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| # Country: Malaysian Water & Waste Water                              |
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| Randall Liew                                                          |
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| May 2008                                                              |
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# Summary

####### 

The high growth rate has drawn heavily on the natural resource base of
Malaysia, both renewable and non-renewable resources. The damaged and
deteriorated environment and natural resources condition as a result of
rapid economic development have raised the country's awareness and
policy makers are taking the demand for improved environmental quality
into account. As Malaysia progresses towards becoming a developed
country in 2020, consumption will correspondingly increase. Consumption
however produces some undesirable impacts on the environment and
climate. Hence, the keyword of the Government of Malaysia is
*sustainable growth*.

The government of Malaysia has instituted a fairly compressive set of
environmental regulations, which are embodied in the Environmental
Quality Act of 1974 (EQA), and its subsequent amendments. The Department
of Environment (DOE) (<http://www.doe.gov.my/>) under the Ministry of
Natural Resources and Environment is the federal agency responsible for
implementing and enforcing the EQA. Although the government advocates a
vision of sustainable development, it has not equipped the DOE with
sufficient power, financial resources, manpower or technical tools to
regulate polluters until recently. During the Ninth Malaysian Plan (9MP)
from 2006 till 2010, environmental stewardship was promoted to ensure
that the balance between development needs and the environment is
maintained. Greater focus was placed on preventive measures to mitigate
negative environmental effects at source, intensifying conservation
efforts and sustainable management of natural resources. Emphasis was
given to the fostering of closer cooperation between stakeholders in
addressing environmental concerns. Environmental planning tools such as
environmental impact assessments (EIA), strategic environmental
assessments (SEA), cost-benefit analysis, market-based instruments and
environmental auditing was increasingly applied in evaluating and
mitigating environmental impacts of development activities. In addition,
research and development (R&D) was intensified to further support
environmental management and sustainable use of natural resources. These
efforts by the Government of Malaysia to improve protection of the
environment and conservation of natural resources is in the hope that it
will contribute towards enhancing the quality of life for all
Malaysians.

# Introduction

####### 

Wastewater treatment plants are mushrooming in Malaysia as a response to
the increasing demands for better and more effective sanitation services
resulting from the country's remarkable economic growth after the 1997
Asian financial crisis. Solid waste management, however, remains in the
backseat. The Indah Water Konsortium (IWK) has been taking charge of
Malaysia's sewage management since 1994, and has built for the country
an effective sewerage management systems. The system boasts of around
8,000 public sewage treatment plants, 500 network pumping stations,
17,000 kilometers of underground sewerage pipes and half a million
household septic tanks connected to the sewers. As the demand for
effective sanitation increased, IWK turned to other private companies to
build wastewater management systems. Malaysia's 27 million people
generate about six million tons of sewage every year, most of which is
treated and released into the rivers. Since about 98 percent of our
fresh water supply comes from surface water, proper treatment of sewage
must be ensured. In February 2006, Malaysia\'s Ministry of Energy, Water
and Communication awarded a US\$113.4 million contract to a consortium
of three Japanese companies to build four treatment plants in Kuala
Lumpur, Negeri Sembilan and Malacca, with a total capacity of treating
over 40,000 cubic meters of wastewater a day using the oxidation ditch
treatment processes. All the four treatment plants are expected to be
completed and operational by August 2008.

The leap towards effective sanitation began with Wawasan 2020 (or Vision
2020), a brainchild of former Malaysian PM Dr. Mahathir Mohammad.
Presented to the Malaysian Business Council in 1996, it called for a
united and industrialized Malaysia by the year 2020. Wawasan 2020
embodied a renewed national policy, and advocated privatization as "*an
important cornerstone of national development and national efficiency
strategy*." It also called for increased involvement of the country's
private sector, while ensuring that the poor have access to basic,
high-quality, low-cost services, at the same time, avoiding
"*unproductive monopolistic practices*" and ensuring workers' welfare.
It was a win-win situation for all. The policy shift created new
business for wastewater and sanitation companies, which took on the task
of sewage management from local governments. Private sector involvement
also brought efficiency into the system.

Until about five decades ago, Malaysia\'s waste disposal system was no
different from what is still found in many developing countries. Night
soil carriers emptied household waste into cans and sold them to farmers
who then used it as manure. Today, however, the bulk of waste produced
by both urban and rural areas is packed in 230 landfills, which are
close to overflowing. Malaysia produces only about a kilogram of solid
waste per capita per day, but estimates suggest that only 1 to 13
percent of Malaysia's solid waste is recycled. While privatizing solid
waste management began in 1996, innovative ways for managing solid waste
has taken a slump. Sludge produced by water treatment plants remains
difficult to dispose.

