| Summary: | Efficiency in water supply is measured by quality of water, low tariff rates, low levels of NRW and good governance. With the increasing number of population, demand for clean water also increased. This has
prompted the federal government to restructured the country's water supply. Thus in 2008, the Federal Government has restructured the water industry and centralized the water management of the state government by establishing SPAN (National Water Services Commission) and PAAB (Water Asset Management Company). The objective of SPAN and PAAB is to improve the efficiency of water operators in Peninsular Malaysia
including Labuan. Therefore this study is to measure the level of efficiency of the state's water services in Northern state of Malaysia before and after the restructuring. DEA approach (Data Envelopment Analysis), and
Malmquist index are used to measure the technical efficiency and productivity of the Northern state's water supply covering the period 2000-2013. The result of DEA score show that the sector's mean technical efficiency
through 14 years was about 73%. and only 42% of the state water operator shows increasing in efficiency score, and Pulau Pinang state has the most efficient utilization of water and has been used as a benchmark for other
state. While Total Factor Productivity analyses show that the sector lags behind in the area of technological improvements, confirming an ongoing problem of inadequate capital investment. In addition, SPAN and PAAB
also need to review their current key performance indicator standards that apply to all state's water operators.
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