Privatization of water supplies : the Malaysian experience

The Government of Malaysia introduced a policy of privatization of public services, including water supply, in 1985. The objectives of the policy were to: relieve the Government of its financial and administrative burden; promote competition, raise efficiency and productivity; accelerate economic growth; and reduce the size of the public sector. At present privatization of water supplies in Malaysia in mainly confined to: management or service contracts for water treatment plants; build-operate-transfer (BOT) contracts; and mixed management and BOT contracts. The 18 contracts awarded to the private sector so far, can be considered successful: consumers enjoy a higher level of service without very high price increases; the Government has kept down the number of staff despite an increase in the number of facilities constructed; and the Government has cut down its development budget on water supply. To ensure a greater success the economic viability of projects prior to privatization needs to be checked. To encourage privatization financing terms and policies of local banks need to reviewed as well as tax laws.