This paper intends to discuss the restructuring and reform of water asset in Malaysia by examining the impact of water supply services on non-revenue water (NRW) after restructuring the water asset. These issues are related to the performance of water supply management in Malaysia. This paper has two objectives. The first objective is to determine the percentage of non-revenue water available in the total water supply after the restructuring of the water industry in order to observe whether the restructure has improved the delivery of water supply or not. The second objective is to analyse the market model of the water industry. Previously, the industry was operated by state governments, but now, overall of the operation starting from the generation, transmission, until the water supply distribution is regulated by the federal government through the National Services Water Commission (SPAN). However, even after privatisation has been implemented in nearly all states, the monopoly power still exists in the market but now regulated by rules and regulations set by SPAN. In order to ensure the success of the water industry restructuring, a new agency was formed by a National Service Water Commission (SPAN), and a new ministry, Ministry of Energy, Green Technology and Water (KETTHA).
Keywords: restructuring, non-revenue water, monopoly
The water services industry in Malaysia has undergone reforms since the colonial era. People choose to live near river for the purpose of easy get the water supply. At that moment, all living activities based on agriculture and dependence on the river is very higher. Therefore, there is a lot of drainage for the development of the local economy (Zakaria, 2013). The river was not only used for drinking and washing, but was also used for the purpose of transporting agricultural products from one place to another.
The next reform of water assets transpired when the colonialists came to Malaya. In the beginning, the local people’s desire to serve to the British officers by providing them clean water; this has then grown into some method that was implemented as guidance on how to supply water in the country until today. The method describe how the water storage system works and normally the storage is located higher position (usually on hills and in forests) as well as how the water distribution system flows. On that time, bricks were used as a drain, and now the system has been changed by using the iron pipes or polythene in order to deliver water to the end users. Afterwards, the reform of water assets in the country continued to grow in line with the ‘developing country’ status. Malaysia has gone through the process of improving its water services by introducing the The Malaysian Water Services Industry Act of 2006 and the Malaysian National Water Services Commission Act of 2006 (SPAN Act) (Mustafa, Begham, & Wan Sobri, 2008).
There are a few elements to be considered in the water services industry in order to be able to measure the success rate of its performance. One of the key elements is non-revenue water (NRW) (Farley & Liemberger, 2005) and another is the service coverage for the population (Alegre & Association, 2006). This paper will identify the applicable of market structures, with the aim to provide a much clearer view on how the process will change the market structure.
The restructuring and reforms of the water industry has attracted the passion of society, especially for academicians, who have given their opinion and suggestion. The NRW analysis is based on secondary data which is sources from the National Services Water Commission (SPAN) (SPAN, 2015) and (HUA, 2012a). The data was picked from 2005 until 2014 and were analyzed to identify the success rate of the restructuring of Malaysia’s water asset management. Also we looked on the percentages of NRW on 9th and 10th Malaysia Plan. NRW also as one of the factor to examine the government leadership on the water loss management in the society as well (England, 2009), and (Mohamad et al., 2008). Actually, the existence of the market model is not necessary to differ from previous model. By referring to the electricity market structure (Nagayama, 2009), we are looking on similarity on the model. The price and less of quality will happen (Economides, 1999) and it will make the market model to be imperfectly (Williamson, 1971).
2. Restructured Water Industry
A water service in Malaysia has developed promptly although in some rural areas still do not receive good services. The deficiency of water supply, especially in Selangor and Kuala Lumpur, expected to be solved very soon. Policy makers in Malaysia through the Ministry of Energy, Green Technology, and Water (KETTHA) have formulated a policy on how to restructure the water industry using the concept of privatization, which is intentional to improve the quality of consumers’ or customers’ services. Hence, restructuring of the Water Supply Department (JBA) across the country will be transformed into a private organization, or privatized the industries. This change has been a realization on 2 April 2007 by the National Water Services Commission (SPAN).
