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Ensuring water security for all
Stephanie Jacob 
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If Dr Xavier Jayakumar has his way, Malaysians will see an end to the country’s constant water disruption and shortage.To him access to an adequate water supply is both a human right and a national security issue.

The Water, Land and Natural Resources Minister estimates the government will likely need to spend between RM100 bil and RM150 bil nationwide to put an end to the water woes of residential and commercial users.

The large sum is roughly the amount needed to acquire assets from private operators and the individual states’ water infrastructure. It includes the operational cost and capital expenditure to upgrade and modernise outdated systems and infrastructure.

Xavier has a huge task on his hands. For one, managing water resources is a state issue. As he puts it, taking over the management and water assets of all states is not a small matter. But he emphasises that if nothing is done to ensure water resources and assets in the states are well managed, water supply and security will become a serious issue.

“If Penang does not do anything within the next five years, it will have problems with raw water supply. In Johor, we are running short of raw water. If we do not invest and change the business plan, then in five years we will have a raw water shortage in the south of Johor.

“In Selangor there are actually over 140 projects that are on hold. These are property and industrial projects that cannot go forward because water supply cannot be guaranteed,” Xavier tells FocusM in an exclusive interview. Although hard to quantify, he believes the idle projects in Selangor alone are estimated to be worth billions of ringgit.

 

Demand outpacing supply

A big concern for the minister is that the demand, particularly in some states, is outpacing the new supply being brought online. The mismatch is compounded by the fact that for the past decade or two, there had been a lack of attention paid to ensuring that the necessary infrastructure was put in place to increase supply so as to keep pace with demand.

Demand is surging, especially in certain parts of the country and the existing infrastructure to meet it is lagging by a decade or two. Xavier explains that it takes at least two years to build a new water treatment plant and that is precisely why it is necessary to draft plans years in advance.

“If I want to build a water treatment plant for 150 million litres per day (mld), it will take me two years to finish, minimum. So, we have to plan two, three, five years in advance so that (we can keep up). But that was lacking in the past 10 to 20 years in order to make sure the water supply was adequate in all the areas. This was maybe political but the priorities were also not in the right place as far as the water industry is concerned,” says the minister.

He uses the Langat 2 water treatment plant to illustrate his point, saying that when the new supply comes on tap (probably by the third quarter of 2021), there will already be ready demand for it. There are many projects waiting for the supply so they canproceed without hurdles.

To avoid another failure of forward planning, Xavier says it is imperative that the government crafts a 50-year plan for water resources and management, so that all Malaysians can enjoy a secure supply of water.

“The main focus of our ministry at present is to make sure that the water industry is sustainable and that people get clean drinking water throughout the year without disruptions,” he stresses.

Restructuring in the states

Another challenge to achieving this is the uneven distribution of raw water sources across the states. Thus, the federal government is encouraging those with ample supply to share with neighbouring states in need of more water.

“States have complete power over the rivers and the water sources. So the federal government has to come in and get them to share the resources equally with everyone.” says the minister.

Xavier says Pahang has already begun to share its resources with Selangor, which has the greatest demand. Melaka and Johor also have a similar agreement in place. Negotiations are underway for Perak and Penang to also share this precious commodity resources.

He also wants the remaining states to complete their water restructuring so the federal government can begin to channel funds to them to help improve their infrastructure and management systems.

Following the implementation of Water Services Industry Act 2006 (WASIA 2006), states were encouraged to restructure and de-privatise their water industry, and place it under one state-owned entity. The rationale for this was so that the federal government could deal with a single player when providing financing or other assistance.

“The federal government did not want to have a fragmented water industry in each state where you would have to deal with four or five players with different bank balances, debt, liabilities and different assets. To deal with the fragmented players it is quite difficult for a country like Malaysia,” he says.

