Home 
Topics Water Water Champions Mohamed Rasheed on Private Sector Investments in Water
 | |
Water Champion: Mohamed Rasheed
|
||||||||||||||||||||||||||||||||||||
Mr. Mohamed Rasheed is the Marketing Manager of the Malé Water & Sewerage Company Pvt. Ltd (MWSC). He has been with MWSC since its establishment in 1995. Joining the water sector at the beginning of the water decade, Mr. Rasheed has spent his entire professional life—25 years in all—experiencing and solving water problems, from shortage to salinity to pollution. He first joined the Maldives Water and Sanitation Authority (MWSA) in 1980. When the Government of Maldives (GoM) abolished the MWSA in 1995 and converted it into a Regulatory Body, Mr. Rasheed moved to the newly established MWSC. MWSC is the joint venture company formed from the partnership between the GoM and the Danish firm NTH Holding/HOH Water Technology. It is 70% owned by the government, 18% owned by IFU (Danish Industrialization Fund for Developing Countries) and 12% owned by the firm. MWSC's primary goal is to produce and distribute desalinated water for Malé on a commercial basis, with viability and sustainability as the important key words. |
Maldives has 1,195 tiny coral islands, of which 200 are inhabited. The combined land area of all these islands is a mere 298 km2 but the islands are scattered in a wide geographic area of 90,000 km2. Water for drinking and cooking comes from the thin, fragile aquifer. Hence, for the people of Maldives, water is all around, but safe water is scarce.
In the mid 90s, Malé was experiencing intense water shortages. The underground aquifer, once the major source of water for all purposes, was depleted of fresh water and displaced by brackish or salt water. Rainwater harvesting became an alternative solution but could not meet all the demands for water.
Distribution of available water was ineffective, often involving long walking distances, long queues, exorbitant charges by water vendors, and more. The wastewater handling systems, on the other hand, faced challenges such as corrosion, blockage, flooding, leakage, and poor maintenance.
Several donor countries and agencies provided generous assistance to the Government to develop the island's water supply and sanitation infrastructure. This led to the development of rainwater harvesting system, installation of public taps, development of a Strategic Plan and Water Action Plan for Malé, and more.
Despite this, the water situation did not improve significantly. Population migration into Malé from outer islands continued unabated and the water demand kept growing. Within a couple of years, water demand outpaced water supply. The O & M costs reached levels where the Government could no longer sustain the services free of cost to the consumer.
We seriously considered private sector participation (PSP) because we needed to reduce the financial burden and risk to the government. We also thought PSP would increase our operational efficiency and transparency, attract better personnel, and allow us to use the best technology available in the market.
Our final solution was a joint venture (JV) that focused on increasing Malé's desalinization capacity, sewer rehabilitation and maintenance, full cost recovery for WSS, and full piped reticulation of water. The Malé Water and Sewerage Company Pvt Ltd (MWSC) was then formed-70% owned by the Government, 18% owned by IFU (Danish Industrialization Fund for Developing Countries) and 12% owned by the private sector (the Dutch firm NTR/HOH).
Arduous, complex, and time consuming process, to say the least. But also productive and inspiring.
The trust and confidence between two partners do not happen overnight. It was only through frequent contact and face to face negotiation that the government was able to accept NTR/HOH as its JV Partner.
It took the Government a while to ascertain that the viability, sustainability aspects, fairness, and risk-sharing terms of NTR/HOH's project proposal were true. Even then, GoM's past experience with foreign partners—where they got the most benefits and we got the most risks—did not make the government comfortable with the arrangement. As testament to this discomfort and mistrust, the government initially employed an independent consultant from UK to monitor the partnership's performance and report to GoM directly.
For starters, the project was really commercially viable given the monopoly concession and foreign investor privileges offered by GoM. The GoM also provided guarantees for repatriation of dividend. Finally, it helped that the government was very stable, and the social and political climate good.
The continuous consumer demand for higher levels of service at lower costs, especially after the 2004 tsunami, is a serious issue. The increase in price of fuel is also a concern. The Government's desire to lower prices to address social needs is in conflict with the need to maintain revenues at a constant level.
We are continuously improving the quality of water and service standards in order to maintain the image of MWSC. We also strive to lower costs through proper house keeping and good management practices.
The service is now dependable. There is continuity in supply — 24/7 at promised quality and pressure.
MWSC is also able to develop additional production capacity according to demand without financial difficulties, and without requiring additional shareholder inputs. The shareholders are also assured of dividends at the end of each year.
Staff turnover is low, and manpower training is given due importance and budgetary backing.
Production facilities use state of the art equipment. We have reduced the energy cost of production by using technological innovations in HOH supplied equipment.
Though not directly related to the partnership, MWSC has contributed to the growth of the building industry. Before MWSC, it wasn't practical to have high rise buildings due to shortages in water. Now, the sky line is full of high rise buildings and Malé' is able to accommodate a larger population.
The minority shareholders rights are protected through adequate clauses in the Joint Venture Agreement. For example, tariff revision will require unanimity of all Board Members. A concession period is given to the partnership. The period depends on the investment—in our case, 20 years to recover investment cost and also sufficient time to make a reasonable profit before a new participant enters the same business. During the concession period, GoM exempts certain duties to enable the company to get off to a good start. There are no restrictions for repatriation of dividends and foreign currency is available to all investors through the local banks.
Before the JV, the government provided the service free of charge, and its operations were undertaken without commercial objectives. As already explained, this setup wasn't really working.
With the partnership, consumers were assured of reliable, high quality water at their door steps. For this water, people were willing to pay for what they consume.
The 3-tiered water tariff also provided a lower tariff for subsistence living needs, and rates are higher as consumption increases. The cross subsidy helps MWSC operate on a commercially viable mode.
GoM subsidized water is still available through road tap bays and this is designated for the economically weak. Over the years, the consumption from the tap bays diminished, while the average per capita consumption increased.
First, consumers are willing to pay for the service they receive.
Second, when the development concept is acceptable to the government and the service provider, then the means of financing and management do not become restricting factors. Everything else becomes a demand and supply issue.
Finally, a system can be made sustainable only when the user pays for the service. Full cost recovery should be the aim from the very beginning, but we should have the flexibility to adjust depending on the consumers' ability to pay.
Quality of life begins with water. When the most important task of the most productive person in a family is fetching water, then there is less time for more productive work. Again there is fear of getting sick using unsafe water. Money spent on finding cure for water related sickness and time lost during sickness are huge losses that can be avoided through judicious investment on water. MWSC would recommend all small island communities to be bold and make the right decision like we did.
| © 2009 Asian Development Bank Privacy | Terms of Use |
 Top of page |
