As the country grows so does the problem of providing sufficient clean water to the population and until about five decades ago, Malaysia’s waste disposal system was no different from what is still found in many developing countries. Malaysia’s 27 million people generate about six million tons of sewage every year, most of which is treated and released into the rivers. Proper treatment of sewerage is paramount as about 98% of Malaysia’s fresh water supply comes from surface water.

Raw surface water becomes contaminated as a result of excessive and indiscriminate discharge of wastewater directly from households or factories to drains and into rivers with minimal or no treatment. This impairment of water quality greatly reduces the usability of the water for ordinary purposes or in a worst case scenario creates a hazard to public health through poisoning or the spread of diseases. To combat this, around 8,000 public sewage treatment plants, 500 network pumping stations, 17,000 kilometers of underground sewerage pipes and half a million household septic tanks connected to the sewers. In response to the increasing demand for a better and effective sanitation services, private companies were encouraged by the government to build wastewater management systems.

As an important component for the development of the country, high emphasis has been placed on the conservation and preservation of water. The enactment and enforcement of the SPAN Act in 2007 was to address all previous deficiencies and to provide a holistic approach to the planning and development, operation and maintenance, provision of water supply, the management, ownership and control of rivers and raw water sources, the provision, operation and maintenance of sewerage services, planning and development of new utility infrastructures for rural and urban areas, the coordination and integration of all such related services, regulating and licensing of water services operator and providers.

The water and wastewater sector offers companies with innovative and revolutionary   technologies a very good prospect, as the new watchword of the ruling government is "A Caring Government" and in line with this, the 2009 Budget focused on the provision of clean water and good sanitation for all Malaysian. The government has budgeted to spend US$85.01 Million for the fiscal year of 2009 to upgrade and supply clean water to rural areas.

Market Trend

Malaysia receives an average annual rainfall of about 3,000 mm, with a total surface runoff of approximately 566 km³, and about 64 km³ contributing to groundwater recharge. The total internal water resource of Malaysia was estimated at 580 km³/year. The World Resources Institute had estimated that in 2007 the annual renewable water supply of Malaysia to be approximately 22,100 m3/person/year, a fall of about 2% from 22,484 m3/person/year in 2006.

But by 2025 it is projected that this would fall to approximately 10,000 m3/person/year2, having said that Malaysia is still very much "rich" in water resources but all these will come to naught if this precious resource is not conserved and preserved.

Water is harvested from the 150 river basins systems around the country that contribute 98% of the total national water use. However this type of water supply system is always subjected to climatic conditions; as would be the case of declining supply during the hot and dry seasons when demand peaks, and the environment. The quality of raw water has declined over the past decade due largely to the lackadaisical attitude of people towards the preservation of its surrounding environment. Indiscriminate disposal of waste and toxic material, construction and development in and around water catchments areas greatly contributed to the degradation of these riverine systems. To harvest safe yield from surface water sources, the government had to-date constructed 55 single purpose and 17 multipurpose dams, with a total storage of 30 billion m3.

As an important component for the socioeconomic development of any nation, the government of Malaysia has placed a high priority for water and sewerage infrastructure development in cities and towns, and the provision of sanitation facilities in rural areas. The increased demand for clean water has led to competition in water use among the various water user sectors and the continued economic growth will magnify this even more acutely. The practicable limit of surface water resources development has been reached in regions of high demand, and it has become necessary to consider other options. The approaches of "get water from somewhere" in water shortage crisis can no longer be applicable nor sustainable.

A proposed 45 km pipeline, estimated at US$3.0 Billion3, to transport raw water from Pahang to Selangor, to address water shortage and uneven distribution of water resources in Selangor, Kuala Lumpur and Putrajaya is expected to begin construction some time end 2008 after the completion and approval of the Environmental Impact Assessment. The effort to reduce the Non-Revenue Water (NRW) from a national average of 38% to 30% is an on-going task for the government and water providers on the rehabilitation of water treatment plants, water mains and distribution pipes to prevent further losses of an important commodity.

The possibilities of harvesting of storm water has been debated by both government and NGO, that beside controlling the occurrences of flash floods in urban centers and downstream areas, the application of storm-water management has the potential of improving the quality of receiving waters and meeting the increasing water demand. Runoff that is stored in detention ponds could be treated before it is released into the existing drainage channels or alternatively, the water can also be used for non-potable purposes such as watering parks and golf courses, and cleaning streets.

In the Ninth Malaysia Plan from 2006-2010, groundwater exploration and development program was looked into as yet another source of water supply to water shortage areas and for irrigation. Wastewater is a mixture of water and dissolved or suspended solids or waste that is discharged from homes, businesses, and industries and this is one of the major pollutants of water bodies. Cities and other urban centers are well known for being polluters of the aquatic environment with sewage and municipal wastewater, industrial, agro and animal husbandry effluents and polluted runoff. In areas of high degree of industrializations, some rivers are declared as Class V under the Water Quality Index (WQI) as the river water is no longer suitable for water supply, recreation, irrigation, fisheries or any other use. A reliable and efficient sewerage system is a vital contributing factor towards the improvement in environmental health of the nation.

Market Access

Malaysia practice an open economy market policies however there is a proviso set by the Malaysian Foreign Investment Committee which states that for "companies which activities involve national interests such as water and energy supply, broadcasting, defense and security and any activities which is of national interest as determined by the Government from time to time, the participation of foreign interest is limited to 30%. In certain circumstances, the Government may also impose other conditions such as the issuance of the "golden share"5; this allows foreign equity participation of up to 30% while Malaysian owns remaining balance of 70% of which 30% must be allocated to Bumiputeras6. This includes services in the environmental impact assessment consultancy, scheduled waste management services, energy services, but exemptions from foreign equity restrictions are allowed in certain strategic services like recovery of wastes through recycling. New project investments or expansion in water supply is still limited to 30% foreign equity participation (WTO, 2005). Exemptions are only allowed in an "acquisition of interest in a manufacturing company licensed by the Ministry of International Trade and Industry as well as manufacturing company which are exempted from obtaining manufacturing license"

Market Entry

The normal path to market into the water and wastewater industry is through the appointment of a sole distributor or agent. International tenders are generally open to pre-qualified, registered suppliers and preference is usually given to foreign suppliers with local distributors or agents. There are opportunities for companies to establish strategic alliances with local companies involved in the water supply industry. For foreign companies wishing to enter the market, it is essential to work with a local partner with relevant industry knowledge and marketing and technical support capabilities. Partnerships often involve some form of technology or skills transfer or a joint venture with equity participation. Transfer of technology by a foreign company to its local partner is considered very important especially when seeking to secure major government projects.

Market Issues & Obstacles

The government is currently drawing up new standards for water supply products that lack Malaysian or International Standards accreditation. Work by various committees led by the Water Supply Division of the Public Works Department Malaysia, in close cooperation with SIRIM, the various state Water Supply Department, foreign experts and representatives of local manufacturing concerns, has seen the drafting of several new Malaysian Standards (MS) for adoption by the authorities.

Excerpts from: Malaysian Water & Waste Water, September 2008, U.S. Commercial Service.