Tuesday, September 25, 2007

post by Susanne Chi

Response to Talkings points for Yang Berhormat Metery KTAK for the senior EditorsMeeting on 2d May 2006

1. Sovereignty Over Water Supply

Minister’s Statement:

CAWP alleged that if a service like water supply is provided on a commercial and profit basis it will be subjected to take over by foreign corporations which will have the same rights as local companies. Government not aware of how the World Trade Organisation (WTO) General Agreement on Trade and Services (GATS) to which Malaysia is a signatory will impact the industry if the Bill is passed.

KTAK has consulted Ministry of International Trade and Industry (MITI), which has confirmed that Malaysia will not make a liberalisation commitment in the WTO regarding water supply or water services. Thus the water industry will not be subjected to take over by foreign corporations despite there would be pressure for Malaysia to do so.

However, according to MITI the Government is firm that Malaysia would not liberalise the water industry as it is considered a basic utility and should not be opened for international market forces to determine.

MTUC/CAWP’s Response:

a) We welcome the Malaysian government’s commitment not to liberalise the water sector. However, we believe that this intention to be more meaningful should be made into law. In the real politics of WTO negotiations, trading off the competitive advantage of one country for another is a key feature. Only a legally binding provision can protect the countries sovereignty and natural resources.

b) Developing countries such as Malaysia, very often come under pressure to open up their service sectors, as a ‘trade-off’ for developed countries’ concession in other areas such as agriculture and better market access for industrial goods.

c) Given that Malaysia’s main exports are agriculture (Agreement on Agriculture) and manufacturing products (Non Agricultural Market Access), this ‘trade-off’ can be an extremely powerful tool for industrialised countries to extract offers in the sectors of their choice.

d) By committing a services sector to liberalisation a WTO Members (such as Malaysia) is legally bound by GATS to provide national treatment and market access to all foreign service suppliers of other Members in that sector. For example, Malaysia has made some commitments in opening its private hospital services. It therefore cannot restrict, for instance, any foreign based medical laboratories from providing electronic diagnostic tests to customers in Malaysia.

e) Furthermore, once a GATS commitment is made, it cannot be withdrawn or modified, unless compensation is given to all Members affected. Therefore, it is important to realise that by making a commitment, a government is effectively “locked” into its schedule, which limits its future policy options. The GATS is essentially about progressive liberalisation.

f) The European Commission has made bilateral and plurilateral requests on environmental services including drinking water and sewerage.

g) The European Commission (EC) in its bilateral requests and offer process to Malaysia is entitled: ‘GATS 2000, Request from The EC and its member states to Malaysia

Water for Human Use and Wastewater management, which includes “Water collection, purification and distribution services through mains. The Mode used is Mode 3, which demands Malaysia to take commitments under Market Access and National Treatment.

At the plurilateral level the EU has requested for sewerage services for liberalisation

MTUC/CAWP’s Recommendation

MTUC/CAWP reiterates that the only manner to ensure that water resources and management remains in the hands of the nation is define the word “person” in the Water Services Industry Bill (WSI) 2006 as “state party” and “fully owned state corporation”

2. Absence of Consumer Protection Clauses

Minister’s Statement

It is not true that there is an absence of consumer protection clauses in the bill. In fact the ten national policy objectives for the water supply services and sewerage services industry as outlined in the explanatory statement of the Bills clearly encapsulates the intention of the bill. More specifically 7 out of 10 objectives stated in the explanatory statements are on consumer protection i.e. 2(a), (b), (d), (f), (g), (h) and (j).

In addition, there are many clauses that are drafted to promote consumers’ interest covering the following areas. Explanations of the Clauses are in Appendix 1

MTUC/CAWP’s Response:

a) We had argued with the Minister that in making judgments, learned judges would refer to the clauses in the Act rather than the explanatory statement. MTUC/CAWP had requested that the Ministry make the explanatory note, the preamble of the WSI Bill, thereby giving it the effective legal power to ensure the intent of the Bill were achieved should disputes arise.

b) As reflected by the Minister’s answer above, there is no specific clause which guarantees consumers their rights or the highest consumer standards. In fact, consumers are not even guaranteed their right to redress or compensation in these bills.

c) Below we provide the Clauses, which relate to consumer protection to demonstrate how weakly they are worded, rendering them totally ineffective.

WSI Section 33

A service licensee providing water supply services or sewerage services has a general duty to -

(a) deal reasonably with consumers; and

(b) adequately address consumer complaints

This is a very general and fuzzy requirement on the part of the service licensee to consumers.

WSI Section 41

(1) The water distribution licensee shall, when supplying water to any premises, ensure that at the time of supply the quality of water supplied complies with the minimum quality standards as prescribed by the Minister.

