Water tariff increase right move, more needed for holistic reform of sector – Ong Kian Ming

File photo of former Member of Parliament for Bangi, Dr. Ong Kian Ming.

KUALA LUMPUR, Jan 23: Former Member of Parliament for Bangi Dr. Ong Kian Ming said the recent move to raise the water tariff was a good and much needed move.

However, other policies would also need updating to bring about a holistic reform of the water sector in Malaysia, said the former MITI deputy minister in a statement issued here on Monday.

The Water Services Commission of Malaysia (SPAN) last week announced that the water tariff in Peninsular Malaysia and Labuan would increase by an average of 22 sen from RM1.43 per cubic meter to RM1.65 per cubic meter.

Kian Ming said this would improve the regulatory structure of water supply in the country and ensure the continued financial sustainability of the water service sector in Malaysia, adding that the tariff rate was still lower than the estimated RM1.75 per cubic meter it costs to supply treated water, on average.

He also said even after the rise in tariff rate, Malaysia enjoys one of the lowest water tariffs in Southeast Asia with only the Vietnam tariff slightly than Malaysia (RM1.62 / m3) and Thailand (RM2.60 / m3), Philippines (RM3.55 / m3) and Singapore (RM9.64 / m3). Many of these countries have increased their water tariff in the past few years and will increase their water tariffs in the near future.

He also said the federal and state governments had announced several measures that will help cushion the impact of the water tariff hikes especially to the poorer households.

“The water tariff hike is part of the Tariff Setting Mechanism (TSM) that will allow SPAN to revise the water tariff every three years. But more needs to be done to restructure the water industry in Malaysia,” he said, proposing several measures. These include:

  1. Putting in incentives for state water authorities to reduce non-revenue water as part of the conditions which have to be met to increase water tariffs.
  2. Setting up a fair and transparent system for capex spending for new residential, commercial and industrial development. Right now, there is a first mover “disadvantage” where private developers of new property projects have to pay the upfront cost of connecting new pipes to existing ones. A better process would be for the state water authorities to come up with a better CAPEX pricing model whereby private developers will be charged a development and connection costs whereas the CAPEX should be born by the water authorities. This would be an improvement to the current integrated water supply scheme currently practiced in the Klang Valley.
  3. Providing incentives for developers, institutions and even individuals to install infrastructure to save water consumption and to conserve water such as rainwater harvesting.
  4. Come up with creative strategies and regulations to tap into new sources of water supply such as drawing on rivers and underground water sources for industrial water supply which has a lower processing cost.
  5. Accessing new sources of financing from foreign investors and international funding organisations such as the Asian Development Bank, the European Invest Bank, the Asian Infrastructure Investment Bank ,the World Bank and GLCs based in Singapore, for example, to increase water processing capacity especially in the poorer states like Sabah and Kelantan, for example.