The Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBAPP): A Good Example of Corporate Social Responsibility of a

Private Water Company in Malaysia

Chan Ngai Weng, PhDPresident, Water Watch Penang

Professor, Universiti Sains MalaysiaEmail: nwchan@usm.my

www.waterwatchpenang.org www.pba.com.my

CONTENTS(1)INTRODUCTION

(2)HISTORY OF PBAPP SDN BHD

(3)WHAT IS CORPORATE SOCIAL RESPONSIBILITY(CSR)?

(4)CSR OF PBAPP SDN BHD

(5)CONCLUSION.

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(1) INTRODUCTION

OBJECTIVES OF THE PAPER:

(i) Showcase how a private water company which is privatised professionally in a transparent & accountable way can be successful

(ii) Introduce the concept of Corporate Social Responsibility (CSR)

(iii)Demonstrate how PBAPP has embraced CSR & examine to what extent other companies in Malaysia can use their example

(iv)Promote CSR for all businesses in Malaysia to ensure Sustainable Development.

WATER IS A GIFT FROM

GOD & SHOULD BE FREE FOR ALL – 100%

AGREE

HOWEVER, WATER IS ONLY “FREE” IF YOU HARVEST IT

YOURSELF. DO NOT EXPECT H2O TO BE TREATED & PIPED

TO YOUR HOUSE FOC!

FREE PAY

“WATER PRIVATISATION SHOULD NOT BE OPPOSED BLINDLY WITHOUT A STRONG

BASIS AS IT IS UNPROFESSIONAL, CONFRONTATIONAL & GIVES NGOs A BAD

NAME”

THERE ARE MORE CASES OF FAILURES IN PRIVATIZATION OF THE WATER SECTOR IN MALAYSIA THAN THERE ARE SUCCESSES:

•SABAH is deep financial crisis and never recovered from massive overspending and privatization resulting in a cycle of debt that caused serious cash flow problems for the government (By the end of 2002, the state owed RM524mil to three water concessionaires BUT such massive debts have never happened in the old days before privatization)

•KELANTAN - Thames Water of London and the State-owned Kelantan Darul Naim Foundation were involved but failed miserably

•INDAH WATER KONSORTIUM (IWK) - The Government had to buy back IWK from Prime Utilities Bhd for RM192.54 million early 2000 (IWK was awarded the sewerage treatment and management services in 1994)

•PUAS, Puncak Niaga – Viable but supported by loans from government

•Perbadanan Bekalan Air Pulau Pinang Sdn Bhd (PBAPP) with PBA Holdings, is listed on the KLSE main board. Appears successful (State still holds majority of shares, State Water Supply Dept controls PBAPP, professionally run, manages the entire spectrum from source to tap, diversifying outside the country, etc.

WATER PRIVATISATION EXPERIENCES IN MALAYSIA

• PERBADANAN BEKALAN AIR PULAU PINANG SDN BHD (PBAPP) was incorporated on 1.3.99 to undertake the role of the successor in the corporatisation of the Penang Water Authority

• PBAPP was granted a license by the State Government pursuant to Part IV, Section 16 of the Water Supply Enactment 1998 to operate as the water supplier in the state

• PBA Holdings Bhd (PBAHB) was incorporated in Malaysia on May 25, 2000 as a public limited company under the Companies Act, 1965:

(a) Governmental Control – Government must still hold majority shares & have the final say in major decisions except the operation

(b) Regulator Penang Water Supply Department (Government Agency)

(c) High Level of Professionalism (Success is determined by Public (Shares).

(d) Works with government agencies, consultants, NGOs, & public (Tariffs, Shares Distribution, New Projects, etc)

(e) All projects based on Open Tender System & the Privatisation process is transparent, viable, justifiable, ethical & equitable

(2) HISTORY OF PBAPP SDN BHD

http://www.pba.com.my

Perbadanan Bekalan Air Pulau Pinang Sdn Bhd

(PBAPP)

(3) WHAT IS CORPORATE SOCIAL RESPONSIBILITY?

•There are many definitions of CSR, and in the past 10 years the concept of CSR has significantly evolved

•CSR is a concept that organisations, especially (but not only) corporations, have an obligation to consider the interests of “Social Responsibility” (i.e. responsibility to customers, employees, shareholders, communities & environment) in all aspects of their operations

•CSR is seen to extend beyond the statutory obligation to comply with legislation

•CSR is closely linked with the principles of Sustainable Development, viz. enterprises should make decisions based not only on financial factors (profits), but also based on the immediate and long-term social and environmental consequences of their activities.

• The World Business Council for SD states that: "Corporate social responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large.“

Models of CSR:

The Philanthropic Model – In the United States, CSR has been defined much more in terms of a philanthropic model

The European Model – In much of Europe, this is much more focused on operating the core business in a socially responsible way, complemented by investment in communities for solid business case reasons

The “Greenwash” Model – In many parts of Asia many companies jump on the bandwagon but their CSR is more greenwash than anything concrete.

