Social policies and private sector participation in water supply – the case of Malaysia (Draft)

The development of water sector in Malaysia has been fairly uneven. While the more developed states have achieved almost universal water coverage, the less developed states continue to struggle to provide access to water, particularly in the rural areas. Underinvestment in the water distribution systems has also resulted in serious non-revenue water problem in some states. A few states have opted to privatise their water sector. Evidence from household expenditure data indicates that, as a result of private sector participation (PSP), access to treated water has improved for all income categories between 1993/94 and 1998/99. However, water affordability for the households with lower incomes has worsened during the same period. The impact of privatisation on issues of access and affordability is mixed. Econometric analysis indicates that privatisation does not seem to have improved access to water nor has it necessarily worsened water affordability. The latter observation is consistent with the analysis of consumption based on existing tariff levels and the WHO’s lifeline consumption benchmark.

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