Drought Brings Malaysia Water Clash to End

By ABHRAJIT GANGOPADHYAY
Feb. 27, 2014 6:35 a.m. ET
A prolonged dry spell that has left one of the world's wettest
countries thirsting for water has led to a deal resolving a five-year
standoff between Malaysia's wealthiest state, controlled by the
opposition, and the federal government.
Water levels in rivers and reservoirs have reached critical lows in
Selangor, the country's most populous state and the one bordering
Kuala Lumpur, the largest city. That has squeezed supplies to water
treatment plants and forced rationing. At the Sungai Selangor dam,
which provides Kuala Lumpur and the administrative capital
Putrajaya with 60% of their water supplies, levels have dropped to
below 50%.
Selangor state and federal authorities signed a pact late Wednesday
allowing Selangor to take over the state's public water system for
9.65 billion ringgit ($2.95 billion) from four water-concession owners,
giving them more control over rates to users, in return for allowing
the federal government to build a water treatment plant, which state
authorities had previously opposed fearing prices would rise.
Shares of two companies, whose units are among the four water
concessionaires, rose in Thursday's trade. Gamuda Bhd. rose 2.9%
higher to end at 4.56 ringgit and Puncak Niaga Holdings 6807.KU -
0.34% closed 5.7% up at 3.55 ringgit, outstripping the 0.5% gain of
FTSE Bursa Malaysia KLCI index.
The pact settles a dispute that flared ahead of elections last year
when Selangor's leadership accused the National Front coalition
that has governed Malaysia since 1957 of engineering an artificial
water shortage through the Front-linked Puncak water supplier in an
bid to make the opposition appear incompetent. Selangor officials
threatened to take over the water companies' operations, which the
federal government rejected.
"The recent drought and water rationing in Selangor, Kuala Lumpur
and Putrajaya was a key catalyst'' for the deal, said Chong Lee Len,
analyst at Kuala Lumpur-based Affin Investment Bank.
The drought has also hit neighboring Singapore, where the National
Environment Agency reported a record-long 27-day dry spell
between Jan. 13 and Feb. 8.
To meet the water needs of a growing population, Singapore has
invested heavily in building reservoirs and adopting technology that
will help it become self-sufficient. It currently meets 30% of its water
requirements by recycling wastewater and another 25% from
desalination.
The water shortage in Malaysia's southernmost province, Johor,
could potentially aggravate Singapore's problem, since the island
nation buys some water from that state under a treaty set to last
until 2061. Water rationing began in parts of Johor last week, with
water-pumping subjected to cuts for 36 hours at a time. Water
tankers are bringing supplies to residents during the dry periods.
Residents in Malaysia say they are adjusting to limited supplies for
now.
"So far I have not felt the pain, but who knows what will happen next
week," said Geoffer Low, a real estate consultant in Selangor.
Water supply disruptions are common during annual dry spells,
which typically occur between January and March. But some
experts blame engineering shortcomings for this year's problem
rather than the weather.
"It is directly related to planning and infrastructure development,"
said Piarapakarn Subramaniam, president of the nonprofit
Association of Water and Energy Research.
Shortages like the current one could have had less of an impact if
the amount of water lost is reduced when supplies are pumped from
treatment plants into homes were improved.
According to the latest official data, Malaysia has 473 water
treatment plants with a total processing capacity of nearly 18 billion
liters a day. In 2012, average water consumption per capita reached
212 liters a day in this country of 29 million, data from the National
Water Services Commission show.
That tops the 165 liter per capita a day usage recommended by the
World Health Organization.
Mr. Piarapakarn said bringing daily water usage down to 180 liters
per capita could result in an additional treated water capacity of 1
billion liters, enough to ensure sufficient supplies during dry spells.
The government could upgrade existing dams and reservoirs to
boost catchment facilities, he said, but consumers should also learn
to use water more prudently.