Water Services Reform in Malaysia

SURUHANJAYA PERKHIDMATAN AIR NEGARA1

WATER SERVICES REFORM IN MALAYSIA

14 – 16 May 2007WATER MALAYSIA 2007Kuala Lumpur Convention Centre


1. Key Challenges

2. Shaping Efficiency and Effectiveness

3. Addressing Funding Challenges

4. Policy and Institutional Framework for Reform

5. Legal and Regulatory Framework

Water Services Industry Act

National Water Services Commission Act

6. Water Services Reform – What’s Next?

OUTLINE OF PRESENTATION


WATER AND SEWERAGE SERVICES STATISTICS

Total Length of Pipes 98,648 km

Total No. of Connections 5,585,724

Total Expenditure RM 3,415,836,374

Total Revenue RM 3,574,960,824

Total Production 12,468 MLD

Urban Coverage 97 %

Rural Coverage 91 %

A) WATER

Total No. of Dams (Water Supply) 54

Total No. of Treatment Plants 462

Total Population 27,100,190

Total No. Reservoirs / Tanks 3,623

Total No. Personnel 14,721

Source : Malaysia Water Industry Guide 2006


WATER AND SEWERAGE SERVICES STATISTICS

B) SEWERAGE

Total No. of Septic Tanks 990,836

Length of sewers 16,267 km

Total No. of Regional ST/ Plants 65

Operating cost (Year 2006) ~RM 400 Million

Population connected 15,932,582

Source : IWK

Total No. of Pumping Station 611

Total No. of Local ST/ Plants 8,473

SURUHANJAYA PERKHIDMATAN AIR NEGARA

Lowest – Penang (RM0.31)Highest – Labuan, Johor & Sabah (RM0.90)Average – RM0.66

* Average for First 35m3

Domestic, 2007Domestic, 2007

0.9

0.53 0.55

0.720.68

0.57

0.73

0.57

0.31

0.77

0.52

0.9

0.56

0.9

0.66

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

RM

/m3

States

REDUCING DISPARITY IN TARIFFS


Lowest – Labuan & Sabah (RM0.90)Highest – Johor (RM2.93)Average – RM1.43

* Average for First 500m3

Industry, 2007Industry, 2007

2.93

1.21 1.251.4

1.591.45

1.6

1.3

0.94

2.27

1.150.9

1.19

0.9

1.43

0

0.5

1

1.5

2

2.5

3

RM

/m3

States

REDUCING DISPARITY IN TARIFFS


Lowest – Penang (19.4%), Highest – Sabah (57.2%), Average – 37.7%

37.72424.7

57.234.7

38.419.4

36.3

5328.8

40

49.730.6

43.835.5

0 10 20 30 40 50 60 70

JohorKedah

KelantanMelaka

N. SembilanPahang

PerakPerlis

PenangSelangor

TerengganuSabah

SarawakLabuan

MALAYSIA

STA

TES

%

ADDRESSING LOSSES DUE TO HIGH NRW


1375

1608

2227

2447

2747

3056

3575

1608

1937

3502

3150

1787

2765

2688

3416

1896

0 500 1000 1500 2000 2500 3000 3500 4000

1998

1999

2000

2001

2002

2003

2004

2005

Revenue

Expenditure

RM Million

Yea

rINCREASING EFFICIENCY THROUGH EFFECTIVE OPERATION MANAGEMENT(Revenue vs Expenditure)


KEY CHALLENGES • Promote efficiency and effectiveness in the industry

• Derive a sustainable business model in long term• Adequately address long term funding issue

• Efficient service levels• Efficient customer relations management

Efficiency and effectiveness• Inefficient operations• Ineffective structures• Ineffective regulatory• Tariff disparity among states• Poor customer relations management• Segmented approach in regulating

water and sewerage services • State Governments as service

providers

Funding• Partial cost recovery• No long term funding• Unsustainable funding structure• Under-investment• State debts• No ring-fencing• Some consumers do not pay sewerage bills• Insufficient Revenue to meet OPEX for

some states• High cost to finance rural water supply

ADDRESSING THE KEY CHALLENGES


1. Key Challenges










Impending changes in the industry landscape (moving towards corporate management)

RegulatoryIndependence

Transparency and

Accountability

Checks and Controls

Competitive Industry Structure

Transformation of Water and

Sewerage Industry

Below cost recovery

Ineffective regulatory structure

Absence of benchmarking

regime

Public perception

Absence of long term

sustainability

Current industry shaping forces

SHAPING EFFICIENCY & EFFECTIVENESS

Government as Service Provider


1. Key Challenges










Low-Interest Finance

Long-Term Funding

Long-Term Sustainability

Medium-term Government

Support

Sustainable long-term funding

structure

Impending Changes in the industry landscape

Deficit cash-flow

Absence of long-term

funds

Tariff increase

guarantee

Guaranteed returns

Absence of long term

sustainability

Current industry shaping forces

ADDRESSING FUNDING CHALLENGES


1. Key Challenges










BODYAREA OF

RESPONSIBILITY DESCRIPTION

Federal Government (Ministry of Energy, Water and Communications)

Policy matters Development of a holistic water policy for the country by setting policy directions.

State Government Raw Water matters Regulate raw water abstraction and catchment management

National Water Resource Council (NWRC) – chaired by Prime Minister

Water Resource matters – Cross boundaries / Inter state / Issue of National interest

Ensures coordination with the various State Government in the management of the water basins.

