presentation marseilles march2012
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8/2/2019 Presentation Marseilles March2012
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S
Improving co-operation
between infra-state levels toprevent conflicts related to
water resourcesFederalism and Inter-governmental Conflict: Water Management in the State of
Selangor, Malaysia
6th World Water Forum, Marseilles, France
Rt .Hon.Tan Sri Dato’ Seri
Abdul Khalid bin IbrahimChief Minister of Selangor
14th March 2012
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Introducing Selangor
Selangor
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Water Management in Selangor:
A Case Study
S
Malaysia: A Federated NationS 13 State Governments and 3 Federal Territories
S Water services industry: Original jurisdiction under respectivestate authorities
S Selangor ’s Water industry
S Selangor ’s water industry was also under state authorityS Was a profitable business, generating revenue
S Between 1997 – 2005, water treatment and distribution serviceswere corporatised and then privatised
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All Water Assets Owned by the Selangor State Government
Under State GovernmentTreatment Operators:
SPLASH/ABASS/PUNCAKDistribution Operator:
SYABAS
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Privatisation of Water
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Privatisation’s Objectives
S Transfers decision rights and ability to profit to private owner
S Ensures private owner responds efficiently to positive incentives of financial gain
S Would address budgetary constraints of state government
S Removes burden of capital expenditure from state authorities
S Promotes CompetitionS Promotes efficiency
S Ensures public funds not used to bail out or subsidise losses of public utility body
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Privatisation of Water
S Private concession companies chosen were not skilled nor experienced in water services industry
S Insufficient injected equity
S Compromised water quality and services
S High tariffs on consumers
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Problems of Water Services
Industry
Non-holistic
water planning &
management
Ineffectiveregulatory
structures
Lack of
maintenance
Inefficient
operations
Unsustainablefunding
structure
Poor asset
conditions
Low costrecovery
Poor servicesto water
consumers
High CAPEX
High NRW
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Changes to the
Water Services Industry
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Imbalance in water services industryS Water treatment operators: Profitable
S Water distribution operator: Severe Losses
S 2006: Water Services Industry Act passed in Parliament
S Water assets to be transferred to a body (PAAB)
S Constitution amended to transfer water services from stategovernment to both state and federal governments
S National Water Services Commission formed as regulatory body
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Changes to the
Water Services Industry
SPrivate operators with greater restriction
S Ideally, operations returned to state authorities
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State Government’s Efforts
S3 or more rounds of negotiations and offers to buy over private water concession companies over the last 3 years
S Returns calculated based on 12% return on injected capital
S Reasonable industry standard
S Compensation more than given
S Situation has reached a stalemate
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Lessons Learnt from
Ongoing Case
1. Privatisation Model for the water industry has failed inMalaysia
S Half of the 13 states experienced financial deficits in water
operations
S By 2008, water sector had a RM1 billion operating deficit
S Total debts owed to federal government by states: RM7.6 billion
S Has not addressed issue of funding
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Lack of understanding of assumptions underlying privatisationS Should contain specific clauses with penalties when companies
fail to comply or project itself fails
S Should ensure government does not continue to underwrite debt
experienced by private company
S Capital expenditure should be borne by government (with
transparent award of contracts), operations may be privatised
S Watch out for cashflow: should not be overly conservative so
concession term is limited
Lessons Learnt from
Ongoing Case
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Lessons Learnt from
Case Study
2. Public sector should play a continued role in the provisionof water services
3. Water operations must be holistically managed
S Water services must not be fragmented
S Do not farm out lucrative portions to private companies, with
government bearing burden of loss-making entitiesS Selangor: water treatment companies annual profits of
between US$10 million and US$47 million in 2001, state-owned distribution arm made losses of US$100 million.
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Lessons Learnt from
Case Study
4. Clarify jurisdiction of water assetsS Ownership of water assets was under state, but operated by
private company
S Same problems ensued: reducing non-revenue water andreplacing old pipes
5. Government’s continued
“ bail-out
”act
S Private companies continued to receive federated governmentloans and grants
S Despite irregularities, breach of contracts
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Lessons Learnt from
Case Study
6. Role of water regulators and operators
S Ensure sustainability and affordability of water resources
S Tariffs commensurate with usage
S But not to ensure rent-seeking operators profit at expense of consumers
7. Political interests cloud reform intentions
S Federal government unwilling to enhance performance standardsS Private operators’ leases instead extended
S Minister has powers to act on “national interest” but no realaction taken
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Lessons Learnt from
Case Study
8. Federalism watered downS Federal Government has increasingly centralised powers
S Sub-national/state governments have less jurisdiction to make
decisions
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Conclusion:
Water Privatisation?
S
Can privatisation of the water services industry work inMalaysia?
S Water services must be treated holistically
S Public authorities must play a continued role
S Clear and rigid rules and regulations must be clarified at outset
S Terms and conditions strictly adhered to
S All levels of governments to co-operate despite politicaldifferences
S Transparent and accountable open tender system
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S
Thank Youwww.selangor.gov.my
www.selangorku.com
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