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By Dato Ir. Syed Muhammad Shahabudin, President, The Malaysian Water Association (MWA)

Malaysia is rich in water resources.Hence, many do not understandwhy the country is at timesshort of water supply. This is evident inrecent times when the water supplysituation in some parts of the country haschanged drastically. Population growth,urbanisation, industrialisation and casesof indiscrimination land developmenthave lead to rapid-growing demands onwater. It has also at the same time,contributed to rising water pollution.

Constitutionally water was a state matterand the role of the Federal Governmentwas limited. However the situation haschanged since January 2005 when theFederal Constitution was amended toallow for joint responsibility in waterbetween states in Peninsular Malaysia and

the Federal Government.

Main Issues Facing The Water Sector

At the moment, there is no single agencyin the country entrusted with overallresponsibility of holistic planning andmanagement of water. There are manyagencies with overlappingresponsibilities at the state and federallevels and insufficient coordination of agency activities in respect of meeting

national objectives.

In several states there are ineffectiveregulatory structures and poorenforcement, leading to inefficiency in theoperating systems. Water systems haveseen under investment in the past, interms of providing efficient servicefacilities for customers. Privatisation hasalso lead to varied success across variouswater supply projects.

Course Of Action

The Federal Government has seen therecent shortcomings in the provision of safe and affordable water supply services

and this has prompted it to act decisivelyby seeking to share responsibility with the

states to reform the water service industryto ensure that it can become self-sustainable.

At the moment, it appears that the priorityis for the Federal Government to deal withthe water supply and sewerage servicesmanagement before tackling the biggerissue of water resources management orintegrated river basin management.

In order to be effective in the reform

process, the Federal Government needs tobe given the necessary legal rights. Thereneeds to be a system of sharedresponsibility in regulating the waterservice industry. The Federal Constitutionhas, therefore, been amended to transferwater supplies and services to theConcurrent List in the Constitution.However, land remains a state matter andthus water catchments and waterresources continue to be vested with thestate Governments.

Water Supply Industry Reforms

The reform is to meet the fol lowingnational objectives:

To create an industry structure thatwill ensure long term sustainability

of the water supply and sewerageservices industry To regulate for the long-term benefitof the consumers and develop highconsumer confidence in servicedelivery To facili tate the development andpromote competition so as toenhance economic and technicalefficiency in the supply and deliveryof water and sewerage services tothe consumers

To ensure the provision of affordableservices on an equitable basis toimprove the quality of life of allMalaysians through effective andefficient provisions andmanagement of water and sewerageservices To es ta bl is h a re gu la to ryenvironment that will lead toefficient allocation of economic andfinancial resources throughsustainable public and privatecollaboration and partnership To est ab li sh a tr an sp ar en t an deffective system of governance thatpromotes excellence in all aspects of provisions and service delivery

Edit or s Note: This art icle was reproduced fro m The Ingenieur Vol 28, Dec 2005 - Feb 2006 wit h p ermission grant ed from Board of Engin eers Malaysia (BEM)

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Basis For The Industry Model

Malaysia has made tremendousachievements in many areas including theprovision of water supply and sewerageservices. Unfortunately, it has not beenable to effectively address and managewater services sufficiently. An industrymodel has been suggested to be based onthe following model.

To ensure long-term sustainability of quality water and sewerage servicesthrough continued capital worksdevelopment facilitated by the WaterAsset Holding Company To ensure long-term sustainability of services through consultativeparticipation in river basinmanagement with respectiveauthorities

sewerage services in peninsular Malaysia.SPAN is the regulatory body that willenforce the rules in the WSI bill.

Once the bills are passed as law, it will givethe Federal Government a say in thedevelopment of the countrys watersector via SPAN. The main areas coveredare as follows:

The WSI BillEconomic regulations, coveringlicensing and duties and obligation of licences to provide water supply andsewerage services Techn ical regulations, coveringtechnical and scientific standards andspecifications, and permits andcertification of contractors andplumbersSocial regulations covering theestablishment of Water Industry Fundand the Sewerage CapitalContribution Fund and theestablishment of a Water ForumConsumer protection - this includesquality of service, consumercomplaints and tariff setting

The SPAN Bill The establishment and members of SPAN The functions and powers of SPANFinancial matters, including theestablishment of the SPAN fundGeneral matters

Provisions In The Bills

Among the salient points in the provisionsof the bills are on policy objectives,licensing, the establishment of SPAN,offence of contamination of water and awater forum and these are brieflymentioned below.

Poli cy obj ecti ves The po licy object ive includes theestablishment of a transparent structurethat will result in substantial improvementin water management in the country,conservation of water, promotingfinancial self-sustainability and ensuringsecurity of the water supply system.

The Malaysian Water Association (MWA) isof the opinion that the transparencyaspects are clouded by provisions in theWSI bill which allows the Minister to makedecision which he deems fit. It will greatlyimprove the perception on transparency

Suggested Policy Framework

In line with the objectives of the NationalWater Service Commission, the policyframework is:

To ensure that there is a fair andefficient mechanism for thedetermination of water tariffs that isacceptable to both users andoperators To determine and implement tariffsthat have been established throughthe appropriate mechanism and tools To improve operational eff iciencythrough short, medium and long-termprogrammes To ensure national development goalsare supported To ensure productivity through theselection of competitive and efficientoperators and the monitoring of operator compliance with stipulatedservice standards, contractualobligations and relevant laws andguidelines

To ensure that the demands of consumers are accounted for throughstakeholder participation in relevantdecision making processes To ensure that consumers have aclear channel for communicationthrough the establishment andutilisation of an industry-relatedconsumer association, and To raise awareness on thedevelopment of the industry throughthe dissemination of key performanceindicators

Regulatory Matters

The government is proposing two bills totackle the present problems and to reformthe water industry. The two bills are theWater Services Industry (WSI) bill and theNational Water Services Commission Billor Suruhanjaya Perkhidmat an Air Negara (SPAN) bill.

