Hong Kong, as a global centre of business and finance, relies on secure water supplies for its sustainable development. Whilst we currently have reliable and consistent water resources to draw down, we recognise the need to prepare for extreme scenarios that may occur in the future. Preparations include strengthened demand management initiatives and the exploration of new technologies to develop additional water resources cost effectively. The Total Water Management Strategy, introduced by Government in 2008, has provided a firm foundation for us to build on. In line with the strategy, we have enhanced public education on water use and savings, limited water loss along the distribution system and extended the salt water supply system. We will appoint consultants to review the progress made under the strategy and to indicate any necessary new directions or refinements.

The Dongjiang (or East River) in Guangdong together with a network of domestic rainwater catchments located across Hong Kong's extensive country parks and rural areas, continues to meet fresh water requirements. We are supplementing and conserving our fresh water resources by using sea water for toilet flushing and through a small but growing amount of recycled water used in estate cleaning, irrigation and landscaping.

In 2012, 76 per cent of raw fresh water was transported by a dedicated aqueduct from the Dongjiang River. This is less than the 89 per cent take down from the Dongjiang recorded over the previous year. Apart from when the aqueduct is closed for annual maintenance, the daily supply from this source is only slightly less than the city's daily consumption. Imported Dongjiang water that is surplus to immediate needs is stored with locally collected raw water in Plover Cove impounding reservoir.

The seawater used in toilet flushing is extracted by pumping stations located at various points along Hong Kong's water front and distributed to 80 per cent of Hong Kong's population.

The Department is developing a viable long term supply strategy based on the predicted water resources needed by both Hong Kong and the neighbouring Pearl River Delta. As a result, we continue to explore alternative sources of both potable and non-potable water to maintain a suitable level of reliance on the Dongjiang.

The supply agreement that covers the Dongjiang takes into account both Hong Kong's needs and the ongoing water supply status within the Pearl River Delta. The ultimate quantity stipulated in the current water supply agreement with Guangdong means that the supply of water from the Dongjiang is sufficient to meet Hong Kong's estimated demand through to 2030 and beyond, as long as there is no acute water shortage in the Pearl River Delta area. Actual draw down is determined on a monthly basis taking into account seasonal rainfall. This optimises the overall use of water resources. The existing three-year agreement, signed at the end of 2011, sets the cost of the water at $3,539 million for 2012, $3,743 for 2013 and $3,959 for 2014. This price regime takes into account the substantial appreciation of China's RMB against the Hong Kong dollar and escalating rates of inflation in Guangdong and Hong Kong. Although the purchase costs are higher than pre-2009 charges, they have not been reflected in any increase in water charges to consumers to date.

We have developed a strong partnership and enjoy close communications with the Guangdong authorities regarding mutual water requirements. By controlling storage levels in Hong Kong's impounding reservoirs, we minimise local water waste and optimise pumping costs. Together with the Guangdong authorities, we oversee water transfer operations and ensure a high degree of transparency in these operations and vigilance in terms of water quality and security.

The Guangdong authorities have implemented measures to protect the Dongjiang's water environment and to ensure that the quality of water pumped to Hong Kong meets the relevant national environmental quality standards for surface water. These measures include new sewage treatment plants, removal of polluting factories and continual operating the bio-nitrification plant at the Shenzhen Reservoir as needed. Relevant laws and instructions have been enacted in Guangdong to maintain quality standards.

A dedicated aqueduct directly transfers river water from the Dongjiang intake to the Shenzhen Reservoir, bypassing possible pollution sources along the supply route. This also enables us to keep treatment costs for fresh water supplies low while maintaining a consistently high level of water quality for consumers.

These works are being overseen by members of Hong Kong's Advisory Committee on Water Resources and Quality of Water Supplies (ACRQWS) who undertake visits to water pollution control facilities within the Dongjiang catchment as well as the supply system itself. The findings and observations by the committee's members who are drawn from the fields of academia, medicine and law as well as Government departments, district councils and green groups, are reported at media briefings and help to maintain public confidence. A visit conducted in November 2012 enabled members to see firsthand the supply system that takes our water from the city of Heyuan to Shenzhen.

Designated water catchment areas cover 30 per cent of Hong Kong's land area. Rainwater collected from these catchments is stored in 17 impounding reservoirs across the territory. Although collected water is largely uncontaminated, the Department has undertaken protection measures along the collection system with regular inspections, maintenance and the removal of debris.

A comprehensive programme involving physical, chemical, radiological, biological and bacteriological testing is applied throughout the collection, treatment and supply processes of water, irrespective of whether it is sourced from the Dongjiang or is collected from within the territory's catchment areas. Samples are taken regularly from both pre-determined and randomly selected points along the supply chain and analysed using advanced and proven technologies with rigorous quality assurance protocols.

From August 2012, the Department applied the updated WHO Guidelines for Drinking-water quality (WHO 2011). Hong Kong is in full compliance. Analytical techniques and equipment used in our laboratories are continuously enhanced and upgraded. Advances, including a new collision cell technique used to detect trace metals in water and an automated imaging particle analysis system which quickly assess the algal population have enhanced water quality monitoring.

On-line Water Quality Monitoring Systems at Muk Wu Pumping Station, Plover Cove Reservoir, Shing Mun Reservoir and Tai Lam Chung Reservoir continue to gauge the quality of the water we receive from the Dongjiang and the water we store in reservoirs. In addition, our Supervisory Control and Data Acquisition (SCADA) system will be extended to include an on-line water quality analyser being set up in phases at our impounding reservoirs. The first, Shek Pik Reservoir, is pending commission.

Economic and sustainable alternative water resources are required to meet long term demand and, if possible, reduce our draw down from the Dongjiang River. We continue to explore options and adopt solutions that will lessen the stress on regional resources and enable us to conserve as much fresh water as possible.

Desalination, using reverse osmosis technology to produce potable water that complies with WHO Guidelines for Drinking-water Quality, is a promising water resource for Hong Kong. We have reserved a site of about 10 hectares at Tseung Kwan O Area 137 for the construction of a desalination plant with an initial output capacity of 50 million cubic metres per annum. Plans include provisions for future expansion to an ultimate capacity of 90 million cubic metres per annum. This will meet about 10 per cent of Hong Kong's fresh water demand.

Planning and investigation studies are underway and scheduled for completion by the end of 2014. The studies cover detailed feasibility, preliminary design and a cost-effectiveness analysis. Subject to the findings and recommendations of the study, we plan to seek further funding for detailed investigation, design and subsequent construction of the desalination plant at a time that will be dictated by demand and supply trends. We will also undertake a public engagement exercise next year. Given the current situation, we envisage a commissioning date of 2020.