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Tuesday April 29, 2014 MYT 12:00:00 AM
Tuesday April 29, 2014 MYT 10:23:21 AM
by khairy jamaluddin
The Selangor Government’s reluctance to gradually raise tariffs, to allow water companies to increase supply and reduce leakages, forced the Federal Government to step in and initiate damage control. Unfortunately, public anger is now directed at the wrong party.
THE other day, I was listening to a business radio “talk-back” show. Irate listeners called to air their anger on the Federal Government for the protracted water crisis. Being unaware of the facts, understandably, they blamed the Federal Government for poor planning.
The question everyone should be asking is this: Why is Selangor and Kuala Lumpur the only areas facing water shortage when the rest of the country does not have such a problem?
Is it because we have not expected the increase in demand for Selangor like other states?
No. All states register increases in demand every year and we have reliable forecast of demand growth to provide the right information for planning.
Is it entirely caused by drought in Selangor?
No. There is also drought in other states at different times of the year, and they do not face water shortage.
Is it because Selangor’s non-revenue water (NRW) is too high compared to other states?
No. Selangor/KL’s NRW is at 32% and lower than the national average (36%), and certainly lower than Pahang (56%), Kelantan (55%), Sabah (50%) and Kedah (47%). Yet they do not have water shortage.
So why is Selangor facing water shortage and who is to be blamed?
With proper planning, there should be enough supply of water to cater for increases in demand and drought contingencies.
The current water strategy ensures water reserves at 70% (which will last for 100 days before hitting critical levels). This means we should have water supply to cover 100% of existing demand.
Under the water concession agreement, the previous Selangor Government deliberately established the initial water tariff at very low rates while allowing for gradual increases in the interest of the public.
These increases are needed to provide additional revenue to the water companies so that they can use the money to increase water supply and reduce leakages or NRW.
Except for Selangor, all other states in Malaysia, including Barisan Nasional and Pakatan Rakyat states have allowed for increases in water tariff in line with the concession agreement or the business plan.
In 2010 itself, the Federal Government had warned Selangor Mentri Besar Tan Sri Khalid Ibrahim of a water crisis in 2014 if water resources were not managed properly.
Khalid retorted, saying that there would be more than sufficient water supply to meet the demands of Selangor and Kuala Lumpur well up to 2019.
This is in stark contrast to what he said last week that “the water supply will only last 29 days if water rationing is not carried out.”
The state government refused to allow for the construction of Langat 2 and has, since 2009, rejected increases in water tariff. In its obstinacy, the state government has become the stumbling block.
The Selangor Government must be held accountable for this water shortage.
They should not deflect this problem by apportioning blame on the Federal Government. If they had approved Langat 2 in 2009, it would be completed by now and we would have enough water today.
Let’s look at the Selangor Government’s alternative water plans.
Based on their election manifesto, Pakatan promised free water or no increase in water tariff. To achieve this, they wanted to buy out the four water companies.
After more than five years of trying, they failed to acquire the companies on a “willing seller, willing buyer” basis.
To fulfil their election manifesto, the Selangor Government halted any increase in water tariff, even though it was provided for under the concession agreements.
As a result, water companies in Selangor said they were not in a financial position to inject money for upgrading infrastructure as well as undertaking NRW projects.
They were even on the brink of defaulting on their bond and loan repayment.
The water companies sued the Selangor Government for breach of contract. As it was concerned about a looming water crisis, the Federal Government was forced to take its first intervention measures.
The Government had to spend RM6.2bil to take over the bonds and further injected RM400mil for operations and maintenance.
The irony is that the Federal Government has to shoulder the increase in national debt to the tune of RM6.6bil because the Selangor Government effectively held the public at ransom.
Despite this first round of intervention to buy some time, the Selangor Government continued to reject Langat 2 and refused to increase the water tariff.
Recognising the seriousness of water issues, the Federal Govern-ment agreed to step in with the second round of intervention.
Under the recent MoU, signed on Feb 26, the Federal Government agreed to provide a sum of RM9.65bil to acquire the water companies and release all water assets to the Selangor Government to operate.
This is a sweet deal for the Selangor Government. You can call it a “highway robbery” because it effectively gets the Federal Govern-ment to spend billions while the Selangor Government operates the water companies to fulfil its election manifesto of free or cheap water.
Why do you think the Federal Government would enter into such a bizarre deal?
This is done purely because the Federal Government was extremely worried for the people in Selangor. As it is, over 1.3 million households or 6.3 million people have been affected and 820 new projects put on hold. It decided that for public interest, it will set aside political differences with Pakatan to look for ways to avert a water crisis.
As this latest RM9.65bil offer was rejected by the water companies, the Federal Government is left with no choice but to resort to a third round of intervention by invoking Section 114 of WSIA.
There is a complication here. In the interest of the public, the S114 allows the Federal Government to step in and take over management and operation from the water concessionaires.
It does not allow the Government to take over ownership of the companies. Once it has successfully resolved the water issue, it has to return the management/operation back to the water companies.
The catch is that if the Federal Government were to execute S114 of WSIA, the water issue will continue until Langat 2 is completed in 2017.
The Selangor Government can continue to frustrate its efforts by (a) not approving the development order, permits and land for Langat 2 and the two new distribution lines; (b) not approving the water mitigation projects; (c) not allowing water tariff increases; and (d) not extending the licence agreement to extract water from rivers in Selangor.
If (a), (b) and (d) are not allowed, the water shortage will get worse.
If (c) is not done, the Federal Government will be forced to inject money to cover operational costs. Any which way, people will put the blame squarely on the Federal Government.
The Federal Government has no other recourse but to request the Selangor Government to sign an agreement to implement (a), (b), (c) and (d) before it can execute S114 of WSIA.
By doggedly sticking to its election manifesto, the Selangor Government has failed consistently over five years to put in place its alternative plan.
The people of Selangor have to suffer the consequence of a failed water plan by the Selangor Govern-ment.
To make matters worse, in the interest of the public and the Malaysian economy, the Federal Government has to bear the financial costs through three rounds of intervention.
> Khairy Jamaluddin, Minister of Youth and Sports, is also the chairman of the Barisan Nasional youth wing and leader of Umno Youth. He can be contacted at email@example.com or via Twitter @khairykj. The views expressed are the writer’s own.
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