Annexes

[ Annex-I | Annex-II ]

II. AN ASSESSMENT OF THE PRIVATIZATION OF SOLID WASTE MANAGEMENT IN MALAYSIA: KUALA LUMPUR EXPERIENCE

In the Malaysian context, privatization is defined as the transfer to the private sector any activities and functions that have traditionally rested with the public sector. In effecting such transfers, three essential organizationally related components are involved: management responsibility; assets (with or without liability) or the right to use those assets; and personnel. Therefore, privatization must involve at least one of those three components. The objectives of the privatization policy could be summarized as:

1. Relieving the financial and administrative burden of the government;
2. Improving efficiency and productivity;
3. Facilitating economic growth;
4. Reducing the size and presence of the public sector in the economy;
5. Assisting in meeting national development policy targets.

A. Privatization of urban management services in Malaysia

In the case of the local government sector, privatization was initially used to finance, build and operate a wide range of infrastructure projects. The pressure of urbanization, however, has made privatization an increasingly necessary tool for the government in meeting demands for more and better urban infrastructure. Notwithstanding the important role of local government and special government agencies in urban management in Malaysia, the momentum of urban development has been so fast that a number of urban services have had to be privatized. At present, the private sector is involved in the delivery of basic services which were once the domain of public agencies including, among others, the provision of key urban services such as sewerage, transportation, telecommunications and solid waste management.

In 1993, the Government of Malaysia initiated the privatization of urban solid waste disposal. That concept called for a feasible privatization plan for solid waste management, including storage, collection, transportation, processing and disposal of solid wastes. The stated objective was to provide an integrated, well-planned, well-managed, efficient and effective, technologically advanced solid waste management system in order to enhance the quality of the environment as part of Vision 2020. The thrust of the system is on waste reduction and the use of technology to recover resources from waste (recycling, comporting, incineration etc.), thereby minimizing the need for final disposal, which is expected to become burdensome in the future.

In essence, the privatization exercise is aimed at reorganizing existing the solid waste management system used by most local authorities into a system that is prepared to undertake disposal of wastes from expanding urban localities, incorporating recycling and safe environmental management measures. In conjunction with that goal, laws and regulations will be streamlined at the federal, State and local government levels to ensure proper disposal, including mandatory separation of recyclable waste by households. Efforts in solid waste management will be given high priority, considering the adverse effect of environmental degradation from waste that is left unattended, especially in the cities. Taking into account the related problems such as finance, lack of expertise and the myriad functions that need to be carried out by the local authorities, the government felt that the job of managing solid waste would be best handled by the private sector. Problems such as the increasing occurrences of indiscriminate dumping of waste, open burning at dumping sites, the difficulty in identifying suitable disposal sites and the lack of manpower hamper the effective performance of the local authorities. Therefore four companies were appointed by the government to manage solid waste for the whole country:

1. Alam Flora Sdn Bhd (1997) which is responsible for the central and eastern regions; (the Federal Territory of Kuala Lumpur, Selangor, Pahang, Terengganu and Kelantan);

2. Northern Waste Industries Sdn Bhd which is responsible for the northern region (Perks, Kedah, Penang and Perak);

3. Southern Waste Management Sdn Bhd which is responsible for the southern region (Negeri Sembilan, Melaka and Johor);

4. Eastern Waste Management Sdn Bhd which is responsible for East Malaysia (Sarawak, Sabah and the Federal Territory of Labuan).

The handling of toxic waste has been privatized to a consortium which operates and maintains a centralized and integrated facility for the storage, treatment and disposal of hazardous waste in Bukit Nanas, Negeri Sembilan. The consortium was scheduled to begin operating the facility by 1998. As an interim measure, the consortium started collecting toxic waste in 1996. The government hopes to minimize the dangers of toxic waste contamination through enforcement of chemical safety standards and sound management of toxic wastes. The government is also providing incentives such as tax rebates to industries for adopting clean technology as well as promoting the recovery and reutilization of wastes.

The scope of privatization with regard to solid waste management involves a number of activities: (a) collection; (b) transportation; (c) treatment; (d) transfer stations; (e) recycling; and (f) disposal. Those activities will eventually be extended to encompass drain cleaning, grass cutting and park maintenance, and road cleaning. The categories of wastes are defined as: (a) domestic; (b) commercial; (c) industrial; (d) institutional; (e) construction debris; and (f) waste from road and drain cleaning and grass cutting.

The above companies have been given 20-year concessions to manage solid waste. It is planned that the whole nation will come under the privatization programme; as an interim measure, the existing local authorities were to continue undertaking waste management functions until such time that the private companies were ready to take over the responsibility. In fact, before the privatization exercise, some local authorities had already been contracting the waste collection service to a number of contractors. In other instances, the local authorities managed solid wastes by using their own staff and resources. Contracting out is another form of privatization which is quite popular in Malaysia. A new Act to ensure uniformity in the implementation of laws and regulations with regards to solid waste management is being drafted for submission to Parliament.

In the case of Kuala Lumpur, City Hall has privatized the solid waste management for most of its area to Alam Flora Sdn Bhd. The privatization exercise includes taking on those staff and workers in the Urban Services Department of City Hall who opt to join the company, movable and immovable properties or assets, as well as contractors previously employed by the city authority for waste collection. Nevertheless, it must be pointed out that while solid waste management is now under the responsibility of the private sector, it does not mean that the local authority can pass all its responsibility over to the company. The role of the local authority is still significant, particularly in terms of enforcing laws and regulations pertaining to solid waste management and ensuring that the private sector meets the required standards and quality. Since the waste management service is under the purview of the federal government, the Ministry of Housing and Local Government through its Technical Services Division of the Department of Local Government is now responsible for ensuring that all companies conform to the standards, rules and regulations as required by the government.

