Wednesday, February 18, 2009

Don't Rape the Country Twice!

I've blogged on "We Want Our Water Back Too!" two weeks ago. The Selangor state government has since issued offer letters to the concessionaires to take back the water concessions.

The four Selangor members of parliament [Charles Santiago (Klang), William Leong (Selayang), Dzulkifli Ahmad (Kuala Selangor) and myself] who are involved in the Water Review Panel issued the following press statement today. Additional comments are available at The Malaysian Insider, Malaysiakini and The Star.

Call Upon the Minister of Energy, Water & Communications to support and endorse the Selangor Government's Offer to Acquire the water assets and concession in the state

The water privatisation exercises in Selangor was started in the early 2000s by the Mahathir administration, where hugely lucrative concessions were granted to politically-linked private companies with neither the skills or experience in the water industry, nor the necessary equity funds to operate these businesses. As a result, the residents of Selangor and Kuala Lumpur were forced to pay high prices for the water supply, unreasonable penalties as well as often poor service quality.

In view of the clear unsustainability and failure of the privatisation exercise, where some of these concessionaires are facing serious concerns in repaying its bonds and water tariffs are scheduled to increase beyond tolerable range, the Federal Government has embarked on an exercise to nationalise the water-related assets nationwide under the new Water Industry Services Act (WISA) enacted in 2006.

The people has suffered once already when the assets were forcibly piratised by the Government. We will like to call upon the Minister not to rape the country twice by buying back these water assets and concessions at inflated prices. Doing so will only provide the basis to the dictum that the Barisan Nasional government privatises profits and nationalises losses.

The Selangor members of parliament who sits in the Selangor Water Review Panel call upon the Minister, who is granted wide-ranging powers under WISA, to not only support, but help execute Selangor's fair and reasonable offer to acquire the water assets and concessions in the state. The offers to the concessionaires were made last week on Friday, 13th February.

The offer made by the Selangor Government was made on the basis of one-time book value of the water-related assets in the concessionaires as at 31st December 2007, and a fair and reasonable return to the actual equity invested by the concessionaires since the industry was first privatised. It should be noted that the offer made by the Selangor state government is guided by and in compliance with the terms and conditions willing signed by all parties in the concession agreement. Therefore contrary to press reports in the last few days, the acquisition offer is neither a cynical offer which is too low, or without basis.

It should be noted that all investment analysts have been using the “discounted cashflow model” which results in significantly higher valuation for these concessions. However, the “discounted cashflow model” is just a technical term for paying the concessionaires its future profits, which in itself is a totally unreasonable proposition, and defeats the purpose of the Governments' water restructuring exercise.

If we were to acquire McDonald's today, it will be fair to put a value to its future profits as it's a wholly private enterprise. However, we are acquiring government concessions in this case – which means that the Government should not be paying for future profits for licenses and rights which it has itself granted!

The Minister is granted wide-ranging powers under the WISA (2006) Clause 191(5) where:
The determination of what amounts to national interest issues arising from the coming into operation of this Act shall be made by the Minister and such determination shall be final and binding upon all persons and shall not be challenged, appealed against, reviewed, quashed or questioned in any court.
Therefore with the powers vested in the Minister, Dato' Shaziman Abu Mansor, a newly minted Minister since the last elections, we call upon the Minister to do the right thing and act to ensure that the rights and welfare of Selangor people and that of all Malaysians.
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