Sewerage privatisation once again?
Writer: Tricia Yeoh
Published: Fri, 11 Nov 2011
Cyberspace was on fire last week after the Auditor-General’s 2010 annual report revealed a host of financial irregularities perpetrated by several government agencies and government-linked companies.
Indah Water Konsortium (IWK) was among six GLCs reported to have paid up to two months’ bonus despite having suffered RM354.91 million in losses in 2009. IWK suffered losses amounting to RM33.35 million that year (The Malaysian Insider, Oct 24, 2011).
It isn’t too difficult to understand why people are angered each year when these scandals are unveiled. As taxpayers, they feel indignant that their hard-earned money is being thrown about – and worse, to line the pockets of those they feel are undeserving.
But this is the epitome of everything that went wrong with the country’s privatisation scheme. Sewage treatment was privatised in 1994, taking over the functions of local government authorities to improve service efficiency and effectiveness. Again, the argument that under a privatised company, things would be better managed.
But in 2000, the government had to dish out RM200 million to nationalise IWK because it was debt-ridden, and today it is wholly owned by the Minister of Finance Incorporated.
Just last month, the Finance Ministry said the government had spent RM1.2 billion to cover its operational deficit. In fact, its total liability (up to June 2011) is made up mostly of “government support loans”, which means that it operates at a loss and could not possibly survive without such grants.
This seems to be the same story for so many of our country’s public utility GLCs. Over the years, we have observed the same drama unfolding within water services and solid waste management as well: privatising and taking over services from the state authorities with the intention of better management, but failing and eventually requiring government assistance.
So, it is most strange that recent reports indicate that the government, after nationalising
IWK in 2000, is reverting to the solution of privatising it all over again.
1MDB, a strategic development company wholly owned by the government, has stated that it plans to form a consortium to take over the national sewerage company for a nominal fee. The consortium would secure RM800 million from 1MDB as seed capital and help to clear IWK’s debts, which stand at RM1.5 billion (Business Times, Sept 9, 2011). Puncak Niaga Sdn Bhd, dominant player in Selangor’s water services industry, is also reported to be involved in the consortium.
Although details of the takeover seem to be unconfirmed, it is certain that the sewerage industry is undergoing major restructuring.
This is something all Malaysians should pay careful attention to, for several reasons.
One, as ratepayers, we would be directly impacted by any changes made to the sewage management tariff and payment system, not to mention the service quality itself.
Secondly, any debts that are paid off by government in acquiring IWK would consist of
Finally, this is a crucial mega deal that should not be hidden away from the public eye. In light of the furore sparked off by the Auditor General’s report, anyone in public service ought to realise by now that transparency and accountability are key in winning the hearts of the many.
It is of great concern that these important negotiations are taking place without any participation from parties external to the deal. A monitoring body or watchdog group like Transparency International could possibly be invited to ensure transactions take place in an open, transparent manner.
The fact that year after year, billions of public funds seem to disappear in an instant – poof! – is truly astounding. The clarion calls repeat themselves in vain, to improve the
system of governance and monitoring.
And these deals that seem to be opaque and obscure really do not help public perception of the administration. One would imagine that we would have learnt from past mistakes on several counts, namely that privatising public utilities does not work in this country. If and when these deals are made, they must ultimately be watertight to protect
Before the deal is signed, it is hoped that the officials representing all Malaysians (read: government) are carefully scrutinising every line of the concession agreement, making sure the terms and conditions of the document are favourable to the people. It would be a ridiculous affair if, several years down the line, the same pattern of being financially unviable and the need for public funds arises yet again.