the United States and Japan.

Lower demand for consumer

durables and residential housing,

tighter monetary policy in 1999 and

2000, and high oil and natural gas

prices were key factors in the US

slowdown from 5 percent in 2000 to

a forecasted 1 percent in 2001. High

US interest rates enhanced the value

of the already appreciating dollar and

raised interest rates worldwide. The

US economy is serving less as the

engine of trade growth for the

region; US imports which grew 13.5

percent in 2000, are expected to

slow to 3.5 percent in 2001 and 3.8

percent in 2002 (PEO, 9). The second


largest economy in the region, Japan,

continues to hover close to recession

as it has for the past 10 years. Equity

markets across the region continue

to falter and, with few exceptions, are

lower than levels prior to the Asia

financial crisis.

Food price inflation remains

moderate across the region. In

economies affected by the Asia cri-

sis, some prices will increase in 2001

and 2002 as economies return to

more normal conditions. In the more

affluent economies, food price infla-

tion is also expected to rise some-

what in 2001 because of higher

energy and logistics costs.

APEC’s Ministerial in Shanghai

in October and a new round of WTO

talks in Qatar in November hold out

the prospect for future liberalization

of the region’s food system. APEC

has put considerable emphasis on

the urgency of a more efficient food

system, through market liberalizing

measures and investment in rural

development. Nevertheless, farm

support levels in Japan, US, Canada,

and Mexico have shown an upward

trend during 1997-2000 according

to the OECD.

RICE PRODUCTION 1999 2000 2001 f

Million tons

China 138.9 131.5 130.2

Japan 8.4 8.6 8.5

US 6.5 6.0 6.2

Southeast Asia 78.6 77.4 78.4

Other PECC 12.5 12.9 12.7

Total PECC 245.0 236.5 236.0

World 408.4 395.6 395.7

Percent

PECC share 60.0 59.8 59.7

Source: USDA, August 2001

TOTAL GRAIN PRODUCTION*1999 2000 2001f

Million tons

Australia 34.5 31.2 31.9

Canada 53.7 51.1 48.4

Chile 2.4 2.5 2.5

China 390.0 345.1 337.4

Colombia 2.6 2.6 2.6

Ecuador 0.9 0.9 0.9

Indonesia 39.6 37.5 38.5

Japan 9.1 9.5 9.4

Korea 5.8 5.8 5.8

Malaysia 1.3 1.5 1.5

Mexico 29.5 27.6 29.1

New Zealand 0.9 0.9 0.9

Peru 2.7 2.7 2.8

Philippines 12.2 12.6 12.6

Russia 53.2 63.0 66.9

Chinese Taipei 1.5 1.4 1.5

Thailand 20.6 21.4 21.5

US 332.2 341.0 317.4

Vietnam 22.7 22.3 22.8

Total PECC 1015.5 980.7 954.2

World 1872.6 1831.6 1821.4

Percent

PECC share 54.2 53.5 52.4

*rice, wheat and coarse grain

Source: USDA, August 2001

FOOD PRICE INFLATION 2000e 2001f 2002f

Food price changes (percent)

Australia 2.4 2.5 2.5

Canada 1.7 4.5 1.8

Chile -0.1 1.0 2.0

China -2.5 1.0 1.2

Japan 0.1 0 0

Korea 0.8 4.5 4.0

Malaysia 1.9 1.6 2.0

New Zealand 3.6 2.5 2.5

Peru 3.0 3.0 na

Chinese Taipei -0.4 1.5 2.0

Thailand -1.8 4.8 3.3

United States 2.3 3.2 2.5

e estimate f forecast

Source: Pacific Food System Outlookeconomy profiles.

For more economy-by-economy analysis, see www.pecc.org/food.

production. In Peru, the agriculture sector

rarely pays for water, with watercosts estimated to make up lessthan one per cent of total agricul-tural production costs, contributingto poor irrigation practices and lowwater-use efficiency. Similarly, lackof proper control and inappropriatetariffs for the use of groundwaterhave resulted in the overexploita-tion of aquifers and severe environ-mental problems, such as contami-nation and salinity. To conserve

water resources, the governmenthas called for the creation of awater market that would operateindependently of the land market.

Japanese irrigation develop-ment and water management arestipulated in the Agricultural LandImprovement Law. CommunalLand Improvement Districts (LID)are based on the role of the ruralcommunity in the management ofthe irrigation system. LIDs areresponsible for management,maintenance, and investment in

the local irrigation system. Despitelocal control, the central and localgovernments heavily subsidize theconstruction of these systemsbecause of the perceived broadersocietal benefits associated withpaddy rice cultivation.

The Critical ChallengeFacing China

With more than 20 percent of theworld’s population, limited landarea, and rapid economic growth,China faces massive economic


ownership. “Price reforms in Chile reduced the use of irrigatedwater by as much as 26 percentand saved as US$400 million in new water infrastructure” (WRI, www. wri.org/press/cheapwater.html ).

Nevertheless, water conflictsstill arise in Chile between house-hold users and the economy’s largemining sector, and between indige-nous populations and hydroelectricplants. The government has intro-duced a proposal that wouldimpose financial penalties for thenon-use of water; it stipulates thatrights to water not used within agiven time period would bereturned to the authorities andreassigned to those who need water.There is strong political oppositionto this proposal from farm associa-tions, who consider the proposedchanges as a challenge to their pri-vate property rights.

