DAP calls for open tender for the RM6.27 billion national sewerage services system privatisation project the single biggest privatisation contract in Malaysian history

Speech by Parliamentary Opposition Leader, DAP Secretary-General and MP for Tanjong, Lim Kit Siang, in the Dewan Rakyat on Thursday, July 22, 1993 on the Sewerage Services Bill 1993

DAP calls for open tender for the RM6.27 billion national sewerage services system privatisation project the single biggest privatisation contract in Malaysian history

The Sewerage Services Bill is the first of six Bills to pave the way for the single biggest privatisation contract in Malaysian history – the RM6.27 billion national sewerage services system privatisation project.

The other five bills are the Local Government. (Amendment) Bill; the Town and Country Planning Amendment Bill; the Street , Drainage and Building Amendment Bill; Federal Territory of Labuan (Amendment of Public Health Ordinance) Bill and Federal Territory of Labuan (Amendment of Local Government Ordinance) Bill.

The Sixth Malaysia Plan, presented in the Dewan Rakyat in July 1991, said:

“12,34 In line with the Government’s objectives to preserve the quality and quantity of water resources as well as to promote public health and tourism, sewerage development will be accorded higher priority under the Plan. Efforts to provide centralized sewerage facilities to state capitals, major urban centres arid designated tourist resorts will be continued. In addition, appropriate sewerage treatment facilities will be provided to areas where the risk of sewage contamination to water intake is great. Besides further enforcement of the requirement that developers of houses, hotels, tourist resorts and other developments construct communal treatment plants and centralized sewerage systems in their project areas, industries will be encouraged to pretreat and discharge their effluents into sewer-age treatment, plants. In the light of the high development, cost of centralized sewerage systems, incentives will be provided to ensure that sewerage projects will be viable for implements and feasible to be privatized,”

In view of the Government’s decision right from the beginning of the Sixth Malaysia Plan to privatise the sewerage system in the country, the question is why no open tenders were called for the privatisation of the entire national sewerage system – making it the largest single privatisation contract in the country.

Instead, the single biggest privatisation contract was given to one of the highest corporate fliers in the country, Tan Sri Vincent Tan through Indah Consortium.

Members of Indah Consortium comprise:
1. North West Water (M) Sdn. Bhd
(NWW) 25 per cent.
2. Lembaga Tabung Angkatan Tentera
(LTAT) 20 per cent
3. Koperasi Polls DiRaja Malaysia Berhad
(KPD) 20 per cent
4. Indah Wastewater Management (M)
Sdn. Bhd. (1WM) 17.5 per cent
{represented by Tan Sri Vincent Tan)
5. Aims Worldwide (M) Sdn.Bhd.
(ATMS) 17. 5 per cent
(represented by Dat.uk Ghazi H. Ramli)

The history of privatisation in Malaysia, in particular mega-privalitisation on contracts, is the history of how politically well-connected corporate leaders made use of their influence to make huge fortunes at the people’s expense as the people have no access to such decision-making process and their rights and interests are not represented at all in such private negotiated deals.

At least, where such mega-privatisation deals are subject to open Lend, public rights and interests would be better protected at all bids would be subject competition and scrutiny as to which one is the best offer in the public interest.

It is for this reason that, the DAP calls for open tender for the privatisation of the RM6.27 billion national sewerage services system, in keeping with the commitments of this government to be open, accountable and transparent.

The people, who are like ‘captive fishes’ in the privatised national sewerage services system, are entitled to know the full details of the privatisation deal, and to demand government responsibility and accountability if the terms are unfair, onerous or indefensible.

For instance, under the privatisation of services system to Indah Consortium, the RM500 million which the Government had allocated for sewerage projects under the Sixth Plan and which had been frozen because of the privatisation would be given to Indah Consortium as a soft loan- which would in fact be the starring capital for the privatisation of the national sewerage services system.

I am sure that in an open tender for the privatisation of the national sewerage services system, with the clear government statement that it would offer RM500 million as soft loan as start-up capital for the project, there would be numerous bids and the country would be in a position to choose one which is most beneficial and profitable to the people of Malaysia.

There are important reasons why the public should be able to examine in detail the privatisation proposals for the national sewerage service system, both because of its extensive national coverage and the length of period of privatisation.

