Letter: Bailout of water concessionaires is against public interest

By Tony Pua, Member of Parliament, Petaling Jaya Utara
Tuesday, 24 May 2011

BN Government’s RM6.5 billion bailout of Selangor privatised water companies has jeopardised the people’s chance of securing a long-term deal to enjoy quality water supply at the lowest water prices.

It has been reported in the media that the BN Federal Government has decided to bail out the debts of the Selangor privatised water companies to the tune of RM6.5 billion. This move has in effect killed any remaining possibility of the Selangor state government striking a deal with these companies to restructure and take over the water industry in Selangor.

The debts of these water companies were at risk of default after they were unable to meet their installment earlier this year. Of the four companies, Puncak Niaga Sdn Bhd and its subsidiary, Syarikat Bekalan Air Negeri Selangor (SYABAS), had debts amounting to more than RM4.2 billion.

The failure of these companies to service their debts, had no bailout been offered by the BN Administration, would have necessitated these companies to come to the table and negotiate the terms of restructuring with the Selangor state government or other parties which has made offers to acquire the businesses and assets billion into acquire these water companies, and taking over their debts obligations.

In addition, the state government is able to ensure that there will be no water tariff hikes post restructuring. Gamuda, through its subsidiary Pengeluaran Air Selangor Holdings (SPLASH) has also made an offer to acquire the same companies for RM10.8 billion, a figure including the existing debts.

However as a result of the Federal Government bailing out the massive debts, they have relieved these companies of their cash flow problems. This will mean that there is now no urgency for these companies to agree to any form of restructuring as desired under the Water Services Industry Act (2006) as they now have the upper hand at the negotiating table at the expense of the rakyat.

In fact the likely outcome from the bailout is that the Federal Government will follow up with the taking over water-related assets will be these privatised water concessionaires will continue to able to operate and profit from the provision of water services in Selangor, without having to be burden by debts which have been accumulated over the years.

The result is clearly a loss for the people of Selangor for they have lost an opportunity for the privatised water industry to be truly restructured to ensure quality water prices are to be provided at the lowest possible prices.

The Minister of Energy, Water and Green Technologies, Datuk Peter Chin must immediately provide clarifications for the move to bail out the debts of the water concessionaires before a restructuring deal is finalised, at the expense of the people’s interest. He must also fully disclose at the same time the means and terms of repayment to the Government by these concessionaires with the Government taking over these debts.

Finally, the bailout debunks all earlier claims by the BN Government that it is acting in the interest of the rakyat, and serves to prove that it is only interested in protecting the interest of its political cronies above everything else.