FREQUENTLY ASKED QUESTIONS
General Question on PAAB
Pengurusan Aset Air Berhad (PAAB) is a wholly owned company of the Minister of Finance Inc., incorporated on 5 May 2006 with the objective of being the holding company for the nation’s water assets.
PAAB forms part of the Government’s efforts to restructure the water services industry in the country to achieve better efficiency and quality, as well as to ensure sustainability of the industry.
- Federal Government of Malaysia
- State Governments of Malaysia
- Suruhanjaya Perkhidmatan Air Negara (SPAN)
- Water Operators in Malaysia
- Financial Institutions
- Contractors, Consultants and Suppliers
- Water Consumers in Malaysia
- Commit themselves to PAAB’s objectives;
- Act loyally, impartially and honestly;
- Subscribe to the high standard of professional ethics
PAAB’s primary responsibility is to develop the nation’s water infrastructure in Peninsular Malaysia and the Federal Territory of Labuan, using competitive financing sourced and obtained from private financial market. The water assets are then leased to water operators licensed by the industry regulator,Suruhanjaya Perkhidmatan Air Negara (SPAN) for operations and maintenance.
PAAB is also tasked to assist SPAN to restructure the nation’s water industry to achieve the Government’s vision for efficient and quality water services.
PAAB will first take over the existing water assets from the various States. Currently, these assets are owned by either the State Governments or private water concessionaires. After the transfer, the state water operators (Service License) will lease back the water assets from PAAB (Facilities Licensee) for operation and maintenance as the States will continue to be responsible for the provision of water supply services.
Thereafter, PAAB will be responsible for building any new water infrastructures required by the States. PAAB will also source and provide the financing for the development of these new assets.
As a result of this exercise, the State Governments will be relieved of the burden to fund the construction of new water assets, which requires enormous capital. The state water operators will also become asset-light, and can focus solely on improving the efficiency of their operations and services to the consumers.
PAAB will be responsible for providing new water infrastructure, upgrading and refurbishing water treatment plants and distribution pipes.
Basically, PAAB will take over the entire water system network starting from part of the pipes connecting the dam to the water treatment plant, the water treatment plant, the balancing reservoir, the servicing reservoir to the distribution pipes to the consumers.
In the past, most State Governments relied on the Federal Government for financial assistance to fund the construction of new water infrastructure because the water revenue generated by the State was insufficient to meet the Capex for such development. Over the years, the Federal water supply loan provided by the Federal Government to the State Governments has accumulated and as at Dec 2007, the total outstanding amount is RM7.6 billion.
In exchange for the water assets, the Federal water supply loan of equivalent value will be transferred to PAAB. However, for some states where the value of the water assets is more than the outstanding loan amount, the surplus value will be taken into consideration and the settlement terms will be negotiated.
The Federal Government provided PAAB with its working capital. As for the development of water infrastructures, we are looking into several options, including issuing bonds in the capital market as well as borrowing from commercial banks. We are considering both short term and long term loans to match the lifespan of the water assets.
As a Government-owned company, PAAB is eligible for more favourable financing rates which will translate to better tariff rates, ultimately benefiting the consumers.
The separation of responsibilities between service providers and asset owner is provided under WSIA and is introduced to drive the industry towards better efficiency. Such separation will enable water operators to become pure service providers, focusing solely on providing water treatment and distribution services, so that they can concentrate their efforts to achieve operational efficiencies. This will benefit the consumers and the nation, in terms of preservation of the environment as well as sustainability of the water resources to support the country’s development.
PAAB is regulated by SPAN, the national’s water services industry regulator. PAAB needs to apply for a Facilities License from SPAN to be the owner of water assets and be able to lease the water assets to the State water operators (Service Licensee).
What is the Water Services Industry Restructuring Initiatives
It encompasses all the states in Peninsular Malaysia, Wilayah Persekutuan Labuan and Putrajaya but excludes Sabah and Sarawak.
The reform is not to promote privatization of water services, it is to promote a more efficient and holistic water supply services.
PAAB’s Procurement Policy
PAAB’s Procurement Policy is based on 4 principles, namely:
- Need for economy and efficiency in project implementation;
- Transparent and efficient procurement process;
- Fair opportunity for participation by all eligible consultants, contractors and suppliers; and
- Encourages the development and participation of Malaysian consultants, contractors and suppliers.
All tenders are evaluated based on their compliance to the contractual requirements, technical and financial capability to carry out the projects together with the price competitiveness for the works, services or supplies.
Depending on the works , services or supplies being procured, tenderers may be required to attend an interview or deliver presentations to clarify its technical and financial capabilities or their tender proposal to the Tender Committee.