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Thursday, August 22, 2013

Putrajaya-Selangor in talks to break water deadlock


KINIBIZ The federal government and the Selangor state government are in ongoing negotiations to resolve some outstanding issues including the long-standing impasse over consolidating the state’s water sector, according to sources.

Successful talks may finally see the Selangor state government acquire all four water concessionaires in the state - Puncak Niaga Holdings, Syarikat Pengeluar Air Selangor Holdings (Splash) and Konsortium Abass Sdn Bhd holds and Syarikat Bekalan Air Selangor (Syabas). The first three are water treatment concessions while the last is the sole water distributor in the state.

In exchange, the Selangor state government is expected to give its nod to federal government-driven projects in the state including the proposed development of the Rubber Research Institute land in Sungai Buloh, the Langat 2 water treatment plant issue and the construction of Perdana University in Serdang.

Talks between the federal and Selangor state governments imply that there is now sufficient political will to resolve matters on which both governments have refused to budge before.

azlanPutrajaya indicated yesterday that it aims to resolve concerns over depleting water reserves in Selangor in three months, with the solution focusing on the long-discussed Langat 2 water treatment project.

The relatively swift resolution period came after years of deadlock between the federal government and the federal opposition-controlled state over the project, hinting that a compromise has finally been achieved between both parties.

In addition to the deadlock over the Langat 2 project, there was also controversy over the Selangor state government rejecting the application to convert the status of 141 acres of land in Serdang from agricultural to education last year, which was sold by the Malaysian Agricultural Research and Development Institute (Mardi) to house the Perdana University Graduate School of Medicine (PUGSM)

The status conversion was needed so as to build the PUGSM campus. PUGSM was founded in 2010 in collaboration with US-based Johns Hopkins University School of Medicine and is a public-private partnership (PPP) initiated by the Public Private Partnership Unit (3PU) at the Prime Minister’s Department.

Its campus on the land was launched by the prime minister in September 2011 and was supposed to be completed this year.

Another issue between the federal and Selangor state governments has been the proposed development of the RRI’s land in Sungai Buloh, measuring about 3,300 acres in size.

Federal opposition politicians have questioned why the Employees Provident Fund (EPF) was selected through direct negotiation to develop the land. In response, prime minister Najib Abdul Razak said that the federal government’s joint venture with EPF to develop the land allows the government to regulate the direction of the development in-line with the national development agenda.

However, the Selangor state government still holds the trump card as matters relating to land falls under the jurisdiction of state governments - it has not played ball in terms of granting the requisite approvals for the development to move forward, according to sources familiar with the matter.

Water takeovers finally moving ahead?

The prospect of a compromise materialising also bodes well for the water industry consolidation proposal by the Selangor state government, which has been difficult to conclude.

The Selangor state government’s efforts to consolidate the water industry has proved tricky as Rozali Ismail, who owns 41.2 percent in the state’s major water player Puncak Niaga, is closely linked to Umno, the lead member of the ruling coalition at federal level.

azlanHowever, Rozali told KiniBiz last week that he would welcome the consolidation exercise and resolving the long-standing impasse would be up to both governments.

“I welcome it (talks to consolidate the industry)… the state and federal agencies should prioritise the water sector, it is more important than electricity and other utilities, it is the source of life,” said Rozali, commenting after news reports that both governments are finally making headway over the water issue.

However, Rozali did not wish to comment on whether either government has commenced talks with him.

Should negotiations between both governments prove fruitful then it is likely that the Selangor state’s takeovers of the state’s water operations would finally materialise.

Puncak Niaga holds a 70 percent stake in Syabas, Selangor state government-linked company Kumpulan Perangsang Selangor (KPS) holds the remaining 30 percent whereas the federal government has a golden share in the water distribution company.

While KPS largely owns Konsortium Abass, Splash is 40 percent owned by construction player Gamuda Bhd with the other 60 percent evenly split between KPS  and well-connected businessman Wan Azmi Wan Hamzah, who was once linked to former Finance Minister Daim Zainuddin.

Since 2009, Selangor state investment arm Kumpulan Darul Ehsan (KDEB) has offered - four times, with offers ranging from RM5.7 billion to RM9.65 billion - to buy all existing water assets but Puncak Niaga has yet to accept an offer.

In early July this year, Selangor Menteri Besar Abdul Khalid Ibrahim reportedly said that Prime Minister Najib has agreed to the consolidation exercise by way of a letter.

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