Kuala lumpur: Malaysia’s water sector still requires alternative funding schemes involving the private sector to reduce the federal government’s financial burden despite the ongoing review of water tariffs in selected states.
According to BERNAMA News Agency, CIMB Securities Sdn Bhd stated that this move is crucial to support the country’s water demand, which is growing at an average rate of two per cent to six per cent per annum.
CIMB Securities highlighted the urgent need to upgrade and rehabilitate aged water assets, including 98 out of the existing 350 water treatment plants (WTP) operating above their capacities and another 120 WTPs facing operational issues. The latest revision in water tariffs provides room for water operators to upgrade infrastructure, accelerate the replacement of ageing pipes, and reduce non-revenue water (NRW).
The research house noted the importance of these adjustments in enhancing water service quality under Malaysia’s Water Sector Transformation Plan 2040 (AIR 2040). The tariff adjustments also helped mitigate a sharp rise in electricity costs and other water-related operating expenses for water treatment plant operators.
The federal government has already provided RM17.7 billion in funding assistance as part of the water industry restructuring between the 10 states and Putrajaya. The federal-backed Pengurusan Aset Air Bhd (PAAB), a Minister of Finance Inc’s wholly owned company, remains the main funding conduit for Malaysia’s water infrastructure projects.
However, CIMB emphasized that PAAB has only replaced eight per cent of the 35,061 kilometres of pipes under its ownership at a cost of RM2.1 billion since the initiative started in 2010. PAAB controls about 26 per cent of water pipelines in the country, totaling 138,587 km, and 31 per cent of water infrastructure across Malaysia (excluding East Malaysia).
To map out a holistic NRW programme, PAAB needs significant investments to meet the target of reducing the average NRW level in Peninsular Malaysia and Labuan to 28 per cent by 2030, down from 37.1 per cent in 2023. For exposure to water-related plays, CIMB Securities reiterated that licensed water operators under Suruhanjaya Perkhidmatan Air Negara would be the immediate beneficiaries of the water tariff revisions.
Ranhill Utilities Bhd and PBA Holdings Bhd, which owns Perbadanan Bekalan Air Pulau Pinang, are the only licensed water operators in the country listed on Bursa Malaysia. Pending further updates on the private sector’s role in Malaysia’s water sector transformation, CIMB maintains Gamuda as its preferred entity for water-related infrastructure construction.
CIMB Securities indicated that Gamuda is positioned to secure construction work worth RM4 billion from the Ulu Padas and Northern Perak water supply schemes. Works for the latter scheme will be conducted on a privatisation basis for a minimum period of 40 years. For bulk water transfer, Engtex Group is one of only two domestic producers of large-diameter mild steel concrete-lined pipes, while Gamuda, IJM Corp, and MRCB are strong in environmental-related projects for flood mitigation.