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Tuesday, July 22, 2014

Did Khalid sell out on Selangor’s water?


COMMENT  Two main contentions are used by critics of Selangor Menteri Besar Abdul Khalid Ibrahim’s management of water in the state. The first is to hold him responsible for water shortages, the second concerns mismanagement of the water restructuring deal.

Khalid has been passionate about fixing the water industry from the day he stepped into office.

He recognised right away that the way water was being managed in Selangor was a recipe for disaster, and he realised that the restructuring and de-privatisation of the water industry was the only viable comprehensive solution to Selangor’s water problems.

Six years later, with the water restructuring incomplete, Selangor is indeed facing water problems.

A number of people (with politicians both at their forefront and at their backs egging them on) blame Khalid, and demand that he does something. I have not seen a single of these people actually provide Khalid with a detailed, viable roadmap of what they actually want Khalid to do differently with regard to managing the water crisis.

The question, once again, is whether people dislike Khalid because of the water issue, or whether people are playing up the water issue because they dislike Khalid.

It is easy to say ‘do something!’, but this exhortation should be predicated on the premise that there is actually something within the ambit of Khalid’s purview that can be done - something that would actually have a positive, long-term effect.

Khalid is in fact doing something. As usual, there are no crowd pleasing fireworks or short cuts involved.

The only way to really fix Selangor’s water problems in any meaningful way is to complete the restructuring process that has already begun. Once under a new management, the various, desperately needed solutions can be implemented, from top to bottom.

Aware of this, Khalid has pursued the said restructuring, both relentlessly and out of the limelight. He believed, accurately I feel, that actual work would be better accomplished without wars of words in the media and so on.

Can the BN be trusted?

In doing so, Khalid has won the ire of some for being excessively trustworthy of the BN federal government.

I have never known Khalid to be excessively trustworthy of anyone, including members of his own team.

At some point, we must examine exactly how far we want to take partisanship. On one end of the spectrum, a state government could try fighting the federation at every single turn. This would in short, make said state literally ungovernable.

If we accept that, then there must be some measure of cooperation, and the question then becomes whether any one party will take advantage of the other.

Anyone who has seriously watched Khalid knows that he is nowhere near the bumbling fool that he sometimes allows himself to appear as. The man got where is was by honing a razor sharp instinct for a good deal - the bigger the deal, the sharper the instinct.

I do not believe for a moment that Khalid got hoodwinked in any part of the water deal. I believe that the integrity that forms Khalid’s core also means that no interests were sold out in the process either (for those who persist in making something out of nothing, there will be one whole section on Bank Islam tomorrow, in the last part of this series).

Uncompromising positions

To recap some of the water industry takeover process: Khalid made the water concessionaires a number of progressively higher offers to buy over the industry, which were all summarily rejected.

The highest offer made was a total of RM 9.65 billion. Once Khalid reached this sum, he refused to increase it by a single sen - a position he maintained for years.

The concessionaires obviously played coy, believing Khalid would eventually cave in, or hoping perhaps for a change of state government in GE13.

In the end, the concessionaires and their BN backers blinked first. If one was inclined to be unkind, the phrase perhaps used would be ‘they were brought to their knees’.

In the end, Selangor got everything Khalid wanted from the water restructuring deal, including what he has always maintained is a fair price. As part of the deal, approval for the Langat 2 water treatment plant was given, pending finalisation of the restructuring exercise.

To date, one of the only stumbling blocks to the timely completion of this restructuring and the subsequent solving of Selangor’s water woes, is Splash - one of the four water concessionaires that is owned primarily by Wan Azmi Wan Hamzah, a long time backer and associate of Anwar Ibrahim.

Splash is trying to hold out for a higher selling price, but Khalid believes that his final price is more than fair. Having read through various valuation methods and studies regarding Splash, I am inclined to agree.

Khalid is consistent in making no exceptions in his refusal to budge on offer price - not for BN-linked players, and not for PKR-linked players. Perhaps the latter got to thinking that changing the menteri besar might change the situation.

An Alam Flora lesson for water negotiations

As a comparison, I often reference Khalid’s handling of the ‘rubbish crisis’ of 2012.

When it came time to renew Alam Flora’s contract, Khalid insisted they reduce what he knew to be over-inflated prices that Alam Flora had negotiated when BN ran Selangor.

Alam Flora refused, and Khalid politely said that in that case, the door is that way, thank you very much.

Alam Flora thought that Khalid was playing poker with no cards, but Khalid did not blink. Alam Flora’s contract was allowed to expire, and the local government was instructed to handle rubbish collection directly, with no middleman.

Immediately there were all sorts of reports of sabotage in rubbish collection, and public uproar was deafening - with Khalid getting the most criticism as usual. However, he stuck to his guns and stayed the course.

Eventually, the initial hiccups were overcome, and now Selangor’s rubbish is collected just as effectively as before, while its citizens are richer by no less than RM 100 million a year - an amount saved simply by cutting out a redundant middleman.

Khalid made zero personal profit from cutting out Alam Flora, and did not compromise any of Selangor’s interests whatsoever. On what basis would we suspect him of doing anything different with regard to the water industry?

I think the takeaway is that when it comes to corporate management, few people know their business better than Khalid Ibrahim.

Selangor’s water woes need long-term, sustainable solutions, and while doing his best to help the short term, Khalid is focusing his primary energies on seeing the water restructuring exercise through and counting on that to make the pivotal difference.



NATHANIEL TAN joins Malaysia in offering sincere condolences to all those who lost someone in the MH 17 tragedy.

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