Korea, which has the lowestper-capita water supplies of anyeconomy in the region, has estab-lished the Comprehensive Projectfor Rural Water Utilization. Theprinciple of “user pays” for irriga-tion water was introduced inJanuary 2000 and is expected toraise the efficiency of waterresource allocation in the agricul-tural sector. Prior to 2000, farmerspaid for water through a member-ship fee to the FarmlandImprovement Association (FIA),which supplied and managed irri-gation water. The government stillprovides subsidies for irrigation,but the government share is pro-jected to drop and the price ofwater is expected to rise, more pre-cisely reflecting water supply costs.

In Mexico, water resources arein the public domain. TheNational Water Commission is theexecutive agency empowered tomanage and oversee water

resources. It is directed by theMinistry for the Environment andNatural Resources. Concessionsare granted to users, generally for aperiod of ten years. Legislationallows transmission of water userights; they can be transferredindependently of land. Irrigatedareas are generally grouped intoDistritos de Desarrollo Rural(DDRs), which are geographicareas surrounding water infrastruc-ture. Almost all DDRs are run bythe beneficiaries, who are responsi-ble for operating, maintaining,and collecting fees for the irriga-tion system.

In some economies the pre-conditions for developing a watermarket do not exist. Canada andNew Zealand, with the highestper-capita water supplies in theregion, have little incentive todevelop water markets. They haveplenty of water. They have legalsystems that define and protectwater rights and they have a vari-ety of fee systems, but they do nottrade water rights. According toEnvironment Canada, mostCanadians pay water rates that donot promote conservation(www2.ec. gc.ca/water/en/man-age/effic/e_rates.htm). Only 4 per-cent were charged a progressivelyhigher price with greater volumes.New Zealand has no market forthe transfer of water. Local govern-ments provide water to urbanareas, while rural areas are self-sup-porting. Water metering occursonly in the Auckland Region,where it began in the early 1990s.

Irrigation water use in NewZealand is carefully controlledthrough the use of water rights,granted and controlled by localgovernment bodies. In 1991, thecomprehensive ResourcesManagement Act (RMA) wasenacted. This act placed into

local government hands theresponsibility to maintain localwater quality and quantity. Alongwith the decentralization ofwater management authoritycame the removal of subsidiesassociated with irrigation,drainage, and flood control. Therole of the national governmentis now limited to the manage-ment of issues associated withcoastal waters. With farmersresponsible for the funding oftheir own irrigation projects,water use has become more effi-cient. The RMA has placeddirectly upon agriculture theresponsibility to reduce all waterpollution associated with produc-tion agriculture.

In Australia, national and stategovernments have introduced amore market-oriented system ofwater allocation and usage. Thecatalyst for reform was a 1994agreement by the Council ofAustralian Governments thatincluded commitments to con-sumption-based pricing and fullcost recovery for water deliveryservices; clearly specified waterproperty rights separated from theland; formal determination ofwater allocations to the environ-ment; and the introduction ofwater trade to maximize economicreturns from water use.

While some water trading istaking place in California andColorado, water costs in theUnited States still do not reflecttheir full economic cost; infra-structure development for deliver-ing off-farm surface water is gener-ally publicly subsidized.

Privatization of Malaysia’swater supply is expected to bestepped up, along with pressureto increase efficiency. Water tariffswill undoubtedly increase; cur-rent rates do not cover costs of



F i g u r e 7 TOTAL WATER REQUIRED TO PRODUCE REGIONAL DIETS, LATE 1980’S

F i g u r e 6 A CHANGING DIET REDUCES WATER USE

Source: Pimentel et al.; Tuongand Bhuijan 1994; UNFAO1999, in Peter H. Gleick, THEWORLD’S WATER, 2000-2001.

North America

Western Europe

Former USSR

Eastern Europe

OECD-Pacific/Oceania

Middle East/North Africa

Latin America

Cent. Planned Asia

South and East Asia

Africa, Sub Sahara

0 500 1,000 1,500 2,000

Water to produce average diet (m3/per capita/year)

1,830

1,170

1,570

1,430

1,210

1,070

1,030

920

770

640

Differences arise from the variability in consumption of water-intensive meatproducts, regional climates, technology, and farming practices

Note: Includes both rainfalland irrigation water.Assumes variations inregional irrigation efficien-cies and diets. Data on dietscome from FAO, 1999. Waterrequirements per caloriedeveloped from Gleick, 1997.Source: Peter H. Gleick, THEWORLD’S WATER, 2000-2001

100

50

20

10

5

2

1

0.5

Rice Wheat Beef Chicken

WHEATPRODUCTIONrequiresone-thirdthe waterneededfor riceproduction

CHICKENMEAT PRODUCTIONrequiresone-tenththe waterneededfor beef production

1,000 Kilograms of water per kilogram of food produced GRAINS

MEATS

P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 – 2 0 0 2 1716 P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 – 2 0 0 2

challenges. Its annual water supplyranks fifth behind Brazil, Russia,Canada, and Indonesia—but per-capita supplies are among the low-est in the region and world(Crook, p. 25). In the region, onlyKorea has a lower per capita level.

Plagued by flooding in thesouth and drought in the north,China hopes to optimize the allo-cation of its water resources bydeveloping water control facilities,

like The Three Gorges (YangtzeRiver) and Xiaolangdi (YellowRiver) Dams and the largest waterdiversion project in its history: thechanneling of water from theYangtze River to the drought-prone north.

