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Federal
Government should freeze its RM250 million grant to Syabas for its Phase One
of RM2 billion pipe replacement project in Selangor as well as review the
30-year RM12.73 billion Selangor/Kuala Lumpur/Putrajaya water
privatization concession
Media Statement
by Lim Kit Siang
(Parliament,
Wednesday):
Last July, Deputy Prime Minister
Datuk Seri Najib Razak announced a review of “lopsided” privatization
contracts which “short-changed” the government and the Malaysian public with
a view to re-negotiate them. He said the government would learn from past
mistakes and weaknesses to ensure that in future, it was not short-changed
when negotiating deals with the private sector.
It is clear however that the
government has not really learnt from its past mistakes and weaknesses in
privatization, or the biggest privatization under the premiership of Datuk
Seri Abdullah Ahmad Badawi - the RM12.73 billion Selangor/Kuala Lumpur/Putrajaya
water privatization – would not have gone wrong right from the start.
This is why the concessionaire
for the biggest water supply privatization project in the country, Syarikat
Bekalan Air Selangor Sdn. Bhd (Syabas) has been served with a “show cause”
letter by the Ministry of Energy, Water and Communications for violating the
concession agreement by procuring pipes from Indonesia to replace ageing
water pipes in the Klang Valley instead of sourcing them locally – only six
months into the 30-year concession!
In fact, the Selangor/Kuala
Lumpur/Putrajaya water supply privatization had gone wrong even before its
conclusion on December 17, 2004, for it had scuttled the plans of the
Minister for Energy, Water and Communications, Datuk Seri Dr. Lim Keng Yaik
who announced in April last year the suspension of water privatization in
all states pending the Federal Government’s review on how best to manage
Malaysia’s water resources.
To use Keng Yaik’s very
colourful language, “ Gone are the days that you (successful privatization
companies) can run away with the cherry and leave us with the baby” and the
“show cause” letter to Syabas by the Ministry of Energy, Water and
Communications will be the acid test whether there are still companies
which can “run away with the cherry leaving the baby” in new water
privatization contracts signed after Keng Yaik has taken over the water
ministry.
If the Federal Government
really means business about no more “lopsided” privatization contracts which
“short-changed” the Malaysian public, it should freeze its RM250 million
grant to Syabas for its Phase One of RM2 billion pipe replacement project in
Selangor as well as review the 30-year RM12.73 billion Selangor/Kuala
Lumpur/Putrajaya water privatization concession.
As a first step, Keng Yaik
should set the precedent of accountability and transparency by making public
the 30-year RM12.73 billion Selangor/Kuala Lumpur/Putrajaya water
privatization concession, which has already produced “a can of worms” in its
first six months, with the Malaysian public and even the Minister himself in
the dark about many things under the privatization concession.
Many question cry out for
answer, such as:
- Why the
Finance Ministry and the Energy, Water and Communications Ministry had
allowed Syabas to award the tender for the RM375 million Phase One of
water pipe replacement exercise to a particular company without first
getting approval from a special committee comprising official from the two
Ministries as the money comes from the Government? Could the government
credibly claim ignorance that such a tender had been awarded and work
started when Syabas had taken out full-page advertisements in national
newspapers?
- Why
Syabas was allowed to flout the open tender requirement by manipulating
its outcome. A day before the tender closed on April 26, 2004, Syabas
sent to all tenderers the new stipulation designating two companies as
obligatory suppliers for pipes and fittings, namely: Laksana Wibawa Sdn.
Bhd (for supply of mild steel, ductile iron pipes and fittings) and Musa &
Rahman Plastic Industries Sdn. Bhd. (for supply of high density
polyethylene [HDPE] pipes and fittings).
Both
these nominated companies are not only relatively unknown, they raise
disturbing questions about the propriety of such last-minute distortion of
the tender process by designating companies to be the obligatory suppliers,
conflict-of-interest and the background of the designated companies, as
Laksana Wibawa, Puncak Niaga and Syabas are believed to have a common factor
in Tan Sri Dr. Rozali Ismail, who is executive chairman of both Syabas and
Puncak Niaga.
