I write in response to Coalition Against Water Privatisation (CAWP) representative Charles Santiago's letter titled Water privatisation clearly against the flow .

Firstly, I am totally against the threat of legal action against non-governmental organisations or consumer action groups. Therefore, I am not in support of Syabas's threat against CAWP and the Malaysian Trade Union Congress (MTUC).

However, conversely, if certain mis-truths have been said and the public has been misled, then it is only fair for the offending party to set things right and offer an apology. For example, Santiago's previous statement "... it would have been impossible for Syabas to have reduced non-revenue water (NRW)" and his subsequent admission that "While Eric's point is true that there are many ways of reducing NRW..". Perhaps an apology to Syabas is in order?

Let me share my views and address the three major points that Santiago has raised:

1) Water tariff should be increased in order to promote prudent use of water.

As indicated by Santiago and myself: "There is a water shortage projected to occur in 2007 and 2008 in Selangor". If ever there was a time to increase water tariffs, it would be now and the quantum should be a lot bigger than the proposed 15%. I am sure if we use 60% less water per capita (300 litres per day) and adhere to the recommended 200 LPD, this pending water shortage can be alleviated and postponed for at least 5-6 years.

Having said that, do remember that water rates in Malaysia are still one of the cheapest around. And I reiterate, it is still much easier to use 15% less water than to gripe about a 15% increase in water rates. Even if the 15% increase was granted uniformly - which was not since it favours the lower income group - the average increase for the household water bill would be about RM3 - RM5.

As for non-payment to Premier Ayer, the dispute was actually inherited by Syabas and hence Puncak Niaga. The NRW works contract with Premier Ayer was signed way back in June 2000 at a total contract sum of RM391,500,000. The dispute with Premier Ayer was for the remaining RM19,575,000.00. This meant that prior to privatisation of PUAS by Puncak Niaga, 90% of the NRW works by Premier Ayer was already done. Therefore, any significant additional NRW reduction subsequent to the privatisation should be rightly credited to Puncak Niaga.

As for the actual NRW figures itself, your guess is as good as mine about what it is then and what is it now. I do not trust the state to manage water because it is proven that they it has failed. I do not know about the national auditors, but if we don't trust them, then who else do we trust? Who audits the national auditors? And who audits the auditor of the national auditors?

2) The private sector is efficient in managing water compared to government-controlled water utilities.

I would wager that one of the reasons JBA was "profitable" operationally was because JBA failed to adequately invest in replacing pipes and building water treatment plants. That kind of "profitabilty" would not be sustainable. This is evident from the poor state of water infrastructure that we see now. I call this the "teh tarik" effect.

Most, if not all, analysts will say that without the planned tariff increase, Syabas' financial model of privatisation will fail and under-investment in water assets would continue. One day, the whole deck of cards will eventually fall and by then it would already be too late.

Santiago also mentioned about the un-bundling of profitable water treatment operations from the problematic water distribution.

Previously, Puncak Niaga was a profitable water treatment operator. With the privatisation, Puncak Niaga now controls the problematic water distribution as well. Therefore, Puncak Niaga's privatisation of Puas to become Syabas is virtually a "re-bundling" of the water by reuniting water treatment and water distribution. There continues to exist another large water treatment operator in Splash. Syabas continues to pay Splash bulk water rates.

If the water distribution is so problematic and "loss making" as Santiago stated, wouldn't Puncak Niaga be better off not privatising Puas? After much analysis, I believe that Puncak Niaga is confident that they can do a better job at managing water distribution and also ensure they are paid regularly instead of continuing to be owed hundreds of millions of ringgit by Puas each year.

Perbadanan Bekalan Air Pulau Pinang deserves high praise for their success. However, the scale and size of the state, the higher growth rates in Selangor and the existing poor state of the water infrastructure differs considerably between Penang and Selangor. Damage has clearly been done previously. It is much harder and many times more expensive to correct mistakes than to avoid making them in the first place.

3) CAWP should purchase shares in Puncak Niaga to benefit from the 'sweetheart deal'.

Obviously, CAWP should not have conflicts of interest and shouldn't purchase shares. In any case, please remember that the Selangor state government still owns 30% of the privatised Syabas and as of today's Bursa's filings, our EPF owns about 9.71% of Puncak Niaga. I would consider Syabas partly privatised instead of fully since our government still has an effective stake of 37% in Syabas. So we rakyat continue to have a stake.

Of course, as a minority shareholder, the less annual salary paid to any director, the better. In fact, I believe that the shairman should not be paid at all since he has a much greater stake in the success of Puncak Niaga.

As a conscientious citizen of the country and a minority shareholder of Puncak Niaga which owns 70 percent of Syabas, I ask Syabas to confirm or deny the following:

That Syabas contravened the concession agreement by buying pipes from Indonesia. However, if local pipe manufacturers take advantage of this ruling and quote above market prices, then local pipe manufacturers should be taken to task. Remember that eventually, the public will be paying for any over-pricing of pipes by local manufacturers.

That Syabas was not involved in collecting money and issuing plumber licences and thus acting outside of its scope of the concession agreement. In this case, I believe that Puas has always been the authority to issue plumber licenses since at least the year 2002. Since Syabas privatised Puas including all assets and liabilities, I assumed Syabas has assumed this role.

Demand that Syabas publish the audit on its NRW work undertaken in the last one year. Yes, I agree that Syabas should publish this audit.

One critical point that seems to have escaped most people but is crucial to the continued economic progress of our country is that the integrity of the Malaysian government is at stake in the eyes of the world. A contract - whether good or bad - has been signed. Nobody should be happy that contracts are not honoured in Malaysia. Foreign investors absolutely abhor this as it undermines the very fabric of our modern society. As Pak Lah said, "If a contract has been signed, we shall honour it. To not do so is just not right". Remember that the water contracts were signed during the reign of Pak Lah and Dr Lim Keng Yaik in their current offices.

Here, I would like to state my position that I have nothing against CAWP and other such NGOs. My beef is with the Selangor state goverment which has clearly failed as far as the water utility is concerned and that if no action is taken right now, the consequences with regards to water quality and a state-wide water shortage is very real. I just cannot accept any politicking which will stall progress in such a critical matter as water.

The statewide water shortage is projected for 2007 and 2008. What year is it now? Can we continue to afford to take cheap water for granted?