MB: State can challenge Federal Govt over water issue

STAR, Saturday March 21, 2009

By YVONNE TAN

THE Selangor government reiterates that it can legally challenge the Federal Government over the water restructuring issue in the state.

“Yes, if we want to, we can. We would like to remind the Federal Government that we have an enactment in Selangor to protect the rights of water users in the state,” Mentri Besar Tan Sri Abdul Khalid Ibrahim said after the Selangor Business Council meeting in Shah Alam yesterday.

However, Khalid says he would prefer if the matter is settled “amicably”.

“If it (the issue) reaches a stalemate, then we will exercise our rights,” he says.

“The Federal Government had agreed that the restructuring of the water industry be done through a state vehicle.

“Initially, they (the concessionaires) wanted to go with us but the Federal Government said it wanted to negotiate with them, bypassing us. The rights of the state must be respected,” Khalid says.

The state had, on Feb 13, offered RM5.71bil to the four privatised water service providers – Puncak Niaga Sdn Bhd, Syarikat Bekalan Air Sdn Bhd, Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash) and Konsortium Abass Sdn Bhd – for the water assets in the state as part of the national water restructuring exercise.

But on Feb 18, two days before the deadline for them to respond to the state’s offer, the Energy, Water and Communications Ministry directed Pengurusan Aset Air Bhd (PAAB) to negotiate directly with the concessionaries. On Feb 27, it was reported that PAAB would soon make an offer worth about RM5bil to buy all the water assets from the four water concessionaires in Selangor.

Whatever the disagreements in Selangor, a deal needs to be formalised by month end or the concessionaires can impose a 37% tariff hike on water in the state.

“The issue of time is not a major issue,” Khalid says.

“This is an issue of federalism, which means the setting up of the federal and state governments. The rights of water, the rights at land are provided to the state. This issue may not happen if it falls under the same party,” he says.

“Puncak, Abass and Splash will only accept the Federal Government’s offer if the offer price is favourable,” an analyst says.

“To adopt the one-time book value purchase price (the benchmark price in previous deals), PAAB will have to come up with a more comprehensive offer for Puncak and the other concessionaires such as lower lease payments (for the assets taken over) as part of the total transaction, so that the entire value to assume the operator’s role would be similar to the concessionaires’ income streams,” the analyst says.

On another note, Khalid says he expects the local economy to improve by 2010.

“This is if the global economic conditions stabilise by year-end; if not, we may be looking at Malaysia’s economy being impacted for the next two to three years,” he says.