Malaysia attracts a number of our clients with its large, literate, young and largely urban population, which equates to a healthy labour market. Foreign workers and businesses are relatively safe as Malaysia has lower crime rates than most other emerging market economies in Asia. Companies also benefit from the country’s high quality transport network, with well connected ports via inland transport to major economic hubs and neighbouring countries.

Our coverage, using our unique Total Analysis model, ensures that our clients make sound, risk-assessed decisions in Malaysia. We keep our clients informed of the latest market moves and political developments, supported by our interactive data and forecasting. Clients also benefit from in-depth analysis of 23 of Malaysia’s most important industries, as part of our 'top-down' and 'bottom-up' perspective. We aim to keep you, as one of our clients, always one step ahead in Malaysia.

Country Risk

Malaysia Country Risk

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Core Views

  • Malaysia's once-bloated current account surplus is coming under pressure from a combination of income account outflows and a dwindling trade surplus. We expect the narrowing of the surplus to continue, forecasting it to come in at 2.5% of GDP in 2014 and 1.6% in 2015. However, the risks are weighted to the downside, with the emergence of a current account deficit over the next few years increasingly likely.

  • Over recent years Malaysia's fiscal accounts have exhibited some worrying trends, with spending rising as a share of GDP, subsidy spending rising as a share of total spending, and indirect tax revenues declining. Going forward we are optimistic that these trends will be halted as subsidy spending is reduced and a Goods & Services Tax (GST) is implemented, which should help stabilise Malaysia's debt metrics and support private sector real GDP growth....

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Malaysia Operational Risk Coverage (9)

Malaysia Operational Risk

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Malaysia is one of the most attractive emerging markets in Asia, offering an array of advantages for investors. The country has a healthy business environment due to its stability and low crime rates, efficient bureaucracy, sophisticated financial markets and various incentives for investors. All of these factors encourage strong foreign direct investment (FDI) inflows to some of the country's key industries, including manufacturing, financial services, oil and gas and tourism. In addition, supply chains in Malaysia benefit from excellent regional and international connectivity and high-quality transport infrastructure. The major issues for businesses are related to the country's labour market, which is restricted by the poor quality of education and the difficulty of employing foreign workers.

Strong scores across all four pillars of BMI's Operational Risk Index mean that Malaysia is regional leader in terms of its...

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Malaysia Crime & Security

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BMI considers Malaysia to be relatively safe for foreign workers and businesses, with lower crime rates, fewer threats from terrorism and less of a risk of interstate conflict than in two-thirds of the emerging market countries in the region. In particular, we highlight that Malaysia has a markedly lower impact from terrorist activity than most of its neighbours, including Thailand, Indonesia and the Philippines, while its involvement in the South China Sea disputes has been less confrontational than Vietnam and China. Malaysia is therefore ranked highly overall in the BMI Crime and Security Risk Index, in 10th place out of 30 countries in Asia with a score of 62.0 out of 100. BMI notes that the main risks to foreigners come from petty crimes and scams, and the potential spreading of terrorist activity over the borders from neighbouring states. The limited threat of international terrorist...

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Malaysia Labour Market

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Malaysia's labour force is characterised by a large, healthy and urbanised population, with reasonably good basic skills as well as a large number of specialised graduates. The domestic labour market therefore provides a wide variety of options for businesses. The workforce is also relatively unregulated, and trade unions have minimal influence. Nevertheless, BMI emphasises that the poor quality of education, combined with tough restrictions on the recruitment of foreign labour, means business will most likely have to provide extra training for local workers. Malaysia is ranked highly in the Asia region in terms of Labour Market Risk, in eighth place with a score of 62.5 out of 100.

The Malaysian labour market benefits from a high number of adults who have completed secondary and tertiary education, which means there are greater options for businesses looking to recruit skilled labour. The government is also investing...

