The decision to approve a “certificate of successful negotiation” for ongoing talks between the Bacolod City Water District and Prime Water Infrastructure Corp. for a controversial 25-year joint venture agreement was “hurried” and done “without proper study,” the general manager of the water utility said.
“Naga-ugtas ako (I am exasperated),” Juliana Carbon declared in an interview.
Carbon stressed that, while she saw nothing inherently wrong in allowing private sector participation in improving BACIWA’ s services and systems, the local utility has, given the needed funding and direction, the capacity to accomplish the task.
A joint venture, she said, “is only one of the solutions and it is not the best; there are many other options.”
From daily noontime rallies staged by the BACIWA Employees Union, opposition to the proposed deal, which many consider “privatization,” has grown steadily, joined by various sectoral organizations. As of this week, four barangay councils – those of Sum-ag, Pahanocoy, Tangub and Barangay 21 – have passed resolutions against the joint venture, with others expected to follow suit.
The joint venture, says the BEU and others against the joint venture, would turn water from a natural resource to a profit-generating commodity, to the detriment of consumers. For starters, the union says, a 12 percent Value Added Tax will be automatically tacked onto water bills once the deal is closed.
The BEU, like Carbon, has pointed to other options, most of which, it says, can be carried out by BACIWA itself – for example, entering into agreements to purchase abundant surface water from neighboring water districts like those of Murcia, Bago or Talisay.
While Carbon acknowledged that BACIWA does not have the funds for expansion, she pointed out that the Development Bank of the Philippines “has written us, offering us standby credit of P3 billion.” The Metro Bacolod Chamber of Commerce and Industry has urged BACIWA to take advantage of this.
Yet, in the end, “the board makes policy and it is their decision to go into the (joint venture agreement) as head of the procuring entity” even as she stressed that the governing body created the Joint Venture Selection Committee to study and evaluate (offers) if these are for the good of BACIWA, the people and the workers.”
Carbon said she herself has “practically no role.”
But even if a joint venture were really necessary, Carbon said, the one being negotiated with Prime Water is fraught with problems, not only for BACIWA but, more important, its employees and its consumers.
In fact, Carbon said that, in comments she was asked to make on the negotiation report following the Joint Venture Selection Committee’s last meeting on July 4, she concluded that “the negotiations are not over yet and in fact failed in some aspects.”
Despite these findings, the board approved the issuance of the certificate of successful negotiation.
While admitting she had yet to receive a copy of the certificate, “I understand that there were refinements based on some of my comments.”
However, she noted that these changes were “most likely done by the board” outside the regular JVSC meeting and should, therefore, be subject to a board decision.
The issue of BACIWA’s earnings from the joint venture readily stood out as a major problem.
Carbon said BACIWA, which she stressed “has never been losing,” had asked Prime Water for P80 million a year, “which is our current average net income.”
“But Prime would agree to only P35 million a year from year 1 to 5, and P36 million a year from year 6-10,” she said. “This includes money for wages.”
Under this arrangement, BACIWA will hardly earn anything, Carbon said, something the Commission on Audit would surely question.
Another major flaw Carbon sees is the lack of detail in many of the proposed agreement’s provisions which, she says, could make the deal grossly disadvantageous to the government.
“If they say they will build a building for BACIWA, the dimensions – the floor area, the number of stories – should be specified” otherwise, Prime Water could build a small building and claim it as compliance with its commitments, she explained.
“If you enter into a partnership, you have to lay down all your reasonable goals and then convince the partner to agree and comply with these. It cannot be only what the partner wants. We cannot leave this to Prime Water to decide,” Carbon stressed.
She pointed out that in the terms of reference, Prime Water committed to supply a minimum of 10 psi (pound-force per square inch) during the first year of the joint venture.
“But in the new TOR, this has been moved to the fourth year,” she said.
The BACIWA general manager notes that while Presidential Decree 198, which created local water districts, mandates that water districts acquire, install and facilitate water systems, the joint venture hands over management and operations to Prime Water and “relegates BACIWA to a mere regulating and monitoring unit,” a point critics of the deal raise to argue why it is privatization in all but name.
Carbon also questioned why Prime Water is not obliged to assume BACIWA’s obligations, like the P400-million balance of its original P507-million debt to the DBP.
Although Prime Water will give BACIWA the funds to meet its annual payments, “what if somehow it becomes unable to do so? Since all revenues go to Prime Water, what happens to BACIWA since, in the contract, BACIWA remains the debtor?”
In contrast, she said, Metro Pacific paid off the debt of the Metro Iloilo Water District.
Another snag Carbon saw is Prime Water’s use of BACIWA’s assets, which she said COA has opined “should be considered asset rentals and subjected to a separate agreement.”
“But the negotiation terms provide that Prime Water will pay net usufruct – a legal term meaning to use and enjoy a thing and which is usually free – payments of P25 million a year. This is really still rental,” she said.
But what riled Carbon most are the provisions covering BACIWA’s personnel.
BACIWA executives have given assurances that employees will be “absorbed” under the joint venture, a claim disputed by both the BEU and Carbon since what they say will happen is that the personnel will be transferred from government to private employment. The union says this is evident since their social security coverage will shift from the GSIS to SSS.
“I cannot understand how a mere contract can change the status of employees from public to private,” Carbon wondered.
“Under the agreement, the employees have only two options,” she said. “Be absorbed and become private sector employees, or retire.”
Also, the proposed agreement is silent on the fact that permanent employees have to resign and go through the pre-hiring process all over again, which she said is definitely not absorption.
And even if employees opt for retirement, “there is another problem.”
This has to do with “propriety – some even call it a bribe,” she said.
Carbon was referring to an admittedly generous offer of financial assistance equal to 250 percent of an employee’s current wage.
“But why should Prime Water, a private entity, give BACIWA employees, who are government workers, this incentive and then pass it on to the consumers? Is the employee even allowed to receive this?” she asked.
And then, she added, there is a third question: “What if the employees choose to remain with the district as government employees? Can BACIWA force them to resign or retire?”
Aside from these and other problems in what the BACIWA board has declared a “successful negotiation,” Carbon said “there are so many horror stories of what happened to the districts that partnered with Prime Water.”
“I wonder why the representatives of the water district did not see this and instead signed the certificate of successful negotiation,” she said.