Malaysia's record in solid waste management does not match Malaysia's
success in sewage treatment. The treated sludge even though is cleaned
and can be used in many ways, but is disposed off in landfills because
of no takers. The recent Ninth Malaysia Plan, the master plan for year
2006-2010 makes only a passing reference to the neglect of sludge and
solid waste management. And the only mention of solid waste states that
the government will undertake "*research and development on reuse of
sludge for industrial, agricultural and landscape purposes*." Malaysia's
search for more effective solid waste management is still on.

![](media/image2.wmf)

> *Statistics: Malaysia Water Industry Guide, 2007*

# 

# 

# 

#  

# Market Profile

*Water Service Providers and Regulators*

State Public Works Department, State Water Supply Department, State
Water Supply Board and State Water Supply Corporation or Company, and
private companies undertake the development, operation and maintenance
of water supply in the states. Water supply regulators were formed in
states where water supply services are provided by State Water Supply
Corporation or Company, and private companies. Sewerage services
operation and maintenance is privatized to Indah Water Konsortium (IWK),
whilst the Sewerage Services Department oversees the national sewerage
sector development and the implementation of the Concession Agreement.
The Ministry for Regional and Rural Development, and the Engineering
Division of the Ministry of Health provide rural water supply. Whilst
the latter is also responsible for the provision of sanitation
facilities to rural communities.

*Funding*

Since water is important for socioeconomic development of the nation,
the Federal Government provides soft loans to State Governments for
public water supply infrastructure and grant for rural water supply
development. To date, the Government has provided RM8.3 billion loan to
State Governments for the water supply sector. The

Federal Government provides grant for sewerage infrastructure
development in the cities and towns, and the provision of sanitation
facilities in rural areas. Problems in the water services sector State
water supply authorities have problems covering the cost of services and
many have deferred maintenance due to capital shortages. This has led to
deterioration in the quality of services, such as poor water quality and
low pressure. In fact, there are water supply authorities that have not
reviewed the water tariff in the last 20 years. Non-revenue water (NRW)
in the water supply sector is high, with a national average of 40.6% and
a range of 18.0 to 73.9% (2002). Besides incurring revenue losses to the
State Governments, high NRW lead to the difficulty of payment by certain
State Governments for bulk water purchases fro m concessionaires that
had constructed and operate the water treatment plants.

The presence of numerous small sewerage treatment plants resulted in
difficulties of operation and maintenance, besides escalating the cost
of operation. There is also a lack of fund to construct regional
sewerage treatment plants. The Nineth Malaysia Plan tries to address 3
major challenges i.e.

Challenge 1: To deliver or make available facilities or services of a
high quality;

Challenge 2: To ensure an efficient and effective delivery system to
meet the rising aspirations of the people; and

Challenge 3: To optimize the use of natural re sources as well as
protecting the environment in order to improve the quality of life.

Some of the issues that will be and need to be addressed in order to
meet the challenges are

*Water Supply Sector*

The increased demand for clean water has led to competition in water use
among the various water user sectors and the continued economic growth
will magnify this even more acutely. The practicable limit of surface
water resources development has been reached in regions of high demand,
and it has become necessary to consider inter-basin and interstate water
transfers. The current approaches towards water supply in cities are
supply driven -- when there's a "shortage", new sources are developed.
This 'business as usual' approach is no longer sustainable because of
the ever-increasing water demand. The new approach will be water demand
management that focuses on conservation measures to make better use of
water. Inter-state raw water transfer The Yen Loan Agreement for funding
the Pahang-Selangor Raw Water Transfer Project was signed in March 2005.
The construction of the project will commence in the Ninth Plan and will
be completed in the Tenth Plan. The project will transfer 2260 million
litres of water per day. Kelau Dam, in Pahang, will capture water and
the water will be released to Semantan River via Kelau River. The
Semantan Intake and Pumping Station will transfer the water via dual
pipelines to the tunnel inlet. The tunnel transfers the water across the
Main Range to Langat 2 Water Treatment Plant in Selangor.

![](media/image3.wmf)

# *Statistics: Malaysia Water Industry Guide, 2007*

*Non-Revenue Water*

The program of reducing NRW and, rehabilitation of water treatment
plants, water mains and distribution pipes is an on-going program in
every five-year development plan. The program of NRW reduction and
rehabilitation of water supply systems will be emphasized in the Ninth
Plan and it is a major component of the water demand management
initiatives.

