the __earthinc

The tussle for control of water distribution in Selangor attracts strong opinions and allegations. The Pakatan Rakyat Selangor state government and its supporters claim that Syabas, the sole water distributor in Selangor, is being mismanaged. Some of the more vocal supporters of Pakatan Rakyat and the state government claim that Syabas is a case of incompetence and downright corruption. The state government believes it could do a better job than Syabas. Whatever it is, Pakatan Rakyat is on a relentless offensive. In the end, however, it might find itself in a situation that Napoleon once found himself in, which was in the frigid Russia.

Pakatan Rakyat in Selangor is having a successful campaign so far. That is because it is hard to disagree with most of the issues raised by Pakatan Rakyat given the negative reports surrounding Syabas. Breach of contract, conflict of interest, large compensation received by its executive chairman Rozali Ismail”¦ the list goes on and on.

The large debt accumulated by Syabas is a symptom to all of these issues and the symptom itself cannot be swept under the carpet. The debt is the immediate factor for Syabas’s request to increase its water tariff by a significant margin.

The state government opposes this, convinced that Syabas is passing the cost of its mismanagement to water consumers unnecessarily. This presents a problem for Syabas. Without the hike, it faces the possibility of bankruptcy.

The default might happen as soon as the end of this year, which is just days away. Bondholders of Syabas have argued that the default might adversely affect the wider capital market, hence the necessity of bailout. The Barisan Nasional-led federal government seems convinced of that argument and it has indicated that a bailout is possible.

The fear is very real. What is also real is the anger that will follow any bailout. Any bailout will be unfair because it is a case of privatizing profits but socializing losses. The stakeholders of the bailed-out firms stand to gain everything at the expense of taxpayers at large.

That, however, does not negate the fact that the only thing that is worse than being forced to pick up someone else’s tab is having no tap water. Any allegation made against Syabas, which is likely to be true, will stand pale against widespread unfulfilled demand for tap water. The tap water must flow regardless the issues.

If there is no resolution to the war of attrition between the state government and Syabas before the default occurs, Pakatan Rakyat’s campaign might see its fortune reversed. When push comes to shove, a bailout will be preferred to no bailout.

Without bailout, the uncertainty regarding tap water supply will be devastating. Everybody loses under the case of no bailout, and no tap water.

If a bailout does happen, somebody will have to take the blame. The federal government will not want to be that somebody. The federal government will want to be seen as the savior of the day instead.

To do so, the federal government might defend itself by stating that without a bailout, the tap water might not flow. The fear of possible water supply interruption is already making its round in the mainstream media. The Sultan of Selangor, for instance, has voiced his concerns regarding the matter.

It is in the interest of Pakatan Rakyat-led Selangor to not to have a bailout. It is in its interest to resolve the issue before Syabas defaults on its bonds.

Perhaps, it is even in the interest of Pakatan Rakyat to allow the water tariff hike to happen. At least that way, Pakatan Rakyat can continue to be on the offensive, leaving Syabas and, indirectly but more importantly, Barisan Nasional on the defensive well into the next state and national elections.

First published in The Malaysian Insider on December 15 2010.