City Hall of Kuala Lumpur has viewed privatization and contracting out of services as a way of reducing its financial burden as well as providing improved services. The provision of garbage collection and sewage treatment services in the federal capital has been privatized. Although that action was a federally mandated initiative, it has relieved City Hall of its financial burden. One would expect, however, that in tandem with the fees imposed by the privatized organizations for the provision of such services, the consumers would be able to claim an appropriate reduction in the assessment rates collected by City Hall. The service fee for solid waste management was included in the assessment bills prior to the privatization of those services. With the relinquishment of the solid waste management service, City Hall can now concentrate on other areas of urban management that require its attention and resources.

While the solid waste management in Kuala Lumpur has been privatized now under Alam Flora Sdn Bhd, industrial and toxic waste management (excluding radioactive waste) has been privatized to Kualiti Alam Sdn Bhd. The rules and regulations for the management of the latter types of wastes, however, are under the jurisdiction of the Department of Environment. In terms of compliance and control, the companies will be strictly monitored by the Department of Environment either through its headquarters or its regional office at the State level.

B. Effectiveness of privatizing solid waste management

It is too early to make a thorough assessment of the privatization programme for solid waste management. Alam Flora Sdn Bhd took over the collection and disposal of solid waste from City Hall on 1 January 1997, and is now completing only its second year of implementation. However, a preliminary assessment based on discussions with the parties involved in the privatization exercise highlighted the following important points:

1. Operational efficiency

Alam Flora Sdn Bhd is responsible for the management of solid waste for the central and eastern region which takes in not only those areas under City Hall jurisdiction but also the entire states of Selangor, Pahang, Terengganu and Kelantan, covering a total area of 72,263 km². Such extensive coverage provides an economy of scale and enables the company to undertake more efficient and effective management. It has enabled the company to use its resources efficiently and to improve productivity. Previously, when the solid wastes were managed directly by City Hall, at times the job was carried out by ill-equipped, undertrained and understaffed individual private contractors who covered fragmented collection areas in the Federal Territory. Under the privatization scheme, those contractors have now been placed under the management umbrella of Alam Flora Sdn Bhd. The company trains the contractors and provides them with modern technology to enable them to carry out their work professionally. As a result of its economies of scale, Alam Flora Sdn Bhd is motivated to introduce up-to-date technology to this field of management.With better scheduling and manpower and equipment use, the turnaround in the collection time and the increase in tonnage collected have improved. Those changes are reflected in the decreasing number of complaints received from the public with regard to service by the company.

2. Waste disposal sites

Despite the obvious operational efficiency of a private organization, the management of solid waste in the Federal Territory of Kuala Lumpur still faces the problem of final disposal. Like many other cities all over the world, land is scarce in Kuala Lumpur and the land-fill method is increasingly becoming an unacceptable option. Some States or districts are not in favour of having such sites in their areas of jurisdiction for the obvious reasons, and particularly from an environmental perspective. The other alternatives such as using incinerators has to contend with the high proportion of PVC materials that give off poisonous dioxin fumes when burnt. The other problem which renders the use of incinerators unsuitable is the high water content of the wastes, which prevents complete combustion. In addition, an active garbage separation programme, under which recyclable materials can be selected, has yet to be introduced. Those difficulties are compounded by indiscriminate dumping that shopkeepers and squatters practice as a matter of course as well as the shortage of labour as waste disposal jobs are considered to be dirty and unrewarding.

3. Service fees

After one year of operation, the fees to be charged by the company had still not been settled. In the past, the semi-annual assessment rates imposed by the local authorities included garbage collection. However, with privatization, householders and commercial property owners now have to pay a separate fee for solid waste collection. The questions regarding the amount to be collected and the basis on which the fees are to be collected have not been settled yet. The issue has to be treated with the utmost care as it has political-social implications.

4. Press reports and feedback

Judging from press reports, the expectations of Kuala Lumpur residents are very high, in as far as solid waste collection is concerned. They expect regular collection and are quick to complain to the local media. On the part of Alam Flora, the company has initiated several programmes for communicating with the public and publicizing its services. Customer complaint counters have been set up, and some educational programmes on solid waste have been initiated. In response to customer expectations, the company has increased the number of collections, provided standard collection bins as well as large collection points in inaccessible areas. To a large extent, the privatized services are under public scrutiny and the company has responded well to public complaints.

However, improvement is still needed in a number of areas. The turnaround time for each garbage truck is severely hampered by the worsening traffic conditions in the city. The company could reschedule collection times to avoid peak hours including collection at night or very early in the morning. The number and location of transfer stations should also reconsidered as a way of helping to increase turnaround time.

In conclusion, it is too early to make a concrete assessment of the privatization programme for solid waste management. However, interviews and reporting in the local media have revealed that the move has resulted in better community services. With a better work culture among the workers and the contractors, and the gradual introduction of modern technology into solid waste management, the service is becoming more reliable and there has been positive improvement. Based on press reports, the service has been receiving lesser complaints from the public. However, it is necessary to wait for the company to start imposing charges for the service and the reactions of the public. The real success of privatization will be measured by the quality of service and, in most cases, the savings it brings about for consumers.

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