![](media/image4.wmf)

> *Statistics: Malaysia Water Industry Guide, 2007*

*Groundwater Resources*

Malaysia has more than 150 river systems that contribute 98% of the
total national water use, whilst the remainder is contributed by
groundwater. To secure safe yield from surface water sources, 55 single
purpose and 17 multipurpose dams were constructed, with a total storage
of 30 billion m3. Water supply systems that are too dependent on surface
water sources are at the mercy of the weather. To meet the increasing
water demand, the development of distant water resources is not always
the best option, and groundwater resources offer the possibility of
on-site development of water supply. Besides, the need to develop the
naturally stored water below ground surface is enhanced by the high
environmental costs incurred in the development of surface water
storages.

![](media/image5.wmf)

> *Statistics: Malaysia Water Industry Guide, 2007*

*Storm water Management*

Besides controlling the occurrences of flash floods in urban centers and
downstream areas, the application of Storm water Management Manual has
the potential of improving the quality of receiving waters and meeting
the increasing water demand. Runoff that is stored in detention ponds
should be treated before it is released into the existing drainage
channels or alternatively, the water can be used for non-potable
purposes such as watering parks and golf courses, and cleaning streets.

*Sewerage Sector*

Sewage is one of the major pollutants of water bodies. Cities and other
urban centers are well known for being polluters of the aquatic
environment with sewage and municipal wastewater, industrial effluent
and polluted runoff. A reliable and efficient sewerage system is a vital
contributing factor towards the improvement in environmental health of
the nation.

*National Sewerage Project*

The National Sewerage Project is made up of 13 projects that cover Klang
Valley and the major urban centers in the west coast of Peninsular
Malaysia -- Kangar, Alor Setar, Butterworth, Bukit Mertajam, Seremban,
Port Dickson and Melaka. The project components are made up of ten
sewerage treatment plants, three centralized sludge treatment facilities
and a sewer network with a total length of 117 kilometers. The
construction of the National Sewerage Project commenced in the Eighth
Plan and will be completed in the Ninth Plan.

*Rehabilitation and rationalization of sewerage treatment plants*

Rehabilitation and upgrading works of sewerage treatment plants will
continued under the Ninth Plan and priority will be given to those
plants that operate within the catchments of public water supply
intakes. This is to ensure that the effluent discharge into receiving
water bodies comply with standards set by the Department of Environment.

The program on rationalization of sewerage systems will result in the
closures of small sewerage treatment plants that will take place after
the completion of regional sewerage treatment plants within their
respective catchments areas. This program optimizes resources with
respect to operation and maintenance of sewerage treatment systems.

Regulated Water Services Industry

An individual problem in the water services sector, such as NRW in the
water supply sector or bill collections in the sewerage sector, cannot
be solved in isolation. The core problems such as poor governance, low
tariffs and lack of funds, need to be resolved first. The solutions may
include transparent policies, independent regulatory bodies, a paradigm
shift in tariffs, and the involvement of civil society. Following the
Constitutional Amendments in January 2005, the Federal Government
involvement in the state water supply services are in the areas of
regulating the service providers and the provision of fund for the
maintenance and expansion of water supply services. The National Water
Commission (SPAN) will regulate all water service providers irrespective
of government or private ownerships, whilst the management of water
resources will remain within the jurisdiction of the State Governments.
The issues of water tariffs need to be addressed with respect to social
responsibility and cost recovery, together with the funds needed to
improve and expand water services, and conservation of fresh water
reclamation of degraded water systems. The privatization of water
services should result in greater efficiencies in the sector and
equitable distribution of water. The planning of water services should
take into account future technological innovations and consumption
patterns that may reduce the need for water supply infrastructure, and
consequently result in lower capital expenditure.

Suruhanjaya Perkhidmatan Air Negara (SPAN)

National Water Services Commission

Ground & 1^st^ Floor

Prima Avenue, Block 3510

Jalan Teknokrat 6

63000 Cyberjaya

Selangor Darul Ehsan

Malaysia

Tel: +60 3 8317 9360

Fax: +60 3 8317 9339

Contact: Mr. LEOW Peen Fong, Director, Regulatory Reforms & Integration
Division

Email: leow@span.gov.my

*Integrated Water Resources Management*

The effective implementation of Integrated Water Resources Management
(IWRM) will contribute to the realization of a sustainable national
water sector. Reforms and initiatives are needed towards providing
adequate as well as an enabling environment for the effective and
efficient implementation of IWRM. IWRM formulates and implements a
course of action involving the management of water and related resources
to achieve optimum allocation of water resources within a catchments or
river basin. The scope of IWRM may be addressed with respect to
integration of different components of water, integration of water with
related land and environmental resources, and integration of water with
social and economic development.