CSR is about how companies manage the business processes to produce an overall positive impact on society, while at the same time minimizing the negative impacts, as

shown in the Figure below:

(4) CORPORATE SOCIAL RESPONSIBILITY OF PBAPP SDN BHD

•PBAPP has fully committed itself towards its Corporate Social Responsibility by contributing towards water conservation and supporting as well as working closely with NGOs, especially Water Watch Penang (WWP) (www.waterwatchpenang.org) in its conservation programmes

•PBAPP is committed to share its profits with its employees & the public via Share Offers on the Stock Exchange

•PBAPP has achieved ISO9000 Quality Standards

•PBAPP has achieved and maintained ISO14001 Standards

•PBAPP is willing to share its success & experience with other water companies

•PBAPP has funded other Social Programmes

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Partnership with NGOsAnnual Water Conservation Programme – PBAPP carries out an annual water awareness & education programme with Water Watch since 1999

The main objectives :

Ø To provide students with a relevant and empowering educational experience about protection of watersheds and other water resources.

Ø To teach students and youths how to take action on water issues.

Ø Involve young people in investigation and action on local water issues

Ø Encourage voluntary action

Ø Establish and encourage links between youth and community and natural resource professionals.

Activities

EXAMPLE: YOUTH ACTION FOR WATER PROGRAMME 2001

PUBLICATIONS ON WATER CONSERVATION

PRODUCTION OF VCD ON WATER CONSERVATION

Networking with Local & Regional Organisations • Sustainable Penang Initiative • MyWP• Penang National Park (Achieved 2003]• USM (RCE PENANG)• UNDP• WWF Malaysia• MENGO• JBA, JPS, PDC, DID, DOE & OTHER GOVERNMENT DEPARTMENTS

NETWORKING

PenangBotanic Gardens

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“WWP SCHOOL ACTIVITIES – CARING FOR OUR RIVERS CAMPAIGN”

Organised with PBA, FORD Foundation, Malaysian Nature Society (Penang Branch), etc. Objectives: to raise awareness on water conservation

to increase knowledge in water monitoringto encourage schools to adopt a river for monitoring

Activities: walk along river bank of Sg. Air Terjuntest water quality (physical, biological and chemical parameters)

Watching Out For Our Rivers -Air Terjun River (Tributary of Pinang River)

Monitoring River Water Quality & Collecting Water Samples for Testing

WATER SAVING CAMPAIGNS

WATER DEMAND MANAGEMENT

WORLD WATER DAY CELEBRATION EVERY YEAR

SINCE 1999

PBAPP-WWP-N PARK RA “WATER DEMAND MANAGEMENT PROJECT” 2007

N-PARK RESORT CONDOMINIUM

KEY PERFORMANCE INDICATORS OF PBAPP SDN BHD BEST WATER SUPPLY COMPANY IN MALAYSIA:

•PROFITS

•EFFICIENCY (ISO9001)

•TRANSPARENCY & PUBLIC ACCOUNTABILITY

•ENVIRONMENTAL STANDARDS (ISO14001)

•MINISTER OF ENERGY, WATER & TELECOMMUNICATIONS ANNOUNCED THAT ALL WATER SUPPLY COMPANIES SHOULD FOLLOW PBAPP’S MODEL & EXAMPLE

•PBAPP IS EXPANDING OVERSEAS –CURRENTLY PROJECTS IN CHINA, MIDDLE-EAST, SOUTHEAST ASIA.

State Domestic Rate (Average for1st 35m3) Industrial Rate (Flat/Base Rate)

Sabah 0.90* 0.90Labuan 0.90 0.90Perak 0.67 1.20Sibu 0.62 0.97 Kuching 0.62 0.97Sri Aman, Miri, 0.62 0.97Limbang, Sarikei, KapitMelaka 0.59 1.40Perlis 0.57 1.30Sarawak 0.56 0.95 Bintulu 0.55 1.21 Selangor 0.55 1.20 Negri Sembilan 0.55 1.00 Kedah 0.53 1.20 Johor 0.53 1.20 Terengganu 0.44 1.15 Kelantan 0.31 0.70 Pulau Pinang 0.31 0.90 ** Ringgit

(Source: Water Water Association)

LOWEST WATER TARIFFS IN MALAYSIA

WHY?

•Tariffs controlled by Government

•NGOs have a say

•Share Holders have a say

•Industry has a say

•Chief Minister has the final say

LOWEST NON-REVENUE WATER (NRW) RATES IN MALAYSIA

MALAYSIA

= 40 %

•The PBAPP example proves that privatization of water is not necessarily bad, although the majority of cases have failed in Malaysia

•Privatisation can be successful if carried out in a transparent, accountable & professional manner without political or other interventions

•Privatised water companies should embrace CSR as a core business function (Government should make CSR mandatory)

•Water companies must not view CSR as a liability but as an opportunity to make more money •WATER IS EVERBODY’S BUSINESS: GOVERNMENT-INDUSTRY-NGO-PUBLIC

(5) CONCLUSION

TERIMA KASIH

www.waterwatchpenang.org

www.pba.com.my