- The
Federal Government is committed, under the Syabas water privatization
concession, to provide RM2.9 billion in financial assistance, of which
RM1.34 billion was to settle the Selangor State Government’s water debts
to Puncak Niaga (M) Sdn. Bhd, Syarikat Pengeluar Air Sungai Selangor Sdn.
Bhd and Konsortium Abass Sdn. Bhd; a grant of RM250 million for pipe
replacement to reduce non-revenue water (NRW); a further RM250 million as
soft loan also for NRW works and the remaining RM1.07 billion as soft loan
for capital expenditures.
Has
the Ministry of Energy, Water and Communications released the RM250 million
grant to Syabas for the first phase of the pipe replacement exercise without
conditions?
- Is the
RM250 million Federal government grant to Syabas for pipe replacement for
the first phase of RM375 million programme to replace 835 km of pipes in
the Klang Valley or for the whole RM2 billion programme for replacing
6,000 km pipes in Selangor in the next five years? If the RM250 million
grant had already been paid out to Syabas without attaching conditions for
strict and scrupulous adherence to the concession agreement, isn’t this a
grave negligence and dereliction of duty on the part of the public
officers concerned?
- In his
response to Keng Yaik, the executive chairman of both Syabas and Puncak
Niaga which owns 70 per cent of Syabas, Tan Sri Rozali Ismail said the
pipes are from Indonesia and the awarding of contracts to the company is
based on several criteria – that it is a bumiputra company, offers the
lowest price, follows the required specifications and is involved in
manufacturing and distributing pipes.
Is
Rozali telling the truth in that both the water privatization concession and
the tender for the RM375 million Phase One of pipe replacement in the Klang
Valley had specified that the winning contractor must be a bumiputra
company? And if so, why did Syabas mislead the water industry in failing to
mention this important condition in its tender invitation?
- Rozali
has justified using imported pipes from Indonesia on the ground that local
water pipe manufacturers are not helping the country’s water industry
because they are selling their products to water operators at
non-competitive rates. This is totally at variance with Keng Yaik’s
public stand that all pipes used in the local water industry should be
manufactured locally. He had declared: “There will be no foreign sourcing
and no foreign technology. We have the technology and enough companies
that are making these pipes.” It is most shocking that Syabas had been
allowed to violate this important government policy for more than a month.
- Keng Yaik
revealed on Monday the existence of a “Selangor Water Control and
Management Agency”, purportedly to be the regulator in Selangor state to
monitor the Syabas water privatization concession pending the
establishment of the National Water Services Commission (SPAN) by
Parliament to regulate and monitor the water service industry
nation-wide. This is the first time that anyone has heard or read about
the Selangor Water Control and Management Agency to regulate and monitor
the Syabas water privatization concession. Who are the members of this
Agency, has it been formed, and if so, when and why its existence has been
kept such a big secret?
- The
media reported yesterday that Syabas has been served with a “show cause”
letter for violating the concession agreement by procuring pipes from
Indonesia for the Klang Valley Phase One pipe replacement programme
instead of sourcing them locally. This violates Section 18 of the
concession agreement stipulating that any pipe installation project
carried out by Syabas should be through open tender and that only local
materials could be used. Has the Ministry of Energy, Water and
Communications the power under the concession agreement to terminate the
concession in the event of such violation?
Keng Yaik as well as Syabas
chief, Rozali should accept the invitation to the parliamentary roundtable
on water privatization in Parliament on Friday to clarify these and many
other questions and issues surrounding water federalization and
privatization.
(08/06/2005)
* Lim Kit Siang,
Parliamentary Opposition Leader, MP for Ipoh Timur & DAP
Central Policy and Strategic Planning Commission
Chairman
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