Parliament should establish a Select Committee on the two water bills when it reconvenes on June 20, giving it five months to submit its report  before end of the budget meeting ion 8th  December, to be followed by a special parliamentary sitting in January 2006 to enact water legislation to set up National Water Services Commission (SPAN)

at the third Parliamentary Roundtable on “Water Privatisation” in Parliament
by Lim Kit Siang

(Parliament, Friday): This is the third parliamentary roundtable organized by the Office of Parliamentary Opposition Leader, and its focus on water federalization and privatization and the long-delayed two water bills is particularly pertinent in view of the “bombshell” exploded by the Minister for Energy, Water and Communications Datuk Seri Dr. Lim Keng Yaik early this week. Signifying that the first water  privatization concession concluded under his watch had gone very wrong in a matter of  six months. 

On Monday, Keng Yaik shocked the nation with the revelation that Syarikat Bekalan Air Selangor Sdn. Bhd. (Syabas), the 30-year  concessionaire for the nation’s biggest water supply privatisation project for Selangor, Kuala Lumpur and Putrajaya, had been served with a “show cause” letter for violating the concession agreement by procuring pipes from Indonesia to replace  ageing water pipes in the Klang Valley instead of sourcing them locally in the RM375 million Phase One Selangor pipe-replacement project to reduce the non-revenue water (NRW) rate. 

The roundtable is looking forward to  the contribution by the special representative of the Minister, the Deputy Secretary-General II of  Ministry of Energy, Water and Communications, Mr. Teo Yen Hua and the Ministry’s consultant on water services,  Dr. Chin Yoong Kheong, Director of  KPMG to throw light on this issue. 

This parliamentary roundtable has been convened in response to the Minister’s repeated call for active participation by all stakeholders, whether MPs, private sectors, NGOs and the consumers to provide vital inputs to the Government in ensuring that the restructuring of the national water services industry would be fair and beneficial to all parties, as this enormous task of restructuring should not be solely handled by the Government alone. 

Although the Minister has repeatedly affirmed his commitment to establish a transparent and integrated structure for the national water supply services, including the establishment of a consumer forum similar to the Water Voice in UK to ensure greater participation by the public in the water services industry, it must be pointed out that there had been very little transparency, consultation and public or parliamentary  participation in the past one year in the process of restructuring the national water services industry. 

It is a basic flaw to believe that there could be a transparent and accountable national water services industry when  the whole process to enact the  two water bills for water federalization and privatization  is so  completely lacking in transparency, accountability and meaningful participation or consultation, whether of  MPs, NGOs or the public at large. 

This is why MPs, NGOs and members of the public have so many questions and doubts about the restructuring of the national water services industry, particularly following the revelation by the Minister about the violation of the concession agreement by Syabas. 

Let me mention some of these: 

  • 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  has reported 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?

There are many other questions which cry out for answer and which should have become  public knowledge by now if the Ministry had fully involved all stakeholders in the process to restructure the national water services industry.

As a first step,  is the Ministry prepared to  set the precedent of accountability and transparency by making public the 30-year Selangor/Kuala Lumpur/Putrajaya water privatization concession?

The Minister does not have a good record of keeping his word with MPs on the two long-delayed water bills, the National Water Services Industry Bill and the National Water Services Commission (SPAN) Bill. 

During the special Parliamentary sitting  in January, Keng Yaik responded to calls by MPs and  promised to take the question of a Parliamentary Select Committee on  the two water bills to the Cabinet – but he was the one who got the Cabinet later in March to reverse its decision of January 19, 2005  to approve the establishment of  such a Parliamentary Select Committee. 

At the Cabinet meeting on 20th April 2005, Keng Yaik agreed to circulate to all MPs  the draft of the two water bills within three weeks, and this was announced by the Minister in the Prime Minister’s Department, Datuk Seri Nazri Aziz in Parliament later the same day.  Three weeks have come and gone, and it is now more than seven weeks since the Cabinet meeting of 20th April 2005 and there are still no signs of the two water bills.   

The two water bills should not be rushed to become law without the fullest and most extensive public consultation and study by all the stakeholders, whether MPs, NGOs or members of the public. 

The Minister has convinced the Cabinet that it is important and urgent that the two water bills should be enacted by the end of the year, which is the reason given as to why a parliamentary select committee could not be formed.  

The Syabas scandal should fortify the case for the need for the fullest study and the most extensive public consultation before the two bills are passed by Parliament, including the establishment of a parliamentary select committee to give the two bills the closest scrutiny. 

For this reason,  I call on the Prime Minister and the Cabinet to make a slight revision of the timetable for the enactment of the two water bills, taking into account both the urgency of have legislation of national water services on the statute books as well as the need for the  fullest consultation and participation by all the stakeholders concerned. 

The new timetable for the enactment of the two water bills should involve the establishment of a Select Committee on the two water bills when it reconvenes on June 20, giving it five months to submit its report  before the end of the 41-day budget meeting on 8th December 2005, to be followed by a special parliamentary sitting in January 2006 to enact the legislation to set up the  National Water Services Commission (SPAN). 

I hope the Minister will present this proposal to the Cabinet for adoption in keeping with his repeated public pledge of wanting to fully involve all the stakeholders in the restructuring of the national water services industry fair and beneficial to all parties..



*  Lim Kit Siang, Parliamentary Opposition Leader, MP for Ipoh Timur & DAP Central Policy and Strategic Planning Commission Chairman