MITI responds to CAWP criticisms that national sovereignty on water is compromised by the Water Services Industry Bill under WTO GATS

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Media Statement (2)

by Lim Kit Siang  
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(Parliament, Monday) : The Ministry of International Trade and Industry (MITI) has made three responses to criticisms by the Coalition Against Water Privatisation (CAWP) at the two Parliamentary Roundtables on the two Water Bills held in Parliament House organized by the Office of the Leader of Opposition, Parliament that national sovereignty on water  is compromised by the Water Services Industry Bill 2006 under the World Trade Organisation (WTO) General Agreement on Trade in Services (GATS).

Today, the Water Services Industry Bill was presented to Parliament for second reading by the Minister for Energy, Water and Communications, Datuk Seri Dr. Lim Keng Yaik.  DAP MP for Ipoh Barat, M. Kulasegaram was the lead Opposition speaker who submitted a critique of the Bill from the human rights, consumer rights, environmental rights and national sovereignty rights perspectives.

MITI states that Malaysia has not committed the water services sector for liberalization, while foreign private investment in this sector subject to domestic regulations and not GATS rules is allowed.

The three responses by MITI are: 

1. “Under GATS: If water is provided on a commercial and profit basis, it will be subject to takeovers by foreign corporations which will have the same rights as local companies.”

COMMENTS:

Under the WTO GATS, Members enter into negotiations to liberalise the services sector.

This process takes place with due respect for national policy objectives and level of development of Members.

In liberalizing trade in services, WTO Members make specific commitments with respect to the liberalization of a particular sector. The choice of such a sector rests with the Member concerned.

Such commitments to liberalise a sector is not open-ended but Members can inscribe terms, limitations and conditions on market access and national treatment in opening that sector.

This means that in making a liberalization commitment a Member can impose certain conditions on how the sector will be liberalized e.g. equity conditions, limitations on the number of service suppliers or limitations on employment.

However, if a sector is not offered for liberalization i.e. no commitment was made to liberalise a particular sector, this sector need not be opened up for foreign participation.

Nevertheless, permitting foreign participation could still be a unilateral undertaking by a sovereign state.

In the case of water services, this sector has not been committed for liberalization by Malaysia under the WTO. As such, any takeover by foreign companies will be subject to domestic laws and regulations and not WTO rules.

However, GATS general principles of transparency and Most Favoured Nation (MFN) will still apply to any measure affecting this sector, but does not affect market access (foreign participation) in this sector.

Permitting water services to be provided on a commercial basis by private companies connotes that private investment in this sector is allowed. This will increase interest of foreign investors in this sector but any mergers or takeovers will be subject to domestic regulations and not GATS rules.

2. “Trade restrictive Government regulation are in violation of GATS and subject the Government to dispute settlement and allow the WTO to decide who controls water supply in Malaysia”

COMMENTS

GATS rules cover disciplines on domestic regulations to the extent that such regulations affecting trade in that sector should be administered in a reasonable, objective and impartial manner.

Such regulations cover measures on licensing requirements, qualification requirements and procedures and technical standards.

However, these disciplines apply only to sectors where liberalization commitments have been made.

If no commitments have been made, water supply regulations are not subject to GATS disciplineS on domestic regulations.

3. “Impact of WTO on the water industry”

COMMENTS

As has been explained, in general GATS rules do not apply to this sector if no liberalization commitment has been made.

However, if such services are commercialized, it attracts foreign interest and could lead to requests by other Members that Malaysia liberalise such services under the GATS.

Nevertheless, prevailing sentiment is that provision of perceived public services such as water supply, are usually under public management and as such, pressure to liberalise these social services is much less.

In any event, incidence of requests made to WTO members for liberalization commitments in water supply services is low.

(08/05/2006)