The dams are multi-purposeprojects for flood control, industri-al and municipal water supply, andhydroelectric power. It is estimatedthat The Three Gorges Dam will

supply 10 percent of the econo-my’s electric power when in fulloperation. The diversion projectincludes three lines: the east line,where water from the Yangtze willbe lifted up through the GrandCanal to the northern parts ofJiangsu Province, into ShandongProvince, and then to the north ofthe Yellow River; the middle line,where water from a reservoir on amajor tributary of the Central

Yangtze will be transferred toNorth China via Henan Province;and the west line, where waterfrom tributaries of the upper reachesof the Yangtze will be diverted tothe upper reaches of the Yellow.When the canals are completed,they are expected to deliver 38 to48 km3 of water annually from theYangtze River. About 30 to 35km3 will be available for indus-tries, urban areas, and irrigation in

North China. The governmentwill invest an estimated 130 to 150billion Yuan (US$15.7 to 18.1 bil-lion) in the first two phases of con-struction, which include the mid-dle and eastern stretches of thecanals, totaling 2,400 kilometers.

Increasing Water Supplies inOther Parts of the Region

Measures are planned by othereconomies in the region to aug-

ment water supplies to meet pro-jected demand. The demand forwater resources by Chile’s hydro-electric sector in the next 40 yearsis expected to increase six times,prompting a need to build some100 new hydroelectric plants. Thedemand for industrial and mininguses of water should more thandouble. An additional 500,000hectares will be needed by agricul-ture to add to the current 1.8 mil-lion irrigated hectares. These largeincreases in demand for water willbe met by a combination of publicand private resources. Chile hasannounced plans to investUS$320 million in the comingyears, with financial support fromThe World Bank and cost recov-ery from the beneficiaries. Publicfunding generally will be focusedon smaller projects. In 2001, forthe first time, a water project willbe offered for investment by theprivate sector, following the policyof concessions to private entitiesalready used for highways andports. The beneficiaries will payaccording to the water used andtheir income level. Other similarprojects, currently in differentphases of planning, will follow.

In the central region ofChinese Taipei, the governmenthas approved construction of theHushan Reservoir, having a totalbudget of US$0.7 billion andscheduled for completion in 2008.This reservoir will satisfy the waterneeds of the industrial sector inthat region until 2021. ThePhilippines expects to increase irri-gated area from 1.55 million to1.64 million hectares by 2004. InMalaysia, interbasin and interstatetransfers of water like the Pahang-Selangor Raw Water Transferscheme will become more com-mon in the future. For some time,there has been some discussion in


T a b l e 1 ECONOMIC AND WATER RESOURCE INDICATORS FOR THE PECC REGION

AUSTRALIA 19.2 18.2 381.9 19,891 13.8 352 15.1 (1995) 4 5 70 18333 2251 5

BRUNEI 0.3 na 5 16,667 na na na na 0 0 1 14

CANADA 31.4 22.6 699.5 22,277 14.3 2740 45.1 (1990) 2 2 7 87261 720 2

CHILE 15.2 14.5 70 4,605 27.1 928 20.3 (1987) 2 5 84 61053 1800 55

CHINA 1265.8 63.8 1079.8 853 32.0 2812 525.5 (1993) 19 19 77 2222 53740 38

COLOMBIA 42.2 22.5 82.5 1.955 28 2133 8.9 (1996) 0 1 37 50545 850 24

ECUADOR 12.6 na 12.8 1,016 na 442 17 (1997) 4 2 82 35079 865 na

HONG KONG, CHINA 6.7 0 163.8 24,448 na na na na na na na na 33

INDONESIA 212.1 60.8 (1998) 153.7 725 62.9 (1999) 2838 74.4 (1990) 3 1 93 13380 4815 16

JAPAN 127 34.9 4759.5 37,476 16.1 430 91.4 (1992) 21 17 64 3386 2659 63

KOREA 47.3 7.4 457.5 9,672 23.7 65 23.7 (1994) 36 41 63 1372 1159 60

MALAYSIA 23.3 41.2 89.3 3,833 33.8 580 12.7 (1995) 2 3 76 24893 365 4

MEXICO 99.6 25.0 574.5 5,768 35.8 (1996) 409 77.8 (1998) 19 21 78 4106 6500 24

NEW ZEALAND 3.8 13.2 50.2 13,211 12.3 327 2 (1995) 1 1 55 86053 285 9

PNG 4.8 na 4.2 875 na 801 0.1 (1987) 0 na 49 166875 na na

PERU 25.6 28.1 52.3 2,043 45.6 (1997) 1746 19.0 (1992) 1 16 86 68203 1195 42

PHILIPPINES 76.3 62.6 75.2 986 40.3 479 55.4 (1995) 12 13 88 6278 1550 16

RUSSIA 145.5 27.0 (1999) 246.7 1,696 na 4313 77.1 (1994) 2 na 20 29641 4600 4

SINGAPORE 4.0 0 92.3 23,075 13.8 (1999) na 0.2 (1990) na 33 na na na na

CHINESE TAIPEI 22.3 25.6 310.2 13,910 18.4 77 17.6 (1996) 23 na 73 3466 480 55

THAILAND 61.9 69.5 121.9 1,969 32.0 210 33.1 (1990) 16 19 91 3393 4750 25

UNITED STATES 275.3 19.8 9962.7 36,189 10.7 2460 471.1 (1995) 19 19 40 8936 22400 16

VIET NAM 78.1 78.2 (1999) 30.1 385 na 367 54.3 (1990) 15 7 86 4693 3000 32

PECC REGION 2600.3 na 19475.6 7,490 na 24508 1641.8 7 9 64 9425 113985 na

na— not applicable

Sources: Column 1: Pacific Food System Outlook and United Nations; Column 2: Pacific Food System Outlook; Column 3: International Monetary Fund;Column 5: Pacific Food System Outlook; Column 6: World Resources Institute; Column 7: World Resources Institute and US Dept. ofAgriculture; Column 9: Seckler et al.; Column 10: World Resources Institute; Column 12: The World Bank World Development Indicators;Column 13: Food and Agriculture Organization and US Dept. of Agriculture.