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Malaysia Logistics

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Malaysia benefits from an abundance of natural of resources, impressive economic growth rates and a reliable and extensive transport network. It also boasts some of the lowest trade costs and most efficient trade procedures in the world. Malaysia is therefore an attractive destination for investors and has established itself as one of the most low-risk, stable and cost-effective locations globally to conduct trade. BMI scores Malaysia an impressive 80.5 out of 100 in the our Logistics Risk Index, ranking it second in the Asia region and third globally, well ahead of neighbouring countries Indonesia and Singapore, and outperforming regional powerhouses China, Japan and India. The stable nature of its political and trading environment, the inexpensiveness of fuel and the large-scale connectivity across the country has aided Malaysia in becoming one of the most competitive countries in the world in terms of trade.

...

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Malaysia Trade & Investment

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BMI considers Malaysia to be among the most attractive countries in the Asia region as a location for investment and a base of operations. Economic growth is set to slow in the medium term; however, the fundamentals are looking strong, and we expect a buoyant economy to drive trade flows and increase the attractiveness of the country as an investment location. This will be further supported by the fact that the government adopts a welcoming attitude towards foreign direct investment (FDI) into most sectors and has established policies that have lowered the burden of bureaucracy, protected ICT activity and intellectual property, and generally created a healthy business environment. Malaysia is therefore ranked highly in the Asia region in the BMI Trade and Investment Risk Index, in third place out of 30 in Asia, just behind Hong Kong and ahead of Taiwan. Its high score of 75.0 out of 100 also places it favourably on a...

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Malaysia Industry Coverage (23)

Agribusiness

Malaysia Agribusiness

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BMI View:  Strong growth prospects, opportunities for increased exports and government support will be the key factors driving growth in the Malaysian agribusiness sector. We see conditions being particularly favourable for sugar, poultry and cocoa production on the back of strong investment. However, we highlight that changing consumption patterns, disease outbreaks, sudden changes in policy and resource shortages could dent growth potential in the sector in the medium and longer term.

Key Forecasts

  • Palm oil production growth to 2017/18: 10.1% to 21.3mn tonnes. Growth will be supported as companies replant mature estates and yields improve on the back of better technology. 

  • ...

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Autos

Malaysia Autos

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According to the Malaysian Auto Association (MAA), auto production grew 5.6% in 2013, to 601,407 units. While passenger car production registered healthy growth of 6.7%, to 543,892 units, output in the commercial vehicle (CV) segment contracted 4.1%, to 57,515 units. For 2014, we expect growth in both CV and passenger car production, and forecast overall auto production growth to come in at 4.9%, to 630,590 units.

Auto sales in June 2014 grew 9.2% year-on-year (y-o-y) to 58,561 units, bringing sales for H114 to 333,142 units, an increase of 6.3% y-o-y.

We are maintaining our 2014 passenger car sales growth forecast of 4.0%, to 600,000 units, as high base effects will temper growth in H214.

Slowdown In Construction To Weigh On CV Segment

The weakness in CV sales has been more pronounced than we envisaged. Sales in the segment declined 3.0% y-o-y over...

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Commercial Banking

Malaysia Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Malaysia Consumer Electronics

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BMI View:   The consumer electronics market in Malaysia has expanded rapidly in value and volume terms in recent years as declining device prices combine with   strong economic performance and   rising   incomes to drive demand growth. Broadly speaking, we expect this dynamic we expect to remain in place in the medium term. Increasing competition in the smartphone, tablet and flat-screen TV markets from Chinese vendors will ensure the market continues to deepen, but as the market becomes saturated intense price...

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Defence & Security

Malaysia Defence & Security

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BMI View: Defence Spending in Malaysia will be ramped up in 2015, with a 10% budgetary increase announced in October 2014. We expect a slight increase in procurement activity while the majority of the development budget will be dedicated to expanding existing projects. The release of a new five year development plan and a review of Malaysia's defence offsetting programme could yield changes for the indigenous defence sector when unveiled in 2015. Malaysia enjoys peace and stability with regards to internal and external security threats. Key concerns include continued incursions by Filipino groups and rising piracy in regional waters.

We expect import volumes to grow in 2015 in line with the 10% year-on-year (y-o-y) defence budget increase, announced in October 2014, with development expenditure for 2015 set at USD1.0bn compared to USD0.8bn in 2014. The government has yet...