National Water Services Commission (SPAN)

Regulatory matters Regulate the water services industry (water and sewerage services)

POLICY & INSTITUTIONAL FRAMEWORK ON WATER SERVICES REFORM


Amendments to Federal Constitution 2005 enables Federal Government to regulate water services and State Government retain rights to regulate raw water in the value chain of water cycle

WATERSOURCE

TREATMENTOF WATER CONSUMERS

TREATMENTOF SEWAGE

WATER CYCLESTATE FEDERAL

CLEAR DEMARCATION OF JURISDICTION

ABSTRACTION

WASTE WATERDISCHARGE

DISTRIBUTION


1. Key Challenges










NATIONAL POLICY OBJECTIVESNational Policy Objectives for the Water Supply and Sewerage Services Industry includes:

To establish a transparent and integrated structure for water supply services and sewerage services that delivers effective and efficient service to consumers

To ensure long term availability and sustainability of water supply including the conservation of water

To facilitate the development of competition to promote economy and efficiency in the water supply services and sewerage services industry

To regulate for the long-term benefit of the consumers

To regulate tariff and ensure the provision of affordable services on an equitable basis


WATER SERVICES INDUSTRY ACT 2006

An Act to provide for and regulate water supply services and sewerage services

Objective : to establish a licensing and regulatory framework for regulatory intervention to promote national policy objectives for the industry.

Does not affect general applications of existing laws on environment quality and land matters and existing State powers on water source.


Economic Regulations

Technical Regulations

Consumer Protection

Social Regulations

CLASSIFICATION OF PROVISIONS OF WATER SERVICES INDUSTRY ACT


Addressing Inefficiencies and

Ineffectiveness

Comparative Regulations /

BenchmarkingKPIs/

Standards

Integration of water and sewerage services

Water ForumRegulated

Tariff

Furnishing of Information

Licensing

Business Plan

PROVISIONS UNDER WSIA THAT ADDRESS THE ISSUES OF EFFICIENCY AND EFFECTIVENESS


TYPES OFLICENCES

Two types of Licences:

CLASS(Private Systems)

INDIVIDUAL(Public Systems)

•Strict conditions•Limited numbers•Comprehensive obligations•Approval by Minister, upon SPAN’s

recommendation

•Less conditions•Unlimited numbers•Minimum obligations•Approval via registration

LICENSING STRUCTURE


INDIVIDUAL

(PUBLIC SYSTEMS)

LICENSING STRUCTURE

WATER SEWERAGE

Facilities

Owned sewerage facilities

Services

Provide services

ServicesFacilities

Owned water facilities

Treatment Distribution


TECHNICAL REGULATIONS

PERMIT & CERTIFICATION

OF CONTRACTORS

Examples:• For construction, connection, modification or repairs of pipes• Maintenance services of system• Desludging services

Examples:• KPIs – response time, coverage, water

quality, pressure, continuity, NRW• Standards & specifications of systems

& equipment• Qualification of persons operating the

system

TECHNICAL & PERFORMANCE

STANDARDS FOR

OPERATORS

TECHNICAL REGULATIONS


CONSUMERPROTECTION

CONSUMER PROTECTION

• Deal reasonably with

consumers• Address consumer

complaints

Quality of Service

• Regulations on rates made

by Minister upon SPAN’s

recommendation

Rates and Deposits


Sewerage Capital Contribution Fund

Contributions from developers

Purpose:

1. Supplement capital expenditure required for sewerage assets

2. Implementation of a regional sewerage system

Water Industry Fund

Contribution from licensees

Purpose:

1. Protection and preservation of the watercourses

2. Ensure sustainability of water supply from the watercourses

3. Improvement of water quality at the watercourses

4 Provision of water and sewerage services in rural development

Water Forum

Commission to designate

Functions:

1. Give feedback and make recommendations to the Commission

2. Represent the interest of consumers

3. Promote consumer’s interest in relation to the tariffs and standards

SOCIALREGULATIONS

SOCIAL REGULATIONS


Federal Government has formed a wholly-owned Water Asset Management Company (PAAB) under Minister of Finance Incorporated to address the funding requirement of the industry

PAAB will also address the outstanding loan of State Government to Federal Government

ADDRESSING FUNDING CHALLENGES


National Water Services Commission (SPAN) Act 2006

LEGAL AND REGULATORY FRAMEWORK


Functions and powers of SPAN include: To advise the Minister on the national policy objective

To implement and enforce the provisions of WSIA

To supervise and monitor water supply services and sewerage services activities

To review and recommend tariffs

SPAN is the economic and technical regulator

Chairman and CEO appointed on 1 March 2007

8 other members appointed on 2 April 2007

Temporary office at Block E4/E5, LEO Building, Parcel E, Putrajaya Malaysia

NATIONAL WATER SERVICES (SPAN) ACT 2006


1. Key Challenges










Water Services Industry Act 2006

Constitution Amendments 2005

National Water Services Commission Act 2006

WATER SERVICES REFORM – What’s Next?

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MISSION :- Efficient- Reliable- Affordable- Sustainable

WATER AND SEWERAGE SERVICES


THANK YOU

Water Services Reform in Malaysia

Documents

sa ra wa

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sewerage services

state government

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