Population2000

(1)

Million

Share in ruralareas 2000

(2)

Percent

GNP2000

(3)

Billion US$

GNP/capita2000

(4)=(3)/(1)

US $

Share of dis-posable incomeon food 2000

(5)

Percent

Annual waterresources

(AWR) 2000(6)

Km3

Total water withdrawals, various

years, see next column(7)

Km3

Withdrawalsas a share

of AWR 2000(8)=(7)/(6)*100

Percent

Withdrawals as a share

of AWR (9)

Percent

Withdrawals for irrigation

(10)% of total

withdrawals

Per capita water supply

2000(11)=(6)/(1)*1000

m3

Irrigated area 1999

(12)

1000 hectares

Share of croplandirrigated

(13)

Percent


Since passage, surface water quali-ty has improved largely throughreductions in toxic and organicchemical loadings from pointsources. Discharges of toxic pollu-tants have been reduced by anestimated one billion pounds peryear. Rivers affected by sewagetreatment plants show a consistentreduction in ammonia between1970 and 1992. The percentage ofthe US population served bywastewater treatment plants hasincreased from 42 percent in 1970to 74 percent in 1998.

Opportunities andChallenges

Making more efficient use ofwater requires complex and multi-faceted strategies that take accountof the communal nature of water;the interdependence of users with-in a water basin; the competingrole of water as an input in agri-culture, industry, and the house-hold; its role as a habitat andmedium for aquatic life; and itsrole as a medium for transporta-tion, including waste disposal.

Where water is in scarce sup-ply, creation of market institutionswill help to more efficiently allo-cate water among competing uses.Market institutions are a precondi-tion for promoting the efficiencymeasures needed to raise the sup-ply of water without large invest-ments in water infrastructure,dams, and diversion channels,which are becoming increasinglyunaffordable, from both economicand environmental perspectives.

In the PECC region, theurban population is projected togrow from 1.1 billion to 2.0 bil-lion in 2025, with most of theincrease in China and developingSoutheast Asia. Such populationgrowth in its cities will put hugestress on the region’s infrastructureand its capacity to provide basicservices, including water supply.Six economies in the region havethe potential for water shortagesunless water control facilities areexpanded and/or efficiencies inwater use are achieved. More liber-alized markets for agriculturalproducts, the biggest user of water,

and pricing of water will assuremore efficient and sustainable useof water resources in the region.This will result in a pattern offood trade that reflects the relativescarcity of water.

The PECC needs to supportefforts to collect and develop datato better assess and monitor watersupply and use. In the Seckler etal. study, many of the numbersused in the projections are by theauthors’ admission, rough esti-mates. Methodological problemsarise from the use of annual andnational numbers, which mask thesignificant geographic and tempo-ral disparities that may exist with-in an economy. Agricultural sectormodeling needs to take moreexplicit account of water as anessential input in food production,processing, and preparation.

Only through rigorous analy-sis of sound data can realistic alter-natives be developed for consider-ation by policy makers. The timegrows short to make wise decisionsthat will determine the region’sfuture prosperity.


WATER STOCKS AND THE HYDROLOGIC CYCLE

Canada regarding the export ofwater resources to meet demandin the western United States.

The Other Side of the Equation —Doing More with Less

Increased water demand in water-deficit areas has historically beenmet by expanding available watersupplies. Dam construction,groundwater pumping, and inter-basin conveyance provided thewater to meet growing urban andagricultural needs. However,future opportunities for large-scaleexpansion of supplies in manyparts of the region will be morelimited due to lack of suitableproject sites, reduced funding, andincreased public concern for envi-ronmental consequences. As aresult, meeting future waterdemands will require some reallo-cation of existing supplies, bettermanagement of water resources,more efficient use of water for irri-gation, greater recycling of water,and other measures that willincrease the “crop per drop.”

In China, more than 24 mil-lion rural residents, 20 millionhectares of farmland, and 93 mil-lion hectares of pasture are in des-perate need of water. In 2000,China undertook some majorwater-saving measures, includingmore intensive management ofwater use, water rationing, andcharges for excess consumption.Some cities installed newly devel-oped water-saving taps, both inhomes and in public places. Thegovernment will continue to shutdown factories that are excessivepolluters and consumers of water,including certain electric power,steel, and paper manufacturingfacilities. China intends to encour-age research and development inadvanced technology, especially in

the bioengineering sphere, to treatwater pollution, and will applycomputer-based information net-works for monitoring and bettermanaging water quality in majorrivers and lakes.

New Zealand has concentrat-ed on raising water quality overthe past 20 years and has achievedgreat success by treating waste-water at specific pollution points.Over the next 20 years, attentionwill shift to methods of reducingnon-point pollution.Governmental and private effortsin the water industry will focuson continuing to improve waterquality and reducing per-capitaconsumption, rather than onexpanding the amount of wateravailable.

