Whither the Malaysia-Singapore water dispute?

The tit-for-tat advertising blitz in Malaysian newspapers laying out the facts of our water talks with Singapore shows no sign of abating. With the publication of eight ads followed by the sale of a booklet, one would say enough is enough. However, Singapore responded with yet another ad in Asian Wall Street Journal on July 25, and this was quickly followed by Malaysia three days later with more ads in the newspapers. With this advertising war going on, one wonders whether the water dispute can ever be settled.

Be it as it may, it is time for all Malaysians to ponder rationally the facts and figures presented.

Trained as an engineer, I have the disadvantage of being critical of what is laid in front of me. Having gone through all the ads and content of the booklet published by Malaysia, I am afraid to state that some facts and figures are questionable.

Total profit Singapore generated from Malaysian raw water in 2001 alone (Sunday 13 July): RM662.5 million
(includes water conservation tax of 30 percent)

No explanations were given in the ad to justify this sum. However, a couple of days after the ad, a member of NEAC explained that RM662.5 million was derived from figures released by Singapore PUB.

According to the report in the press, the profit figure was based on 79,775 million gallons of raw water supplied by Johor, which contributed 71.77% of Singapore's total water consumption of 111.147 million gallons. Also, the total profit from sale of water in Singapore in 2001 was RM923.2 mil, which was inclusive of a 30% conservation tax. Therefore, according to NEAC's clarification, the profit derived from 79,775 million of raw water from Johor was 71.77% of RM923.2 mil = RM662.5 mil.

Let's assume that the figures of 79,775 million gallons of raw water, 111.147 million gallons of total water consumption and the total profit of RM923.2 million are correct. But, using the percentage of 71.77 to calculate the profit from the raw water supplied from Johor is simply not correct.

Firstly, the raw water has to be processed in a treatment plant, and the treated water stored in reservoirs and then distributed through pipelines before reaching the consumers. In the process a certain amount will be lost through leakage, etc. This amount of loss is termed as Non-Revenue Water (NRW). In Singapore the % of NRW is about 10% - 15 %.

Secondly, an amount, estimated at about 15% of the processed Malaysian raw water was sold to Johor @ 50 sen per 1,000 gallons and this quantity of treated water could not be subject to a conservation tax of 30%.

Simply state, from a gallon of raw water supplied by Johor, Singapore cannot produce a gallon of treated water for its own consumption, much less if 15% of it had to be sold to Johor.

Therefore, the figure of RM662.5 million has not been correctly derived. But this figure has been used many times in other ads and in the booklet and also to derive others figures.

"Malaysia Gets Nothing" (13, July) &
"Singapore's processed water subsidy to Malaysia last year" (14, July)

The above two statements are contradictory. If Malaysia gets nothing then there should be zero subsidy to Malaysia. I have contended that the statement "Malaysia Gets Nothing" can only be true if Johor does not sell a drop to Singapore but let the water flow into the sea.

Review of Water Price (16, July)

It is not wrong to say that the price review can be carried out after the expiry of 25 years of 1961 and 1962 agreements, i.e. after 1986 and 1987. But, surely Malaysia must have been fully aware that selling raw water at 3 sen per 1,000 gallons was dirt-cheap even before 86/87. Why did Malaysia choose to defer the review to year 2002, a delay of about 15 years? How much revenue was lost all these years?

Besides the 1961 and 1962 Water Agreements, there is another, i.e. the 1990 Agreement, which is supplemental to the 1962 Agreement and based on the MOU between Johor and Singapore signed on 28th June 1988. Amongst others, this 1990 Agreement reaffirms Singapore's right to draw water from Johor River "subject to the terms, previsions, conditions and stipulations" of the 1962 Agreement.

It is important to note that the MOU was drawn up during the period when the 61 and 62 water Agreements were due for review. Surely the subject of water pricing must have been brought up during the discussions, which led to the signing of the MOU in 1988. Can those officers who were involved in the 1988 MOU and in the 1990 Agreement explain this serious and expensive omission?

Johor will buy no more treated water from Singapore.

(Page 13 of booklet & news reports in New Sunday Times 27, July)

According to published reports, Johor will not buy treated water from Singapore after the completion, later this year, of its Semanggar water treatment plant of 160 mld or 35 mgd capacity. The estimated cost of this Zero Dependence Project is more than RM600 million. According to Johor Menteri Besar, Johor would save RM6 million annually if it stopped buying Singapore's treated water at 50 sen per 1,000 gallons.

To analyse the total cost of producing treated water from this plant, let's assume that the project is being wholly financed by a commercial bank with a term loan facility of RM600 million, payable in 25 years and at 7.2% interest per annum. The total annual loan repayment (capital + interest) will be more than RM46 million. With this, the capital cost to produce 1,000 gallons of treated water would amount to RM3.60 for the first 25 years. Add to this is the production cost (labour, chemical, power etc), which is RM2.40 per 1,000 gallons, the figure used in the ads, and the total cost will amount to RM6.00 per 1,000 gallons or RM76.65 million per year.

If one compares this to about RM6.00 million which Johor is currently paying for the same quantity of treated water it obtains from Singapore, can one says that Singapore's subsidy to Malaysia is another RM70.00 million, an additional amount which Johor has to bear to produce 35mgd of treated water on its own?

In conclusion, all the ads and publications by both countries are superfluous and sheer waste taxpayers' money. At best, they raise more questions then provide answers.

Cut the rhetoric and go for arbitration, PERIOD!

Note: This article has been sent to Malaysiakini for publication.

Related articles:
The Water Agreements
Arbitration the only way to resolve water dispute
Water dispute - The pot is now calling the kettle black

nakedeyeview.com.my 2007