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The Great Leap Backward


Speech while debating on the Water Services Industry Bill 2006

by M.Kula Segaran

(Parliament, Monday): The Water Bills is "A Great Leap Backward" for Malaysia. The two Water Bills will compromise our national sovereignty, does not provide the highest level of consumer protection and has no regards for the management of water catchment areas, upstream of water intake and the water treatment plants.  Furthermore it will cost Malaysians RM100 billion without any guarantee of access to safe, affordable water in adequate quantities. 

Contrary to what the Minister says, the Malaysian water sector is highly profitable.

Lembaga Air Perak made RM50 million profit, Penang, RM50 million, Terengganu, RM77 million, and Kelantan RM70. Therefore, water is a profitable sector and the Bills allows for a back door privatisation. If oil was the black gold in the 20th century, then water is the blue gold of the 21st century. In future, water will be employed as international trade and investment agreements to control its flow.

If the Minister is serious about not privatizing water – make it into law and many problems will be solved.

Malaysia aspires to be a developed nation in 2020, yet this government is unable to guarantee that water is an entitlement to its citizens. It is universally accepted that water is a basic necessity and a Human Right. Many countries in the world including the Netherlands and Uruguay have made the Parliaments have ensured that water is provided by the state and privatisation is illegal. 

All major religions emphasise the importance of water as life – giving. These religions emphasis that water cannot be treated as a commodity and provided on a commercial basis. Water is a gift from God and is to be shared among all. IT is not a product that is created by humans. Seventy-five per cent of the human body comprises water. It is a medically and scientifically proven fact that water is essential to life and healthy living.

Institut Kefahaman Islam Malaysia (IKIM) noted, "Water consumption in fast-industrialising Malaysia rose 8% a year between 1981 and 2001. Water consumption will increase by 4% between 2003 and 2010. On the other hand, the sources of fresh water will become critical due to intensive urbanisation, deforestation, water diversion and the leaching of waste material from industrial discharge and industrial farming into the river.

In fact, IKIM also states that, "Islam ascribes the most sacred qualities to water. It is a source of life, of sustainability and purity."

If water is privatized, which the WSI 2006 Bill provides for, then water will be delivered only to those who are able to pay for it. As such the public will have to spend and suffer more due to the increase in their cost of living.

Malaysia plans to spend up to RM100 billion (half the cost of the 9th Malaysia Plan) over the next 45 years to build new infrastructure and refurbishment in the water supply and sewerage sector.

The water and sewerage sector has been neglected by the government in their failure to invest, upkeep and maintain periodically the water and sewerage infrastructure. Furthermore, the Bills are so flawed that they will not address the fundamental problems in the water and sewerage sector.

Thus, the problems in the water and sewerage sector are voluntarily self – inflicted by "Napoleon's with eyes wide open." The Barisan Nasional government cannot claim that it is not responsible for the current problems. The Barisan Nasional government is the cause of these problems.

We thank the Minister for his openness in engaging civil society through the more than 50 so called public consultations. However, out of the 350 recommendations from civil society and various industry groups, only 3 minor changes were accepted. Leaders of civil society are crying foul that the Minister is not working n tandem with the demands of the Prime Minister's call for the Rakyat to work with him and not for him. It appears that the Minister only works for himself and his interest. What has happened to the other recommendations? A detailed explanation is required from the Minister on why only these three recommendations were taken and not the others.  

During the so called intellectual discourse with civil society, the Minister had mentioned repeatedly that he wanted to leave a legacy through an excellent Water Services Industry Bill. However, the Minister and the Ministry's action and conduct to date have been nothing but a let down to the water sector and consumers in this country. The only legacy that the Minister will leave is the whole sale legalized sell-out of the Malaysian water sector to foreigners and thus Malaysia's Great Leap Backward to colonial times.

Issues of National Sovereignty

Mr. Speaker,

The Water Services Industry Bill 2006 (WSI) presented by the government today for second reading will endanger national sovereignty and water security in the country. Specifically Malaysia's international commitments to the World Trade Organisation (WTO), namely the General Agreement on Trade in Services, will compromise Malaysia's sovereignty and hand over Malaysian water in a silver platter to foreign corporations. This Parliament must go not go down in the history of this country as the Parliament that sold our national sovereignty to foreigners.

Unfortunately, the most pertinent matter, namely the awarding of license to water operators is solely in the hands of the Minister. The Minister can award the license to anyone in the terms and the conditions that he deems fit.

Thus, it does not prevent a fully or majority owned foreign operator to obtain a license to operate the management and supply of water and sewerage in Peninsular Malaysia and the Federal Territory of Labuan.

Why nothing is spelt out in the act to ensure that all material time that this essential and strategic sector remains within the power and jurisdiction of the Federal or state government.