In Mexico, there is signifi-cant scope for increasing effi-ciency of water use. Leakage inthe water distribution systemaccounts for a loss of 30 to 50percent, most from agriculturalactivities. Only 1.2 millionhectares is cultivated with mod-ern, efficient technology.

One way to use water moreefficiently is to apply it to the pro-duction of higher-value commodi-ties. In Java, Indonesia, develop-ment of brackish water ponds forshrimp is likely to continuethrough conversion of irrigatedlands along coastal areas orthrough new development in theouter islands. Aquaculture in Javais still modest in its use of water,about 2 percent of total agricultur-al withdrawals. Still, demand forthis high-value use of water willincrease in the future and willrequire water untainted by thepesticides and fertilizers often pres-ent in irrigation and drainagewater. In the coastal areas ofChinese Taipei, fresh-water andbrackish-water fishponds use large

amounts of groundwater, aboutten times the amount used bypaddy fields, to regulate salinity,oxygen, and temperature. Seawaterintrusion and land subsidence incoastal areas are mainly caused bythe withdrawal of groundwater foraquaculture. Nevertheless, aqua-cultural farming has proved to bemore profitable than crops. Thegovernment, however, has begunto impose restrictions on expan-sion of aquaculture, since landsubsidence is a growing problemin some coastal areas.

Conservation of water, reduc-ing pollution, and recyclingincrease water basin efficiency andthus overall water availability. TheUnited States has made greatstrides in increasing the efficiencyof water use in the economy’sprincipal irrigated areas: theCentral Valley of California, theSnake River Valley in Idaho, theHigh Plains from Texas toNebraska, the Mississippi Delta inArkansas and adjoining states, andsouth-central Florida. Irrigatedagriculture remains the dominantuse of fresh water in the UnitedStates, although its share hasdeclined since 1970. Irrigatedcropland area has expanded byabout 30 percent since 1969,while field water application ratesper acre have declined about 15percent. Increased use of sprinklersystems and other more efficientmeans of irrigation have resultedin only a 12 percent increase intotal irrigation water applications.

The 1972 Clean Water Act inthe United States defines qualitystandards for drinking water, pri-mary contact recreation areas, andsupport of aquatic life. Waterquality criteria established theminimum physical, chemical, andbiological parameters required forwater to support a beneficial use.


Water is an essential resource in the global food system for food production, processing, and home prepa-ration, as well as being a vital beverage for sustaining human life. While water moves, changes from solidto liquid and gaseous forms, and is consumed by plants and animals, the overall amount of water avail-

able to us today has not changed much in millions of years. The stock of the world’s water has remained fairlyconstant throughout the earth’s history.

Much of this stock of water is not very useful for supporting human life, however. About 97.5 percent of it is inthe oceans, where it is useful for recreation, for ocean shipping, and for food supplies, but is not directly consum-able. A fairly small amount is desalinized, a costly process of converting seawater to fresh water. The remaining2.5 percent of the world’s stock of water is fresh water, but even much of this is inaccessible. Two-thirds is cap-tured in ice caps, glaciers, swamps, and deep aquifers. Only one-third is available for human use from freshgroundwater supplies, freshwater lakes, man-made reservoirs, and rivers.

The fresh and saltwater stocks are constantly renewed and depleted by the water cycle. The water cycle con-sists of the following processes: condensation, the conversion of water vapor to liquid droplets in the form ofclouds, which in turn results in precipitation when the conditions are right. Precipitation falls to the surface andinfiltrates the soil or flows to the ocean as runoff. Surface water either fresh or salt water evaporates, returningmoisture to the atmosphere, while plants return water to the atmosphere through transpiration.

This annual flow of water on the earth’s surface amounts to about 40,000 km3 —– the difference between110,000 km3 of annual precipitation that falls on the earth’s land surface and the 70,000 km3 of water that returnsdirectly to the atmosphere as a result of evaporation from open water and the transpiration of water by plants.

While the PECC region accounts for about 40 percent of the world’s population, it has access to only one-thirdof the world’s annual water resources.


Sampat, Payal. Deep Trouble: TheHidden Threat of GroundwaterPollution. Worldwatch Paper 54.Washington, DC: WorldwatchInstitute, 2000.

Seckler, David, UpaliAmarasinghe, David Molden,Radhika de Silva, and RandolphBarker. World Water Demand andSupply, 1990 to 2025: Scenariosand Issues. Research Report 19.Colombo, Sri Lanka: InternationalWater Management Institute, 1998.

World Development Indicatorsdatabase. Washington, D.C: The World Bank, 2001.


WEBSITES ON WATER RESOURCES

Crook, Frederick W. and XinshenDiao. “Water Pressure in China:Growth Strains Resources.”Agricultural Outlook. Washington,DC: Economic Research Service,USDA, January-February, 2000.

De Moor and Peter Calamai.“Subsidizing UnsustainableDevelopment.” Published jointlyby the Institute for Researchon Public Expenditure (The Hague, the Netherlands) and the Earth Council (San Jose,Costa Rica), 2000.

De Villiers, Marq. Water: The Fateof Our Most Precious Resource. NewYork: Houghton Mifflin Co., 2000.

FAO. Crops and Drops: Makingthe Best Use of Land and Water.Rome, Italy, 1999.

Gleick, Peter H. The World’s Water2000-2001: The Biennial Report onFreshwater Resources. Washington,DC: Island Press, 2000.

Gollehon, Noel R. “WaterMarkets, Implications for theRural Areas of the West.” RuralDevelopment Perspectives. Vol. 14,No. 2. Washington, DC:Economic Research Service,USDA, 1999.

