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Financial Modelling by AWER is Correct!

Media statement by National Water Services Commission (Suruhanjaya Perkhidmatan Air Negara-SPAN) mentioned that our calculation is not accurate.

Financial modelling done by World Bank is actually referring to average tariff and NRW recorded in certain countires. Meanwhile, AWER’s financial modelling used official statistics, that are the NRW and lowest tariff in each state instead of average tariff (by World Bank). Average tariff is higher in value compared to lowest tariff. In Malaysia, the lowest tariff is also said to be of very low value and it is not recovering both Capital expenditure (Capex) and Operational Expenditure (Opex) in the water treatment and supply for every cubic meters. Therefore, this is in actual fact a very low estimate loss of revenue.

The World Bank has also published report in comparing NRW between developed and developing nations. In the year 2006 report, the average NRW recorded for developing nations is 35% and developed nations recorded NRW at 15%. Malaysia aspires to be developed nation by year 2020 and AWER is proposing to keep our national NRW levels at 20%. This is actually higher than the 15% average NRW recorded by developed nations and it is achievable.

AWER proposes a task force to be formed to prepare a detailed NRW reduction plan. It is important to plan rather than leaving it to the water operators to decide on the way forward in reducing NRW levels. The plan should be divided as following:

STEP 1: Identification of critical, sub-critical, and non-critical areas through NRW monitoring system. This will allow the government and water operators to plan to tackle the ‘lower hanging fruits’ first, the critical areas. The saving from these locations definitely can assist to help to reduce the NRW in the sub-critical and non-critical areas. The classification of criticalness will be based on results of NRW monitoring in each supply area. Each state will have different target as the NRW values varies.

STEP 2: As Technical Regulator, SPAN is also entitled to determine the types of replacement materials and other technical specification in water services. Without a detailed regulation on NRW monitoring and types of replacements that should be carried out, water operators will definitely put up individual extend of NRW solution system. There should be a common stand in this to ensure a proper and equitable cost can be estimated for NRW reduction. Therefore, technical standards or regulation must be developed through the task force.

STEP 3: To prevent escalated cost claimed by water operators, all water operators must be licensed and regulated under WSIA 2006. This further supports the need of Sabah and Sarawak to be regulated under WSIA 2006. This also means that SPAN will regulate the water operators. SPAN needs to audit all Capex and Opex of licensed water operators to ensure there is no element of ‘BLOATED COST’. Pengurusan Aset Air Berhad (PAAB) will be financing the development of all water services’ infrastructures to minimize the impact to tariff. The ‘Asset-Light Model’ approach is vital in ensuring NRW reduction takes place while ensuring equitable tariff.

STEP 4: SPAN should monitor achievements of water operators based on targets set on NRW reduction. SPAN should also constantly publish water operators’ achievements to inform the public of the service quality of water operators. This will keep all level of users informed and be assured that the water quality and services are constantly monitored.

Table 4 outlines NRW achievements by selected Asian cities which records NRW levels below 20% as published in the Asian Green City Index by Siemens. Densely populated areas will give quick returns as the connection per kilometer is high. This will improve the overall NRW achievements for the whole state. Eventually, saving from these densely populated areas can be used to carry out NRW reductions programmes for other locations.

Table 4: NRW achievement by major Asian cities as reported in the Asian Green City Index by Siemens



NRW recorded (%)

Year of record


Beijing, China




Guangzhou, China




Mumbai, India




Osaka, Japan




Seoul, South Korea








Tokyo, Japan



(source: Asian Green City Index, Siemens, 2011)

In short, NRW needs proper national plan and strategy. All water operators must be licensed and regulated under WSIA 2006 to ensure ‘Asset-Light Model’ can be implemented to reduce the impact to tariff while reducing NRW levels. AWER hopes that relevant agencies will take our suggestion into consideration so that Malaysia can achieve better NRW targets.

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