KUCHING: Industry participants can expect the following overarching general business outlook in the immediate term, such as on-going projects in the water industry, being expected to continue.
Newly awarded projects may be subject to re-evaluation or termination, with the exception of critical works such as new water distribution projects; the feasibility of new projects will be reassessed.
“Change in tender and selection procedures; submitted tenders in the evaluation stage and new tenders will likely be delayed or thoroughly reviewed,” according to Frost and Sullivan associate director for energy and environment practice Melvin Leong.
“The role of Pengurusan Aset Air Bhd (PAAB), a national water asset management entity that reports to the Ministry of Finance, may be reviewed. PAAB ran into substantial debts at RM14 billion in 2015.”
Policy change with regards to foreign participation in the municipal water works is unlikely, Leong said, as domestic water EPCs will continue to dominate the municipal water segment, while the industrial water market will remain the low-hanging fruit for foreign water companies.
This comes as the water tariff is unlikely to change.
“It is notable that water price is zero-rated under the Goods and Services Tax (GST); GST was introduced in 2015, and it may be abolished altogether in 2018,” Leong said.
“Nonetheless, the water tariff in Malaysia, which is already one of the lowest in Asia, is unlikely to be reduced and it is regulated by SPAN or National Water Services Commission.”
Frost and Sullivan had earlier forecasted a capex of US$1.67 bIllion in Malaysia’s municipal segment in 2018, a growth of 11.3 per cent from 2017. A pessimistic reforecast shows a lowered growth rate at 9.5 per cent or spending of US$1.64 billion in 2018.
However, the reforecast shows only a marginal drop in actual spending.
The outlook for the water industry for the remaining year is expected to be positive, as efforts will be intensified to reduce non-revenue water (NRW), revitalise water infrastructure and services in urban areas, and develop new water infrastructure in rural areas.
Nevertheless, with the exception of Sabah and Sarawak, it is unlikely that more new water treatment plants (WTP) will be built in the short term.
The new government is also expected to accelerate efforts in reducing NRW, especially water physical losses or leaks. In 2015, the national NRW was recorded as 35.5 per cent, with Melaka and Penang recording below 20 per cent.
The previous administration pledged to reduce the national NRW to 25 per cent by 2020. However, this figure can be improved as Singapore and Japan recorded NRWs below 10 per cent.
“Water leakage is largely due to aging distribution mains or pipes, and this has put a strain on the WTPs, which are already producing water at maximum capacities.
“This, in turn, affects water supply to consumers. The immediate solution to leak reduction is extensive replacements of pipes and associated equipment, such as valves and pressure-regulating valves. Construction of new WTPs to accommodate high water loss will not be financially viable and will not solve leak problems.
“Immediate opportunities or focus areas are states with high NRW such as Selangor, Negri Sembilan, Perlis, Sabah, and Kedah. With the exception of Selangor, the above-mentioned states can also expect water projects in new water distribution systems for the rural population and capacity extension of current WTPs for growing industries in those states.”