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Food & Drink

Malaysia Food & Drink

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BMI View: The Malaysian economy's strong real GDP growth during 2014, which we estimate reached 5.8% for the full-year, was driven by strong exports and increased domestic consumption. Proposed changes to the country's fuel subsidy scheme and the introduction in April 2015 of a 6% goods and services tax (GST) are likely to produce a slowdown in domestic consumption. However, these changes will have a positive impact on long-term fiscal discipline by reducing expenditure and increasing government revenue. BMI maintains its view that, across the forecast period, inflation should remain manageable and continued strong real GDP growth is to...

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Freight Transport

Malaysia Freight Transport

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BMI View: Activity levels across Malaysia's different freight modes will see moderate to strong growth even though we expect GDP and foreign trade growth to lose a little momentum in 2015. With infrastructure investment plans advancing, Malaysia will be gradually expanding its freight capacity to match demand. Air freight, potentially affected by aviation disasters in 2014, will nevertheless achieve low single digit growth. Rail freight is expected to do slightly better than air freight. With regard to shipping, gross tonnage and container volume growth will pick up as both exports and imports continue to grow despite worries over piracy and a slight easing of domestic consumption.

BMI expects a slowdown in Malaysian economic growth in 2015, with GDP rising by 4.2% compared to an estimated 5.8% in 2014. The slowdown will reflect weaker domestic...

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Information Technology

Malaysia Information Technology

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BMI View: Growth is expected to slow slightly in 2015 compared to 2014 but, nonetheless, we believe the Malaysian IT market has a bright medium-term outlook, due to a supportive economic environment and a government policy framework encouraging the development of the market. In the hardware market, rising incomes and increased access to affordable data connectivity, along with cuts to Windows licensing fees,...

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Infrastructure

Malaysia Infrastructure

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BMI View:  The potential for greater transport and energy infrastructure development has improved our outlook for Malaysia's construction sector in 2015, despite our expectations that near-term construction growth will moderate from levels seen in Q114. This outlook is due to three factors: greater fiscal spending on fixed asset investment and a restocking of the company's project pipeline.

Key Trends And Developments

  • In October 2014, Malaysia's Prime Minister Najib Razak announced plans to invest USD23bn on the country's transport infrastructure. Razak said the government would build a 1,663km Pan-Borneo Highway in eastern Malaysia. The estimated USD8.3bn highway would stretch from Sabah in...

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Insurance

Malaysia Insurance

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BMI View : The life segment, despite being larger in size, will underperform growth in Malaysia's insurance sector over the 2015-2018 period due to a rather saturated market. On the other hand, the non-life segment will see benefit from the removal of statutory tariffs on certain non-life lines which will increase competition and drive growth in the sector.

We forecast total gross premiums to grow 5.9% in Malaysian ringgit (MYR) terms in 2015, the same growth rate that was achieved in 2014. However, in USD terms, growth will accelerate to 11.9% due to our expectation for the MYR to appreciate versus the US dollar over the course of the year. We forecast gross life premiums to rise by 11.5% (in USD terms) and gross non-life premiums to increase by 12.6% (in USD terms) in 2015.

Over the 2015-2018 period, we forecast gross premiums to grow at an annual average of 8.8% (in...

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Medical Devices

Malaysia Medical Devices

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BMI Industry View: Malaysia's strategy of introducing business friendly policies and not least a new set of medical device regulations has seen it continue to attract multinational investment in manufacturing plants in the country. Whilst there has been some change, most local manufacturers tend to specialise in the manufacture of rubber-based consumables, which has resulted in a high reliance on imports. This being a factor, alongside continued investments in healthcare, the medical device market is set to expand at a solid 16.1% per annum.

Headline Industry Forecasts

  • In US dollar terms, the medical device market is projected to expand by a CAGR of 16.1%, which should...

