KUALA LUMPUR (July 1): Almost two decades since the passing of the Water Services Industry Act 2006 (WSIA), the spirit of the act, which seeks to provide a framework for a sustainable water services industry, is still a work-in-progress.

The water services industry’s financing model is still far from sustainable, leading to low investments in assets, as tariffs, especially on domestic users, have not been increased even as operating costs go up.

This has resulted in water services companies having to defer any upgrade of their assets and postpone maintenance works. Underinvestment in the water infrastructure, which is already old to begin with and suffering from high leakages, will only lead to more leakages in the future.

These leakages, or non-revenue water (NRW), will lead to water services companies requiring more revenue to supplement the losses and to maintain their operations.

So this is the hefty bill that the people will eventually have to bear, either directly or indirectly, as the government defers water tariff hikes.  

For Pengurusan Air Selangor Sdn Bhd, the water service operator for Selangor, Kuala Lumpur and Putrajaya, it is imperative for water tariffs, especially for domestic usages, to be allowed to rise according to the company’s business needs and as per WSIA.

“It is very clear [to us] that once we have submitted the financial business model, and the model has been approved, by right there should be an increase in tariff.

"Meaning to say that the increase in tariff is ‘upfront’, and not at the ‘back-end’,” says Air Selangor acting chief executive officer Abas Abdullah.

This means tariffs should be allowed to rise first, with the proceeds channelled to implementing Air Selangor’s capital and operational expenditures. The state-owned water company’s business model should not be invest first-pay later, as is the case now.

With Air Selangor requiring RM35 billion in capital investments in infrastructure over the 30-year period from 2019 onwards to reduce its NRW to 15%, the company is in dire need of funds.

Unless the federal government could provide the bulk of the funding through Pengurusan Aset Air Bhd, which owns the nation’s water assets, tariffs will have to rise.

Read the whole story in this week’s issue of The Edge Malaysia weekly.  

In the second cover story, we look at whether things could get worse for the local stock market in the second half of 2023 (2H2023).

Financial markets continued to be impacted by the shock waves of rising interest rates, geopolitical risks and recession fears in 1H2023.

Despite the chaos around the world, US equities have been on the rise — the Dow Jones Industrial Average gained 3% year to date, while the S&P 500 advanced 15% — a stark contrast to the FBM KLCI, which had declined by 7%.

To be fair, the local benchmark index had a good start in January, gaining close to 2% within the first month of the year.

Then came the banking crisis in March, which saw the collapse of Silicon Valley Bank and Signature Bank in the US, as well as the acquisition of Credit Suisse by UBS in Switzerland. While the situation had eventually calmed down, market sentiment had been affected and many investors had turned cautious since then.

In the face of market volatility, what steps should investors take? What are the main factors that they should be watching out for in the second half of this year?

The Edge spoke to Pheim Asset Management Sdn Bhd founder and chief strategist Dr Tan Chong Koay, Tradeview Capital Sdn Bhd CEO Ng Zhu Hann, Amundi Malaysia head of Asean equity Andrew San, MIDF Amanah Investment Bank Bhd research head Imran Yassin Yusof and Inter-Pacific Securities head of research Victor Wan to get the answers.

Meanwhile, how did stocks selected by fund managers and The Edge perform in 2023?

Get the full story in this week’s issue of The Edge Malaysia.

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