Malaysian govt gets stay on water concession disclosure

The Edge Friday, 02 July 2010 14:39 Malaysia
Govt gets stay on water concession disclosure

Written by Bernama   

Friday, 02 July 2010 14:39


KUALA LUMPUR: The federal government on Friday, July 2, obtained a stay on the High Court ruling which allowed the disclosure of the audit report and the water concession agreement signed with the Selangor government and Syarikat Bekalan Air Selangor (Syabas) pending an appeal. The federal government, which filed an appeal on Wednesday, was supposed to disclose the two documents by Monday.Judicial Commissioner Hadhariah Syed Ismail, who issued the ruling on June 28, allowed the stay in the suit brought by Malaysian Trades Union Congress (MTUC) and 13 others asking for a judicial review to gain access to the documents.Senior federal counsel Suzana Atan today submitted that the disclosure of the documents would affect the daily administration of the government's machinery and the public interest as a whole.She said the audit report could not be revealed as it had been classified as confidential under Section 2A of the Official Secret Act 1972.If the stay was granted, it would not inflict any hardship of the applicants, she added.Suzana said the Attorney-General's Chambers would write a letter to the Court of Appeal to expedite the hearing of its appeal against the High Court decision.Lawyer Malik Imtiaz Sarwar, for the MTUC, countered that under the Federal Constitution, the applicant had a right to the information and that the government would not be damaged as the court had viewed that making the documents public would not be detrimental to national or public interest.He also said that the Selangor government had not objected to the disclosure of the documents and welcomed the court decision.The Selangor government representative was not present today.
In granting the permission, Hadhariah said if she refused the application, the appeal by the government would be rendered nugatory (invalid) if the Court of Appeal reversed her ruling.She said the matter was not a straight-forward case as it involved public interest and the government.Hadhariah said she must be balanced in her decision and that she was more on the public interest because water was a basic right and there should be transparency in the deal.On June 28, she granted the application by the MTUC and the 13 others who had asked for the judicial review after then Energy, Water and Communications Minister Datuk Seri Dr Lim Keng Yaik rejected their request for the documents.The applicants had written a letter to the minister on Nov 7, 2006, and the ministry replied on Dec 4, 2006, that the documents had been classified as confidential and secret.The utility now comes under the portfolio of the Energy, Green Technology and Water Ministry. -- Bernama
Selangor water deadlock broken?

Written by Jose Barrock & Isabelle Francis   

Monday, 21 June 2010 12:00


KUALA LUMPUR: The deadlock in the proposed consolidation of water assets in Selangor may have been broken with all the parties close to agreeing on pricing, and ironing out the issues of operations and maintenance (O&M). Sources familiar with the matter said that as things stood, the Selangor government and federal government-owned Pengurusan Aset Air Bhd (PAAB) would jointly pay for the acquisition of the state’s water assets and liabilities at over one time book value. The sources said PAAB would be the owner of the assets, and as consideration for the state’s payment of a portion of the total acquisition price, the Selangor government would end up with a stake in the management of the assets. Although the mechanics have yet to be ironed out, The Edge Financial Daily has learnt that the federal government’s portion of the acquisition price would be equivalent to one time book value of the assets, while the state government will pay for the agreed sum over and above that. The Selangor government is understood to have roped in the AmBank group to provide the funding and merchant banking services. “There has been a lot of headway made, AmBank is on standby. It’s very high stake games, but talks have been progressing well.“Only the operations and maintenance are still left to be ironed out. At the earliest, the deal could be concluded by the end of this month. Some delays could surface depending on the outcome of negotiations,” said a source familiar with the deal.

