Jun 29, 2018

By Melvin Leong, Associate Director, Energy & Environment Practice, Frost & Sullivan

Malaysia has one of the most organised water infrastructures, with one of the highest rates in population access to clean water and sanitation in Southeast Asia. Nonetheless, overbearing challenges remain in the Malaysian water industry, such as:

  • High non-revenue water due to leaks, water theft, and payment defaulters
  • Old distribution pipes causing discolouration of treated water
  • Old distribution pipes being prone to damages that cause leaks
  • Domestic water EPCs dominate the municipal water segment, while industrial water market will remain as low hanging fruits for foreign water companies
  • Water tariff in Malaysia, which is already one of the lowest in Asia, is unlikely to be reduced in the short term

Lukewarm Water in 2018

Frost & Sullivan had earlier forecast a CAPEX of $1.67 billion in Malaysia’s municipal segment in 2018, a growth of 11.3% from 2017. A pessimistic reforecast shows a lowered growth rate at 9.5% or spending of $1.64 billion in 2018. However, the reforecast shows only a marginal drop in actual spending. The outlook of the water industry for the remaining year is expected to be positive, as efforts will be intensified on reduction of non-revenue water (NRW), revitalisation of water infrastructure and services in urban areas, and new water infrastructure in rural areas. Nevertheless, with the exception of Sabah and Sarawak, it is unlikely that more new water treatment plants (WTP) will be built in the short term.

Reduction of NRW and Infrastructure Improvements

Malaysia is expected to accelerate efforts in reducing NRW, especially water physical losses, or leaks. In 2015, the national NRW was accounted as 35.5%, with Melaka and Penang recorded below 20% NRW. The previous administration had pledged to reduce the national NRW to 25% by 2020. However, this figure can be improved as Singapore and Japan recorded NRWs below 10%.

Water leakage is largely due to aging distribution mains or pipes, and this has put a strain to the WTPs which are already producing water at maximum capacities, which in turn affects water supply to consumers. The immediate solution to leak reduction is extensive replacements of pipes and associated equipment such as valves and pressure regulating valves. Construction of new WTPs to accommodate high water loss will not be financially viable and will not solve leak problems.

Immediate opportunities or focus areas are states with high NRW such as Selangor, Negri Sembilan, Perlis, Sabah, and Kedah. With the exception of Selangor, the above-mentioned states can also expect water projects in new water distribution systems for the rural population, and capacity extension of current WTPs for growing industries in those states.

All Eyes on Selangor State

The Selangor Government has announced its intention to complete the restructuring of the state’s water management. This would mean that Pengurusan Air Selangor Sdn Bhd, or Air Selangor, Selangor’s the water management body is likely to conclude the acquisition of the remaining water concessionaire, Syarikat Pengeluar Air Sungai Selangor (SPLASH) in 2018. The acquisition remained elusive pre-2018.
SPLASH is the final piece to the puzzle that will enable Air Selangor to streamline a more holistic water management in Selangor, which is the most industrialised and populous state in Malaysia. Additionally, Air Selangor will focus on service improvements in Selangor and is expected to extend consumer-friendly platforms that leverage Internet of Things (IoT) and data analytics.

Next, projects related to smart water management in Selangor can be anticipated. Water management is one of the key components for digitalisation and improvement. Selangor is working toward achieving a smart state status by 2025.

Renewed opportunities in smart water management in Selangor in the mid to long term will include:

  • Water pollution control and detection
  • Leak detection
  • Rainwater harvesting
  • Water quality monitoring
  • Advanced water pipes
  • Water use minimisation
  • Consumer-centric mobile application

The digitalisation of Selangor’s water management, especially in the above-mentioned focus areas should pave way and opportunities to foreign technology and solutions providers. Therefore, prospects in the rejuvenation of water facilities in Selangor are bright. Furthermore, water supply and improvements are anticipated to be part of the rural and suburban development, and will remain a key agenda for Selangor and Malaysia to focus on.

About Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

Frost & Sullivan

For six decades, Frost & Sullivan has been world-renowned for its role in helping investors, corporate leaders and governments navigate economic changes and identify disruptive technologies, Mega Trends, new business models and companies to action, resulting in a continuous flow of growth opportunities to drive future success.

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