Water Quality – minimum quality standards as prescribed by the Minister. This statement does not ensure that water quality in Malaysia is of the highest standards.

WSI Section 88 and 89

Section 88 (1) Any sum of money in respect of –

(a) water supplied or services rendered in connection with such supply; or

(b) the provision of sewerage services,

shall be payable, within thirty days from the date of presentation of the bill, to the service licensee and if such sum is not so paid, the sum shall be recoverable by the service licensee through civil action in court.

Section 89 (1) Subject to subsection (2), a water distribution licensee may –

(a) disconnect the supply of water to a consumer by severing the service water pipe or cut off the water supply including the right to reduce the supply of water or pressure of the water supply; and

(b) take such other means as it deems fit and proper.

Provides for automatic disconnection of water supply after 30 days. The Bill does not make it mandatory for the water operators to resolve the matter with the consumer such as sending notices, rescheduling payment, providing for flexible payments, etc.

WSI Section 68

“The Commissioners may develop consumer standards on its own initiative or upon recommendation from the Water Forum…”

There is no guarantee that the highest consumer standards will be developed.

WSI Section 69

(1) The Commission shall designate a body to be know as the “Water Forum” for the purposes of this Act by notifying the body in writing, if the Commission is satisfied that –

(a) the membership of the body is open to all persons;

(b) the body is capable of performing as required under the relevant provisions of this Act; and

(c) the body has a written constitution.

The Water Forum is open to any “relevant persons”. This creates barriers to civil society is setting best practices and highest standards as they will be confronted by the industry players even at the conceptual stage. Water Forum will be weighted in favour of industry.

SPAN Section 15

There is also no explicit statement that among the functions of the Commissioners is to protect the consumer interest.

3. Minister’s Power

Minister’s Statement

There is no absolute power accorded to the Minister because most of the decisions to be made are either based on Cabinet decision or SPANs recommendation. However under circumstances for the purpose of national interest, prompt decision has to be made. The Minister shall exercise its authority as the Minister in charge of the water services. For the appointment of the Chairman of SPAN, administratively it is still bound to the Prime Minister’s decision. List of powers accorded to the Minister are listed in Appendix 2.

MTUC/CAWP’s Response:

a) The Minister is the final decision maker in all matters in this legislation;

b) Section 5(1) states that the Minister is to appoint Commissioners. However, the criteria stated (Section 5(1) (c) … have experience and shown capacity and professionalism in matters relating to finance, engineering, business or administration, or to be otherwise suitable for appointment because of their special knowledge and experience. These favours ex – civil servants and industry actors and may discriminate against civil society, especially environmentalists and consumer advocates.

c) Section 11(1) Minister may at any time revokes the appointment of any member of the Commission without assigning any reason for the revocation

d) Section 18(1) The Commission shall be responsible to the Minister

There is no language as “the Minister shall give due regards to the recommendation of the Commissioners.” Instead the various clause which the refer to the Minister’s decision making ability as “may upon the recommendation of the Commission”

The issue of collective responsibility of the Cabinet and referring to the Prime Minister do not apply, as it is matters relating to Executive powers. In relation to powers granted to the Minister through this legislation, this is the first Bill, which provides far-reaching powers to the Minister with no bounds, safe the powers of the Executive.

4. Lack of an effort to benchmark water quality (CAWP)

Minister’s Statement

Clause 41 on water quality require that the water distribution licensee shall, when supplying water to any premise, ensure that at the time of supply, the quality of water supplied complies with the minimum standards as prescribed by the Minister. Currently the standard is based on standard set by the Ministry of Health guidelines on water quality (World Health Organisation minimum standard). Failure to comply commits an offence under the Act.

Commission may, under Clause 68, on its own initiative or upon the recommendation of the Water Forum, prepare or caused to be prepared consumer standards and this may include benchmarking on water quality.

Under Clause 175, the Commission is required to monitor all significant matters relating to water supply and sewerage services industry and report to the Minister at the end of each financial year of the Commission. This shall include the services and performance standards of licensees. The Commission shall publish the report in a manner deems appropriate as soon as practicable following the date on which the Commission conveys the report.

MTUC/CAWP’s Response:

a) Clause 41 gives the power to the Minister to decide on the minimum water quality standard. This can erode existing high water quality standards in Malaysia.

b) The technology used by water treatment operators is of the lowest level treating water only for bacteria and sediments. The current technology (except for Seremban) does not address the toxic waste in Malaysian rivers. There is no incentive or rewards to force the water operators to increase the water quality.

c) The Minister does not have any power to regulate issues relating water catchments and upstream of water intakes.

