Malaysia Agrees on Water Industry Nationalization Amid Drought

Malaysia’s federal government is ready to inject funds to help opposition-controlled Selangor state nationalize water assets in the region surrounding Kuala Lumpur as the country’s drought worsens.

Selangor will also give the go-ahead for an additional water treatment plant after agreeing to an action plan with the central government today, according to a joint statement. They agreed to pay a combined 9.65 billion ringgit ($3 billion) to four water concessionaires to take over their assets to revamp the industry, the local authority said in a separate statement.

Water rationing began in parts of Selangor this week after a month-long drought drained dams. The state, controlled by Anwar Ibrahim’s opposition alliance, has been trying to nationalize treatment assets in its jurisdiction for years. Some other parts of Malaysia have also reported shortages amid rising concerns over the potential impact on palm oil crops if the dry weather continues.

“Today is a historic day which has been long-awaited for by the residents,” the governments said in the statement. “The prolonged negotiation has lasted since 2008 without any solution. This affected the water supply service industry in Selangor state and new projects can’t take off due to the lack of water supply.”

Companies including Gamuda Bhd., Kumpulan Perangsang Selangor Bhd. and Puncak Niaga Holdings Bhd. are being asked to sell their interests. The central government would contribute 2 billion ringgit with the takeovers to be completed within three months, according to one of the statements.

Prime Minister Najib Razak witnessed today’s signing after failing to win back control of the Selangor assembly in last year’s general election.

Before it's here, it's on the Bloomberg Terminal.