What is water really worth in Southeast Asia

Water is our most vital natural resource, but one which modern societies are facing increasingly acute challenges to manage and deliver. Only by determining the true value of water—and pricing it in a socially equitable manner according to that need—can we generate the required investment to mitigate the global water crisis. This is the crucial question at the heart of Boston Consulting Group’s (BCG) recent publication, What Is Water Really Worth?

The reality of the global water crisis is increasingly stark. The World Bank estimates that since 1970, renewable water resources have decreased by half. At the same time, the UN reports that global demand for water is increasing by 1% annually. Despite the severity of the crisis, investment in water resources remains inadequate. According to UNICEF, achieving universal access to clean drinking water, sanitation, and hygiene services by 2030 will require a fourfold increase in current investment levels, let alone the investment needed for other uses, such as agriculture and industry.

Southeast Asia is a region at the sharp end of this global crisis - facing challenges of too much, too little, and too dirty water. In a case of “too little,” Malaysia’s Johor, a rapidly developing region in the global competition for data infrastructure, rejected nearly one-third of data center applications between January and May 2024 due to fears of overstretching water and power resources. In Thailand, the business region of Hat Yai was barely spared from flooding that caused over four billion baht of damage across the province in December 2024, showcasing how “too much” is also impacting regional businesses. Meanwhile, in Indonesia, the challenge of “too dirty” is apparent in the 70% of rivers heavily polluted by domestic waste. These examples reveal the existing impact of water challenges, and without the right intervention, those challenges are only set to get worse.

Changing the flow of water investment

Southeast Asia, and the world, must address key systemic barriers to overcome water challenges. Several key factors contribute to the underinvestment in water resources. Political, regulatory, and governance challenges complicate the coordination of public investments. Investment dynamics are also challenging, with high capital costs, long payback periods, and difficulties with monetization due to regulations and the public, non-financial nature of many benefits, often deterring private investment.

Underpinning these difficulties is the widespread undervaluation and mispricing of water. While these factors are closely linked, they differ in key ways which must be recognized to turn the tap on water investment. The widespread undervaluation and mispricing of water does not reflect the severity of the growing crisis. At the same time, it promotes the inefficient allocation of water resources and leads to underinvestment in water resources that are critically needed.

In many countries, water is priced well below cost-recovery levels. BCG’s analysis of common water comparison metrics reveals what that looks like in cities of Southeast Asia. Kuala Lumpur prices water at just GBP 0.73 per cubic meter (m³) for up to 15 m³ per month, Ho Chi Minh City at 0.23 GBP/m³, and Manila at 0.32 GBP/m³—substantially lower than the 1.82 GBP/m³ seen globally.

Measuring the value of investment

Appropriately valuing and pricing water isn’t easy. Water provides not only economic value, but also value in the form of social and environmental benefits. These include enhancing food security, avoiding potential conflicts, and supporting ecosystems. What’s more, the regional examples outlined above show the clear negative impacts that water can trigger for Southeast Asia’s business ecosystem. Recognizing and quantifying these broader impacts, and then presenting them in ways that can guide pricing and investment decisions, is a complex challenge.

BCG’s Water Value Framework is designed to provide a structured approach to assessing the economic, social, and environmental value of water by considering three ways that water creates value - direct use, indirect use, and availability for use in the future.

The tool provides two lenses that can be used to inform decision-making. The first is in measuring total value - this captures the overall value, measured in dollars, generated by water via its contributions to economies, ecosystems, and societies. The second measure is that of marginal value - reflecting the value gained from an additional unit of available water. Marginal value is a particularly useful metric for municipalities and companies building business cases for investments in additional water resources, such as water reuse, storage, or desalination infrastructure.

These benefits are not hypothetical. For example, research from Israel shows that the marginal value of additional water from new desalination plants is $4 per cubic meter, based on avoiding the economic losses from potential future water shortages.

The appropriate valuation of water is a critical first step to fairly and sustainably pricing water. It is also crucial for turning the tap on investment to build the infrastructure and develop the products and services required to address the water crisis. One of the most important benefits of improved water valuation is the ability to develop more effective and equitable water pricing and allocation strategies. An accurate assessment of water’s valuation provides policymakers with the information they need to make key strategic decisions. A more detailed look at pricing structures and allocation strategies is considered in the report.

Water scarcity and challenges are also generating a new wave of technological and ecological innovations to consider across three key areas of digital innovation, infrastructure innovation, and emerging solutions. Water tech is growing fast in importance. In 2023, water tech companies received $1.2 billion in funding, more than double the pre-pandemic funding levels in 2019. Appropriately valuing water can accelerate the innovation process by prioritizing resource allocation, driving innovation funding, supporting cross-sector collaboration, guiding policy development, and promoting public awareness and engagement.

Turning the tide on Southeast Asia’s water investment

Water is expected to be the most visible side of Southeast Asia’s climate impacts - whether that’s too much, too little, or too dirty. These impacts are not only highly emotive and impactful on daily lives, but they also present fundamental challenges to a fair society and successful business ecosystem. Adapting to these impacts will require that water becomes a strategic priority for both public and private sector. Building regional water resilience is vital for both social and economic resilience. In order to achieve this, water must be better valued and priced to attract the needed investment into Southeast Asia’s water sector.

It’s time to stop taking water for granted and recognize that as a region, we need to invest in a sustainable future for this most precious of our shared resources.