5. Infringement on Fundamental Human Rights to Affordable Access of Water (Query raised by the DAP)

Minister’s Statement

The objective of restructuring the water industry by the government is to ensure affordable and accessibility of water to all citizens. There will be no more privatisation, as the water operators would be given license to operate. The government has also instructed that all state government are to corporatise their state water authorities. This is to ensure that the water operators are run efficiently even if they are government owned corporations.

Water is an essential necessity thus the government will ensure the public will have access to continuous supply of clean, treated water.

MTUC/CAWP’s Response

a) The MTUC/CAWP has requested that the phrase “…that water is an entitlement” be inserted into the Bills. The Minister agreed but unfortunately did not deliver on his pledge.

b) The MTUC/CAWP had asked that the word “person” be defined as state parties and state owned corporations be inserted into the interpretation section. This will ensure that water will be managed by the state and/or its agencies.

6. Allowing Market Forces to Decide on Water Supply Unethical and Immoral (Query raised by the DAP)

Minister’s Statement

The water services industry is a strictly regulated service and unlike other services there is no intention of liberalising it by allowing the market forces to decide on water supply to the public. In the new industry structure every service provider in the industry would be licensed.

MTUC/CAWP’s Response

Section 191 provides a list of 15 private companies managing the water supply in Peninsular Malaysia. The government has already liberalised the market as these private companies operate in response to market forces. Water companies such as Puncak Niaga, and Ranhill are listed in the stock market and have to meet financial projections, especially tariff increase for increase in stock value.

7. Failure to Address Environmental Concerns by Protecting Water Sources. (Query raised by the DAP)

Minister’s Statement

This is not true as under Clause 55 of the Water Services Industry Bill if the licensee is of the opinion that the supply of water is unsafe for the purpose of normal supply to the public or poses a health risk to the public the water distribution licensee shall immediately temporarily cease the supply of water to any premises.

MTUC/CAWP Response

a) Clause 55 allows for the water operators to shut down the treatment plant without compensating the water users or providing the water users with alternative water supply. This will further cause hardship to water users as they will have to source for water.

b) The Minister does not have any power to regulate issues relating water catchments and upstream of water intakes.

c) Furthermore, the Water Bills do not promote water demand management but continuous to promote meeting water supply needs.

8. Lack of consultation with the Rakyat on Impact of Bills (DAP)

Minister’s Statement

This is not true of the Water Services Industry Bill and the Suruhanjaya Perkhidmatan Air Negara Bill is the first 2 bills that the government has declassified to enable the Ministry to have public consultations with all stakeholders and the public at large. Altogether there been public consultations made before and after the drafting of the 2 Bills. Details of the consultations are as detailed below.


No. of Consultations

Consultation before and during drafting of Bills


Consultation after approval of Cabinet


MTUC/CAWP Response

We welcomed the Minister’s mature decision to declassify the Bills. This provides the Ministry with the opportunity to tap into the expertise of the private sector and civil society to scrutinise the Bills thereby further enhancing them. However, after various parties submitted 350 recommendations, only 3 minor changes were made. This is most disappointing especially when both the private sector and civil society acknowledges that the Bills are seriously flawed.

9. No guarantee of Efficiency, cost and Quality of Water (Query raised by the DAP)

Minister’s Statement

The Bill does not make any provision for privatisation of supply of water. However, with the existence of the national water regulator, this would enable the government to ensure that the water operators would perform efficiently supplying water at the cost that is affordable and according to the quality determined.

MTUC/CAWP’s Response

a) The Bills allow for the licensing of private companies to manage water services in the country. If it is true that that the Bill does not make any provision for privatisation, why isn’t it unambiguously stated in the Bill.

b) Clause 175 is about the “Reporting to Minister on industry performance.” MTUC/CAWP calls that full disclosure of all information related to industry be made mandatory for public scrutiny. As the provision of water is a natural monopoly, only through full transparency can benchmarked competition be effective. Furthermore, the Water User Forum shall have full oversight over these industry data.

10. Apparent advantages that will be given to water industry players to dominate the water forum and Commission (Query raised by the DAP)

Minister’s Statement

This is not true as the Commission may decide that an existing body that was previously designated as the Water Forum is no longer an appropriate body for the purpose of the Act if it is not satisfied that the body no longer meets the requirements set out in Clause 69(10) (b) i.e. the body is incapable of performing the functions imposed on it as a Water Forum.

MTUC/CAWP’s Response

The MTUC/CAWP wants the Bills (Clause 69) to make it explicit that the Water Forum is restricted only to water users and civil society. Examples of these groupings are consumer groups, residents associations, environmental groups, human rights groups, farmers’ organisations, associations representing small and medium scale enterprise, etc. No water industry player is allowed in the forum.

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