Let Selangor handle the water assets

Selangor has been asking the federal government to revoke the concession agreement that gives Puncak Niaga a 70% stake in Syabas on the grounds that the latter has violated several conditions. One of them is the award of capital works to Puncak Niaga's related companies, which was supposed to have been done on a competitive basis, and another is the procurement of pipes from companies that are reportedly controlled by Rozali in Indonesia.

M Shanmugam, The Edge

Putting aside the objections from Selangor, the federal government will call for competitive bids to build the Langat 2 water treatment plant that is estimated to cost more than RM8.6 billion. This looks like another futile effort by the federal government to force its way into the state's water industry.

Matters relating to land and water come under the state. Without its approval, it would be difficult for the federal government to implement the project, let alone come up with a realistic pricing.

Well aware of the limitations, Deputy Prime Minister Tan Sri Muhyiddin Yassin, who is also the chairman of the Special Cabinet Committee on Selangor Water Issues, has said the assistance of the Attorney General has been sought to help look into how to get the project done, considering the state's power over land matters.

Assuming the matter goes to court, which cannot be discounted, the state has the resources to fight the federal government, so we could be looking at a prolonged affair. In the meantime, the price will keep going up based on the history of the project.

When efforts to implement Langat 2 picked up pace in 2007 and early 2008, the cost was estimated at RM5 billion. This has now risen to RM8.6 billion. Why the escalation in the estimate? There really is no answer but the oft-quoted justification is that material costs have gone up significantly over the years.

Whether it is the cost of materials or the consultancy fees for some well-connected companies that have risen is something that needs to be looked into carefully. For now, what is perplexing is the basis for the decision to invite tenders. According to reports, the committee has taken this step to avoid being accused of not being proactive in view of a possible water shortage in the state in three years or so.

But without having made a compromise with the state on issues related to the water assets, on what grounds are the tenders being invited? Without any certainty on when the land and other approvals can be obtained, would any contractor worth its salt be able to put in a realistic bid?

If there are delays in securing the approvals, the winning bidder would certainly have to adjust the price. Do we want this? Also, without a representative of the Selangor government on the Cabinet Committee, can the outcome be disputed by the state?

Even though the bidding is open to companies under the control of the Selangor government, what makes the Cabinet Committee think that the state will participate? Doing so would mean the state is legitimising the process and hence would have no grounds to object to the move to build Langat 2.

There is no doubt that the proposed water treatment plant is necessary for a long-term solution to the growing demand for treated water in Selangor, Kuala Lumpur and Putrajaya, thanks to an increase in the population. But whatever the Cabinet Committee decides is moot without the state participating in the decision-making process.

Since March 2008, it has been no secret that the federal government has found Selangor Menteri Besar Tan Sri Khalid Ibrahim a handful in dealing with matters related to the state's water assets. He will not go along with the federal government's objective to have Pengurusan Aset Air Bhd (PAAB) lead the consolidation of the water assets.

Khalid wants Selangor to take control of Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) — the sole water distributor of the state, Kuala Lumpur and Putrajaya. At the moment, Syabas is under the control of Puncak Niaga Holdings Bhd, which is headed by Tan Sri Rozali Ismail.

Selangor has been asking the federal government to revoke the concession agreement that gives Puncak Niaga a 70% stake in Syabas on the grounds that the latter has violated several conditions. One of them is the award of capital works to Puncak Niaga's related companies, which was supposed to have been done on a competitive basis, and another is the procurement of pipes from companies that are reportedly controlled by Rozali in Indonesia.

These issues had not gone down well with the federal government, even before March 2008. It was to break Puncak Niaga's monopoly in the Selangor water industry that the federal government gave Kumpulan Darul Ehsan Bhd the mandate in February 2008 to lead the consolidation of the state's water assets.

The letter, which KDEB was not shy to display to the media, gave it bragging rights to lead the consolidation of water-related assets in the state. By virtue of the letter, KDEB also said Langat 2 — which would be the biggest plant in the state — should be under its purview.

But relations between the federal government and KDEB became frosty after the state was taken over by Pakatan Rakyat in the March 2008 general election. Subsequently, KDEB took a back seat in moves to consolidate the water assets. Instead, the federal government is seeking to take over the water assets in the state — something that has not seen much progress — via PAAB.

With regard to Langat 2, the Cabinet Committee has to get real. At the moment, whenever there is a problem, the state blames it on Puncak Niaga while the latter says it cannot undertake capex works to reduce non-revenue water because the water tariff rates, as agreed to in the concession agreement, have not been approved by Selangor.

This blame game can, and will, go on as long as no party is responsible for the water supply situation. Under the circumstances, why not go back to the previous solution of letting KDEB consolidate the water assets and allowing it to build Langat 2? The cost is likely to be lower. Moreover, the federal government has nothing to lose because should it win back Selangor, KDEB would come back under its control.

That way, any party that controls the state government would be in full control of water supply. It would not leave any room for shifting the blame, like what is happening now. That is a more practical solution than inviting tenders, which may be stillborn and will only complicate matters.