KUALA LUMPUR Feb 26 Malaysia's government
signed a pact on Wednesday with the country's richest state of
Selangor to restructure the water industry as a lengthy spell of
dry weather forced an end to a five-year feud over control of
Media reports said opposition-run Selangor won approval from
the federal government to take over four water firms in exchange
for compensation of 9.65 billion ringgit, or $2.94 billion, to
The owners include builder Gamuda, whose shares
dropped 0.7 percent, and water services company Puncak Niaga
, which initially jumped 3.3 percent, in a stock market
that was down 0.4 percent. Both firms have strong ties
to the ruling National Front coalition.
In exchange, the federal government got the state's approval
to build a 3.8-billion ringgit ($1.2-billion) water treatment
plant that opposition leaders had argued would prompt a steep
hike in water tariffs.
A government spokesman told Reuters the deal had been signed
but could not immediately confirm the details. Selangor Chief
Minister Khalid Ibrahim signed the agreement with Prime Minister
Najib Razak as a witness, state news agency Bernama said.
The deal comes after a month-long dry spell forced Selangor,
which accounts for a fifth of Malaysia's economy and is a base
for multinationals such as Western Digital and Panasonic
Corp, to begin limited water rationing as levels in its
dams plunged to critical lows.
Selangor has become a crucial political battleground. Ahead
of elections last May, its leaders accused the ruling coalition
of using water supplier Syabas to manufacture a water crisis and
sow doubts in voters' minds over the opposition's competence.
The federal government said the state had jeopardised its
water supply by blocking construction of the new plant.
Wednesday's deal comes as Najib promotes a "National
Reconciliation Plan", an effort to dampen an upsurge in racial
and religious tension in the multiethnic country since the
contested May election narrowly returned his coalition to power.
Defacto opposition leader Anwar Ibrahim is contesting a seat
in Selangor next month in a duel that may pave the way for him
to become the state's next chief minister, giving him a
potentially crucial power base ahead of the next election.
Wednesday's price is nearly double the first offer of 5.7
billion ringgit that Selangor state made to the firms in 2010.
($1=3.2815 Malaysian ringgit)
(Reporting by Niluksi Koswanage; Editing by Stuart Grudgings
and Clarence Fernandez)