Privatized Water Supply Contracts Losing Money in Malaysia
Sabah, one of two Malaysian states on the large island of Borneo, is losing RM40 million ($10.5 million) a year to pay three private companies that are supplying water to some of the most populated areas of the state, namely Kota Kinabalu, Sandakan, and Lahad Datu. As a result, the state has requested a soft loan from the Federal Government to help “correct” the privatization contracts. The request was initially made to Malaysian Works Minister Datuk S. Samy Vellu.
In 1993, three companies - Jetama Sdn Bhd, Timatch Sdn Bhd and Lahad Datu Water Supply Sdn Bhd - were given contracts to sell water to the state Water Department, which has distributed the water to customers. However, the Sabah government has only been able to collect RM40 million ($10.5 million) a year from customers while paying nearly RM80 million ($21 million) to the three private suppliers. As a result, the state government has had to come up with RM40 million ($10.5 million) a year on its own to cover the shortfall.
After being briefed by officials at the Sabah Water Department, Works Minister Vellu asked that that state government draw up a working paper for the Federal Government to consider. He was quoted as saying that it is a “pitiful affair” for the state, especially since water theft and leakage are serious problems.
A front-page article in the leading English language newspaper, The Star, had earlier reported that the Sabah government would buy back the contracts from the three companies and assume responsibility for water supply in these areas. However, a subsequent report quoting the Sabah Chief Minister, Datuk Osu Sukam, said that it was not the intention of the state to buy back the privatized water concessionaires, but simply to obtain the federal loan to help alleviate the current shortfall. Two of the concessionaires, Jetama and Timatch, are considering the prospect of handling distribution and billing (in addition to supply), but Lahad Datu has rejected such an arrangement. The state government has a 20% interest in the three companies.
The ruling coalition, Barisan Nasional (BN), won elections in Sabah earlier this year. BN officials campaigned hard, promising - among other things - increased and improved infrastructure development in the state, which is generally less developed than the rest of Malaysia. Minister Vellu was in Sabah to check on the status of various infrastructure projects.
For more information on water supply projects in Malaysia, please contact:
Vivian How or Steve Knode
United States Asia Environmental Partnership
376 Jalan Tun Razak
50400 Kuala Lumpur