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Renegotiation of CA not enough without renouncing privatization –WPN

by Water for the People Network

The Water for the People Network (WPN) said that government should renounce water privatization and assert water as a human right whose provision should be under effective public control. This is the most important basis for terminating the concession agreements (CA) between the State and private water firms. The vital public utility should be returned to the public sector, WPN said, and not remain in the hands of profit-seeking water oligarchs.

President Duterte recently ordered the CAs between government and water firms Maynilad Water Systems Inc. and Manila Water Company to be renegotiated. Department of Justice (DOJ) Secretary Menardo Guevarra said that certain provisions of the water CAs are onerous and disadvantageous to both government and consumers. The DOJ began reviewing the CAs upon the instruction of President Duterte at the height of the water crisis during the first quarter of this year.

The onerous stipulations recorded by the DOJ include prohibition against State interference in rate-setting, indemnification for revenue losses due to this interference, and irregular extension of contracts by 15 years. These are issues that have been raised by water rights advocates, WPN said, in the more than two decades since water in Metro Manila was privatized.

“The WPN has long and repeatedly called for the scrapping of the CAs. The CAs are the very epitome of water privatization, which has failed to deliver promised cheaper, cleaner, and more secure water services,” WPN spokesperson Prof. Reggie Vallejos said. Water utilities have to deliver water as a human right, he stressed, and mere renegotiation of the CAs will not truly ensure public interest objectives over private profits.

“The government has not yet revealed its points for renegotiation but we doubt that these will be enough to uphold the public welfare if they are still within the failed water privatization framework and biased towards profitability for water oligarchs,” Vallejos said.

WPN recalled that water privatization has only resulted in more expensive water, with rates increasing seven-fold for Maynilad and ten-fold for Manila Water from the start of the concession in 1997 to the third quarter of 2019. The CA-directed rate rebasing every five years since privatization allowed firms to make profits by charging consumers increasing tariffs including, among others, for projects that fail to push through. WPN added that the CA gives government a key role in rate-setting (judging whether enumerated expenses were prudent and just in the interest of consumers), but nonetheless allows the companies to sue the State should its regulation affect their profit-making.

The water firms also face Supreme Court-imposed penalties for violating the Clean Water Act, with poor sewerage services performance versus targets as of 2018. Meanwhile, water service interruptions have been hounding Manila Water and Maynilad consumers since March 2019.

These problems bring us back to 1997, WPN said, when the Ramos administration invoked a national water crisis and handed over water sourcing, processing and distribution to the private sector. The huge socially-sensitive water utility was handed over to the Ayalas and Lopezes. The biggest water privatization until then was perfectly in tune with the Ramos government’s grand promotion of globalization policies including deregulating the oil industry and liberalizing Philippine agriculture, said the group.

Public sector water operations should be re-established in Metro Manila and the rest of the country as soon as possible, said Vallejos. “These should be returned to the public sector to ensure that profit-seeking does not get in the way of delivering cheap, clean, and secure water services to the public,” he said.

WPN cited the growing global trend of water remunicipalization reversing water privatization. This has already happened in over 231 cities in some 37 countries around the world for instance in Spain, Germany, Argentina, and even in France, home to water multinationals. The poor experience with water privatization is making governments choose public water sourcing and distribution over private control, the group said.

Government’s continued implementation of water privatization is seeing additional oligarchs taking over public control of water, said WPN. Specifically, these are big business interests close to Duterte, for instance, Manny Villar and Dennis Uy who are also in the water business through Prime Water Infrastructure Corp. and Udenna Water and Integrated Services, respectively. Prime Water has been striking joint venture agreements with local water districts in areas nationwide but undermining water services according to a Commission on Audit report, WPN observed.

Simply renegotiating the CAs to let more oligarchs keep profiting from the water business will not remove the ill effects of privatization on the public and may even make it worse, WPN said. Government must bravely decide to take control of the vital public utility and run it as a service rather than for profit, the group said. #

Govt should be transparent, release 9 signed foreign loan agreements — IBON

Research group IBON said the Duterte administration should immediately release to the public all nine foreign loan agreements it has already signed for infrastructure projects, especially for the upcoming Kaliwa Dam project with China.