To help the states migrate all their assets and infrastructure to a single entity, Pengurusan Aset Air Bhd (PAAB) helps purchase the assets owned by private entities and leases them back to the state. PAAB, wholly owned by MOF Inc, will also be responsible for building new water infrastructure required by the states. Taking some of the financial burden from them, the states can then focus on making their operations efficient and on customer service.

Perhaps the most daunting task was in Selangor where negotiations had been ongoing for years. However, with the change in government last year, the talks were finally concluded. As a result, Air Selangor is now the sole water supplier for the state.

With the Selangor water asset acquisition completed, only a few states have yet to restructure. Some like Pahang and Terengganu are in active negotiations. The former has agreed to the migration although the assets have not yet been taken over by PAAB. Thus far, Terengganu has yet to agree but negotiations are well underway on how best to move forward.

One state which is showing reluctance is Kelantan. Perhaps it could be a fear of losing control over the state’s water industry, says Xavier.

Still, he is confident that the remaining states will ultimately fall in line as failure to do so would mean losing the federal government’s financial assistance. “If you do not want to hand over, then the government funding will not be there. So, you (the state) are stuck and cannot go forward. If you have your own funding then you will not come back to us but which state has that kind of money to spend?” he asks.

He stresses that the federal government is not interested in holding on to any one state’s water industry. “We just want to support them and we are leasing it back to them, so that it (the water industry) can be run more efficiently,” he says.

 

Reducing non-revenue water

One of the biggest issues stemming from outdated infrastructure and inefficient management and operations of the water companies is the high level of non-revenue water (NRW) which stands at an average of 35%.

Again, however, resolving this is no easy task. Reducing NRW by a single percent will cost the government between RM800 mil and RM1 bil. Nonetheless, Xavier says it must be a priority over the next decade or so.

“We are losing 5,000 mld plus a day to NRW. This is good enough to supply the whole state of Selangor! No one has paid for that water though it has been treated, but it is lost the minute it leaves the treatment plant,” he says.

The minister adds that this is not just caused by leaking pipes but also inefficient water companies with bad business models, among other factors.

He says the federal government and the states have to be in line with each other to undertake this huge endeavour. States that show progress on this front will receive incentives in the form of government funding to help them achieve their goals.

Xavier emphasises that the ultimate goal is to ensure Malaysians have a safe, clean and uninterrupted supply of water all day, all year long. “Like I have said, if we want to have 24 hours of uninterrupted water services for 365 days (a year), everybody has to chip in to make it work, not only the federal government.”

 

Opposition to revising tariffs

One way for everyone to do so is through higher tariffs. Xavier says that six states have agreed to higher rates. He acknowledges that convincing them and the remaining states to do so has been challenging. This is perhaps unsurprising at a time when much of the rakyat are feeling the pinch of the high cost of living.

The proposal has also been criticised by political parties, such as Parti Sosialis Malaysia (PSM) which has accused the government of treating water as a commodity rather than a human right.

“PSM demands that there should not be any increase in the water tariffs without an overall reform of our water management structure,” says PSM secretary-general Sivarajan in a recent statement.

The minister, however, believes that raising tariffs is unavoidable. “You cannot stick to rates that are 15 to 20 years old. You got to have water rates at the present rates at the current level the country is at financially and where inflation is. Because whatever we are tendering for (for infrastructure projects) are at current market rates. We are not tendering at the rates of 10 years ago, so the water rates also have to be there (at that level),” he justifies.

Xavier agrees that with higher rates so to should come more transparency and accountability from the water industry players.

“The water companies in the different states must be accountable. When I talk about a tariff mechanism being put in place in order to make sure the industry is healthy, people will want to know how lean and effective the water company is as well. That it is not top-heavy and is only looking at profit margins, rather than looking to the supply for the industry and the people.

“You have to make sure the water industry players are providing the necessary resources for the people and at the same time, the company is transparent so that the people will understand that we are running something that is worth for them to pay for because they are getting their money’s worth,” he says. FocusM



This article first appeared in Focus Malaysia Issue 330.