McGovern, George. The ThirdFreedom. New York: Simon &Schuster, 2001.

The National Center for APEC.The APEC Food System. Seattle,Washington: 1999.

Nor, Dato’Abi Musa Asa’ari BinMohamad. “The Role of WaterResources in the Agri-FoodSystem.” Paper presented at thePacific Food Outlook Meeting,Kuala Lumpur, Malaysia, May 8-10, 2001.

Pacific Economic CooperationCouncil. Pacific Economic Outlook,2001-02.

Pacific Economic CooperationCouncil. Pacific Food SystemOutlook 2001-02, economy assessments, posted onwww.pecc.org/food, October 2001.

Postel, Sandra. Pillar of Sand, Can the Irrigation Miracle Last?New York: Norton, 1999.

Rosegrant, Mark and Peter Hazell.Transforming the Rural AsianEconomy: The Unfinished Revolution.Asian Development Bank. OxfordUniversity Press, 2000.

Rusak, J.A., P.R. Leavitt, G. Chen, M. Chen, J. You, and L. Zhang. “Predicting the futureand unraveling the past:Paleolimnological analyses of fluc-tuations in the climate and waterquality of central Saskatchewan.”American Society of Limnologyand Oceanography. Copenhagen,Denmark, 2000.

REFERENCES� The Centre for Land Use and Water Resources Research—

www.cluwrr.ncl.ac.uk/

� Environment Canada—Overview of rates, pricing and public education—www2.ec.gc.ca/water/en/manage/effic/e_rates.htm; Utility rates and policies by municipality—www.ec.gc.ca/water/en/manage/use/e_mun.html;Water use and pricing database—www.ec.gc.ca/water/en/manage/use/e_datab.htm

� The International Commission on Irrigation and Drainage—www.icid.org/index_e.html

� International Water Management Institute—www.cgiar.org/iwmi/

� National Agricultural Library—www.nal.usda.gov/wqic/

� NASA Observatorium: Hydrologic Cycle—observe.ivv.nasa.gov/nasa/earth/hydrocycle/hydro1.html

� Scientific American, Safeguarding Our Water, Feb. 2001—www.sciam.com/2001/0201issue/0201intro.html

� UNESCO’s International Hydrological Programme—webworld.unesco.org/water/ihp/db/shiklomanov/index.shtml

� US Department of Agriculture, Economic Research Service—www.ers.usda.gov/Briefing/wateruse/

� U.S. Water News Online—www.uswaternews.com/homepage.html

� Water Policy for the Asian Development Bank—www.adb.org/documents/policies/water/default.asp

� The World Bank: Chile’s water reforms—www-wds.worldbank.org/pdf_content/0000092653981013134617/multi_page.pdfWhy water subsidies don’t help the poor—www.wsp.org/pdfs/working_subsidy.pdf; www.wsp.org/pdfs/working_subsidy.pdf; Series of World Bank Water-RelatedPowerPoint Presentations—wbln0018.worldbank.org/EGFAR/gfsc.nsf/Water+Resources+Management?OpenView&Start=1&Count=30&Expand=7#7

� World Resources Institute—www.wri.org/

� The World’s Water: Information on the World’s Freshwater Resources—www.worldwater.org/

Find economy profiles and more detailed economy-specific discussions of water and water resource management at: www.pecc.org/food

The Pacific Economic Cooperation Council (PECC) is an independent, policy-oriented organizationdevoted to promoting economic cooperation in the Pacific Rim. PECC brings together senior gov-ernment, academic, and business representatives to share perspectives and expertise in search ofbroad-based answers to economic problems in the Asia Pacific region.

Founded in 1980, PECC now comprises member committees from the economies of Australia; Brunei;Canada; Chile; China; Colombia; Ecuador; Hong Kong, China; Indonesia; Japan; Korea; Malaysia; Mexico;New Zealand; Peru; the Philippines; Russia; Singapore; Chinese Taipei; Thailand; the United States; and VietNam as well as the Pacific Island Nations. France (Pacific Territories) and Mongolia were admitted as associatemembers in April 1997 and April 2000, respectively. The Pacific Basin Economic Council (PBEC) and PacificTrade and Development Conference (PAFTAD) are institutional members of PECC.

PECC’s governing body is the Standing Committee, which meets several times a year and consists of thechairs of PECC committees in each member economy. The day-to-day administrative and coordinating func-tions are carried out by an International Secretariat based in Singapore. Each member committee sends a high-level tripartite delegation from government, business, and academia to the PECC General Meeting heldapproximately every two years.

In addition, PECC establishes task forces, forums, and working groups to concentrate on particular policyareas. These groups meet periodically, organize seminars and workshops, conduct studies, and publish theirconclusions and recommendations for the benefit of the Pacific community. Task force topics include capitaland financial markets, fisheries development and cooperation, human resource development, Pacific IslandNations, and science and technology. PECC also supports regional forums on trade policy, food and agricul-ture, minerals, energy, telecommunications, and transportation and publishes annual editions of PacificEconomic Outlook and Pacific Food System Outlook.

At the regional level, PECC’s most important link with government is through APEC. PECC is the onlynongovernmental organization among the three official APEC observers. PECC representatives attend APECministerial meetings, senior officials meetings, and working group meetings. PECC also works with otherinternational organizations such as the World Trade Organization, the Organization for Economic Cooperationand Development, the Asian Development Bank, The World Bank, and United Nations’ agencies.