What Clause 4 is missing is ensuring that this sector is properly is at all material time in the hands of the Federal and/or state hands. The word "Person" is not defined in the WSI Bill 2006. How will the Minister ensure that foreign operators cannot bid for the license?

What the average Malaysian worries is that the government will loose control of the water sector as it is forced to give in to international players in this sector as Malaysia has signed the General Agreement on Trade in Services (GATS) which progressively opens up the services sector including the water  sector.

General Agreement on Trade in Services (GATS)

The Malaysian government's commitment not to liberalise the water sector is untenable. In the real politics of WTO negotiations, trading off the competitive advantage of one country for another is a key feature. So the YB Minister's statements don't hold water.

The Malaysian government had similarly made a commitment not to commit any plurilateral undertakings. However, the Minister of International Trade and Industry (MITI) had in the Hong Kong World Trade Organisation (WTO) Ministerial in December 2005 submitted Malaysia to the plurilateral process.

The fact of WTO negotiations is such that developing countries like Malaysia and others, very often come under pressure to open up their service sectors, as a 'trade-off' for developed countries' concession in other areas such as agriculture and better market access for industrial goods. Given that Malaysia's main exports are agriculture (Agreement on Agriculture) and manufacturing products (Non Agricultural Market Access), this 'trade-off' can be an extremely powerful tool for industrialised countries to extract services offers in the sectors of their choice. By committing a services sector to liberalisation a WTO Members (such as Malaysia) is legally bound by GATS to provide national treatment and market access to all foreign service suppliers of other Members in that sector.

For example, Malaysia has made some commitments in opening its private hospital services. It therefore cannot restrict, for instance, any foreign based medical laboratories from providing electronic diagnostic tests to customers in Malaysia. 

Furthermore, once a GATS commitment is made, it cannot be withdrawn or modified, unless compensation is given to all Members affected. Therefore, it is important to realise that by making a commitment, a government is effectively "locked" into its schedule, which limits its future policy options. The GATS is essentially about progressive liberalisation. 

We reiterate that the only manner to ensure that water resources and management remains in the hands of the nation is define the word "person" in the Water Services Industry Bill (WSI) 2006 as "state party" and "fully owned state corporation"

We are not against liberalization.  However, water is a strategic resource and cannot be owned or managed by foreign corporations.

We know for a fact that:

 The European Commission has made bilateral and plurilateral requests on environmental services including drinking water and sewerage.

The European Commission (EC) in its bilateral requests and offer process to Malaysia is entitled: 'GATS 2000, Request from The EC and its member states to Malaysia' Water for Human Use and Wastewater management, which includes "Water collection, purification and distribution services through mains. The Mode used is Mode 3, which demands Malaysia to take commitments under Market Access and National Treatment.

At the plurilateral level the EU, the United States and 10 other countries have requested the liberalisation of the sewerage sector.

In this regards our parliaments and legislature would be potentially reduced to powerless institutions. Elected representatives' role in charting the future of their nations would essentially be an exercise in futility. In fact, the WTO dispute mechanism would effectively veto power over parliaments and government policies, administrative actions, regulations and rule. The use of multilateral trade rules in undermining government policy making constitutes economic colonization of nation states.

If the Bill is passed this Parliament will go down in history as the Parliament that sold out the nation's sovereignty. The Right to water of the future generations of Malaysians will be perpetually mortgaged. Thus, we parliamentarians, who are duty bound to safeguard the sovereignty of this nation will ensure that water security and national sovereignty will be compromised.

Our concern is shared by the Coalition Against Water Privatisation and the Utusan Malaysia.

The "Rencana Pengarang" in Utusan Malaysia on the 4th of May, 2006 stated that:

Di sinilah kita dapat saksikan bahawa tidak semua industri boleh dibuka kepada pasaran dunia walaupun dasar liberalisasi dan globalisasi menuntut tindakan sedemikian…

Tetapi tanpa kajian mendalam pun kita boleh mengesan bahawa liberalisasi dan globalisasi mutlak, tanpa hemah hanya menguntungkan pihak negara-negara maju berbanding negara-negara kecil…

Dalam hal ini, kita dapat mengesan bahawa pelbagai pihak di negara-negara lebih maju akan mengenakan tekanan kepada Malaysia untuk membuka industri bekalan air supaya menjadi milik asing…

Tetapi kita mesti mengambil berat tentang keutuhan kedaulatan negara bagi melindungi kepentingan nasional dan warganegara. Apabila sesebuah industri dipastikan sebagai strategik, kerajaan mesti bertegas mempertahankannya…

Sememangnya pihak asing yang berkepentingan akan mengemukakan hujah-hujah bagi mem pengaruhi rakyat tentang kelebihan liberalisasi dan globalisasi. Tetapi kita pula mesti berhati-hati mematahkan hujah-hujah mereka dengan sentiasa memikirkan kepentingan negara dan rakyat…

Andainya kita lemah dalam berhujah dan rakyat pula menerima pemilikan asing terhadap industri strategik, maka kedudukan kedaulatan negara pasti terjejas…

The statement clearly says that Parliamentarians must protect the interest of the country and in this specific case, the sovereignty of the nation and the water security of its people. Therefore the Bill should be amended to protect and promote the interest of the nation. 

