Fresh Water Offers

Fresh Water Offers (from theSun, 22nd February 2013)

Over the recent weeks, the water wars between the Selangor government and water distribution company Syabas have intensified. Following the Wangsa Maju water pump breakdown, eight-page A4-sized booklets titled Selangor Water Crisis! – Don’t Get Misled – Get The Facts were distributed in the Klang Valley.

Although Syabas denied any involvement in the publishing of the booklets, the point-by-point list of arguments which criticises the state government was suspiciously similar to the press statement released by Syabas last month.

In my previous column on the water issue, I spelt out the reasons why as the concession holder to water distribution rights in Selangor, Syabas is the rightful party responsible for ensuring the maintenance of the water pumps – which it failed to do.

Immediately following the pump-house failure was the surprise announcement by Prime Minister Datuk Seri Najib Razak that RM120 million would be allocated to Syabas for upgrading works, and monitored by the National Water Services Commission (SPAN). The justification was for these funds to be used for maintenance and upgrading works. This is on top of the 20-year RM320.8 million zero-interest soft loan to Syabas in 2009, another 20-year RM110 million loan in October 2011, and thereafter taking over Syabas’s RM2.9 billion outstanding bonds when they were due for repayment.

While it is true that money is required for upgrading and maintenance, is it the federal government’s role to dish out funds to Syabas each time it needs the money? Mind you, these are public funds, millions of which could surely be used for better purposes. This is rather like an unemployed capable grown adult who keeps asking for pocket money from his parents.

Let us not also forget that Syabas is a private company – not a charity – that entered into a contract with the state and federal governments, a contract which legally spelt out its responsibilities. The very reason for which the company was chosen to carry out water distribution services on behalf of the state was supposedly based on its expertise.

Therein lay the flaw of the theoretical assumption that any kind of privatisation would be inherently better than government-run public services. In a seminar earlier this week at Universiti Malaya on “The Pitfalls of Water Privatisation: Failure and Reform in Malaysia”, Dr Jeff Tan from Aga Khan University showed how globally, there is no statistically significant difference of the efficiencies resulting from private and publicly-invested water services.

In fact, because of the monopolistic nature of utilities, there is a limited number of able bidders; therefore there can never be competition in markets, but competition for markets. This means to say that the philosophy behind privatisation may actually fail in the instance of water provision, because the very nature of the industry does not allow for competition. For water to be made available at the most efficient and reasonable rates possible, water treatment and distribution should be managed by a single entity, unlike the multiple parties in Selangor.

Which brings us to the latest development of the week. At the time of writing, the Selangor government announced it would make a fresh offer to the four concession companies to take over water services in the state. This would be the fourth state offer since 2009, all previous ones having been rejected on the grounds that the amounts were considered too low.

Energy, Green Technology and Water Minister Peter Chin expressed his doubts over whether the takeover would take place – this is ironic, given the fact that the federal government itself would need to give the green light as the golden shareholder of Syabas via the Finance Ministry. The obstacle to getting a deal signed, sealed and delivered may not necessarily lie with Syabas alone after all.

Perhaps a reminder is needed here, that the water restructuring was a policy of the federal government. The Water Services Industry Act 2006 was passed in Parliament with the understanding that fragmented water industries like that of Selangor would eventually be integrated to ensure a more holistic approach.

Under the previous Selangor offers, the model would be exactly this: returning water services to a state-run entity practising good governance, run by professional experts experienced in the water industry. This would ensure better water quality for consumers, not trapped by high and increasing tariff rates. It was interesting to note in Tan’s presentation, for example, that Johor has the highest water tariffs in the country, whose water industry is run entirely by the private sector.

Selangor’s water companies’ financial performance was the worst among all states in Malaysia as at 2007 and 2008, which begs the question of what solution is in store. The answer is not to fork out even more public funds to save an already drowning ship, but to resolve the matter once and for all by pushing for a radical change in the industry’s ownership, preferably to a government body with no rent-seeking interests. The federal government’s role is to determine the best policy for public and national interest – this is one time it should deliver on that commitment without hesitation.

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