Kota Marudu Member of Parliament

Waste not, want not

THE Energy, Green Technology and Water Ministry (KeTTHA) is rolling up its sleeves to restructure and consolidate the country’s water sector.

The Water Services Industry Act 2006 (WSIA) was introduced a decade ago but to date, only half of the states in the peninsula have migrated. The process to acquire the country’s water concessionaire companies and integrate them under the regulatory framework of WSIA must be expedited, says KeTTHA secretary-general Datuk Seri Dr Zaini Ujang. WSIA’s implementation is essential but it’s been dragging on for too long, says the 52-year-old.

“Financial sustainability is the key issue. Negotiations led by KeTTHA Minister Datuk Seri Dr Maximus Ongkili, have been ongoing between the federal and state governments. We have to agree on the valuation of the water assets. It’s about numbers, really. But the arrangement of migration to WSIA should be concluded with all states as soonest possible, according to the 11th Malaysian Plan (RMK11).”

By November 2016, only Johor, Malacca, Negri Sembilan, Penang, Perak, Kelantan and Perlis have fully migrated under WSIA. Selangor and Kedah are at the final stage of negotiations but Pahang and Terengganu have yet to start.

“WSIA’s a big thing because it was designed to transform the water sector. In the past, the governance framework of our water sector wasn’t clear. The individual states govern, operate and monitor the quality of services.

In addition, states needed a lot of financial assistance from the federal government to develop water assets. Some states borrowed from financial institutions and it just wasn’t sustainable to keep dishing out federal grants,” he says, adding that WSIA provides for water resource grants for water resources such as to build dams, off-river water storages, and barrages.

Such allocations are necessary because unlike costs for services, under the WSIA framework, expenses on assets cannot be passed on to consumers. At least 50% of our treated water is subsidised, says Dr Zaini.

“We’re determined to be a developed nation in three years, Insyaallah. It’s important to understand that developed nations don’t subsidise water at all because water services can be efficiently operated to create revenue by exporting expertise and water technologies.”

Subsidised water services will discourage water conservation initiatives, and limit the potential innovation on water technology and services, he adds.

“Our water demand in Malaysia is on average over 210 litres per day per capita. This is much higher than neighbouring countries, and among the highest bracket in the world. Why? Because there’s a lack of water conservation initiatives.

“Our water rates are among the cheapest globally. No operator will ask consumers to use less water because it means having lower revenue for them. At the same time, the level of non-revenue water (NRW) is high – more than 35% on average. Investing to reduce NRW has a long return on investment (ROI) due to cheap water rates. We’ve to correct this business model to stop excessive consumption and wastage.”

Lower consumption and low NRW means we can rely on our present water resources and eliminate the need for more investment on new water resources, he explains. Instead, we can concentrate on investing to improve and innovate water technology for better water quality and a more efficient industry.

States that have migrated to WSIA have shown great improvement, he says, citing Malacca as an example. The state’s NRW and treated water quality have improved. Malacca is generating money because their water services are now properly governed.

KeTTHA, he shares, is also studying a new set of Standard Operating Procedures (SOP) for water treatment plant operators. The proposals include:

> Having an emergency response manual in place to ensure efficient action in the event of water contamination incidents.

> Having an action plan to handle pollution.

> Installing river monitoring system equipment to detect water pollution early.

> Equipping water treatment plant labo­ratories with water analysis equipment to detect pollutant odour.

We can have a high SOP but would operators want to invest if the water tariffs are too low, he asks, adding that the volumetric-based tariff which links treatment and disposal of wastewater to water consumption, is a key policy under the RMK11.

Explaining the ‘polluters pay’ principle behind the volumetric-based tariff, Dr Zaini says: “The more water you use, the more trees, money and energy, is needed to treat the drinking water. And, the more wastewater you generate, the more money and energy is needed to treat and dispose or recycle that wastewater.”

The volumetric-based tariff will result in more resilient and sustainable water resources for the country. And, sustainable, he quips, also means ‘bankable’ when it comes to investing in water-related capital expenditures.

“Through WSIA, water operators will be asset-light and focused on delivering high quality water services, with Pengurusan Aset Air Berhad (PAAB) providing long-term loans for non-water-resources-assets.”

Dr Zaini finds it shocking that some states in the peninsula haven’t reviewed their tariffs in the last two decades. The current low tariffs are not sufficient to cover operating costs. The result is below par operational efficiency and services, he shrugs, insisting that the need to strengthen the tariff setting, is pressing.

“The tariff setting is heavily politicised here. But current rates are neither based on scientific evidence nor financial feasibility. If tariffs are reviewed, people might think that the government is unkind.”

That perception contradicts water conservation policy, he argues. Pricing can:

> Lead to people conserving water and reduce wastage.

> Promote the use of technology to conserve water.

> Encourage more research to make the water sector more efficient and productive.

Instead of being a service sector, water can be a source of revenue for Malaysia. Through WSIA, Malaysia can provide high level expertise, services and technologies not only for Malaysia but to the global market, he believes.

Tariffs in Malaysia are cheaper than Thailand, Indonesia and Vietnam, though our GDP per capita is much higher. Our water tariff must be financially sustainable, he stresses.

“If it’s too cheap, what kind of services will you get? Of course through WSIA, the Government is generous enough to continue providing subsidy in the form of capital expenditures for water-resourse-assets (CAPEX), but not to cover operating expenditures (OPEX).”

Lamenting how our sewage charge is also too low, Dr Zaini points out that for many years, the Government has been providing annual grants to Indah Water Konsortium (IWK) which operates our sewerage services.

Last year, IWK recieved a RM400mil grant for OPEX, but that shouldn’t be the case, he says. It should be covered by the tariff collection.

Cabinet, says Dr Zaini, agreed on Dec 7, last year, on the nationwide implementation of the joint-billing for water and sewerage in Labuan, with Malacca and Johor, set to follow suit. The move, which is also being practised in almost all developed countries including Singapore and Japan, is necessary for water and sewerage services operators to cover their operating expenditure.

We have to learn fast. Our neighbour across the causeway has monetised its wastewater industry.

Wastewater, says Dr Zaini, comprises of municipal sewage and industrial wastewater. The ministry regulates both water and sewage but monetising that wouldn’t make sense now because water is accessible at dirt cheap rates.

“The book says that great innovation happens when we are in big trouble. However, who would want to innovate when it takes 20 years to get a return on investment? Besides, will people accept water from a recycled source?” — By CHRISTINA CHIN

Source : The Star Online