Issues on resource allocation

The government has indicated that it will spend RM100 billion over the next 45 years in the water and sewerage sector. We support the public sector reforms in the water and sewerage sector to ensure and efficient and effective quality delivery system to meet the rising demands of Malaysian citizens. Furthermore, the long term availability and sustainability of water supply and the conservation of water resources must be of paramount importance. 

The proposed Bill is silent on water demand management. It does not require the water operators to have a water demand management plan which is standard in all other water bills in developed countries. Water operators are concerned about profitability. However, the government must be concerned about water availability and sustainability. Therefore, it must require that water operators put in place water demand management as in most developed countries. Otherwise, the government will be liable to continue sourcing for new water sources such as the Pahang – Selangor inter – state water transfer project which comes at a tremendous cost, causes serious environmental and social damage and yet not assure water availability in the long term.

Other simple and creative ways of sourcing water such as using rain water, making it compulsory for all building to have dual piping, with treated water for drinking and raw water for other use must be introduced.

The problem with non revenue water has to be addressed immediately. The main reason for NRW is underinvestment by the Barisan government into the water infrastructure. Negeri Sembilan has the highest NRW at 50% in Peninsular, with Penang having the lowest NRW at 19%. We should have achieved single digit NRW if the government have been pro – active and serious in managing water. The two states where water has been privatized also has dismal NRW, with Johor at 36% and Selangor at 37%.

This demonstrates that Penang has most efficient method of managing water. The government's attempt of privatizing water, as in the case of Syabas and Syarikat Air Johor, has nothing to do with efficiency but rather the transfer of wealth to an appointed private sector player. This is demonstrated by the fact that one director of a privatized water firm earn RM2.2 million and the another director earns RM2.1 million in director's fees.

Will the RM100 billion and the Water Bills be a cure all for the water and sewerage current inadequacies in Peninsular Malaysia? Or will it be another "mumbo – jumbo" experience IWK, Putra and Star LRT?

Issues on environmental protection

The 9th Malaysia Plan provides startling figures on the availability of water for Malaysia. The most frightening figure is for Selangor. The industrial, economic, political and administrative centre of Malaysia will only have 3% water reserves in 2010. With continued uncontrolled logging of forests especially in reserve forests, degazettment and subsequent development of catchment areas, pollution of rivers, the water sources of Peninsular Malaysia are fast depleting. 

We ask the Minister, is 3% is a safe reserve margin for a state like Selangor, Kuala Lumpur and Putrjaya? The accepted reserve margins are 17%.

Why has the reserve amount fallen drastically for Selangor, Kuala Lumpur and Putrajaya from 2005 to 2010?

The Water Bills do not provide any authority to the Minister to manage the water sources, the catchment areas and the rivers. Can the Minister assure continued safe raw water to the water operators?

What has the Ministry done to date to increase the reserve margin?

Table 1: Production capacity and Supply Quantity of water Supply, 2000 – 2010

  2000 2005 2010
  production supply % production supply % production supply %
Malaysia 11917 9655 23 14226 11806 20 18482 16271 14
Selangor 3437 2858 20 4390 3740 17 5150 5000 3

Source: 9 Malaysia Plan, pg. 386

The water catchment areas and rivers are the most important source of raw water for water operators. Yet the Bills give no provision for the Minister to regulate these aspects. The Bills must manage water and sewerage in its totality.

Issues on consumer rights

The various clauses relating to consumer standards are extremely weak. It does not offer the consumer any protection. The various clauses such as the Section 33, Section 41, Section 88 and 89, and Section 68 are extremely weak.

 The Human Right to Water is denied through Section 88 and 89 which provides automatic disconnection which is both unfair and unreasonable. The draconian act of cutting water supply should not be an option included in the Bills.   We cite Rajah Ramachandran - vs - Perbadanan Bekalan Air Pulau Pinang Sdn Bhd.

 This Water Bills are also a way of saving Indah Water Konsortium. IWK services are governed by local council Act and should not be governed by the Water Bills. This relationship is parasitic one.

 The technology currently used originated in the 1920s, i.e. the lowest technology levels are currently being used. Our water treatment plants are not built to treat toxicity. Therefore, the water supplied is not guaranteed to be free of toxicity.


* M. Kula Segaran, MP for Ipoh Barat  and Vice Chairman DAP

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