Gov't scraps water privatisation plan

Beh Lih Yi
Jun 21, 05 6:03pm

In a U-turn, the government has decided that water services will not be privatised or federalised after all - exactly the decision sought by a non-governmental lobby.

Energy, Water and Communications Minister Dr Lim Keng Yaik explained today that water supply services will remain under state governments, while the federal government will set up a regulatory body to oversee the industry.

He conceded that he had said water supply services would be privatised or federalised at a consultative meeting organised by the Federation of Malaysian Consumers Association in July last year.

However, his ministry “changed strategy” after holding a series of consultations with industry experts, state governments and non-governmental organisations (NGOs) during which he found out that the two models proposed were not suitable for use here.

“After consultations, we think total privatisation, which is successful in the United Kingdom, is not applicable in Malaysia... so we have cut out the word ‘privatisation’.

“The national water council then suggested federalisation to take complete control (over the water industry). We held dialogues with state governments but they said ‘No... let us have (this as) as our responsibility and our duty’.

“So I said okay, let us set up a regulatory body to make sure they can run (the industry) properly... otherwise we will give it (the authority) to someone else,” he told reporters at a 60-minute press conference held in the Parliament lobby today.

“I am a new minister (in charge of water). Just after three months in the ministry, I got the wrong idea, and after the consultations, they told me ‘Minister, this is not a good idea’.”

His statement still contradicted earlier remarks that all state governments except Kelantan have agreed to let the federal government take over control of water supply services.

Elaborating, the minister said the idea of privatisation or federalisation had been officially scrapped during the amendment of the Federal Constitution earlier this year. This was reportedly meant to pave the way for the federalisation and eventual privatisation of water supply services.

The amendment enabled jurisdiction over water supply services to be placed in the ‘concurrent list’ in the constitution - meaning the federal and state government share responsibility for overseeing the sector.

‘Follow Penang model’

Lim said he would heed the calls made by NGOs to use the public-public partnership water management module, implemented by the Perbadanan Bekalan Air Pulau Pinang (PBAPP). However he said he would insist on calling this a “public-private partnership”.

Penang uses an arrangement that keeps water supply management under combined state and public control. PBAPP is a public-listed company which allows consumers to be the shareholders.

At present, Johor and Selangor have privatised the water management services. Kelantan and Perak have corporatised entities, while state governments control the water supply department elsewhere, according to Lim.

“We have told them to follow the Penang style... we told them to change to a corporation that will be owned by the state government and hopefully, will emulate the PBAPP to become a public-listed company with its shares owned by the consumers,” he noted.

Under the latest proposal, which the minister described as “reform of the water industry”, a National Water Services Commission will be set up to regulate water supply operators.

The commission will be empowered to issue a licence to the operators, or revoke it should the operator fail to comply with performance standards.

A Water Assets Holding Company (Wahco) owned by the finance ministry will also be established as a business entity to build up capital expenditure for the water supply operators, with full cost recovery over a period of 40 to 50 years.

“Substantial funds are required and the operators can’t borrow from the bank because the bank will charge a seven to eight percent rate of interest which will not be sustainable... so we will suggest to the federal government that this capital expenditure work must be done by Wahco.”

Wahco, with its government-owned background, will be able to “go into the chartered market for a cheap and long term price”, Lim said.

According to him, this model will ensure that water service operators will not be burdened with the cost of building infrastructure amounting to billions of ringgit, but can concentrate on providing good water supply services.

Bills to be tabled

On the water tariff, he said this would be determined by the federal regulatory body, which will fix a standardised national tariff that “definitely will be lower than the current highest tariff (among the states), but higher than the lowest tariff”.

“Don’t talk about tariffs, don’t use the tariff to scare the people, that’s why I don’t want to talk about tariffs... let the regulator decide. I know (reporters) want to make news out of the tariff, but you don’t talk about the water services, you are only interested in the tariff,” he replied.

Lim said the Water Services Industry Bill and the National Water Services Commission Bill will be discussed by the cabinet next Wednesday for approval to be tabled during the current Parliament sitting up to July 26.

He added that he would obtain additional views from the public after the bills are tabled for first reading. If major revisions are required, the bills can be withdrawn and re-tabled later.

The proposed privatisation of water services sparked protests based on arguments that the increase in costs would be passed on to consumers.

Special interest groups strongly believe that essential services should not be turned into profit-oriented ventures.