That sounds familiar. Why am i inclined to find that believable? 
Another point to add to Lee’s points: You will find information in some of the article i have linked to at A drought? No kidding that suggests that reservoirs are not a good choice considering Taiwan’s topology and climate.
A few thoughts (“in the rough”; nothing conclusive) in reference to Lee’s proposals:
About reducing leakage:
- certain pipes are owned by the water corporation, and to reduce leakage on that level capital is required - who will provide that? (That requires a political decision)
- certain pipes are owned by water users, and those owners may feel inclined to reduce leakage if the water rate is raised high enough (assuming the leaks are located after the meter) or if they are fined for leakage or denied water delivery (in cases where leaks exist before the meter)
About wastewater reuse: - wastewater plant upgrades require capital - who will provide that? (That requires a political decision)
About sewage treatment: - sewage lines and treatment plants require capital - who will provide that? (That requires a political decision)
A few other thoughts (things to consider):
Cisterns: in many parts of the world with sporadic rainfall people use cisterns to collect rain water. (Such water can be used for other things than drinking water.)
Rate increases: easy to implement. (They require a political decision)
Rate increases: increasing the water rate would provide an incentive for fixing leaks and generate capital for necessary investments.
Fines for wasting water: easy to decide but enforcement not only difficult (lots of opportunities for bribing, cheating, etc.) but also with undesirable social consequences (such a system requires intrusive actions on part of a “water police”)
Tentative bottom line: much hinges on politics - politicians will act this way when they get kickbacks from the industry and that way if the people put enough pressure on them - kickback systems cannot be fully eradicated but can be weakened by strengthening and enforcing appropriate laws - politicians will act in the right direction if the people put enough pressure on them - thus it all comes down to what the people decide to do