*Amendment to Federal Constitution*

In the Special sitting of Parliament in January 2005, Parliament had
approved the amendments to the Ninth Schedule to transfer WATER SUPPLIES
AND SERVICES from State List to Concurrent List (except Sabah and
Sarawak) and to amend the Tenth Schedule whereby revenue fro m water
supplies and service is assigned to the Federal (assigned to the States
before amendment) -- except Sabah and Sarawak The amendments received
Royal Assent on 4 February 2005 and were gazetted on 10 February 2005.
The date of enforcement was fixed on 21 March 2005. After the
amendments, the Federal Government will only regulate the water services
industry in terms of licensing and regulating water operators. The
ownership and control of rivers and canals and the water remains with
the State, The State also retains power to declare and regulate water
resource:

• water catchment areas;

• water source; and

• river basin

The new industry model is intended to cover Peninsular Malaysia and the
Federal Territory of Labuan Proposed Two Water Bills. The initial plans
of the government were to table the two Bills for first reading in the
April session of Parliament, the second and third reading during the
June session and royal assent there after.

# Market Demand

  --------------------------------------- ---------- ------------ --------------
  **SEWERAGE DEVELOPMENT PLAN (2006 -                             
  2035)**                                                         

  PROJECT DESCRIPTION                     QTY        TARGET       COST (US\$ M)
                                                     COMPLETION   

  Refurbish/Upgrade of Sewerage Treatment                          
  Plants (STP) and Sewers to meet                                 
  Proposed Effluent Standards                                     

  a\. Standard A (in water catchments     884 STPs   2015         250.48
  areas)                                                          

  b\. Standard B (non-water catchments    3,748 STPs 2020         1,221.90
  areas)                                                          

  c\. Sewer Rehabilitation                1,300 km   2010         237.46

                                                                   

  Sludge Treatment Facility Development   22.5 Mil   2015         985.71
                                          PE                      

  Regional Sewerage System Development    17.4 Mil   2035         5,939.05
                                          PE                      

  Pour Flush System Conversion                       2035         468.25

  Re-plumbing for Sullage Collection                 2035         91.11

  **Total**                               ** **      ** **        **7,484.13**
  --------------------------------------- ---------- ------------ --------------

# Main Players

####### State Corporatized and Privatized Water Management Companies 

*Encik* **Ahmad** **Zahdi** Bin Jamil, CEO

SAJ Holdings Sdn. Bhd.\
SAJ Headquarters\
Jalan Garuda, Larkin\
P.O. Box 262\
80350 Johor Bahru\
Johor

Malaysia

Tel: +6[0(7) 2244040]{.smallcaps}

Fax: +6[0(7) 2240033]{.smallcaps}

E-mail: <azahdi@saj.com.my>

Website: [http://www.saj.com.my](http://www.saj.com.my/)

PA: Puan Zaleha (2255501)

 

*Tuan Haji* Zuhaimi bin Mohd Jusoh, General Manager

Air Kelantan Sdn. Bhd.\
5^th^ Floor Bangunan Petronas\
Jalan Sultan Yahya Petra\
15200 Kota Bahru\
Kelantan

Malaysia

Tel: +6[0(9) 7437777]{.smallcaps}

Fax: +6[0(9) 7472030]{.smallcaps}

Email: <msmj@airkelantan.com.my>

Website:
 [http://www.airkelantan.com.my](http://www.airkelantan.com.my/)

PA: Puan Norita

*Ir.* **Wong** Tiong Kai, CEO

Laku Management Sdn. Bhd.\
Level 6, Menara Soon Hup\
Lot 907, Jalan Merbau\
98000 Miri\
Sarawak

Malaysia

Tel: +6[0(85) 442020]{.smallcaps}

Fax: +60([85) 442005]{.smallcaps}

E-mail: <wtk@lakumyy.po.my>

Website:
[http://www.lakumanagement.com.my](http://www.lakumanagement.com.my/)

PA: Mdm. Monica

*Ir.* **Jaseni** Bin Maidinsa, General Manager

Perbadanan Bekalan Air Pulau Pinang Sdn. Bhd.\
Level 32, Bangunan Komtar\
10000 Pulau Pinang