The WSI bill sets out the legal framework for the regulation of water supply and

Body Area of responsibility Description

Federal Policy matters Development of a holisticGovernment water policy for the country by

setting policy directions

State Water basin matters Manage existing waterGovernment basins with the view of protecting

the quality of raw water andidentifying new water basinswhen required

National Water Governance matters Ensures coordination withResources the various stateCouncil governments in the management

of the water basins

National Water Regulatory matters Regulate the whole waterServices industry based on the

Commission policy directions set out by thefederal government

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if the Minister allows the decisionmaking process to the commission,except on three areas, namely, thedetermination of national interest, thedetermination of a situation that givesrise to an emergency and the power tomake regulations.

The objective of conservation of waterhas not been adequately addressed inthe bill. There are provisions forpunishing consumers for wasting water,but this is a reactive approach. Acomprehensive provision that placesresponsibility on both the commissionand the licensee is aimed to educate andpromote consumers to use water atoptimum levels. Further, a subsidiarylegislation is also deemed necessary.

Th e po li cy ob jective di rect ed atpromoting financial self-sustainability of the licensee is clear. But the provision inthe bill does not show clearly how it is tobe achieved. The facilities licensee asdefined in the WSI bill is not similar to theconcept of Water Asset HoldingCompany (WAHCO) as promoted by theminister on earlier occasions.

On the security of supply, although waterresources will remain in the domain of the state authority and will not beregulated by SPAN, the MWA is of theopinion that in the absence of legislation,the security of supply of raw water willnot be easy to manage. The idea of legislation to cover this subject issupported for and it is appropriate thatthis is done now.

Operati ng Licences According to the bills, all water supplyand sewerage services operators must belicensed by SPAN. Those operating underexisting concession agreements, (CA) aregiven the option to continue with theagreements or to migrate to the newregulatory regime. There are 16 CAs inoperation throughout PeninsularMalaysia as listed in the WSI bill. If theoperators opt to migrate to the newregime, they will be granted licences inplace of the agreements. Operators whochoose to continue under this CA mustregister the agreements with SPAN. Theywill then be authorised to continue withtheir services and activities for two yearsor more (if extended by SPAN). At thesame time they are required torenegotiate the agreements.

In the fixing of tariff, the transparencyaspect must be upheld. The WSI Billprovides that the Minister may makeregulations to provide the level of ratesbut if it falls short of what it prescribesthe Minister must consider fixing thoserates. It is considered important that thebill spells out those terms to giveassurance to both consumers andlicensees. The Water Forum must beengaged in the decision making process,otherwise it will be difficult for it tofunction effectively as desired.

Time Frame

The two bills were to be tabled by theend of the Parliamentary sitting inDecember 2005. However, the tablinghas been deferred to March 2006, as theMinister of Energy, Water andCommunications, Datuk Seri Dr. Lim KengYaik wants to allow more time for thepublic and non-governmentalorganisations to study the contents of the two bills.

Conclusion

Th e in it ia tives to re st ructu re wa te rservices in Malaysia was initiated by theMalaysian Water Association for thewater industry almost ten years ago. Itwas only in the past two years thatserious attempts have been made bythe government towards achieving thisobjective with the birth of the Ministryof Energy, Water and Communication. Aspromoted, the objective was to haveeconomic regulation as this wouldresult in the improvement of theindustrys efficiency, building investorconfidence to attract investment andwill encourage consumers to pay for theservices.

Forming SPAN and drafting laws forwater supply and sewerage services isthe best thing to happen to an industrythat is facing a crisis. Even though the journey is long and complex, it is stil lvital.

Acknowledgement

This arti cle is based on a collection of papers previously presented to the Government by

MWA and th e response by MWA at th e dialogue session wit h the Mini stry of Energy,Water and Communicat ion on November 10, 2005.

The Com mi ssio n A body corporate SuruhanjayaPerkhidmatan Air Negara or SPAN whenestablished will, among others, beresponsible to regulate and maintainuniformity in the countrys water sector. The commission will have a Chairmanand between eight and ten persons asmembers appointed by the Minister tohold office for a term of two years. Amember of the commission shall beeligible for re-appointment for not morethan five terms.

Offence Of Cont ami nat ion Of Water Any person who contaminates any watersource or the water supply system shallbe guilty of an offence.

If the act results in death deathpenalty or maximum jail term of 20years and whippingIf the act does not result in death butthe contaminant is radioactive ortoxic substance A maximum jailterm of 10 years or a maximum fine of RM500,000 or whipping or all threeIn any other case A maximum fineof RM100, 000 or a maximum jail termof one year or both.

Punishments mentioned above appearto be heavier than provisions in theEnvironmental Quality Act (Act 127).Provisions in WSI Bill are, however, moreprecise and appear to be moreappropriate as deterrents.

Water Foru m The co mm issi on may de sign ate anindustry body to be known as WaterForum. Among the functions of theWater Forum are:

To represen t th e in te rest s of consumers of the water supplyservices and sewerage services To promote consumer interest inrelation to the tariffs and standards of the water supply and sewerageservices To gi ve feed back and makerecommendations to the commissionon any matters concerning theinterest of consumers on the watersupply services and sewerageservices

The commission is required to have dueregard to the recommendation of theWater Forum. MBJ