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Ranhill Utilities Bhd’s recent announcement to Bursa on the move by Ministry of Finance Inc. (MOF) to initiate the step to dispose Indah Water Konsortium’s (IWK) share to Ranhill Utilities Bhd was not surprising but extremely disappointing. Association of Water and Energy Research Malaysia (AWER) vehemently rejects MOF’s step as it is derailing from the National Water Services Industry Restructuring. We urge MOF to immediately stop this inane move and stick to the original restructuring model that was agreed upon prior to amendment of Federal Constitution in year 2006. MOF’s move will definitely cause huge damage to the restructuring process. This is not the first time the lobbying groups tried to throw spanner to the restructuring process.

Privatisation is a failure

Privatisation of water services industry (water treatment, water supply and sewerage services) was a proven failure and recorded clearly in annals of Malaysian history. In fact, IWK was one of the prominent examples. This situation has mooted the third attempt to restructure water services industry in Malaysia spear headed by Economic Planning Unit (EPU) and in 2006 the executive power was given to the Federal Government with Water Services Industry Act (WSIA) model to be implemented in Peninsular Malaysia and Labuan. Concession agreements will be phased out and state governments will form companies to manage water treatment and supply. By 2010, IWK is suppose to be broken to state based entities and merged with water services companies at state level. This was the model that was presented to state governments and Conference of Rulers which was agreed upon before amendment to Federal Constitution and respective state enactments. MOF’s move to derail implementation of WSIA model will cause state governments to question legitimacy of the step and may fight to undo the amendment to Federal Constitution as the Federal Government failed to keep to the actual restructuring plan. The merger of water treatment, supply and sewerage components was seen as the best model to ensure economic, social and environmental sustainability after comparing many models around the world.

Why there is a rush to take over IWK’s operation by private entities?

It was due to a fictional capital expenditure (capex) forecast under IWK’s plan which was said to be worth RM 60 billion and in recent years getting closer to RM 100 billion. Thus, any private entity that gets to control IWK’s operation will be able to control the capex similar to how water concession agreements and the first generation Power Purchase Agreement (PPA) models. Once that fictional capex is spent, this company will try its best to spike the sewerage tariff and if that does not go through the government will come in to bailout with taxpayer’s money. We believe many Malaysians have seen this type of modus operandi in Malaysian privatisation  or fondly known as “Piratisation”. The lobbyist will not lose. The one time book value or government bailout does not investigate how the money is channeled via the main company’s subsidiaries that will implement such fictional capex as contractors and sub-contractors. AWER has seen the proposal by IWK in their fictional capex projections and there were a lot of discrepancies which we have asked SPAN to investigate and carry out detailed audit few years ago.

Who advised MOF to make such a move?

This is not the first attempt to take over IWK. In 2011, AWER did oppose another such privatisation plan of IWK and the government did stop such a move. A new Finance minister was just appointed recently and is busy managing our economy that is badly hit by the Covid-19 pandemic. We can only notice that the sly lobbyist using such a situation to benefit their agenda. The question is what were the MOF officers doing to prevent this? Why ministry in charge of water (including sewerage) and National Water Services Commission (SPAN) did not stop this wrong step? Are they kept in the dark? Who have misled the MOF minister?

What should be done to IWK?

IWK’s restructuring delay is also caused by IWK’s own personnel lobbying to derail from the actual restructuring plan since 1st January 2008. These officers only see their own interest superseding the nation’s interest by delaying this process for many years. AWER has already proposed a plan for IWK’s restructuring to MOF in the budget 2021 consultation process. The plan is to break IWK’s operation into state based entities and merged with respective state water companied in 3 phases (during 12th Malaysia Plan).

Phase 1: Selangor (Putrajaya and Kuala Lumpur), Johor, Melaka, Labuan and Penang to be completed by June 2022.
Phase 2: Kedah, Perlis, Perak and Negeri Sembilan to be completed by end of 2023
Phase 3: Kelantan, Terengganu and Pahang to be completed by end of 2025

AWER urges MOF minister and the cabinet to step in and do not allow this privatisation move to proceed. We need to implement the National Water Services Industry Restructuring to ensure water security is achieved. Any derailment will only threaten Malaysia’s water supply security and will cost us more in near future to mitigate arising problems.

Association of Water and Energy Research Malaysia (AWER)














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