URBANISATION AND WATER INDUSTRY GROWTH IN MALAYSIA : ISSUES AND CHALLENGES IN THE NEW MILLENIUM

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1 URBANISATION AND WATER INDUSTRY GROWTH IN MALAYSIA : ISSUES AND CHALLENGES IN THE NEW MILLENIUM ABSTRACT Hashim, N. M. Spatial Study Unit, Faculty Of Development Science Universiti Kebangsaan Malaysia UKM Bangi Selangor, Malaysia In Malaysia, most river basins are in the process of being regulated but there is a need for further regulation to meet long term demand. In order to fulfill future needs the water resources of this country must be managed carefully. The main problem faced by Malaysia is fulfilling the acceptable quality and quantity of water demand at the right time and place. This is due to water pollution problem as well as the scattered distribution of rainfall. The quality and reliability of a source of water vary considerably both in time and space. Under the Federal Constitution of Malaysia, land as well as water matters are the responsibility of the states. Hence, in terms of water supply, the states governments are responsible to develop the resource as well as maintain the good quality of clean water. Under the states legislation, the authorities or organisations responsible for water works are either state Public Works Department (PWD), State Water Supply Department, State Water Supply Board or State Water Supply Corporation or Company. Federal PWD headquarters in Kuala Lumpur is the coordinating and implementing agency for all water supply planning schemes in Malaysia. It is noted that more and more states are favouring the formation of water boards or towards privatisation and some of the states planning towards fully corporatisation of the agency to reduce the public administration budget. In terms of urbanization in Malaysia, the growth is still in progress despite the recent economic downturn. Development on the west coast of Peninsular Malaysia especially the state of Selangor, Negri Sembilan and Johor is espected to increase in the near future with the commencement of hi-tech based industrial operations and other forms of manufacturing activities as well as new urban centers. A substantial increase of water demand is expected and in addition rapid development of landuse activities such as urbanisation and industrialisation have caused a great change on the quality of water resources. Based on the above discussion, it seems that the avaibility of water supply will become insufficient for Malaysia in the near future due to rapid development and population growth. This paper attempts to highlight the latest government efforts in managing water resources as well as clean water supply to fulfill the urban demand. It also focusses on the issues and challenges in managing the resources in line with the principles of sustainable water use in the new millennium. INTRODUCTION Over the years, the Malaysian government through its privatisation policy has accorded high priority to water supply development since water is regarded as a compulsary need for human life. This paper will begin with an overview of urbanisation and urban development in Malaysia in the past two decades. The paper will relate the matter with water supply development and management in particular discussing the privatisation aspect in water supply industries in Malaysia. This paper also focusses on the issues and challenges in strategized sustainable urban water use as well as water supply industry and its management in Malaysia towards the new millennium.

2 URBAN GROWTH AND DEVELOPMENT IN MALAYSIA After Independence in 1957, the post colonial era brought a new dimension of urbanisation and urban growth. The newly found power in 1963 when Malaysia was formed was used to alter the urban system led by the British. Since 1957, a significant amount of natural land cover or forested area in Peninsular Malaysia have been converted to buildup landuse especially for agricultural purposes by the various type of government agencies. Table 1 showed the land development involved in the five years development in Malaysia. Table 1 : Land development achievements by type of programme from 1971 to (in hectar). Programme 2 nd Plan ( ) 3 rd Plan ( ) 4 th Plan ( ) 5 th Plan ( ) 6 th Plan ( ) FELDA FELCRA RISDA STATE PRIVATE TOTAL Source : Modified from Lai, 1991 The urbanisation process has brought the population expansion especially at urban centers due to pulling factors such as job vacancies and others modern and sophisticated facilities served by the urban areas. Foreign and local investment in agricultural, commercial and mining sectors had increased the proportion of built up areas as well as urban population in Malaysia. Table 2 : Urban population growth in Malaysia (by state) State Change in urban population, Natural increase (%) 1991 (in thousand) Johor Kedah Kelantan Melaka Negeri Sembilan Pahang Perak Perlis P.Pinang Selangor 1, Terengganu W.Persekutuan Peninsular Malaysia 3, Source : Modified from Khoo, S.G & Kate, V.K. (1996) Based on Table 2, the overall urban population in Peninsular Malaysia is about 52.3 per cent in However according to Samad Hadi (2000), the total urban population has increased to 58.8 per cent in the year In the year 2000, the state of Selangor, Wilayah Persekutuan and Penang emerged to be the most urbanised states and has achieved the urbanisation level of developed countries, i.e 80 per cent the total population is urban dwellers. The same reason is reffered to the phenomenon where the mentioned states were the leaders in manufacturing industries in Malaysia.