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Metals

Malaysia Metals

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BMI View: Malaysia has a well developed metals sector and is a leading global producer of both steel and tin, However, local producers have been met with increasing pressure from other markets in recent years, with a sharp uptick in Chinese output levels, in particular, leading to downwards pressure on prices and hence production volumes. Out outlook for both the Malaysia steel and tin sectors is therefore one of caution with production growth expected to be moderate over the next few years.

2014 saw Malaysia's steel producers experience falling output and revenues as a flood of cheap imports squeeze prices and margins. With much of this extra supply arriving in the form of cheap products from countries such as China, Indonesia and South Korea, local producers have found themselves hit by falling orders for hot rolled coils as well as other heavily imported steel...

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Mining

Malaysia Mining

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BMI View: Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, Malaysia's mining sector is unlikely to witness a resource boom over our forecast period to 2018. Depleting reserves and falling ore grades will continue to impede growth in the tin sector, while falling gold prices remove the shine off investment in the gold mining industry.

We forecast Malaysia's mining industry to reach USD41.2bn by 2018, increasing at a clip of 5.0% per annum. Despite significant deposits of untapped minerals and positive reforms by the Malaysian government in recent years, a resource boom is unlikely to catch up with the country anytime soon. In contrast to the relentless pursuit of volume growth over the past decade, mining firms are focusing on the development of their core brownfield assets on the back of the economic...

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Oil & Gas

Malaysia Oil & Gas

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BMI View : A low oil price environment will hit short-term investment, particularly into exploration, and longer-term production prospects. Consumption, in contrast, will benefit slightly from lower prices.

Headline Forecasts (Malaysia 2013-2019)
2013 2014e 2015f 2016f 2017f ...

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Petrochemicals

Malaysia Petrochemicals

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Malaysia is set to end the decade with a major increase in petrochemicals capacity, but BMI's latest Malaysia Petrochemicals Report warns that new plants will be dependent on imported crude oil and be forced to compete with low-cost ethane-based US producers.

The focus of development will be Petronas' refinery and petrochemical integrated development (RAPID) project in Pengerang, which is likely to be completed in 2019. It is set to have around 300,000b/d of refinery capacity and over 7mn tonnes per annum (tpa) of petrochemicals capacity. RAPID has been delayed due to concerns over its economic viability due to rising costs and falling domestic crude oil volumes at a time when the US is planning to boost petrochemicals production using competitively priced ethane derived from shale.

Other Petronas projects include its joint venture (JV) with...

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Pharmaceuticals & Healthcare

Malaysia Pharmaceuticals & Healthcare

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BMI View: Malaysia's 2015 budget reinforces our upbeat outlook on the country's pharmaceutical market. Rising healthcare expenditure plans to improve medical access and efforts to mitigate the impact of the Goods and Service Tax on medicine prices will provide companies with significant revenue-earning opportunities. However, downside risks to our outlook include further economic slowdown forecast for 2015, worries of an increasing number of imitation drugs and growing political differences within both the opposition and ruling coalitions.

Headline Expenditure Projections

  • Pharmaceuticals: MYR6.60bn (USD2.10bn) in 2013 to MYR7.22bn (USD2.25bn) in...

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Power

Malaysia Power

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BMI View :   The Malaysian power sector is set to grow at a slower rate in 2015 than in preceding years as we expect no thermal projects to be completed in that year. However, we expect sector growth to accelerate after 2015 as most of the major thermal projects being developed in Malaysia for completion after 2015 are on schedule.

We forecast electricity generation in Malaysia to grow by 1.9% in 2015. This growth rate marks a significant slowdown from previous years, with the five-year historical average growth for power generation at around 8.0%, according to our estimates. We do not expect the slowdown in 2015 to continue in 2016 and over the long term. We have maintained our long-term forecasts for electricity generation in Malaysia this quarter as the major projects we have incorporated into our forecasts after 2015 remain on schedule. We forecast electricity...

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Real Estate

Malaysia Real Estate

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BMI View: Malaysia's commercial real estate market benefits from the country's location in South East Asia, as well as the government's welcoming attitude to foreign investment and the developed and fairly transparent nature of the business environment. The country has a developed real estate investment trust (REIT) market, although there is room for this to expand. Indeed over the medium term we see increasing interest in Malaysian commercial real estate from international investors, as well as increasing investment overseas by Malaysian firms.