It is believed that the talks are skewed towards the setting up of a special purpose vehicle (SPV) to oversee the O&M of the state’s water industry. The crucial issue of who will be in control of this SPV is yet to be sorted out. “Both parties, state and federal (governments) want control of this SPV; this bit has to be sorted out,” the source added. It is unclear if any or all of the other shareholders of the state’s water concessionaires would be included in the joint distribution and supply operations.The Edge weekly had reported in January 2010 that the federal government had proposed a joint ownership by the state and concessionaires of the water operations. PAAB, which is owned by the Minister of Finance, Inc, was set up in May 2006 to restructure and consolidate the country’s fragmented water sector, with the policy making it the owner and the O&M players “asset-light”. PAAB CEO Ahmad Faizal Abd Rahman has been continuing with the efforts since his appointment to the role about a year ago. The breaking of the deadlock stemmed from recent discussions between PAAB, state and federal officials and the state water concessionaires – Puncak Niaga Holdings Bhd, Syarikat Pengeluar Air Sungai Selangor Holdings Bhd (Splash) and Konsortium Abass Sdn Bhd. The state and federal governments had been at a stalemate over the last two years over who should be the rightful party to consolidate Selangor’s water assets and have control over its supply and distribution. In June 2009, the state government had made an offer of RM9.22 billion, or one time book value for the water-related equity, assets and liabilities of the four water companies. However, that did not pan through due to the lack of agreement from all parties. In an interview with The Edge Financial Daily in November last year, Selangor Menteri Besar Tan Sri Khalid Ibrahim had said the state was no longer pursuing the exercise but remained adamant over control of distribution as it was a “state right”. Selangor now owns a 30% stake in Syabas, 30% of Splash and 55% of Konsortium Abass. The Puncak group, which is under the control of its executive chairman Tan Sri Rozali Ismail, owns 27 water treatment plants in the state and the remaining 70% stake in Syabas. Construction giant Gamuda has a 40% stake in Splash, while the remaining interest is held by privately-held The Sweet Water Alliance Sdn Bhd. The remaining 45% stake in Konsortium Abass is held by another privately held company, Operasi Murni Sdn Bhd.Syabas holds the water supply and distribution concession for Selangor, Kuala Lumpur and the federal administrative centre in Putrajaya. It buys treated water from Splash, the Puncak group and Konsortium Abass. Both Selangor and PAAB officials did not respond to queries, while Rozali, who owns 40.8% of Puncak, could not be reached for comment. The latest development comes three months after Gamuda, led by its managing director Datuk Lin Yun Ling, announced a bold RM10.75 billion takeover offer, via Splash, to take over the water assets for RM10.75 billion, or 16.6% more than the state government’s offer. Gamuda’s proposal, however, was not seen as in line with the national water consolidation policy. Subsequently, Gamuda made a revised offer. It maintained its previous valuation of the assets, which would be acquired by PAAB at its previous offer of RM8.18 billion made in March 2010, while Splash will top up the difference of RM2.57 billion for the right to lease the assets from PAAB. Under that proposal, PAAB would own and carry all the assets in its books. It would lease them to Splash which would be the O&M concessionaire for a 30-year period.Some quarters believe it was Gamuda’s revised offer that did the trick in breaking the long running deadlock over the water consolidation exercise. Time will tell if the exercise will finally sail through, or hit more rough waters again. This article appeared in The Edge Financial Daily, June 21, 2010.

