Saturday, November 14, 2015

Water Politics – Counting The Costs

Azman Ujang (Posted on 12 November 2015 - 05:52pm)

ONE of the worst effects of the Barisan Nasional losing power in Selangor to Pakatan Rakyat since 2008 has been the haggling over control of the state's water assets, which at times have even put the state, Kuala Lumpur and Putrajaya on the brink of a crippling water crisis.

It all started when early into his administration, the then Selangor mentri besar Tan Sri Abdul Khalid Ibrahim decided on what he called the restructuring of the state's water assets for "better services and lower tariffs".

He made it seem like his pet project and was even obsessed with it at times, even to the extent of having an axe to grind with the federal government for privatising the assets and granting four concession companies to run Selangor's water in 2004.

Because Selangor is the country's most developed state and key industrial hub with already superb infrastructures, he could afford to spend a lot of time on this, unlike his counterparts in largely rural-based states like Sabah and Sarawak – which are still grappling with basic needs like roads, water supply and electricity.

And that's what Khalid did for most of the six years he was MB.

A key issue with the concessionaires was overpricing and striking willing buyer willing seller deals, while between the state and federal governments, they were over legal and land matters.

Finally in February last year, the deal was struck with the signing of a memorandum of understanding (MoU), allowing the Selangor government to take over the equity of the four concession companies.

To show how relieved the federal government was with the end of the protracted tug-of-war, Prime Minister Datuk Seri Najib Abdul Razak, then deputy prime minister Tan Sri Muhyiddin Yassin and Chief Secretary to the Government Tan Sri Dr Ali Hamsa were present when Khalid and Energy, Green Technology and Water Minister Datuk Seri Dr Maximus Ongkili signed the MoU in Putrajaya.

But cracks began to appear within the Selangor government quite soon after, with internal efforts under way to replace Khalid as MB, and concerns were expressed about the fate of the water deals.
These worries were not unfounded because in March this year, Mohamed Azmin Ali (who took over from Khalid in September last year) revoked the water supply industry agreement, accusing the federal government of breaching the pact on matters concerning land acquisition.

For a while, what I called in several previous columns on this issue as Selangor's water chronic politics that Khalid started, seemed to worsen as both sides traded barbs.

Ongkili told Parliament in June that the restructuring exercise could not be fully resolved yet following the Selangor government's failure to fulfil the conditions in the master agreement with the federal government.

But it was not all doom and gloom. Common sense, which is not at all common among politicians on both sides of the political divide, did prevail. Azmin, when presenting Selangor's 2016 Budget on Oct 30, announced that the state government had finalised the takeover of water services two weeks earlier.
As Azmin put it, the water industry is now back in the ownership of the Selangor people, which means the agreement with the federal government is back on track.

The Selangor government takes over lock, stock and barrel assets and liabilities worth RM9.65 billion while the federal government has injected RM2 billion to facilitate the takeover exercise.

Of the RM2 billion from the federal government, RM1.68 billion has gone into paying the shareholders of three of the four concessionaires – Puncak Niaga Sdn Bhd, Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) and Konsortium Abbas Sdn Bhd, while talks with the fourth concessionaire, Syarikat Pengeluar Air Selangor Sdn Bhd (SPLASH) have broken down after it rejected the RM250 million valuation offer by the state government.

But the biggest cheer out of all the mess created by Selangor's water politics should be for the Langat 2 water treatment plant, whose construction has now begun in earnest after a long delay.

This all too vital project initiated by the federal government to cater to rapidly growing clean water demands of Selangor, Kuala Lumpur and Putrajaya up to the year 2025, should have been completed in 2013, if not for Khalid's refusal to grant a development order for construction to start.
It has been used as a pawn in the negotiations by Selangor in the takeover of the assets instead of being treated as a separate issue given its critical importance.

Giving credit where it's due, Putrajaya has always given the highest priority to the Langat 2 plant, costing about RM2 billion that will treat raw water pumped by pipelines from Sungai Pahang hundreds of kilometres away.

Federal ministers and officials have openly expressed their exasperation against Selangor's apparent game of political one-upmanship, over the development order and land approvals, and other permits connected to the project.

Their worst fears were confirmed when residents and industries had to endure a spate of water rationing in the past few years with the more critical one occurring early last year.

One major multinational food and beverage manufacturer in Shah Alam reported losses running into RM15 million daily during the height of the water disruptions.

This single act of not signing that piece of paper called "development order" has also proven to be very costly indeed for the taxpayers too, plus the loss of new wealth to Selangor's economy.

Azmin announced in his budget speech that the state government would fund the construction of two water treatment plants, costing about RM800 million to mitigate water shortage, while waiting for the completion of Langat 2.

And the bad news is that due to all the delays, the new date for Langat 2 to be fully operational has now been set for 2019, six years later than the original schedule. Overall, its construction has reached only 20%.

A senior Ministry of Energy, Green Technology and Water official told me that besides the RM800 million to be spent by the Selangor government for the two plants, the federal government itself has used up RM1 billion for mitigation projects to upgrade capacity at existing treatment plants, in order to prevent supply shortages.

"This means the RM1.8 billion from both governments is enough to build another treatment plant of the size of Langat 2 to cater to Malacca, Negri Sembilan and Johor combined. Or for another three states of Kelantan, Terengganu and Pahang, or even Sabah and Sarawak," the official said.
On top of that, he said, because of the delay of Langat 2, some 800 projects were deferred in Selangor due to the shortage of treated water.

"You can imagine the losses to the economy and equally important, thousands of job opportunities lost," he added.

Actually, the takeover of the water assets by the Selangor government that ended the federal government's privatisation effort, is fraught with ironies and uncertainties.

In the first place, the privatisation was done due to the inefficient ways of the then government entity, Jabatan Air Selangor in managing the state's water supply. Suffice to say, the privatisation effort has achieved its objective with much greater efficiency under the concession companies.

They would have even been more efficient had it not been for political interference by the state.
What Khalid once described as "better services and lower tariffs" shall remain a pipe-dream because Azmin has already talked about the need to increase water tariffs following the takeover of the concessionaires by the new government-owned, Air Selangor.

Can another government department be more efficient than a private company?

And to top it all, how could the Selangor government monetise its assets or ensure return on investment with its free water policy for the first 20 cubic metres of consumption?

This free water of the Khalid era has led to consumers' habit of wasting this vital resource, and if you ask me, this policy should go. It's free for consumers but let's not hide the fact that the Selangor government is paying heavily to the concessionaires all this while. Again, it's the taxpayers' money.
Water is life and no one minds paying for it.

Let's once and for all, stop playing politics over water because if there's a water crisis, needless to say, it's the mother of all crises.

The Sun

No comments: