By IPS Correspondents
PENANG, Jun 26 2005 (IPS)

Malaysian civil society groups scored a stunning victory recently when the government announced it was scrapping plans to federalize and privatise the management of water.

But activists are now worried that privatisation could take other forms and that a proposed federal-level water assets holding company would control millions of dollars in infrastructure spending.

The surprise reversal came last Tuesday, when Energy, Water and Communications Minister Lim Keng Yaik said the proposal for the federal government to take over management of water from the various state governments had been called off.

Lim said that although he had spoken about privatisation and federalization of water services at a forum in 2004, the government changed its stance after consultations revealed that total privatisation was not suitable for Malaysia, “so we have cut out the word ‘privatisation’,” Lim added, reported Internet news site Malaysiakini.com.

He said that two bills, to be tabled before Parliament in July, were aimed only at setting up a regulatory body, the proposed National Water Services Commission (SPAN) and at regulating the management of water supply.

The minister’s announcement came on the heels of a demonstration outside Parliament on Tuesday by 450 people who wanted to hand over a memorandum endorsed by 127 groups opposed to water privatisation. The action was organized by the Coalition Against Water Privatisation, which includes the Malaysian Trades Union Congress (MTUC), the umbrella body for the country’s unions.

Since February the Coalition had been urging the government to adopt a public-public partnership, so that water authorities in the various states could exchange experiences and learn about best practices from each other. The grouping has called on the central government to emulate the model of the Penang Water Supply Corporation (PBAPP), widely regarded as world-class in terms of its efficiency, profitability and cheap water tariffs.

The PBAPP, though listed on the Kuala Lumpur Stock Exchange, is 75 percent owned by the state, with the remaining shares in the hands of consumers and employees. It boasts a non-revenue water level (water lost to leakages or otherwise not billed for) of only 18 percent – about half the national average, and much lower than many established multinational water corporations.

Lim said the demonstrators were wasting their time as the government was actually following their suggestions. For example, all state water authorities will be “corporatised” to follow the example of the PBAPP, he added.

But the minister declined to use the term “public-public partnership”, saying he still preferred “public-private partnership”.

His insistence on the term is causing activists and opposition politicians some concern. “I had asked whether the government was conducting privatisation of the water services without using the word ‘privatisation’,” said parliamentary opposition leader Lim Kit Siang.

In a statement he pointed out there was a great wariness among non-governmental organizations (NGOs) and other sections of civil society over whether the minister was really adopting the NGO case for water management.

Others observe that ‘privatisation’ has received bad press, so the government was using the term ‘public-private partnership’, a more acceptable-sounding euphemism.

“Privatisation has gone through a name change after disastrous water privatisation outcomes in Bolivia, Indonesia and the Philippines,” said Charles Santiago, the coordinator of the Coalition Against Water Privatisation.. “In insisting on the term ‘public-private partnership’, the minister is in effect saying that he supports privatisation,” he added in an interview.

Santiago said public-public partnerships, on the other hand, involve water authorities sharing expertise with each other to improve efficiency, while ensuring that water management continues to be under state and public control. A partnership based on a common understanding of public service objectives, it would ensure that profits are reinvested in the respective water authorities instead of being siphoned out by private companies.

In contrast, the minister’s main concern appeared to be getting state water authorities to corporatise and become publicly listed companies, although owned by the state, said Santiago.

Today, water authorities in Selangor and Johor states are already privatised and controlled by Malaysian companies, and a few more state water bodies are corporatised, while the rest are directly controlled by the states.

Several of these states had announced plans to privatise their water authorities and raise tariffs before the government’s reversal. For instance, Perak State’s water authority, despite being profitable, had indicated that it would privatise water, with tariffs to be hiked 20 percent initially and 40 percent later.

Negri Sembilan State said it had already offered a privatisation deal to a private company and had indicated a 25 percent tariff increase was on the cards.

“Our stand is clear: we want the government to put down the no-water-privatisation commitment in black and white so that it cannot be changed in future,” Vinothan Kurup, vice-president of the MTUC and chairperson of its consumers committee, told IPS.

Activists say they also want an open declaration from all states that they will not privatise water management, and that those who have done so will reverse the moves. Better still, activists would like a new law making water privatisation illegal.

Attention is now focused on the central government’s plan to set up a water assets holding company under the Finance Ministry that would have access to large, long-term loans at low interest rates and the power to decide on infrastructure spending.

Activists say this is where the big money will be, and that the body is likely to emerge as the most powerful organ controlling water supply – more powerful than the regulatory commission SPAN – for it would determine the future of water resource management in the country.

“This holding company will decide who is going to build dams and reservoirs and where they will be built. It will also indirectly determine the tariffs too,” worried Santiago, adding, “there must be safeguards to protect the public interest and to ensure that the infrastructure spending doesn’t end up as a windfall for cronies and certain favoured contractors.”

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