Wednesday, July 24, 2013

Water For Singapore

Water For Singapore

1. I would like to thank the visitor to my blog who pointed out that the terms of the agreement to supply raw water and receive treated water to and from Singapore actually favours Malaysia. I agree. But I am talking about revision in the price of raw water since 3 sen per 1000 gallons is ridiculous today. It would be even more ridiculous in the decades to come. Hence, the need to renegotiate. According to the present agreement, if Malaysia sells 1,000,000 of raw water it should be paid 3,000 sen or RM30.00.

2. Malaysia can buy 12% of the raw water treated by Singapore at 50 sen per 1000 gallons i.e for 120,000 gallons, Malaysia has to pay RM60.00 for this. But the cost of treating water is RM1.09 (say RM1.10)

3. The savings for Malaysia is therefore 60 sen per 1000 gallons equals to RM72.00 for 120,000 gallons.

4. Since 3 sen is ridiculous, supposing Malaysia wishes to ask for 6 sen per 1000 gallons, an increase of 100%. It can only do so if Singapore agrees. It can be assumed that Singapore would want to increase the price of treated water. It may ask for the same quantum i.e a 100% increase to RM1.00 per 1000 gallons.

5. For 120,000 gallons Malaysia will have to pay RM120.00. The cost of treatment for 120,000 gallons is 1.10 x 120 = RM132.00.

6. The benefit for Malaysia would be reduced to RM12.00 due to the increase in price. If there is negotiations then Singapore might be persuaded not to increase or to increase at a lower rate. But this will not be the end.

7. Johor charges Malacca 30 sen per 1000 gallons. If we charge the same to Singapore would it raise the price above the cost of treatment? If it does than it would be better for Malaysia to have its own treatment plant.

8. That is why negotiations are necessary from time to time. We should not allow ourselves to be short-changed over the next 57 years to 2060.

9. Malaysia should learn to include exit clauses when entering into agreements. It should always remember that over time money depreciates i.e prices increase.
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