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Country: Malaysian Water & Waste Water

Randall Liew
May 2008

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.

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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.

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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.

Breakdow n of Type of Discharge

Sewage Treatment
M anuf acturing Industry
Plant s
45%
47%

Animal Farm (Pig Agro-Based Indust ry

Farm) 3%
5%

Statistics: Malaysia Water Industry Guide, 2007

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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

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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.

Designed Capacity vs Production (in MLD)

30000

25000

20000
Million Litre Per Day (MLD)

15000

10000

5000

0
1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

Year
Designed (MLD)
Production (MLD)

Statistics: Malaysia Water Industry Guide, 2007

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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.

Calculated Non-Revenue Water 2005

70.00%

60.00%

50.00%
Percentage Wastage

40.00%

30.00%

20.00%

10.00%

0.00%
Melaka
Perlis

Perak
Johor

Sarawak
N. Sembilan
Sabah

Kedah

kelantan
Selangor
Pahang

Terengganu

Pulau Pinang
States State Average
National Average
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.

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Quality Trend of River Basin (1990 - 2005)

80

70

Number of Rivers
60

50

40

30

20

10

0
'1990 '1992 '1994 '1996 '1998 '2000' '2002' '2004'

Year Clean
Slight ly Pollut ed
Pollut ed

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.

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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 & 1st 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

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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.

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Market Demand
SEWERAGE DEVELOPMENT PLAN (2006 - 2035)

TARGET
PROJECT DESCRIPTION QTY COST (US$ M)
COMPLETION

Refurbish/Upgrade of Sewerage Treatment Plants

(STP) and Sewers to meet Proposed Effluent
Standards
a. Standard A (in water catchments areas) 884 STPs 2015 250.48
b. Standard B (non-water catchments areas) 3,748 STPs 2020 1,221.90
c. Sewer Rehabilitation 1,300 km 2010 237.46

Sludge Treatment Facility Development 22.5 Mil PE 2015 985.71

Regional Sewerage System Development 17.4 Mil PE 2035 5,939.05
Pour Flush System Conversion 2035 468.25
Re-plumbing for Sullage Collection 2035 91.11
Total 7,484.13

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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: +60(7) 2244040
Fax: +60(7) 2240033
E-mail: azahdi@saj.com.my
Website: http://www.saj.com.my
PA: Puan Zaleha (2255501)

Tuan Haji Zuhaimi bin Mohd Jusoh, General Manager

Air Kelantan Sdn. Bhd.
5th Floor Bangunan Petronas
Jalan Sultan Yahya Petra
15200 Kota Bahru
Kelantan
Malaysia
Tel: +60(9) 7437777
Fax: +60(9) 7472030
Email: msmj@airkelantan.com.my
Website: 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: +60(85) 442020
Fax: +60(85) 442005
E-mail: wtk@lakumyy.po.my
Website: http://www.lakumanagement.com.my
PA: Mdm. Monica

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Ir. Jaseni Bin Maidinsa, General Manager

Perbadanan Bekalan Air Pulau Pinang Sdn. Bhd.
Level 32, Bangunan Komtar
10000 Pulau Pinang
Malaysia
Tel: +60(4) 2610169
Fax: +60(4) 2627418
E-mail: jaseni@pba.com.my
Website: 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: +60(9) 6201103
Fax: +60(9) 6201104
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: +60(6) 2921738
Fax: +60(6) 2836749
E-mail: khalid@samb.com.my
Webaite: http://www.samb.com.my
PA: Puan Saadah

En. Sazli Mohd Salleh, Manager – Government Relations & Corporate Affairs
Konsortium ABASS Sdn Bhd
15th 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

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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

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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

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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.

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