Malaysia

Tel: +6[0(4) 2610169]{.smallcaps}

Fax: +6[0(4) 2627418]{.smallcaps}

E-mail: <jaseni@pba.com.my>

Website: [http://pba.com.my](http://pba.com.my/)

PA: Mdm. Ooi

*Dato\' Ir.* **Wan Ngah** Bin Wan Ali, CEO

Syarikat Air Terengganu Sdn. Bhd.\
Jalan Sultan Ismail\
20200 Kuala Terengganu\
Terengganu

Malaysia

Tel: +6[0(9) 6201103]{.smallcaps}

Fax: +6[0(9) 6201104]{.smallcaps}

E-mail: <kpe@satuwater.com.my>

Website: <http://www.satuwater.com.my/> 

PA: Puan Juliana Najib Chua

*Ir. Tuan Haji* **Mohd Khalid** bin Nasir CEO

Syarikat Air Melaka Berhad\
Graha Maju, Tingkat 10\
Jalan Graha Maju\
75300 Melaka

Malaysia

Tel: +6[0(6) 2921738]{.smallcaps}

Fax: +6[0(6) 2836749]{.smallcaps}

E-mail: <khalid@samb.com.my>

Webaite: [http://www.samb.com.my](http://www.samb.com.my/)

PA: Puan Saadah

*En*. **Sazli** Mohd Salleh, Manager -- Government Relations & Corporate
Affairs

Konsortium ABASS Sdn Bhd

15^th^ Floor, Plaza perangsang

Persiaran Perbandaran

40000 Shah Alam

Selangor Darul Ehsan

Malaysia

Tel: +60(3) 5512 2660

Fax: +60(3) 5511 4660

Email: <sazli@abass.com.my>

Website: [http://www.abass.com.my](http://www.abass.com.my/)

# Market Entry

The normal path to market into the clean water industry is through the
appointment of a sole distributor or agent. International tenders are
generally open to pre-qualified, registered suppliers and preference is
usually given to foreign suppliers with local distributors or agents.

There are opportunities for companies to establish strategic alliances
with local companies involved in the water supply industry. For foreign
companies wishing to enter the market, it is essential to work with a
local partner with relevant industry knowledge and marketing and
technical support capabilities. Partnerships often involve some form of
technology/skills transfer or a joint venture with equity participation.
Transfer of technology by a foreign company to its local partner is
considered very important especially when seeking to secure major
government projects.

# Market Issues & Obstacles

The government is currently drawing up new standards for water supply
products that lack Malaysian or International Standards accreditation.
Work by various committees led by the Water Supply Division of the
Public Works Department Malaysia, in close cooperation with SIRIM, the
various state Water Supply Department, foreign experts and
representatives of local manufacturing concerns, has seen the drafting
of several new Malaysian Standards (MS) for adoption by the authorities.

The new MS standards contain details on materials to be used and
dimensions (including diagrams and performance tests) and will accord
with international standards used in Britain, Australia, Germany, USA
and Japan to ensure strict controls on quality.

# Trade Events

<http://www.awam2008.com/>

<http://www.asiawater.org/>

<http://cisnetwork.com/itex/about/index.php>

<http://www.faconex.com/lab_about.asp>

<http://www.faconex.com/ica_intro.asp>

# Resources & Contacts

####### For More Information \[NOTE: only use this format, do not change it.\]

The U.S. Commercial Service in Kuala Lumpur, Malaysia can be contacted
via e-mail at: Randall Liew; Phone: +60 3 2168 4825; Fax: +60 3 2168
8350; or visit our website: www.BuyUSA.gov/malaysia

####### The U.S. Commercial Service --- Your Global Business Partner

With its network of offices across the United States and in more than 80
countries, the U.S. Commercial Service of the U.S. Department of
Commerce utilizes its global presence and international marketing
expertise to help U.S. companies sell their products and services
worldwide. Locate the U.S. Commercial Service trade specialist in the
U.S. nearest you by visiting <http://www.export.gov/>.

*Disclaimer: The information provided in this report is intended to be
of assistance to U.S. exporters. While we make every effort to ensure
its accuracy, neither the United States government nor any of its
employees make any representation as to the accuracy or completeness of
information in this or any other United States government document.
Readers are advised to independently verify any information prior to
reliance thereon. The information provided in this report does not
constitute legal advice.*

*International copyright, U.S. Department of Commerce, 2007. All rights
reserved outside of the United States.*