Privatisation failure spurs S’gor govt to take over water

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Selangor is in the midst of crucial negotiations to take over the water assets of four concessionaires operating in the state.

The negotiations are critical as Selangor residents are staring at a steep water tariff hike by the end of March if the present situation persists.

Private water distribution company, Syabas, 70 per cent owned by Puncak Niaga, had last year asked for a tariff hike by January 2009. In December, the Water Minister Shaziman Abu Mansor said that according to the concession agreement, water tariffs in Selangor and Kuala Lumpur would be hiked by up to 37 per cent in January 2009.

This tariff hike was delayed to 31 March 2009 to allow time for the Selangor government to take over the water assets from the four concessionaires.

Under the lop-sided concession agreement, water tariffs are expected to be hiked as follows:

  • Up to 37% in 2009
  • 25% in 2015
  • 10% in 2019
  • 5% in 2021
  • 5% in 2024
  • 5% in 2027
  • 5% in 2030

Source:  Background Note to Public Briefing by the Water Review Panel, Selangor State Government

In the same Background Note, it was noted:

There is evidence to show that Syabas has breached key terms of the concession, including:

  • breaching of the ceiling for capex (capital expenditure) and operating expenditure (opex) works,
  • non-inclusion of state representatives on Syabas’ board.
  • more than 72% of contracts worth a total of RM600 million were awarded to selected companies via direct negotiations and only 25% via competitive open tender.
  • a discrepancy of more than RM525 million between the summary of contracts awarded in 2005, 2006 and 2007 and Syabas’ review document.

In this regard, the Selangor State Government has written to the Ministry of Energy, Water and Communications to revoke Syabas’ 30-year water supply concession in 2005.  No response has yet been received from the Ministry on this matter.

Some argue that the Selangor government’s offer price to the concessionaires is too low – but that is beside the point. As MPs in the Selangor Water Review Panel – Charles Santiago, Tony Pua, Dr Dzulkifli Ahmad and William Leong  – observed in a joint statement:

The offer made by the Selangor Government was made on the basis of one-time book value of the water-related assets in the concessionaires as at 31st December 2007, and a fair and reasonable return to the actual equity invested by the concessionaires since the industry was first privatised.

It should be noted that the offer made by the Selangor state government is guided by and in compliance with the terms and conditions willing signed by all parties in the concession agreement. Therefore contrary to press reports in the last few days, the acquisition offer is neither a cynical offer which is too low, or without basis.

It should be noted that all investment analysts have been using the “discounted cashflow model” which results in significantly higher valuation for these concessions. However, the “discounted cashflow model” is just a technical term for paying the concessionaires its future profits, which in itself is a totally unreasonable proposition, and defeats the purpose of the Governments’ water restructuring exercise.

What we are witnessing is the utter failure of the Mahathir privatisation “get-rich-quick” scheme. Well, it wasn’t a total failure as certain individuals became multi-millionaires overnight.

The people of Selangor and KL have to back the Selangor state government in this takeover. (The assets will then be handed over to a federal body and then leased back to the state.) The alternative is a steep tariff hike – with more to come in the future.

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flyer168

Party promotions based on “seniority, patronization, money politics, etc” without “Meritocracy and Proven Track Records” leads to “Leaders” that UMNO is inheriting – “Elite, Ketuanan UMNO BEGGARS !”

To move forward, let us all change our “Ketuanan/Racial/Personal/Selfish, Etc Paradigm” and start thinking about “OUR GREAT NATION MALAYSIA for ANAK BANGSA MALAYSIA” as our Bapa Merdeka Tunku together with his first cabinet adopted – From TOP to BOTTOM.

veryupset

Water IS a required instituiton..! Without water, all living things will die. You think BN will give in without creating an issue first…?? Their pocket money has decrease since the Selangor state was taken over by PKR..! And its a BIG state ! And a lot of resources & richness…! That’s why Toyo fella is being a “….’ about it…! Water charges shouldn’t be that high. By right it should be free but we understand there must be some charges, at least a minimum. Not squeeze us dry…! So many people are out of work & the BN govt is… Read more »

tan, tanjong bungah

Hi everyone,

In Malaysia, privatisation = piratisation. Exorbitant profits (guaranteed by the Govt) thru’ lop-sided agreements transfer hard-earned money of rakyat into the pockets of cronies and families of UMNOputras and BNputras! No wonder, calls by such people to continue the NEP in the form they want so as to perpetuate the plunder of the rakyat’s money and the country’s riches!

So, such piratisation of projects would definitely fail, but nevertheless, are highly-successful in the eyes, or rather pockets, of the UMNOputras and BNputras! The latter have not surprisingly always declare that such privatisation projects are highly-successful!

Dr.Hamid Ibrahim

Dear Anil It was at one time fancy to privatise almost all public utilities so that the contractors can make money out of peoples misery. Now it is back to public undertakings. Mahathir and others privatised a number of Public Utilities; if PEOPLE do not object, they will even privatise “Public Administratin” and the Public Servants got nothing to do but collect monthly payments. No more – this will not do – people are aware awake now. See the attachment of a Judgment in Johannesburg. Johannesburg, 30 April 2008 PREPAYMENT WATER METER SYSTEM UNCONSTITUTIONAL, FREE BASIC WATER TO BE INCREASED… Read more »

Joenathan

Thats the way to go,keep up the good work and keep the rakyat at heart.TQ to the govt of Selangor.

Eric

Watchout, If not careful, Selangor will fall back to BN. Then all Selangor & KL folks will have no choice but to pay high water tariff for the coming years ahead. Now it’s money talk. Hope no MP will jump ship. What’s that 10 millions, 20 millions or 50 millions?? It could be easily recovered in a few year’s time.

Selangor & KL folks should publicly show their support for this take over exercise by the Selangor government.

lanwm

take it back selangor, this will really benefit your people and yout own governance

Mayden

The following are my suspicions:

Federal govt (may) side Syabas and gang by putting a spanner in the works. Mainstream media has already started belittling state govt’s offer. Finally consumers will have to pay more and BN and the media will have a field day belittling PR govt.

If my suspicions are true, then we really need to change the federal govt.

usan

ya i strongly support mb selangor tan sri khalid sud take back this water project frm this boy rozali.i am very sure tan sri khalid can manage selangor water very much better the rozali. wat is rozali if u compare to tan sri khalid. pse tan sri mb prove it to all MALAYSIAN i know u have the knowledge n i pray to GOD that u wil succed