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Kedah-Penang water spat will make Malaysia less attractive to foreign investors: Experts

08 Apr 2021 / 10:22 H.

PETALING JAYA: The tiff over water between Penang and Kedah underscores how deep political differences have trumped other priorities.

It has the potential to tarnish Malaysia’s image as an investment destination, which will have a major negative impact on the country’s economy, according to an analyst and an economist.

“An issue that could have been easily resolved behind closed doors is now being played out publicly and it will only hurt the two states,” Universiti Teknologi Malaysia geostrategist Dr Azmi Hassan told theSun.

As it is, Malaysia is beginning to lose out to other countries in attracting foreign investments, and the water spat will only make the country even less attractive, according to economist Dr Yeah Kim Leng.

Kedah is demanding RM50 million a year from Penang for drawing water from Sungai Muda. The money, according to Mentri Besar Muhammad Sanusi Md Nor, is to underwrite the financial cost of preserving the Sungai Muda forest reserve.

On March 24, Kedah announced that it would launch a riverside water retention project that Penang claimed would choke its supply of raw water.

A stretch of Sungai Muda south of Sungai Petani forms a natural boundary between Kedah and its southern neighbour, Penang.

The Penang government is led by DAP, a partner of Parti Amanah Negara and PKR in the Pakatan Harapan coalition, while PAS leads the Kedah administration as a member of Perikatan Nasional.

Azmi said both states have been “acting very foolishly” given that it is only a minor issue that could have been overcome through discussions.

He said both leaders, Sanusi and Penang Chief Minister Chow Kon Yeow, may be playing to the gallery.

“Even if they reach some kind of agreement, there will still be some who will claim that the other side has benefited more,” he added.

Yeah pointed out that Penang has more to lose given that it is the country’s most important hub for the production of high-value items.

“The world’s biggest multinational companies have investments there, and they are watching how this will play out,” he told theSun.

“We are already losing out to other countries in wooing foreign investors, and if the two states do not end the fight soon, it will make us even less attractive,” he added.

Yeah said the economic impact will be felt not only by Penang but also the whole country, given that the state is a significant contributor to the gross domestic product.

“The world will see Malaysia as a politically unstable country, and foreign investors will think twice about putting their money here,” he added.

Association of Water and Energy Research Malaysia president S. Piarapakaran said both sides should agree on how much Penang pays for raw water.

He said the quantum should depend on the quality of raw water. “The higher the quality, the more Penang should pay,” he told theSun.

He said the payment will also give Kedah a reason to protect the water catchment area to enable it to fetch higher returns on the sale of raw water.

He said this will give Kedah, a state with few natural resources, an added revenue stream.

“Kedah should also be mindful that whatever action it takes should not breach the Water Services Industry Act 2006,” Piarapakaran added.

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