Firstly, the privatisation by Indah Consortium will cover 43 urban areas in all 13 states, including:

*sewerage networks and treatment facilities currently owned and operated by Local Authorities, as well as existing systems owned and operated by the private sector;
*new systems constructed by the private sector as part of new building development; and
*new services provided by the Consortium to unsewered areas.
In these 43 urban centres, Indah Consortium will
*develop new sewerage facilities to all existing urban areas;
*certify new facilities provided by the private sector as part of new urban development;
*operate and maintain the sewerage system to meet specified compliance standards.
In addition to these 43 urban centres, Indah Consortium will provide technical advisory services to all other Local Authority areas in Malaysia.

Indah Consortium given 28 years to operate the national sewerage services system
Secondly, under the Indah Consortium privatisation proposal, Indah Consortium will have access to very valuable land-banks which will generate great profits and income.

Thirdly, the long period of privatisation, as Indah Consortium will be granted a 28-year privatisation contract – although the entire national sewerage system would he completed in the first 18 years.

Indah Consortium will collect RM57.9, million to RM150.5 million a year from sewerage tariff once the national sewerage services privatisation contract is awarded

But the most remarkable term of the privatisation proposal is that Indah Consortium will not only get RM500 million as soft loan when the privatisation contract is awarded, but it will be able to immediately generate cash and revenue by billing Malaysian households without having completed any sewerage project. It will be able to do this once the Sewerage Services Act becomes law and two taken; firstly, the Federal Government assume control and of all sewerage systems from the State Government, and local authorities; and secondly, the Federal Government, privatises the sewerage services to Indah Consortium.

Under the privatisation proposal, the sewerage tariff will be incoporaterl as a surchage on the water tariff collected by State water authorities. The general public will receive one bill with one amount to pay which will cover water and sewerage services. The sewerage component of the bill will be made up of two parts:

*an availability charge calculated as a percentage of the assessed value of the property;
* a usage charge calculated as a rate on the volume of water used.

The Minister for Housing and T.oca 1 Government, Dr. Ting Chew Peh, was reporter in the Star of 13th July 1993 as saying that every household will have to pay between RM3 and RM10 a month for the First five years when sewerage services are privatised.

Under the indepth study undertaken by Indah Consortium from March 1 to August 31, 1992, it estimated that there were 697,000 households in the 43 local authorities connected to sewer-age systems while 577.500 households with individual septic tanks – bringing a total of 1,254,500 households under its coverage.

TF as Dr. Ting Chew Peh had said, every household will have to pay between RM3 and RM10 a month for the first five years, this means that Indah Consortium will be collecting from RM4,763,500 to RM12,545,000 every month front the 43 local authorities, or RM57.2 million to RM150.5 million every year for the first five years after the award of the privatisation contract.

Why had Dr. Ting Chew Peh doubled the sewerage tariff when Indah Consortium had only proposed RM3 to RM5 per household?

I want to ask Dr. Ting Chew Peh whv in his announcement last week, he had doubled the sewerage tariff when the sewerage services are privatised, as Indah Consortium had only proposed RM3 to RMS per household per month!

This is a clear case where the Minister responsible instead of protect any the public is in fact sending a message to Indah Consortium to double its sewerage tariff from what it, had proposed in its Privatisation Proposal made to the Federal Government on 18th August 1992.

What can the paying pubic expect their interests to be protected if Ministers need not be open , accountable and transparent in every step of every privatisation process – not only with regard to the price and terms of the award, but the price the public would have to pay in terms of monthly rates from every household for 28 years!

This is why the mechanism to protect the public interest once an important public service the sewerage is privatised is very important – as Ministers cannot be interested at all.

Under the Sewerage Services Bill 1993, the Director-General of Sewerage Services would oversee the privatised national sewerage services system.

Under Clause 9, his powers and functions include:

(a) to formulate and implement a plan so that all reasonable demands for sewerage services are satisfied:
(b) in consultation with the relevant authorities, prepare a structure plan formulating the policy and general proposals in respect of the development of any new sewerage system and measures for improvement of any existing sewerage system;
(c) to prescribe the minimum standards and specifications of any installation or equipment relating to sewerage systems, septic tanks, connections and private connection pipes and to register persons supplying such installations or equipment; etc.

What I find most important is (i), which states:

“(i) to promote the interests of customers of sewerage services or connection services provided by any person licensed under this Act in respect of –
(i) the prices to he charged for the services;
(ii)the quality of the services;
(iii)in relation to sewerage services, the continuity of the services.”

