Water concessions scheme an 'organised blunder'

At a forum entitled: “Restructuring, Reforming or Rakyat?” held at the Chinese Assembly Hall yesterday, Klang MP Charles Santiago (pic below) blasted the Selangor water concessions scheme as an organised blunder that burdened the poor in favour of water concession companies and the federal government.

In the past, the Selangor water industry was centralised under a state government department, from management of raw water, to water treatment and distribution.

This changed over the years, first when water distribution came under the corporatised body Air Selangor Water Management Agency (PUAS) under the Water Supply Department (JBA), and later in conjunction with the Malaysian government's wave of privatisation policy.

The water industry in Selangor is therefore currently fragmented, with many players involved. The state under Selangor Water Management Board (LUAS) owns full rights to raw water.

The rights to water treatment, however, is split several ways, between the state and concession companies Splash Sdn Bhd, Abbas Sdn Bhd and Puncak Niaga Sdn Bhd, while water distribution is fully privatised and managed by Syabas Sdn Bhd.

In December 2008, The Ministry of Energy, Water and Communications agreed to allow Syabas to increase the water tariff by 37 percent on March 31, 2009.

Under the agreement, more water tariff hikes would take place until 2035, with hikes of 25 percent in 2015, 10 percent in 2019, and five percent every few years thereafter.

'Water quality has not improved'

Forum moderator Yong Yew Wei commented: “The original aim of privatisation to improve the efficiency of public utility services has failed miserably. The water privatisation scheme is an example, whereby water quality in Selangor has not improved over the years while concession companies are demanding for tariff hikes."

According to Charles, it has been calculated that if the Selangor state government were to regain control of all state water assets, the efficiency of the state water industry would improve by leaps and bounds.

"In addition to retaining the scheme of providing 20 cubic metres of water for free every month to every household, we will also be able to decrease the water tariffs gradually.

“Look at Penang, a state where the water utility board has manage to keep the water tariff at RM0.37 per cubic metre compared to RM0.77 per cubic metres in Selangor, and still succeed at making at least RM50 million in profit every year.

“Selangor, which has a higher population concentration, would be able to enjoy greater economies of scale if our water industry had been more efficient."

He added: "Under the new water tariff schemes imposed by Syabas, the fee for water reconnection is RM50, which is a sharp increase from RM10 before.

“The majority of the people who endure water disconnections, sometimes for up to two weeks, do so because they could not afford to pay their water bills.

“Is it fair that the Syabas impose such heavy penalties at the expense of so many who are poor?"

Water concession firms reaping huge profits

Another speaker, P Subramaniam, said that water concession companies were reaping supernormal profits. "The former president of Puncak Niaga earned an annual salary of RM5.2 million. So remember that everytime you flush your toilet, ten cents goes into his pockets."

The panel also questioned the ability of the four concession companies to provide quality and economical water supply.

For instance, they cited that the companies had accumulated a total debt of RM6.4 billion, which was more than the RM5.7 billion the Selangor state government had offered to purchase all water assets in the state.

In addition, they pointed out that there is evidence to show that Syabas has breached key terms of the concession, that more than 72 percent of contracts worth a total of RM600 million had been awarded through direct negotiations to selected companies, and that there were a discrepancy of more than RM525 million between the summary of contracts awarded in 2005, 2006 and 2007 and Syabas' review document.

The panel concluded that water was an important commodity that could not be left in the hands of inefficient private firms, and that all water assets in Selangor should be returned to the state government based on the fair and reasonable offers that it has made.