When privatization takes place, it is followed by a process akin to cannibalization. Polite society call its cherry picking and the World Bank refers to it as unbundling.

What the newspeak means is that the profitable and unprofitable sectors of the production process of service or good are separated. The unprofitable sectors are transferred to the private sector.

This has taken place in many sectors including electricity, telecommunications, road infrastructure, oil and water services sector.

This is the only way that privatization can successfully take place, as it obvious to all and sundry (except those who are blond or chose to be) that he private sector is not in the business of ensuring universal access to water services, or health care or a sound transportation system or any public good for that matter. This has historically been the role of the Government.

Because only the State has the power to levy taxes, it has the unique capacity o redistribute income and implement cross subsidies with the positive goal of increasing social equity and the well-being of the entire population. This is not a role that the private sector can play.

Cherry picking in water services usually means the separation of rural and urban service and/or the removal of sewerage and sanitation services.

When the profitable sectors of water services are removed from the public domain, an important source of cross subsidy is lost.

So cherry picking/cannibalization removes the possibilities for sectoral cross subsidy and disempowers (reduces) the capacity of the Government to use taxing systems to promote sustainability, public health and social equity goals. Similarly, privatization has removed a significant revenue source from the State Waterworks Department. That could explain how the Selangor State Water Department (now PUAS) still owes the water privateers some RM900 million or why Selangor taxpayers spend RM1 billion for operation cost alone.

It looks like these debts and fiscal problems became unmanageable only after privatization kicked in.

In fact a review of the over all revenue and expenditure for the State Water Department from 1978 to 1997 (on the JKR website) showed that they were in the black.

However in 1997, Selangor’s expenditure registered over RM400 million while revenue accrued showed RM274 million only. (Selangor privatized water treatment in 1994) Was this the start of the road to perdition? Is this the route that privatised water supply and delivery in other sates will go?

Now that distribution of water supply and billing has been handed over to PUAS, who has in turn hired a company to collect debts, what is the precise role of the Selangor Government in the water business?

Now that the State no longer collects revenues from billing; who is responsible for the deficits-creating aspects of water services delivery, eg loans and debt incurred from expansion of the water sector, maintenance, expenditures, insurance fees, and interest on the pass loans, etc? Does the State have to pay lessee fee to private water operators?

IS that Why Selangor has to fork out RM600 million every year at taxpayers’ expense “to assist PUASin operations”? One cannot help but ponder on these imponderables.

Samy Vellu’s reason for water privatisation is that it “would allow burden to be shared by many people rather than just one agency, the Water Supply Department”.

He could’nt be more correct. Privatisation of water services is ultimately paid for by us – the people.

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