Vivian says M’sia benefitted from buying treated water at 21% of cost but why SG consumers charged at least 672%?

In Parliament today (9 Jul), Foreign Minister Vivian Balakrishnan said he expects Malaysia to fully honour the terms of the 1962 Water Agreement, including the price of water, signed between Singapore and Malaysia.

“The 1962 Water Agreement was guaranteed by both Singapore and Malaysia in the 1965 Separation Agreement, which in turn was registered with the United Nations,” he said.

Tying the 1962 Water Agreement to the 1965 Separation Agreement signed between both countries, Minister Balakrishnan added, “Any breach of the 1962 Water Agreement would call into question the Separation Agreement, which is the basis for Singapore’s very existence as an independent sovereign state.”

Water has been in the spotlight in recent weeks after Dr Mahathir said in an interview with Bloomberg last month that the 1962 water supply deal with Singapore was “too costly” for Malaysia and that he wanted to talk to Singapore about it.

“We will sit down and talk with them, like civilized people,” Dr Mahathir told Bloomberg.

The water agreement allows Singapore to draw up to 250 million gallons of raw water from Johor daily at three sen (1.01 Singapore cents) per 1,000 gallons.

Vivian: Malaysia benefited from water pricing arrangement

In Parliament, Minister Balakrishnan noted that Singapore has already stated its position on the water issue comprehensively.

“The core issue is ‘not how much we pay, but how any price revision is decided upon’,” he said. “Neither Malaysia nor Singapore can unilaterally change the terms of this agreement between our two countries.”

He also added that Malaysia has previously acknowledged that they themselves have benefited from the pricing arrangement under the deal.

Johor currently buys treated water from Singapore at 50 sen per 1,000 gallons, as provided for under the 1962 Water Agreement. This is a fraction of the cost to Singapore of treating the water, he further noted.

“Hence, in 2002, then-PM Dr Mahathir said that Malaysia did not ask for a review when it was due as Malaysia knew that any revision would also affect the price of treated water sold by Singapore to Malaysia.”

According to a MFA media release on its website, it costs Singapore RM2.40 to treat every 1,000 gallons of water. By selling the treated water to Malaysia at 50 sen or 21% of cost, Singapore is providing a subsidy of RM1.90 per 1,000 gallons to Malaysia. Everyday, Singapore is providing a water subsidy of RM70,000 to Malaysia, it said.

Singaporean households charged at least 672% more for treated water from PUB

Meanwhile, Singapore’s water prices were raised earlier this month (1 Jul). The new water tariff which Singapore households now have to pay is:

• S$1.21 per cubic meter, for consumption below 40 cubic meter per month
• S$1.42 per cubic meter, for consumption exceeding 40 cubic meter per month

This does not include the Water Conservation Tax or the Waterborne Fee. If both are included, the total water price would be:

• S$2.74 per cubic meter, for consumption below 40 cubic meter per month
• S$3.69 per cubic meter, for consumption exceeding 40 cubic meter per month

Since MFA said that it costs Singapore RM2.40 or S$0.81 to treat every 1,000 gallons (4.55 cubic meter) of water, that means it costs Singapore S$0.178 to treat every cubic meter of water. Including the cost of buying water from Malaysia at 3 sen per 1000 gallons or S$0.0022 per cubic meter, the total cost to Singapore for 1 cubic meter of treated water would be $0.178+$0.0022 or S$0.18.

To summarize, PUB buys water from Malaysia at S$0.0022 per cubic meter and spends another S$0.178 per cubic meter to treat it, giving a total cost of S$0.18 per cubic meter. It then in turn, sells to Singaporean households at S$1.21 per cubic meter (using the above $1.21 rate and excluding Water Conservation Tax and the Waterborne Fee). This translate to at least 672% more Singaporean households have to pay for the treated water from PUB. And if we use the S$2.74 rate which is inclusive of taxes, Singaporean households end up paying 1,522% more.

So, can PUB give Singaporeans a breakdown how consumers are being charged 672% more after buying water at 3 sen from Malaysia and treating it at RM2.40 per 1,000 gallons?

Furthermore, can PUB also explain the S$1.1 billion profits it gained in the last 7 years, as noted by financial blogger Leong Sze Hian?

Editor’s note – It would help a lot to explain to the citizens on the cost to treat water via the Newater or desalination process. However, PUB chooses to lump everything together and justify the increase of water by simply referring to the investments made by the government on water treatment. Based on past figures, it seems that the government will eventually be profiting from the sale of utilities even though the upfront investment is high.