Money Better Spent
(A version of this was published in theSun on 27th July 2012).
‘Inside Job’ is a brilliant and incisive documentary that dissects the American financial industry for what it was: one huge scam, and a system that eventually collapsed in 2008. It reveals damning evidence of the complicity between the private sector and upper echelons in the government. Top executives walked away with millions – even billions – of dollars, whilst companies collapsed leaving thousands unemployed around the world.
I wonder if we are not facing a similar situation locally.
Fellow columnist Azman Ujang in his piece “When experts know best” earlier this week stated that consumers should trust Syabas’ technical services executive director that there is an impending water crisis in Selangor because he is an expert.
He proceeds to say that Selangor froze Syabas’ capital expenditure (capex), making it “impossible for the company to perform its task to reduce the non-revenue (NRW) water as targeted in the concession agreement”; that the responsibility of providing sufficient infrastructure to process water lies with the Selangor government, and finally cites one reason for the crisis, that is “the shortfall in treated water to meet increasing demand”. (theSun, 23rd July 2012).
Failure to comply
With all due respect, this deviates slightly from the reality, which is that the Selangor government froze Syabas’ capex because it had failed to comply with its task of reducing non-revenue water as required under the concession agreement. Further, the state has said Syabas had already breached its ceiling for capex and operating expenditure (opex) works that the agreement allowed for.
This is akin to a parent grounding a child for not cleaning up his room, and the child blaming his parent by saying his room is not cleaned up because he is grounded.
What is also not pointed out is that Syabas has not demonstrated stellar performance, in any case. An audit report is said to have revealed a discrepancy of more than RM525 million between the summary of contracts awarded in 2005, 2006 and 2007, and Syabas’ review document. It also reportedly showed more than 72 percent of contracts worth a total of RM600 million were awarded to selected companies through direct negotiations and only 25 percent through competitive open tender.
And in 2005, the government even threatened to terminate Syabas’ concession as it allegedly violated the agreement and Treasury regulations by procuring pipes from Indonesia for its pipe replacement programme instead of sourcing them locally.
No, not the state government, but the federal government themselves, through Energy, Water and Communications Minister Dr. Lim Keng Yaik. The Indonesian companies were reported to have belonged to the Syabas’ executive chairman.
Righting the wrongs
These problems were recognised early on by the federal government and hence the Water Services Industry Act 2006 was passed in Parliament to solve this messy picture. The Act would restructure the water services industry in all states including Selangor.
It is the failed negotiations between the state and federal governments, and water companies such as Syabas, that has led to this current dispute. Under the new scheme, in fact, the responsibility for providing capex for water treatment facilities would come under the federal government’s new Water Asset Management body, or Pengurusan Aset Air Berhad (PAAB).
But because Syabas and Puncak Niaga Sdn Bhd (which owns 70 percent of Syabas) were not happy with the Selangor government’s buyback offer price, the industry is caught in a deadlock situation.
Money better spent
Deputy Prime Minister Muhyiddin Yassin said that while water reservoirs are filled to the brim, five raw water treatment plants are working at over-capacity at 24 hours a day, and are at risk of a breakdown.
But here is the rub. First, all water treatment plants are designed for 24 hours’ operation, 7 days a week, 365 days a year. All critical equipment in the plants are designed with standby units so they can be operated non-stop.
Second, it is argued that for this reason, the Pahang-Selangor Water Transfer Project which includes the Langat 2 treatment plant is urgently needed. I have written previously that the total cost of this huge project could go up to as high as RM9 billion.
This money could in fact be better spent in reducing non-revenue water (NRW) through pipe replacements. NRW refers to the amount of water wasted due to inefficiencies. The NRW in Selangor stands at 32 percent currently, which means one third of treated water literally goes down the drain, lost.
It is interesting that an Energy, Green Technology and Water Ministry senior official has said it would cost RM7.2 billion to reduce 32.3 percent to 20.8 percent, when in fact Selangor’s NRW reduction programme was estimated to cost only RM2.89 billion over 30 years starting 2005 (Affin Securities, 7th June 2005). Even with inflation, could the costs increase by RM5 billion within a seven year period?
Tax-payers would appreciate the more sensible option of embarking on an immediate NRW reduction programme, because the more water you pump into an already leaking pipeline, the more you would lose. Good management would therefore dictate that efficiency and minimisation of water losses should be first addressed before increasing capacity via the massive water transfer project.
In addition, even if the water treatment plants were being overworked, could not such additional funds be used to upgrade them instead?
Solutions ahead
The federal government has formed a special Cabinet Committee on water, which strangely enough does not include any Selangor government representative. One would imagine the state concerned ought to be present in such urgent talks.
The Selangor government has at the same time formed a Syabas Supervisory Committee to monitor daily the effectiveness and efficiency of Syabas’ services and water supply situation for consumers, including on-site monitoring of the water supply shortage as claimed by Syabas.
It is unfortunate that two separate and concurrent committees exist but are not in communication with the other. Both sides accuse the other of politicising the issue. And although it is a political matter indeed, those knowledgeable of the facts and figures should put aside their differences to draw out long-term plans for the future of sustainable and clean water supply in Selangor, Kuala Lumpur and Putrajaya.
The ‘Inside Job’ ends on a bleak note, showing how those responsible for the duping of millions of people are actually back in power. We can only hope that on home ground, we will have a different story ending.