3 GROWTH IN THE MALAYSIAN WATER SUPPLY INDUSTRY In Malaysia, before 1940 s, all the major towns especially in West Coast of Peninsular Malaysia had their own isolated water treatments. After the Second World War, the development of water supply continued and the available water treatment plant were rehabilitated and in addition new water schemes were implemented to meet the increasing demand. By 1950 the country had 100 treatment plants producing about 195 million litres per day (MLD) supplying a population of 1.15 million (JKR, 1995). As the population of Malaysia increased, larger schemes have been undertaken by the government. Based on a study by Chuan, T.S. (1991), there are more than 400 treatment plants producing approximately 5000 MLD serving a population of about 14.3 million people. In terms of water supply coverage, about 98% of the urban population and 75 % of the rural population are served with pipe water supply and the national coverage is 87% (JKR, 1995). The total capital for new schemes of water supply for various states in Malaysia is about RM8 billion under the 7 th Malaysian Plan. The investment indicated the increment in water demand was stimulated by the factor of urbanisation as well as increment in standard of living and urbanisation level. Table 3 showed the estimation of investment that required for water supply project in Peninsular Malaysia. Table 3 : The estimation of investment needed for water supply in Peninsular Malaysia. Period Additional capacity (MLD) Investment per MLD Total investmnet for each period million RM17.3 billion million RM15.0billion million RM55.4 billion Source : Rozali ( 1999) Based on Table 3, the huge investment or capital is needed for water supply development in Malaysia. It also clearly shows the significance of the investment to fulfill future needs. In the early days when the development and operation of water scheme was low, the Federal Government financing these projects using the allocated budget or through international loans or lending agency. When the operation cost and capital involved in water projects increased, the Federal Government suffered from foreign debt and in some circumstances, the foreign debt put pressure on the efficiency and performance of central administration. In order to overcome the financial problem, the Federal has come to the conclusion of privatisation of water supply scheme in The transfer activities has seen as a best solution in terms of reducing the Government international debt as well as avoiding birocracy in water management. However, the water supply capital works is still under the Federal Government eventhough the privatisation has tookplace. The reason is to reduce the impact of water tariff increment if the private sector undertakes the capital wokrs as well as the investment. The transfer of activities and function from government to the privates sector also has increased and expand the water industry business not only in domestic but also in the international level. However, the privatisation of water industry in Malaysia failed to fulfill the public satisfaction and sometime the transparency of the privatisation process was questionable. PRIVATISATION OF WATER SUPPLY UTILITY : ISSUES AND CHALLENGES IN THE NEW MILLENNIUM

4 Before 1983, the authorities that managed the water supply sector was either the State Water Supply Departments (for the state of Selangor, N.Sembilan, Johor, Terengganu and Sabah) or the State Public Works Departments (Kedah, Kelantan, Pahang, Perlis and Sarawak). Through the water privitasion policy, that is from 1983 onwards, the state government had taken initiative to privatize their water department, fully or apart. Some of the state government had corporatized their water department and others privatized the whole water supply services. In the year 2000, it is clearly showed that most of the states in Peninsular Malaysia given way to the privatisation or corporatisation in order to upgrading their management performance as well as for the purpose of water supply s project continuity. However, in reality there are several issues and problems arised regarding the process of privatisation of water supply utilities in Malaysia. Some of the problems are seen as obstacles towards privatisation processes as well as threathening the avalability of water resources. Among the main issues brought to focus in recent years are 1) problems in operationalising the privatisation 2) Increased of river pollution problems and 3) Lacking of water demand management aspect. The privatisation of water supply utilities in Malaysia has given rised to questions from public. The question of transparency in the process is often highlighted by the public. The public or the water users always argue who is behind the private sector ; is there any invisible political hand or political pressure or political interest in dealing with the huge mammoth projects awarded to the private sector? A recent newspaper survey revealed that 67% of the respondents disagreed with the water supply privatisation as solution to the water crisis (water defisit and water mismanagement) in Malaysia, with special reference to the Sungai Selangor Dam) (NST, 1999). Another issue in water privatisation is the sole emphasis on water supply management whilst neglecting the importance of water demand management. For example, the private sector always determines their solution of water crisis by proposing new dams in the uphills. In Malaysia, the environmental NGO s raised an issue on which they agreed about the many options given to the dam operation such as enhancing the unseenable sources i.e. groundwater where the abundance of these source was still under utilised in Malaysia (CAP, 1999). Water pricing is always an issue in water management in Malaysia. According to Ali Hamsa (1999), under pricing of water makes the privatisation financially nonviable or difficult. At the moment, the Federal Government is still committed to subsidized or expends billions of ringgit as well as giving incentives to support the private sector especially in capital works and long term investment. Recently the Selangor government has announced the new rate of water tariff rates which has increased 20 to 75 percent. The justifications used by Selangor government was not relevant at all. The political opposition party has responsed to the matter and brought the discussion up to the highest level in state management. The same question arised regarding the water increment i.e the transparency of the privatisation. Land clearing in the urbanisation process is the main indicator in relating the urbanisation process to the degradation of water resources in Malaysia. Water pollution and river basin incapability to serve as water catchment had interupted the production of clean water in Malaysia. For some reason, treatment plants within the urban corridor often ceased operations due to water pollution. In the survey done by NST (1999), the respondents has pointed out three factors influencing river pollution i.e. i) lack of official enforcement, ii) indiscriminate garbage disposal and iii) excessive land development. In Malaysia, less attention given to water demand management. As far as the water distribution is concerned,

