Khalid: Water privatisation a failure
Published: Fri, 16 Mar 2012
SHAH ALAM: Malaysia’s water services privatisation failure due to abuse was highlighted by Tan Sri Khalid Ibrahim at the 6th World Water Forum in Marseille, France on Wednesday (pic).
”(Water privatisation) has failed in Malaysia as it has been used to benefit the rentier class at the expense of consumers,” said the Menteri Besar, who was speaking at the session for local and regional authorities.
Khalid said while there have been successful cases of privatised water operations at the international level, the Malaysian chapter is not the case.
“This is a classic case of a country’s failed attempt at privatising a public utility, made worse by two factors: the inextricable nexus between political and business sectors where private individual profitability is prioritised, and conflicting political interests”.
He stressed that privatisation in theory is not wrong as it is meant to address the government’s budgetary constraints and improve efficiency and competitiveness.
“But in Selangor, the private concession companies chosen to treat and distribute water were not skilled nor experienced in the water services industry. Without sufficient equity, the water distribution company began to compromise on its water quality and service delivery, forcing high tariffs on consumers.”
He added that in 2008, half of the 13 water companies in the states in Malaysia had experienced financial deficits and water operations had a RM1 billion operating deficit.
“There should have been specific and detailed clauses providing penalties for the companies’ failure to comply with conditions. In our case, the agreement was so flawed that when the distributor experienced financial difficulties, the government eventually underwrote the companies’ debts.”
“The question for the state government now is whether privatisation can work, and if so, how? Malaysia is a case where water services were used by a rentier class, domestic drivers of privatisation and political kingmakers, through their well-oiled connections.”
He said the solution lies in ensuring that water services are treated holistically and the state has made efforts to do so by adhering to the processes detailed in the Water Services Industry Act 2006 which sets out to consolidate the industry. The Act also provides for decentralisation of water services.
Although this was passed at the federal level, the Barisan Nasional-led federal government was hesitant to implement it following a surprise win by the Pakatan Rakyat in Selangor following the 12th General Election in March 2008.
“So when the time came for the state government to buy over the shares of private companies (as stipulated in the Act) they responded with a hostile attitude.”
He explained that the state has had three rounds of negotiations and formal offers were presented but the concessionaires demanded higher compensation and to date the situation has not improved.
He stressed that political interests is a major factor that is impeding reform. Instead of pushing for complete and wholesale buying of the water services industry, the federal government has extended the private operators’ leases.
Khalid was among seven federated state leaders who spoke at the session – themed “Towards better water governance: Solution for Regional actors” – which is hosted by Regions United (FOGAR) at the World Water Forum.
This is the first time Selangor has raised the issue at an international forum, following more than two years of negotiations to take over the water services industry. Khalid is expected to speak further on the issue today (Friday) in London.