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The coming global water shortage.

It dwarfs all other potential global shortages. Peak oil? A piker compared to no water. Push comes to shove and we will find replacements for oil. Water? Drink or die. The biology is that simple.

In my December 2008 book The Jubak Picks I wrote that “Water–perhaps even more than oil–is at the center of the current environmental crisis.”

“There’s the global shortage of water that’s clean enough to drink and clean enough to use in industrial processes. The World Bank reports that 80 countries now have water shortages that threaten health and economies. The dimensions of the problem get even larger when you include water-short regions of otherwise water wealthy countries.  For example, the United States has, on average, enough water, but the cities of the Southwest, California, and Florida all face severe water shortages.

“A growing population–especially a population that insists on moving to water short areas such as Florida–is part of the problem. More people equals a demand for more water. But that’s only part of the problem. Since 1900, water use has grown six times while global population has increased by only two times. As economies grow and as living standards go up, the per capita demand for water climbs. We also insist on fouling the planet’s limited supplies of fresh water. According to the World Bank about 95% of the world’s cities still dump raw sewage into their waters.”

It’s not hard to see the crisis coming. What’s hard—and frustrating to investors—is that there’s aren’t very many ways to invest in water.

 In my book I suggested water pump and pump stocks such as Flowserve (FLS). Last summer I wrote about irrigation stocks such as India’s Jain Irrigation Systems. See my post ) Good company but horrendously difficult to buy without an account in India. (It’s 500219 on the Bombay Stock Exchange.)

But I’ve got a new suggestion–one brought to my attention by a recent newsstory on Bloomberg–for where to look for water stocks–Singapore–and three specific stocks for you to look at.

 The island nation that gets three times as much rain as London has become a world leader in water recycling and purification.

For Singapore, water technology, is a necessity. The densely-settled and heavily industrialized city-nation depends for survival on water imports from Malaysia. That’s not exactly a comfortable dependence. Singapore was expelled from the Federal of Malaya in 1965 and the two countries have been friendly and often not so friendly rivals since then. In 1965 the country set self-sufficiency in water as a national goal. Singapore isn’t there yet. But the country is set to open the newest of five water recycling plants. That will enable Singapore to recycle 30% of its water, the most of any major city in the world.

And all the expertise that Singapore has gained working on its own water needs makes for a pretty nifty export industry in a thirsty world.

Especially since the Singapore government, always on the lookout for a chance to grab a piece of a new global industry has decided to back its companies with research money–$240 million from the government to lure companies like General Electric (GE) to open research lobs in the country—and with financing so they can offer the kind of low cost loans and necessary to lock up deals these days. In the last three years Singapore’s water companies have signed 100 projects worth $5.6 billion.

Who are these companies?

I wrote about one of them not so long ago—Keppel Corporation (KPELY.PK)—in a post about Asian stocks that paid unexpectedly high dividends. (See that post here )

Keppel’s biggest business is building offshore oil rigs but its infrastructure business includes a fast-growing cooling systems business with contracts in China, the Middle East and the United Kingdom. A wholly-owned subsidiary Keppel Integrated Engineering is targeting what it calls the green infrastructure business with assets that include two wastes to energy incinerator plants and a water processing plant. Next year the company will open a $1.1 billion water recycling plant in Qatar.

 Another is Hyflux (HYFXY.PK), a maker of membranes for filtration plans that built its first water desalination plant in 2005. In 2008 the company beat out General Electric for a $468 million contract to build the world’s largest filter-based desalination plant in Algeria. The company has done business in China since 1994 and entered the Indian market in 2006. Revenue climbed by 301% from 2005 to 2008.

A third Singapore water play is Sembcorp Industries (SMBDT.PK). The partially state-owned company is building a $1.7 billion water desalination plant in the United Arab Emirates and another $1 billion combination power/desalination plant in Oman. The company operates a similar combo plant in Vietnam.

And as is typical of many Singapore companies Sembcorp has its finger in many pies. One, that makes a pretty good business on its own, is developing, marketing, and managing industrial parks in Vietnam, Indonesia, and China.

Full disclosure: I don’t own shares of any company mentioned in this story in my personal account.