The Malaysian Government has already taken the effort to improve the quality of service in the Malaysian water industry by establishing the Ministry of Energy, Green Technology, and Water (KETTHA), which has developed the privatization policy. The functions and objectives of the Ministry are as the following:
· Drafting the policy direction and overall strategy for water services industry including water supply and sewerage;
· Establishing and reviewing the regulatory framework to ensure the water industry can be enforced by the regulatory body;
· Encouraging water conservation through efficient use of water;
· Planning, assessing and monitoring the infrastructure of development projects; and
· Managing cum being the National Water Resources Council Secretariat and other high-level committees on water services that have been established by the Malaysian Federal Government.
· To realize the water supply and sewerage services industries are conducted in a transparent and integrated by providing the effective and efficient services to consumers;
· To check the availability and sustainability of water supply, including water conservation;
· To contribute to the sustainability of water drainage and watersheds;
· To increase the level of competitiveness in the water supply and sewerage services industry to ensure economic growth;
· To create sustainable regulatory mechanisms that will assist the operators of the water supply and sewerage services industry in managing financial crisis;
· To regulate the water industry with the aim to benefit consumers in the long term;
· To regulate tariffs and ensure the provision of affordable services on an equitable basis;
· To improve the quality of life and environment through effective and efficient management of water supply and sewerage services;
· To establish a system of accountability and effective governance of operators in the water supply and sewerage services industry; and
· To regulate the security system in ensuring water supply and sewerage.
Consequently, water services throughout Malaysia been actively privatized in order to improve its management. All of the private water companies are fully supervised by the Water Asset Management Company or Pengurusan Aset Air Berhad (PAAB), which has taken over all the infrastructure and assets of the JBA. SPAN was concerned will regulate the water industry throughout the country including the issuance of licenses and permits for involved water companies. The privatization or reforms in this industry is expected to reduce complaints from consumers, who had previously questioning about the flowing slow of water supply system, as well as to improve the quality of water supplied to consumers (Munisamy, 2009). Beside that, the privatization in this industry can help to reduce the burden for every state not only in maintaining operating costs but also in maintaining old pipes or other assets.
3. Non-revenue Water (NRW) in Malaysia
Non-revenue water (NRW) can be determined as losses in water supply distribution network (Farley, 2003) or the difference between supplied water from generator and metered quantity to the consumers. For example, consumers should consume the same amount of water that has been produced by a dam or a water treatment plant like a generator. But, there are few amounts of meter cubic water losses during the transaction process. The numbers vary for each regulator and each country. Some places are well managed, and some still recorded a huge amount of water loss. In other words, NRW is a failure to the water services industry. According to SPAN during “Asia Water Conference 2012: An International Conference on Water and Wastewater”, there are 2 causes of NRW, which is physical losses, and commercial losses. Physical losses can be determine as a leakage from all parts of the system, and overflows at the utility’s storage tanks such as treatment plant. This is because of poor on operations and maintenance, the poor of active leakage control, and low quality of underground assets such as piping systems. A commercial loss was caused by unregistered meter, data-handling errors, and theft of water in various forms (HUA, 2012).
Malaysia has faced the same issues since the water industry existed. The NRW has been recorded from time to time with different amounts of meter cubic and percentages. Another issue that has also been confirmed in a report released by the World Bank identified the percentage of NRW in developing countries, including Malaysia, is high (Kingdom, Liemberger, & Marin, 2006). However, such problems can be improved by good governance through the SPAN (Mustafa, Begham, & WMA, 2008). We shall expect Malaysia’s water industry to have a glimmer of hope in ensuring sustainability for the future.
Malaysia has allocated a lot budget in 9th and 10th Malaysia Plan, to reduce the NRW since 2006 where by SPAN was established (Weng, Jahi, Hui, & Talib, 2014). But unfortunately, it is not happen, either in a short term or long term, except Melaka, Negeri Sembilan, and Johor. To analyze the level of the percentage on NRW in Malaysia, the resulting value is divided into two sections according to the 9th Malaysia Plan (2006 to 2010) and the 10th Malaysia Plan (2011 to 2015). The data only shows until 2014. Below are the tables of Malaysia’s NRW from 2005 to 2014.