The truth about S’pore–M’sia water deal

THIS is a chapter that sours our relationship with Singapore and sometimes numbers are used to mislead the mass. However, the same numbers that are used to mislead can be corrected to show the truth. Here we have to ask one important question. Are Singaporeans subsidising Johoreans? In this article, every 1,000 Imperial gallons is equivalent to 4.5 cubic metres (m3).

Recently, Dr Vivian Balakrishnan (Singapore Foreign Minister) addressed the Singapore parliament with these facts:
> Singapore purchases raw water at 3 sen per 1,000 gallons or 0.67 sen per m3;
> Singapore sells treated water to Malaysia at 50 sen per 1,000 gallons or 11.11 sen per m3;
> It costs Singapore RM2.40 per 1,000 gallons or 53 sen per m3; and
> Singapore subsidises Johoreans by RM1.90 per 1,000 gallons or 42 sen per m3.

It was reported that Johor now buys about 6% of the total treated water and it is above the 2% agreed limit.

According to a booklet published by Singapore in 2003, Johor is selling the treated water at 87 sen per m3 to Johoreans and earning 76 sen per m3 or RM46 million a year. This is used as a comparison and Johor is said to rake profits from this difference. However, the truth is, after the treated water is purchased, the cost of distribution, maintenance, pipe works and billing is still part of the operation and it will be unfair to say that a huge sum of profit is made.

Our population density is not as high as Singapore's. We have piping routes that has low connection per km (kilometre). If the connection per km is higher, the revenue is higher and return in investment is also high. This is not the case in Malaysia. We prorate our costs and there are a lot of cross subsiding in our tariff setting. The water tariff used by Johor is approved by Suruhanjaya Perkhidmatan Air Negara (National Water Services Commission) and whatever profit earned is a regulated profit.

In Penang, the raw water charge is 3 sen per m3 and it is 2.33 sen higher than what Singapore pays to Malaysia. As for the inter-state water transfer project between Pahang and Selangor, the raw water is charged at 10 sen per m3 and this is 9.33 sen higher that what Singapore pays to Johor. Raw water needs to be treated to enable it to be consumed. This is when treatment cost kicks in.

Imagine that there was no Singapore-Malaysia water deal and Singapore needed to find its own water resource. During the second day of the 2017 Singapore Budget debate, it was revealed that water treatment cost using desalination technology will cost about S$3.00 to S$3.50 per m3 and this cost is excluding the pipeline cost. At the current exchange rate, it will cost Singapore between RM8.89 and RM10.37 per m3 to carry out desalination to produce treated water (Bank Negara Malaysia's exchange rate, S$1 equals to RM2.9631 on July 13, 2018).

Singapore is entitled to draw up to 250 million gallons a day and it is reported that Johor buys back treated water around 37 million gallons a day. That leaves Singapore to get up to 213 million gallons a day.

My fellow Malaysians, we are in actual fact subsidising Singapore because if there is no raw water supply from Johor, Singaporeans have to rely heavily on desalination plants. This will cost Singaporeans between RM8.36 and RM9.84 per m3 more compared to what they spend to treat the raw water from Johor. In short, we are subsidising Singapore between RM2.93 billion and RM3.44 billion a year by allowing them to draw raw water from Johor. This is what we call, an "apple to apple" comparison.

This also explains Singapore's knee jerk reaction and manipulation of numbers to prove themselves right. If they need to rely on desalination plants for more than one-third of their current water demand, the water tariffs in Singapore may go up a few fold. The economic and political implication of such a jump is unbearable for the Singapore government. Therefore, it is natural to see them react in the way they are now.
We urge the Federal Government and the Johor state government to renegotiate the water deal, but this time we should be selling treated water at a bulk rate, which is reviewed annually, to reflect the actual cost of water treatment and supply. This is a better solution compared to selling raw water.

This article was contributed by Piarapakaran S, president of the Association of Water and Energy Research Malaysia, a non-government organisation involved in research and development in the fields of water, energy and environment.