Clause 9(i) should normally he able to assure the public that their interests will be protected when the national sewerage services system comes under the monopoly of Indah Consortium.

However, I am not assured, in view of the abysmal record of the Barisan Nasional Government to protect, the interests of the consumers against monopolies created by its privatisation programme.

DAP demands Consumer Compensation Scheme should he written into all privatised services, whether sewerage services or electricity supply

Electricity supply is the best, example. When Tenaga Nasional Bhu. was privatised, the Electricity Supply Act 1990 was passed where under Clause 4, the Director-General of Electricity Supply was given functions and duties which include:

“4. (b) to exercise regulatory functions in respect of the service, of providing electricity by the licensee including the determination of performance standards and standards of facilities and services and the enforcement thereof;
“(c) to promote competition in the generation and supply of electricity to, inter alia, ensure the optimum supply of electricity at reasonable prices;
“(d) to promote the interests of consumers of electricity supplied by licensees in respect of –
(i) the prices to be charged and the other conditions of electricity supply;
(ii) the continuity of el electricity supply; and
(iii) the quality of the electricity supply services provided.
“(e) to ensure that all reasonable demands for electricity are satisfies.”

The Malaysian people will agree as one that the Director-Genera 1 of Electricity Supply had clearly failed in Iris duty to promote the interests of the consumers of electricity supplied by Tenaga Nasional Bhd in the prolonged national energy crisis which has not yet been resolved.

If the consumers, whether of electricity or the national sewer-aye services system, are to Vie properly protected, it should be written into the law which laid .the basis for privatisation that consumers are entitled to claim compensation for losses ‘incurred as a result of the failure to provide proper and regular service.

In the Sewerage Services Rill as well as the Electricity Act, there are all sorts of provisions whereby the public are liable for legal prosecution, but there is not a single provision to entrench the right of consumers to Consumer Compensation Scheme.

For instance, Clause 17(2) provides that if an owner or occupier of a building fails to comply with notice given by Director-General of Sewerage Services on proper drainage for sewage, the Director-General “may apply for a mandatory order” from the court.

Why is there no similar provision in this Bill giving the consumer the power to apply for a mandatory order from the court if indah Consortium or the Director -General of Sewerage Services had been negligent or irresponsible in the discharge of their duties under the Bill?

Let me make it clear that the DAP fully agrees that there is an urgent need for a modern national sewerage system to treat ‘human and commerc ial waste, as testified by the fact that more and rivers running throughly densely populated and industrialized areas of Peninsular Malaysia have become ‘dead rivers’ because of their heavy pollution.

However, this is no ‘reason why there should Vie no public tender for the national sewerage services system. In fact, the proposed privatisation of the national sewerage services system should not have-been used as an excuse to freeze all sewerage projects in this country, like the RM50 million Penang Island Municipality Sewerage Project, which should have been completed already, if not for the foot-dragging by the MPPP and the Federal Government at first and then the freeze ordered by the Federal Government on all sewerage projects because of the privatisation proposal.

Sewerage is a concurrent subject, under the Federal Constitution, and the Federal Government, must share equal if not greater responsibility with the state governments and local authorities for the deplorable condition of sewerage services in the country today.

In fact, sewerage and low-cost housing, both of which fail under the Ministry of Local Government, and Housing, are two of the greatest failures of the Barisan Masional Government in the past two decades. This is probably because the Minister of Local Government and Housing had come from the MCA for the last two decades, and the ineffectiveness and impotence of MCA Ministers have been translated into the two greatest failures under the Barisan Nasional Government – sewerage service and low-cost public housing.

The existing sewerage system currently serves only 46 per cent of the urban population, and the system is in poor condition as the government had failed to give it the attention it deserved to provide for a clean and healthy environment.

It is no exaggeration to say that the sewerage system has reached a crisis stage in Malaysia – but the Barisan Nasional government seems to be in the habit of allowing crisis situations to emerge so that they could use it to justify crisis decisions like the award of the privatisation of national sewerage services system to Indah Consortium without open tender.

This is not the first time when crisis situation is allowed to develop to justify indefensible decisions taken long beforehand, and we are likely to see more of this game-plan being repeated -including the Sepang Airport, and Commonwealth Games projects.