The group raised concerns of government’s transparency since it has denied IBON’s previous requests for copies of the loan agreements.  

The government has an obligation to disclose these contracts as a matter of public interest and protecting the country’s sovereignty, the group said.

The nine foreign loan agreements signed by the government include the Chico River Pump Irrigation and New Centennial Water Source-Kaliwa Dam with China; Pasig-Marikina River Channel Improvement, Cavite Industrial Area Flood Management, Metro Manila Subway, and North-South Railway with Japan; Panguil Bay Bridge; and the new Cebu International Container Port with Korea.

IBON research head Rosario Bella Guzman said that there is lack of transparency of government offices to disclose loan agreements signed by the government. 

IBON wrote a letter to the Department of Finance (DOF) in June 2018 requesting copies of the loan agreement for the Chico River Pump Irrigation Project.

The DOF responded that the contract has a confidentiality clause and that the agency is not allowed to disclose details of the contract to any third party.

Loan agreements should be disclosed since the projects are public infrastructure which are supposed to be serving public interest, said Guzman.

The Chico River Pump Irrigation Project, with the provisions that could be disadvantageous to the country, may become the gold standard of other loan agreements, Guzman added.

Guzman said that the contracts for other Chinese loans such as the one for the New Centennial Water Source-Kaliwa Dam Project would follow the template of onerous provisions found in the Chico River Pump Irrigation Project.

The loan agreement for the Kaliwa Dam which was signed in November 2018 is yet to be made public and IBON has yet to receive a copy of the loan agreement it requested from concerned offices.

Guzman added that the Php12.2-billion Kaliwa Dam will be 85 percent funded by China official development assistance (ODA), in other words, debt that will be paid for by the public in the future.

“China loans are one-sided and impose onerous conditions, which could result in the Philippines virtually giving up its sovereignty,” said Guzman.

IBON previously raised questions on the Chico River Pump Irrigation loan agreement being governed by China laws, and that any arbitration or suit shall be heard at the China International Economic and Trade Arbitration Court (CIETAC).

“Natural resources, including water, are the subject of these loan agreements, which makes it more problematic if conditions are lopsided in favor of foreign governments, creditors and investors,” Guzman added.

Instead of prioritizing the attraction of one-sided foreign investments and loans for its infrastructure program, the government should put national interest and public welfare first over local and foreign big business interests.

Government can start by subjecting the loan agreements it is signing to public scrutiny and declining those that are not mutually beneficial and do not contribute to the country’s domestic economic development, IBON concluded. #

Suspend rate hike, scrap concession agreement with water firms, govt told

The Water for the People Network (WPN) said that government should not accede to the ruling of an international arbitral court granting the Maynilad Water Systems, Inc. petition to collect its corporate income tax (CIT) from consumers. 

The water rights group agreed that any impending water rate increase amid the ongoing dispute on pass-on CIT should be deferred.

The group likewise urged the scrapping of the concession agreement (CA), which it said allows onerous grounds for price hikes.

The Singaporean Supreme Court finalized an International Chamber of Commerce (ICC) arbitration decision that Maynilad may recover its CIT through pass-on charges.

Maynilad has demanded that the Philippine government pay Php3.4 billion in indemnification for non-recovery of its CIT for the period March 11, 2015 to August 31, 2016.

This is after the Metropolitan Waterworks and Sewerage System Regulatory Office (MWSS-RO) refused to honor an arbitral decision favoring Maynilad while that for Manila Water remained pending.

As per CA with the Philippine government, both Maynilad and Manila Water took to international arbitration in 2013 to contest the RO’s rejection of their petitioned rate increases for the rate rebasing period of 2013-2018.

The firms’ petitions included CIT recovery and other expenses unrelated to the delivery of water services.

