In a move that reflects increasing centralisation of federal powers, RM655.2m worth of Penang’s water-related assets will be transferred to the federally managed Pengurusan Aset Air Bhd (PAAB) in exchange for the federal government financing the Mengkuang Dam expansion.
The basic terms of the transfer of assets agreement:
- The Penang state government will be relieved of repaying an outstanding RM655m water supply loan due to the federal government.
- However, the state water authority, PBAPP, will have to pay PAAB an annual lease rental of RM14.56mil over 45 years for those assets (total works out to RM655m). (For the 2009 financial year, PBAPP incurred RM7.6m in “dam and mains lease charges”.)(RM600m of assets will remain under PBAPP).
- Upon expiry of the lease, the state land will automatically go back to the state. In effect, this means the state government/PBAPP won’t have to pay interest on its current outstanding loan while the debt burden will now be repaid by PBAPP through annual lease charges over a longer period. (The lease rentals will be tax deductible.)
- The Penang state government will be given a grant allocation (instead of an interest-free loan) of RM1.2bn for the expansion of Mengkuang Dam in mainland Penang. (Current capacity 23 million cubic meters; expanded capacity 78 million cubic meters.)
- The federal government will be fully responsible for handling water supply upgrading projects.
- The financing for future upgrading may come from a) future grants from the federal government, if given b) PBAPP asking for financing from PAAB, or c) PBAPP seeking its own external financing. (But who financed the original Mengkuang Dam and other dams in the state? Was it the state or the federal government? How did Penang manage that without transferring ownership of assets to KL? Shouldn’t this be covered by the taxes we pay to the federal government?)
- PBAPP will focus on providing water treatment and distribution services and improving efficiency (but surely much depends on the quality of the infrastructure?);
- The people of Penang will retain control of water tariff rates, which currently are the lowest in the country.
The big issue here is not whether it was proper for Teng Hock Nan to announce the deal but the whole rationale for transferring the assets to KL.
As I see it, the federal government now gets to control the handling of the RM1.2bn expansion of Mengkuang Dam and all other water upgrading projects in the future. Big money at stake there – which is probably the rationale for the new federal water laws that provide for the transfer of water assets to KL.
The question remains, how were the original Mengkuang Dam, the Teluk Bahang Dam and other dams financed in the past without ceding control of water assets to KL?
Bear in mind, we will lose control of about 50 per cent of the state’s water-related assets to PAAB and upgrading work will be handled by KL (like the upgrading work on Penang Hill Railway, which was handled by KL).
We might save on interest and lower lease rentals over a longer period (than the original loan repayments) – but will lease rentals imposed on PBAPP be increased after future infrastructure upgrading is completed?
This continues a trend of major infrastructure projects coming under federal control: think Penang port, Penang airport, hill railway ‘upgrading’, Penang Bridge 1 and 2, RapidPenang.
Not a step in the right direction. In fact, it is a bad move and detrimental to the interests of the people of Penang.
If ever Pakatan takes over Putrajaya, we should insist that all these infrastructure projects (including any upgrading work process) be returned to the respective states and decision-making on the upgrading of infrastructure decentralised.