PETALING JAYA, April 22 — With the recent spate of grievances from residents and businesses on the continued water shortage and rationing, it seems the Selangor government has little to say except for the fact that it was due to the failure of the water concessionaires to unanimously agree to the state’s latest offer, which expired in March.

And in doing so, it appears that the much-needed and federally-funded Langat 2 project still hangs in the horizon, as the Selangor government raised the motion last Friday to delay its construction pending further details from the restructuring exercise.

“Why lay blame on the water concessionaires when the Selangor government could have avoided the crisis by approving the development order of Langat 2 fours years ago?” said an industry observer, when asked about how the water concessionaires’ non-acceptance of the state’s latest offer had been attributed to the water crisis, hence the need to invoke Section 114 of the Water Services Industry Act (WASIA). And, in turn, for the Selangor government to release the development order for Langat 2.

“Water shortage is actually due to a combination of many reasons including water treatment plants in Selangor working at maximum capacity, continuous delay in construction of Langat 2, lack of water pipe connectivity to critical water stress areas, high water pipe leakage, prolonged drought and the state’s sole reliance on rivers for raw water source — and not due to a commercial impasse,” the industry observer said.

In many analysts’ reports published in the recent week, analysts claimed that Langat 2 should be regarded as the people’s interest and not to be treated as a commodity. One analyst pointed that the treatment plant project is seen to be used as an “exchange” by the Selangor government in return for the Federal government to invoke Section 114 of the Water Services Industry Act (WASIA) in an attempt to gain full control of the water assets at a lower valuation.

According to analyst reports, there had been examples of successful water restructuring cases in six other states in peninsular Malaysia, which did not involve invoking Section 114 of WASIA.

Although Selangor Mentri Besar Tan Sri Abdul Khalid Ibrahim said WASIA was used in the restructuring of the water industry in Johor, Penang, Malacca and Negri Sembilan, the end result of the water restructuring schemes in those states was at no divestment losses to the water companies.

All six precedents of water restructuring were spearheaded by Pengurusan Aset Air Berhad (PAAB), using a valuation model of one-time book value. It was carried out via an asset and liability transfer agreement, where the federal government bought over based on book value of the water companies on “willing-buyer, willing-seller” basis.

“And even if Section 114 was invoked, it does not result in a change of ownership of the water assets but simply allows the federal government to assume control of the operations and performance management of the water companies on a temporary basis.

“The control is to ensure proper production, treatment and distribution of water to the public but does not result in a takeover of the water companies’ assets,” said the analyst, adding that both the federal and Selangor governments had different expectations and motives in invoking the Act.

Based on published reports, it seems that the Selangor government’s intention to invoke Section 114 of WASIA is to acquire water concessionaires at the state’s valuation, which analysts deem unfair.

It was previously reported the invocation of Section 114 of WASIA could also have severe implications on the sanctity of Malaysia’s government-linked contracts and affect investors’ confidence.

Analyst further added that it is puzzling as to why the authorities see change of ownership or controlling party would help solve the water shortage problem as all 34 water treatment plants in Selangor were already operating over capacity.

In a TV3 Buletin Utama interview aired on April 14, former Selangor mentri besar Tan Sri Abu Hassan Omar blamed the current state administration for the current water woes. He said the current problems could have been avoided if the state government had approved the construction of Langat 2.

In the interview, Abu Hassan said: “The current water crisis in the Klang Valley would not have happened as experts had foreseen it since 1994... and the matter could have been avoided.”

Located at Hulu Langat, the Langat 2 treatment plant is expected to produce almost 1.9 million litres of treated water daily with transferred water from the Pahang state, once fully completed in 2017. The water treatment plant is expected to provide a reliable and sustainable water source until at least year 2025.

Despite the construction of the project was awarded of a close to RM1 billion contract by the federal government, assemblymen from both political divides in Selangor state debated last Friday on passing a motion which requested the Selangor government to stall the Langat 2 project before the water restructuring exercise in the state was completed.

A consortium of three entities — MMC Corp Bhd, Salcon Bhd and Ahmad Zaki Resources Bhd (AZRB) — had received a letter of acceptance dated April 16 to construct the first phase of the Langat 2 water treatment plant and water reticulation system with a contract sum of RM993.89 million.

Meanwhile, a spokesperson from the Ministry of Energy, Green Technology and Water (KeTTHA) said the deferment of the plan to construct Langat 2 water treatment plant and the distribution system “was due to delays in getting the development orders and land acquisition approvals for the construction from the Selangor government”.

However, the spokesperson said the development orders had been handed over to KeTTHA with the signing of Memorandum of Understanding (MoU) between the two governments on February 26.

The spokesperson said due to the stall, the Langat 2 treatment plant and distribution systems can only be ready in 2017.

“In the meantime, the federal government had implemented a few mitigation projects to ensure sufficient water supply to the people such as upgrading the design capacity for round-the-clock operation of 11 pump houses owned by Syabas and transferring raw water from Negri Sembilan to the Sungai Semenyih and Sungai Langat treatment plants,” said the spokesperson.

The recent water shortage and rationing had vindicated former KeTTHA minister Datuk Seri Peter Chin who warned the Selangor government back in July 2010, that the delay in approving Langat 2 would result in a water crisis in Selangor, Kuala Lumpur and Putrajaya in 2014, as water usage in Selangor was projected to grow by 2 per cent to 3.5 per cent annually. Chin’s assumption was based on a research carried out by the Economic Planning Unit research in the year 2000.

At that time, the Selangor government had refuted the Federal government’s claims and said the state had consulted experts who looked at the population growth rate, water usage, and current supply capacity, and believed that there was enough water until 2019. In addition, the Selangor government then recommended that the implementation of the Pahang-Selangor water transfer project should only begin in 2016.