5 the percentage of water wastages (non-revenue water- NRW) is very high and creates an acute problem. The NRW ranged from 20 to 60 per cent in 1995 (Government Of Malaysia in Chan, N.W ; 1998). The NRW actually calculates all wastage of water through leakages, illegal connection and other losses. As stated by the Director-General of the Department of Irrigation and Drainage (DID) Malaysia the key area in privatisation is to have more transparency in the process (Keizrul, 1999). Besides that, the public satisfaction factor must be considered as an important agenda in privatisation. Make in a such a way that water becoming the everybody s business. According to Johari (2000), for privatisation succeed, there should be competetion in the supply of public services. In terms of maintaining the ecosystem health, water resources (water surface and underground) should be managed in the integrated drainage basin perspective with special reference to urban drainage to control urban pollution loads. In order to put this into practise, the use of the available National Water Resources Council will accelarate this target. The ideal holistic and integrated drainage basin management governed by the Council with special focus on water resources management as a main part of the system was the only solution towards sustainable water use as well as conserving resources. CONCLUSION The concept of managing water resources through a holistic integrated drainage basin perspective should be pursued in the new millennium. The governments (Federal and States), the public as well as the private sectors must work together as partners in this business in order to achieve the earlier mentioned objectives. All parties should feel as the stakeholders in the company in which they must have the same concern, the same target eventhough they act in the different roles. BIBLIOGRAPHY Ali Hamsa Working towards sustainable development in Malaysia. Paper presented in Training workshop of economic instruments for sustainable development. Melaka March CAP CAP comments on the Selangor Dam projects. Comments on the detailed environmental impact assessment (EIA) for the proposed dam. Consumers of Penang. Penang. Unpublished report. Chan Institutional issues for water management in Malaysia. Paper presented in Asian conference on water and wastewater management. Organised by Ministry of Health & Med. Edu. Health Affairs, Dept of Env. Occup. Health. 2-4 March Tehran, Iran. Chuan, T.S An overview of water supplies in Malaysia. EAWSN review. Vol 1. June Kuala Lumpur. EPU Corporatisation and privatisation of water utility: The regulatory environment. Paper presented in National water Conference : The water industry in the new millennium : Challenges and opportunities. Organised by Asian Strategy & Leardership Institute (ASLI). Kuala Lumpur. 23&24 March JKR Perancangan jangkapanjang Bekalan air Negara. Jabatan Kerja Raya, Cawangan Bekalan Air, Kuala Lumpur. JKR Malaysia Water Industry Report 95/96. Water supply Branch, JKR. Kuala Lumpur. JICA National Water Resources Study, Malaysia. Sectoral Report. Gov. Of Malaysia. Kuala Lumpur. Johari, A Water supply in the 21 st Century - What s in store? Paper presented in World water day Organised by Deparment of Irrigation and Drainage Malaysia. 22 Mac Lai, F.S Watershed management in Malaysia. Malay Forester 54 :

6 Khoo, S.G & Kate, V.K Pembandaran dan pertumbuhan bandar di Malaysia. Siri Monograf Banci Penduduk. Kuala Lumpur. Jabatan Perangkaan Malaysia. Keizrul, A Everyone lives downstream. The need for sustainable water use and management. Paper presented in World water day Organised by Deparment of Irrigation and Drainage Malaysia. 22 Mac NST Respondents unhappy with state of rivers, realise role. Saturday. June Newspaper- News Straits Times. Rozali, I Growth opportunities in the Malaysian water industry. Paper presented in National water Conference : The water industry in the new millennium : Challenges and opportunities. Organised by Asian Strategy & Leardership Institute (ASLI). Kuala Lumpur. 23&24 March Samad Hadi Malaysian urbanisatiuon and the environment. Sustainable urbanisation in the new millennium. Environmental Managemnet programme. Bangi. 76pp.