For more information, contact the PECC International Secretariat, 4 Nassim Road, Singapore 258372, Tel:65-737 9822/23, Fax: 65-737 9824.

P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 – 2 0 0 2 2322 P A C I F I C F O O D S Y S T E M O U T L O O K 2 0 0 1 – 2 0 0 2

PACIFIC ECONOMIC COOPERATION COUNCIL

MEXICOMexico National Committee for

Pacific Economic Cooperation(MXCPEC)

Paseo de la Reforma No. 175,10th Floor

06500 Mexico, DFTel: 525-241 3440Fax: 525-591 0645

NEW ZEALANDNew Zealand National

Committee for PacificEconomic Cooperation(NZPECC)

c/o Statistics New ZealandPrivate Bag 92003Auckland, New ZealandTel: 64-9-357 2132Fax: 64-9-357 2255

PERUPeruvian National Committee for

Pacific Economic Cooperation(PERUPEC)

Ministry of Foreign AffairsJr. Lampa 545, 4th FloorLima, Peru Tel: 51-1-311 2573Fax: 51-1-311 2577

THE PHILIPPINESPhilippine Pacific Economic

CooperationCommittee (PPECC)c/o Philippine Foundation for

Global Concerns43/F, Philamlife Tower 8767 Paseo de RoxasMakati City, PhilippinesTel: 632-885 0924Fax: 632-845 4832

RUSSIARussia National Committee for

Pacific Economic Cooperation(RNCPEC)

19 Novy Arbat St., Office 2035103025 Moscow, RussiaTel: 7-095-203-53-47Fax: 7-095-203-82-07

SINGAPORESingapore National Committee

for Pacific EconomicCooperation (SINCPEC)

47 Scotts Road, #06-00 Goldbell TowersSingapore 228233Tel: 65-822-0150Fax: 65-822-0101

CHINESE TAIPEIChinese Taipei Pacific Economic

Cooperation Committee(CTPECC)

Taiwan Institute of EconomicResearch (TIER)

5F, 16-8, Tehwei Street Taipei, TaiwanTel: 886-2-2586 5000Fax: 886-2-2594 6528

THAILANDThailand National Committee for

Pacific Economic Cooperation(TNCPEC)

Department of Economic AffairsMinistry of Foreign AffairsSri Ayudhya RoadBangkok 10400ThailandTel: 662-643-5248Fax: 662-643-5247

UNITED STATESUnited States National

Committee forPacific Economic Cooperation

(USNCPEC)1819 L Street, N.W.,

Second FloorWashington, D.C. 20036USATel: 1-202-293-3995Fax: 1-202-293-1402

VIETNAMVietnam National Committee for

Pacific Economic Cooperation 171 Vo Thi Sau, Q3Ho Chi Minh City SR VietnamTel: 84 8 823 0301Fax: 84 8 829 4472

SOUTH PACIFIC FORUMForum SecretariatPrivate Mail Bag, Suva FijiTel: 679-312 600,

(Direct) 302 375Fax: 679-301 102

FRANCE (PACIFIC TERRITORIES)France (Pacific Territories)

National Committee for PacificEconomic Cooperation(Associate Member)

c/o Secrétariat du Comité France(Territoires du Pacifique) pourle PECC

27, rue Oudinot75007 Paris FranceTel: 33-1-53-69-25-29Fax: 33-1-53-69-22-76

MONGOLIAMongolian National Committee

on Pacific EconomicCooperation

(MONCPEC) (AssociateMember)

c/o Ministry of Foreign AffairsUlaanbaatar-49, Peace avenue 12-aMongoliaTel: 976-11-311311Fax: 976-11-322127


PACIFIC ECONOMIC COOPERATION COUNCILPacific Economic Cooperation

Council InternationalSecretariat

4 Nassim RoadSingapore 258372Tel: 65-737 9822Fax: 65-737 9824

AUSTRALIAAustralian Pacific Economic

Cooperation Committee(AUSPECC)

JG Crawford BuildingAustralian National UniversityCanberra ACT 0200AustraliaTel: 61-2-6125 0567Fax: 61-2-6125 0169

BRUNEI DARUSSALAMBrunei Darussalam National

Committee for PacificEconomic Cooperation(BDCPEC)

Economics DepartmentMinistry of Foreign AffairsBandar Seri Begawan BD 2710Brunei DarussalamTel: 673-2-261 177Fax: 673-2-261 620

CANADACanadian National Committee for

Pacific Economic Cooperation(CANCPEC)

Asia Pacific Foundation of Canada666-999 Canada PlaceVancouver, BC, V6C 3E1CanadaTel: 1-604-684-5986Fax: 1-604-681-1370

CHILEChilean National Committee for

Pacific Economic Cooperation(CHILPEC)

Chile Pacific FoundationAv. Los Leones 382, Of. 701ProvidenciaSantiago, ChileTel: 56-2-334 3200Fax: 56-2-334 3201

CHINAChina National Committee for

Pacific Economic Cooperation(CNCPEC)

China Institute of InternationalStudies

3 Toutiao TaijichangBeijing, China 100005Tel: 86-10-6513 1421Fax: 86-10-6523 5135

COLOMBIAColombia National Committee

for Pacific EconomicCooperation (COLPECC)

Ministry of Foreign AffairsCalle 10 No. 5-51Santafe de Bogota, ColombiaTel: 57-1-283 9549Fax: 57-1-283 8441

ECUADOREcuadorian Committee for the

Pacific Economic CooperationCouncil (ECPECC)

Avenida 10 de Agosto y Carrion, Ministry of Foreign Affairs, Quito, EcuadorTel: 593-2-501-197/561-215 (ext.

