SINCE ITS ESTABLISHMENT on 5 May 2006, Pengurusan Aset Air Berhad (PAAB) has played a pivotal role in Malaysia’s national agenda to restructure and revitalise the water services sector. As a wholly owned entity under the Minister of Finance Incorporated (MoF Inc), PAAB was conceived to spearhead change through two core mandates: firstly, to settle the state government's federal loan debts for water infrastructure through the acquisition of their water assets of equivalent value. Secondly, to build, upgrade and rehabilitate the water supply infrastructure by offering competitive financing resources to ensure the sustainable development of water services nationwide.

“Our mission is to empower the water sector through long-term financial solutions and infrastructure development, so that Malaysians continue to enjoy access to clean and reliable water,” says Zulkiflee Omar, the CEO of PAAB.

Through these mandates, PAAB has become a catalyst in strengthening the operational and financial resilience of the nation’s water industry. In particular, it has supported state water operators in transitioning towards financial independence, while focusing on delivering high-quality services to consumers.

A Structured Approach: The Fourphases of Industry Evolution

The transformation of Malaysia’s water sector is underpinned by four distinctive phases:

1) MIGRATION PHASE (2008-2020)

• Migration started

• Asset-light operation

• Less financial sustainability

• Moratorium period granted

2) STABILISATION PHASE (2021-2030)

• Heavy CAPEX implementation

• Increase reserve capacity margin, reduce non-revenue water (NRW)

• Increase in service quality

• Review water tariff and lease rental

3) CONSOLIDATION PHASE (2031-2040)

• Cost-efficient operation

• Optimise resources

• Increase in profit margin and reserve

• CAPEX funded using internal fund

4) FCR (FULL COST RECOVERY) PHASE (2041-2050)

• Appropriate tariff level

• CAPEX entirely funded using internal fund

• Bankable entity

• Guaranteed services and quality

Each phase represents a progressive shift toward financial autonomy, operational excellence and sustainability.

Business Model Built For Impact

PAAB’s innovative business model comprises three core business functions:

1. Migration

2. Development of Water Assets

3. NRW Financing

1) MIGRATION: RESTRUCTURING WITH PURPOSE

The migration phase marked a watershed moment in Malaysia’s water industry. During this phase, state water operators formally entered the federal restructuring regime. As part of this transformation, over RM9bil in legacy debts—originally federal loans to states for water infrastructure—were novated to PAAB.

In return, states transferred equivalent-value water infrastructure assets to PAAB. PAAB introduced a 45-year lease rental repayment plan, significantly easing the financial burden on state water operators, while enabling them to focus on consumer service delivery.

PAAB assumed the responsibility of repaying old debts to the federal government, thus facilitating a more streamlined and centralised debt management system.

This structure exemplifies an Asset-Light Model, enabling state water operators to function more efficiently without being weighed down by capital expenditure responsibilities.

2) DEVELOPING WATER ASSETS: FLEXIBLE AND FUTURE-PROOFED

PAAB provides competitive financing to state water operators for the development of essential water infrastructure. This process is carried out under four flexible implementation methods:

a. Major: Full implementation by PAAB from consultancy to project completion.

b. Minor: PAAB manages tender and procurement, while state operators handle execution.

c. Mini: Full implementation by state operators for smaller-scale projects, capped at 10% of their approved business plan or RM20mil per project.

d. Main: Only provides funding for the development of water infrastructure.

This tiered approach ensures maximum flexibility and collaboration, tailored to the unique operational capabilities of each state operator.

3) NRW FINANCING: PLUGGING THE LEAKS

To address the critical issue of NRW, PAAB introduced a short-term seven-year loan facility. This financing covers a portion of operational expenditures (OPEX) tied to NRW initiatives such as:

a. Geographic Information System (GIS) development

b. Establishment of District Metering Zones (DMZ)

c. Leakage detection and rectification

d. SCADA and telemetry systems

e. Pressure management areas

f. Meter installation and replacement

g. Hydraulic modelling development

This initiative directly contributes to improving operational efficiency and preserving valuable water resources for the future.

Nationwide Impact Through Infrastructure Development

Since its inception, PAAB has invested in numerous projects across Peninsular Malaysia. As of December 2024, the organization has successfully completed or invested in projects worth more than RM7.47bil. These efforts have increased national water supply capacity by 2,081 million litres per day (MLD) as well as replaced and connected 2,946km of water pipelines (7% of the total 39,752km of asbestos cement (AC) pipelines in Malaysia).

These improvements not only enhance water security, but also contribute an estimated 11% to Malaysia’s overall water reserve margin.

As for Penang, PAAB plans to invest nearly RM1bil to finance the construction of two water treatment plants in Seberang Perai this year. This initiative, carried out in collaboration with the Penang state government, involves the development of the Sungai Perai Water Treatment Plant (WTP) in the Seberang Perai Tengah district, and the Sungai Muda WTP in the Seberang Perai Utara district. Upon completion, the project is expected to establish and maintain a 15% treated water reserve margin by 2030 for the state of Penang, enabling it to effectively meet increasing consumer demand due to future development in Seberang Perai Tengah and Seberang Perai Utara.

In recognition of its outstanding contribution to the Malaysian water industry, PAAB was awarded the prestigious “IEM Award for Contribution to Engineering Industry in Malaysia 2024” by The Institute of Engineers, Malaysia (IEM).

A Vision Anchored In Sustainability

With a clear mandate, a robust business model and a long-term vision, PAAB continues to redefine Malaysia’s water landscape. From strategic migration to infrastructure development and NRW reduction, PAAB stands as a cornerstone of sustainable water management. It enables state water operators to focus on service delivery, while PAAB handles the financing and development of new water assets. Currently, PAAB is focused on sustaining treated water reserve margins and reducing NRW losses. Moving forward, PAAB is also looking to support water operators in managing treatment plant residue and recycling industrial water.

“Our focus will always be to support state water operators and enhance Malaysia's water industry,” Zulkiflee affirms.

As the nation advances through phases of its water industry transformation, PAAB remains firmly committed to providing competitive financing for the development of water infrastructure in Malaysia. This commitment aims to support the increase of the national water reserve margin and to contribute to the reduction of non-revenue water, both now and in the future.