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waterPerak recently raised water tariffs even though the Perak Water Board has been making healthy profits for the past five years. Jeyakumar Devaraj writes on the turbulence sparked by the hike and the controversial move to corporatise the Board.

At the April sitting of the Perak State Assembly, the chief minister (MB) of Perak, Tajol Rosli, announced that the Perak State Water Board would be raising water tariffs by 15 per cent from 1 July 2006. Domestic consumers using less than 20 cubic metres per month – about 40 per cent of Perak households fall into this category – would be exempted from this price hike. The MB went on to explain that this price hike was necessary as the State is planning to corporatise the Board soon.  

  Old rates

(per cubic metre)

From 1 July 2006
 Domestic Use

         –  10 cu metres

11     –  20 cu m        

> 20 cu metres 

 

  

RM 0.30

RM 0.70

RM 0.90

  

RM 0.30

RM 0.70

RM 1.03

 Industrial Use  RM 1.40 RM 1.61

 

Perplexing

Many find the Perak State Government’s decision to raise water tariffs perplexing. The Perak Water Board or the Lembaga Air Perak (LAP), as it is more popularly known, has been showing healthy surpluses for the past five years. In 2005, for example, its profits were RM54 million. Compared to the other states, Perak is doing reasonably well – the surpluses are healthy and the rate of non-revenue water (unbilled water or NRW) is lower than most other states. So why is there a need to corporatise or raise the tariffs.

State Water Consumption

in 2002 (million cubic metres)

Surplus/(loss)

in 2003

(RM million)

Non-revenue water

in 2002 (%)

 Kedah  183  31.4  41.9
 Penang  224  60.4  19.8
 Perak  212  34.8  30.2
 Selangor  675  (449.1)  44.7
 Johor  310  111.7  32.7
 Kelantan  43  11.5  44.9 

Source: Water Tariff and Development: The Case of Malaysia. Cassey Lee       Tables 2, 4 and 8

Master Plan for water

In 2004, the Perak state government commissioned Price Waterhouse Coopers to conduct a study and give recommendations regarding the future of water services in the state. The study has been completed but until now the Perak public has not been told what the master plan for water services is.

Is the proposed corporatisation of the LAP just a prelude to the wholesale privatisation of the revenue earning portions of the state water services? Will there be effective mechanisms to ensure that the contracts awarded to corporate entities are not excessively favourable to these corporations? What are the measures that will be taken to ensure that the quality of water will not be compromised?

Perak Water Coalition

Several groups in Perak feel that these issues have to be addressed by the state government before the it implements any change in water tariffs or goes ahead with the corporatisation of the LAP and have come together to form the Gabungan Pengguna Air Perak ( Perak Water Coalition). The coalition presented a Memorandum to the MB on 15 June 2006, outlining all the various concerns. It has also embarked on a campaign to alert the people of Perak about the impending changes to the state’s water services.  By the end of June, over 30,000 pamphlets had been distributed in various towns in Perak including Ipoh, Tapah, Sg Siput, Batu Gajah, Bruas, Chemor, Slim River, Sungkai and Grik.

The RM250 million mistake 

At a forum on “The future of the water industry in Perak”, organised by the Water Coalition on 29 June 2006 at a hotel in Ipoh, Y Y Koon, a retired senior engineer who has considerable expertise in the water industry, charged that the huge RM250 million dam nearing completion in Ulu Kinta is a colossal waste of public funds. He argued convincingly that water supply in Perak could be increased at a fraction of the cost by augmenting the capacity of existing facilities. Who were the consultants for the feasibility project? Why did they not consider cheaper options? Were the tenders awarded in an open and transparent manner? Koon told the audience that these are issues that the Perak people should take seriously.

Blue gold!

Charles Santiago, who spoke at the same forum, warned that many corporations are eyeing the water industry. After all, water is an excellent “commodity” and demand for it will never cease as it is a basic necessity. One does not need to fear outside competitors – you cannot bring in cheaper water from China as you can for most consumer goods. The firm that lands a water contract is assured of generous profits every year. This is why several of the large corporations that have BN connections are pushing very hard for water contracts.

Santiago also pointed out that new investment laws being pushed by the World Trade Organisation and by Free Trade Agreements are opening the doors to ownership of water resources by foreign companies. He argued that this would be a dangerous development.


Citizens’ oversight committees

Malaysia needs citizens’ committees to oversee developments in the service sectors. Water, health care, education and transport play an important role in our lives. We all stand to lose if these are taken over by corporate interests, which are driven purely by the profit maximisation motive. And we have to agree that committees appointed by the relevant minister are of no use – how can such a committee blow the whistle on its master or the master’s political colleagues?

The Coalition is therefore requesting the Perak state government to set up a 15-member board to oversee developments in the water sector. It is proposing that five of the board members should be from civil society groups such as consumer groups, unions and other NGOs. The remaining 10 should be nominated by political parties based on their share of the total votes in the latest state elections. If, for example, the opposition parties garnered 40 per cent of the votes, the opposition parties can then nominate four members to the citizens’ board.

This citizen’s oversight committee should vet every major decision of the LAP and have the power to refer objectionable decisions to the State Assembly for further discussion before implementation.


Government intransigence

What can a civil society grouping like the Perak Water Coalition do if the government spurns all requests for dialogue and bulldozes its decisions through? This was the main topic of discussion at the Coalition meeting on 5 July 2006. Some groups felt that we had made our stand clear. Now we have to be realistic and live with the new rates.

Grassroots groups, however, argued that the issue is not only the 15 per cent tariff hike. The more important issue is that of proper and transparent governance. The MB has already indicated that there is RM1.5 billion worth of water contracts in the pipeline. We must ensure that this is spent wisely; otherwise, we, along with our children, will be saddled with the debt.  Some others opined that if we do not carry on until we get a positive response, then we might as well not attempt any protest when the FTA issue or the new health care financing scheme or new petrol price hikes are announced.

After quite some discussion, all the Coalition members present at the meeting decided that the campaign must be stepped up. On 11 July 2006, members of the Water Coalition lodged police reports against the MB of Perak at more than 40 different police stations in Perak, expressing their disappointment that he had refused to dialogue with the people regarding the drastic changes that the state government is planning for the water services in Perak. The plan is to step up the campaign another notch if there still is no response.

Wish us luck, and at the same time keep an eye on what is happening in your state!

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