KUALA LUMPUR, March 15 — Selangor welcomes legal avenues to settle disputes with water concessionaires as it will allow the government to expose water privatisation deals to the court of public opinion, Mentri Besar Tan Sri Khalid Ibrahim said today.
He said the Pakatan Rakyat (PR) government will exploit Syarikat Bekalan Air Selangor’s (Syabas) RM472 million suit against the state’s refusal to allow a price hike in 2009 to highlight issues regarding water privatisation in the state.
“Syabas has no capacity to do this and it has broken a lot of agreement. The court allows us now to contest on a bigger issue to look at the whole agreement, to see whether Syabas complies with the whole agreement. We are looking forward to it to open their accounts to the public,” Khalid (picture) told the BFM radio station this morning in a live interview.
He also said that the current impasse over the takeover of water supply assets belonging to concessionaires in the state should go to international arbitration since there is no agreement to his administration’s final offer of RM9 billion.
He said the fact that water distributor Syabas would be unable to meet bond payments “shows that action by federal government to earlier privatise has shown weakness.”
The deal involving Syabas, the Selangor government and the federal government allows for conditional tariff hikes every three years.
The debt service problem started when Syabas was barred from implementing a 37 per cent tariff hike agreed upon in January 2009 after the Selangor government claimed the sole water distributor had not done enough to reduce leakages which cost the state millions.
This, in turn, led to payment problems between Syabas and water treatment concessionaires, who supply it with treated water and all are now at risk of debt defaults.
Selangor, which already owns 80 per cent of the state’s water assets, is in the process of taking over the remaining assets from the concessionaires to fulfil a statutory restructuring which will see water supply across the peninsula centralised under the federal government.
Selangor’s third and final offer of RM9 billion for the assets and liabilities of all four concessionaires fell through after it was rejected by three of the four water players.
But privatisation plans under a federal water agency have been put in deep freeze as federal and state governments engage in what industry watchers have called “excessive politicking”.
PR wants to control the state’s water assets so it can fulfil its promise to keep water cheap for Selangor, Kuala Lumpur and Putrajaya residents by controlling tariffs.
Khalid repeated today that Selangor will not budge from its final valuation as “if I offer another RM1 billion, then the five million customers will have to pay extra.”
“Saying yes or no is up to the federal government. Among the clauses of the Water Services Industry Act, once the federal government decides on the price, it cannot be contested in court.”
He said that if the federal government did not want to force a valuation on the stakeholders involved, then Selangor was willing for the deal to go to international arbitration.
“The ball is in the federal government’s court,” he insisted.
Khalid said that should Syabas default on payments and refuse to allow the state to take over, then the federal government would be responsible should taps be shut off.
“If this should happen, we should deprivatise water first, then talk about money. The federal and state governments will stand by the decision of the arbitration,” he said.
He also criticised the water concessionaires for wanting an excessive profit on the sale of their assets.
“We have given them a reasonable amount by international standards of 12 per cent per year on equity return. Some of the concessionaires are looking for 70 per cent return. The world will be laughing at the federal government for buying that request,” Khalid said.
“If you want 70 per cent, then let’s go to international arbitration and see whether it’s fair for Selangor people to pay that,” he said.
He added that there was a political dimension to the deal as “once you ask your cronies to do the job, maybe the cronies are telling the federal government they want a lot more.” - Malaysian Insider
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