Politics: No easy way out of federal-state row

Written by R B Bhattacharjee   

Monday, 28 December 2009 00:00


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Although Malaysia is nominally a federation of 13 states and three federal territories, it functions mostly as an unitarian state, with the federal government having close control over the allocation of resources, and state governments getting what the centre deems fit for them.For much of the last 52 years, this arrangement worked quite well for most of the country, most of the time, as the Barisan Nasional (BN) coalition formed both the federal government and most state governments as well.Then came the March 8, 2008 general election, when five state governments fell to the opposition parties, which then came together as the Pakatan Rakyat (PR) coalition.Nothing was the same anymore. Soon, the BN-led federal government began to take a slew of measures that effectively kept resources out of the hands of the PR state governments. This demonstrates the relationship between power and access to funds in the Malaysian political context, and is crucial to understanding the future direction of politics, business and development in the country.A few examples will be sufficient to illustrate this point. Right after the 12th general election, news broke that the then Tourism Minister Datuk Seri Azalina Othman Said had cancelled all memorandums of understanding (MoU) between the Malaysian Tourism Action Council (MTAC) under her ministry and the five states that were in the PR’s hands.New MTACs that came under her ministry’s direct control were set up and all tourism promotion funds would be channelled through them.The then Entrepreneur and Cooperatives Development Minister Datuk Noh Omar similarly announced after the 2008 general election that all federal project funds under his (now defunct) ministry would henceforth be distributed through Mara, the agency that spearheads the New Economic Policy agenda of creating opportunities for bumiputeras, and no more through the State Economic Development Corporations in the PR-held states.Likewise, village development and security committees in the PR-held states were told that they would continue to receive their allowances even after they quit from their positions and would be reabsorbed into new committees under the Ministry of Rural and Regional Development.In essence, the rules for the allocation of funds were being rewritten because of the new political equation. Naturally, the PR coalition was not at all happy with the situation and has made its objections known at every turn.As things stand, however, the federal-state power equation is heavily in the BN’s favour and bringing about change will be an uphill task for the PR.At the root of this relationship is the power imbalance that has been built into the nation’s charter. This is clear from the distribution of legislative powers and responsibilities between the federal and state governments that is listed under the Ninth Schedule of the Federal Constitution.Most of the important functions of a government are vested in the federal authority. They include foreign affairs, defence, internal security, law and order, trade, commerce and industry, physical development such as communication and transport, and human development such as education, health and medicine.By contrast, the state governments are responsible for lands and mines, Muslim affairs and customs, native laws and customs, agriculture and forestry, local government and public services, and sundry services and licensing.A concurrent list covers social welfare, scholarships, town and country planning, drainage and irrigation, housing, culture and sports, and public health.Referring to the restricted role ascribed to state governments under the Federal Constitution, Penang Chief Minister Lim Guan Eng, who is also the DAP secretary-general, told a forum recently, “the state government could shut down tomorrow and very few people would notice”.Indeed, the simmering tension between the BN and PR coalitions over federal-state relations is being reflected in the growing frequency with which the issue has cropped up in the PR’s deliberations in recent months.Among the high-profile disputes is that of Kelantan’s claim on oil royalty that the Pas-held state says the federal government owes it since a 1974 agreement between the state and the national oil company Petronas.The issue has not only lighted up parliamentary debate, it looks increasingly fractious, with scores of grassroots groups joining in to call for Kelantan to be paid what they saw as its dues under the Petroleum Development Act.Umno elder Tengku Razaleigh Hamzah, who was the first chairman of Petronas, has weighed in on the controversy by expressing his readiness to join an opposition-led caucus on the oil royalty issue.BN leaders have held to the line that the oil is drilled outside the state’s boundaries, based on a definition that sets the limit at three miles from the state’s shore rather than the 200 nautical miles zone that defines a country’s exclusive economic zone.While taking this stand, the federal government has nevertheless promised to pay Kelantan what it terms as “wang ehsan” (compassionate aid) from next year for exploration activities off its shores.Opposition leaders say this stand is inconsistent, since Terengganu, Sarawak and Sabah are being paid royalty without such definitions being invoked. The Kelantan government has said that it is prepared to go to court to claim some RM2 billion in oil royalty from the federal government.Another instance of federal-state discord is seen in the federal government’s attempt to take over water assets in 11 states in the country.Under the Water Services Industry Act 2006, the federal government would acquire all water assets, including treatment plants, dams and pipes, and license water players.Consequently, the federal water asset management company Pengurusan Aset Air Bhd (PAAB) was set up to undertake this task. While most states have ironed out a deal, there is however no sign that a settlement may be reached anytime soon in Selangor.Although the Selangor government was given the mandate to restructure the water assets, the talks hit a stalemate when two of the four concessionaires in the state rejected its offer.A recent letter to the press by the Selangor Water Review Panel provides some clues on what has gone wrong. Refuting a claim that the Selangor government was to blame for the delays in the consolidation exercise, the panel said that the federal government had been secretly negotiating a RM320 million interest-free, unsecured loan to Syabas, one of the concessionaires, which explained the company’s lack of interest in the state government’s offer.Another dramatic example is the frequently stormy relationship between the PR-led Penang government and the federal government, which periodically erupts in the news. Federally-funded projects that have had the hiccups since the BN lost control of the state make a long list. A recent reminder was a complaint by a Penang Port senior official that a RM1.1 billion investment in the port was at risk because the federal government had suspended indefinitely a RM355 million channel dredging project.Perhaps the most disruptive of all the tussles between federal and state governments occurred in Perak, where the two coalitions physically fought for control of the state assembly, and at various points involved the palace, police and the courts. The overthrow by the BN coalition of the PR-led state government that was elected in the 12th general election has come to symbolise the struggle for power between the two sides.Going forward, the imbalance in powers between federal and state governments is likely to form the backdrop of a major constitutional and political contest between the two coalitions. Certainly, there will be no lack of action the closer it gets towards the next general election.