Over the short and medium term we have some concerns about the Malaysian economy. Although we forecast a good rate of GDP growth, at 5.8%, in 2014, for the rest of our forecast period, to 2018, we see growth slowing to as little as 4.1% a year. Monetary tightening and potential interest rate rises could affect domestic demand, and with exports equating...

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Retail

Malaysia Retail

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BMI View:  We have upgraded our full-year GDP forecast for Malaysia from the previous 4.5% to 5.8% on the back of increased domestic consumption, which bodes well for the continuing health of the retail market - particularly areas such as furnishing & home. However, the retail market is expected to temporarily soften with the implementation of the Goods and Services Tax on April 1.

Our Malaysia retail report provides a comprehensive forecast of various retail indicators including household spending and headline total spending across each retail subsector; household income and employment forecasts; demographic forecasts; and a detailed breakdown of household and per capita spending across a large number of retail areas, including food & drink, clothing & footwear, household goods, and a number of other subsectors.

Hypermarkets,...

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Shipping

Malaysia Shipping

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BMI View: Continuing, albeit slower, economic expansion and trade will support activity levels in Malaysia's main ports in 2015. Port Klang and Port Tanjung Pelepas further benefit from expansion projects and developments which have been completed over the last two years.

BMI is predicting a slowdown in Malaysian economic growth in 2015, with GDP rising by 4.2%, compared to an estimated 5.8% in 2014. The slowdown reflects weaker domestic consumption and export demand. The expected introduction of a 6.0% goods and services tax (GST) in Malaysia in April 2015, along with a likely reduction in fuel subsidies and higher electricity tariffs as the government seeks to control the fiscal deficit, will combine to limit household spending. Meanwhile, the slowdown in China, one of Malaysia's key trading partners, will restrain export demand. China is Malaysia's third largest...

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Telecommunications

Malaysia Telecommunications

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BMI View:  

Although the mobile penetration in Malaysia is high, BMI believes that there is still scope for growth. Strong competition between the operators on the telecommunications sector will erode ARPU, but value-added product offerings, such as data heavy bundles, will add buoyancy. Wireless and wireline non-voice services account for an increasingly large proportion of operators' revenues, and this is encouraging them to reinvest heavily in next-generation infrastructure, including fibre-to-the-home and 4G LTE. However, unlike at other relatively mature market, operators such as Digi , have managed to increase their subscriber base by bundling their data offers in with prepaid SIM-cards.

...

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Tourism

Malaysia Tourism

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BMI View: The Malaysia tourism report examines a range of key indicators for this rapidly expanding market in the midst of the highly competitive Asia Pacific region. We are forecasting healthy growth in inbound and outbound travel throughout our forecast period to 2018, leading to high rates of tourism related expenditure and a steadily improving industry value. Along with domestic economic growth, this indicates a very positive potential investment environment.

Malaysia was targeting arrivals of 28mn in 2014 - we expect that the country will fall a little short at 27.1mn though this is still healthy growth of 5.2% compared to 2013 arrivals. The government is highly supportive of tourism, and is targeting annual arrivals of 36mn by 2020 (with tourism related income of MYR168bn). Effective marketing campaigns are raising the country's global profile, including the new '2015 Year of Festival'...

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Water

Malaysia Water

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B MI View : This quarter, the forecasts for the Malaysian water sector have been substantially expanded, with added granularity, resulting in the revision of our existing forecasts. In particular, we now forecast water extraction by source, and water losses. Overall, we take a positive view of the country's water sector, which benefits from large volumes of available water and a moderately strong project pipeline, offering opportunities to infrastructure companies. However, supplies can vary from region to region, and this, in conjunction with an incoherent water management structure, can pose risks to water utilities companies, as can the high levels of water losses and non revenue water consumption. Over the longer term, we expect these risks to decrease following stronger legislation for tariffs and tariff payments, rising levels of water meters and a stream of investment...

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