253) Fax: 593-2-566-176

HONG KONG, CHINAHonk Kong Committee for

Pacific Economic Cooperation(HKCPEC)

Admiralty Centre, 18 Harcourt RoadSuite 2401A, 24/F, Tower IHong Kong, S.A.R., ChinaTel: 852-3101 4100Fax: 852-3101 0151

`

INDONESIAIndonesia National Committee for

Pacific Economic Cooperation(INCPEC)

Centre for Strategic andInternational Studies (CSIS)

Jalan Tanah Abang III/23-27, Jakarta 10160, IndonesiaFax: 62-21-386 5532Tel: 62-21-384 7517

JAPANJapan National Committee for

Pacific Economic Cooperation(JANCPEC)

The Japan Institute ofInternational Affairs (JIIA)

11F Kasumigaseki Building3-2-5 Kasumigaseki, ChiyodakuTokyo 100, JapanTel: 81-3-3503 7744Fax: 81-3-3503 6707

KOREAKorea National Committee for

Pacific Economic Cooperation(KOPEC)

Korea Institute for InternationalEconomic Policy (KIEP)

300-4, Yeorngok-Dong, Seocho-GuSeoul 137-800 , KoreaTel: 82-2-3460 1151Fax: 82-3-3460 1244

MALAYSIAMalaysia National Committee for

Pacific Economic Cooperation(MANCPEC)

Institute of Strategic andInternationalStudies (ISIS)

No. 1 Pesiaran Sultan SalahuddinP.O. Box 12424 50778 Kuala Lumpur, Malaysia Tel: 60-3-2693 9366Fax: 60-3-2693 9430


PECC MEMBERS

Economic Research Servicewww.ers.usda.govThe Economic Research Service(ERS) is the main source of eco-nomic information and research inthe US Department of Agriculture.ERS economists and social scien-tists develop and distribute a broadrange of economic and other socialscience information and analysis toinform public and private decisionmaking on agriculture, food, envi-ronmental, and rural issues.

The ERS’s timely reports aredistributed to public and privatedecision makers to assist them inconducting business, formulatingpolicy, and learning about thefarm, rural, and food sectors. ERSpublications are available to thepublic and the news media inboth print and electronic form.

The agency ’s three divi-sions—Food and RuralEconomics, Market and TradeEconomics, and ResourceEconomics—conduct research,perform commodity market andpolicy analysis, and develop eco-nomic and statistical indicators.The executive and legislativebranches of the US federal govern-ment use ERS information to helpdevelop, administer, and evaluatefarm, food, rural, and resourcepolicies and programs.

In addition to research reportsand commodity analyses, ERSpublishes several nationally recog-nized periodicals that communi-cate the findings of the agency’sresearch program: AgriculturalOutlook, Food Review, RuralDevelopment Perspectives, andRural Conditions and Trends.

Farm Foundationwww.farmfoundation.orgFarm Foundation is a nonprofitorganization founded in 1933 toimprove US agriculture and thewell being of rural people. FarmFoundation acts as a catalyst toincrease knowledge about agricul-tural and rural issues. Programactivities stimulate the researchagenda, improve educational programming through extensionand other outreach education,and sponsor forums to foster pol-icy dialogue on important issuesfacing agriculture and rural peo-ple. Its linkages to agriculturaleconomists and social scientistsbring disciplinary knowledge tobear on priority areas. The foun-dation’s programs promote theinteraction of business and policyleaders, government officials, and educators in exploring strate-gies and policy options. Theresults provide a solid basis forinformed private and public sector decisions.

Institute of Strategic andInternational Studieswww.jaring.my/isisThe Institute of Strategic andInternational Studies (ISIS) wasestablished in 1983. As anautonomous and nonprofit organ-ization, ISIS Malaysia is engagedin a wide range of activities focus-ing on objective and independentpolicy research and fostering dia-logue and debate between thepublic sector, the private sectorand academia. Its programs aredirected toward five central areasof national interest: defense, secu-rity and foreign affairs; nationaland international economic affairs;

strategies for nation-building andnational unity; policies on energyand natural resources; and science,technology and industry.

Universiti Putra Malaysiawww.upm.edu.myUniversiti Putra Malaysia (UPM),once a traditional agricultural uni-versity, has grown into one ofMalaysia’s largest academic centersof science and technology, withabout 4,300 staff and 33,500 stu-dents. Its primary function istraining of human resources at thetertiary level. Programs of studyare offered at three levels: diploma,bachelor and post-graduate. Thecourses offered are tailored for on-the-job, hands-on experience andpractical training in the public andprivate sectors. Besides teaching,UPM places great emphasis onresearch. About 1,210 researcherswith Ph.D.’s and Master’s degreesand more than 5,000 postgraduatestudents are exploring the frontiersof science in efforts to expand fun-damental knowledge of humannature, society, industry and thenatural world.


SPONSOR PROFILES

The Pacific Food System Outlook represents the first regionwide coordinated effort toprovide the outlook for the Pacific food system. The food system includes not just pro-duction agriculture, but also the whole complex of economic relationships and link-ages that tie the region’s food consumers to producers. The goal of the Pacific FoodSystem Outlook is to help increase knowledge about the diverse components of thisvital segment of the global economy.

Dealing with Water Scarcity in the Pacific Food System

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