For the period of 2018-2022, the MWSS Board has already approved the RO’s rate rebased tariffs, which again reportedly disallows CIT recovery. The MWSS-RO announced a staggered Php5.73 per cubic meter (cu. m.) rate increase for Maynilad and Php6.22/cu. m. for Manila Water.

These are lower than the firms’ petitioned rates, wich for Maynilad still included the CIT.

The WPN urged the MWSS Board in a letter to uphold the decision to prohibit CIT recovery because it is unjust to consumers.

“In the first place, it is very wrong to pass on the burden of paying the CIT to consumers,” said the group.

The concessionaires are technically public utilities providing a very basic need such as water, said WPN. Aside from mandating the periodic alteration of basic charges through rate rebasing, the CA ensures the concessionaires’ steady flow of revenue and profit-making with other increases based on inflation, an environmental charge, and value added tax, noted the group.

WPN supports the MWSS-RO plan to suspend the impending rate hike this year should Maynilad insist on collecting indemnification from the government.

“The amount being demanded by Maynilad alone could reach Php40 billion, tantamount to an increase of about Php5.00/cu. m. on current average tariffs. Any rate hike today is also insensitive due to the soaring prices of goods and services,” said the group.

Inflation has risen to 6.7 percent in September from 6.4 percent in August.

Aside from pushing for the prohibition of the CIT and rate hike suspension, WPN stressed that strategically, government should review and repeal the CA altogether.

 

“It is the basis of the enrichment of private water firms at the expense of consumers. Government should instead ensure control over water resources to have these safe, accessible and affordable for the public,” WPN said. #

Groups protest water rate hike

Members of the Confederation for Unity, Recognition and Advancement of Government Employees (COURAGE) and Water System Employees Response (WATER) staged a picket protest outside the office of Metro-Manila Sewerage System (MWSS) in Balara, Quezon City to denounce the latest water rate hike by Maynilad and Manila Water Thursday, October 4.

According to Ferdinand Gaite, National President of COURAGE, Maynilad will increase its rates by approximately P5.73 per cubic meter while Manila Water will impose a P6.22-P6.55 per cubic meter hike in the next five years.

Customers of Manila Water (East zone concessionaire) will pay an additional P1.46 per cubic meter starting October 16 while Maynilad (West zone concessionaire) started a P0.90 per cubic meter increase last October 1.

Gaite also blames the rampant high prices of goods and services because of TRAIN Law (Tax Reform for Acceleration and Inclusion) that added burdens to the water customers.

Meanwhile Bayan Muna Rep. Carlos Zarate will file a resolution seeking the lower house to fast track the probe to stop water hike by legislating and forwarding measures to protect consumers.

He cited the anomalies happen in 2012 where giant water firms collected in advance for future projects.

This included the P45 billion Laiban project and P5.4 billion Angat Dam Irrigation project.

Both projects were cancelled in 2010 but P6 billion worth of collections were already made in 2012. # (Video by Dave Galman / Report by Joseph Cuevas)

Group to MWSS: Show us the numbers

The Water for the People Network (WPN) expressed dismay that the Metropolitan Waterworks and Sewerage System – Regulatory Office (MWSS-RO) would not readily reveal the numbers involving water companies’ petitions for tariff increases in public consultations that the MWSS-RO itself convened this week.

The group said that by doing so, the government agency effectively hindered the consumers’ right to know.

Instead of genuinely consulting the people, it seemed to be conditioning the public to blindly accept the impending water rate hikes based on the petitions of the Manila Water Company (Manila Water) and Maynilad Water Services Inc. (Maynilad), said the group.

The WPN is composed of groups and individuals promoting people’s control over water services and resources.

A concession agreement (CA) between government and water concessionaires warrants the rate rebasing process every five years.

The process pertains to the determination of new tariffs based on the Manila Water and Maynilad’s past and future expenses, as well as a rate of return that will allow the firms to recover their investments.

The MWSS-RO has conducted public consultations before and during the past rate rebasing periods purportedly to grasp the public pulse with regard to the implementation of new tariffs.

The private companies’ petitions have historically been approved, resulting in water rates increasing manyfold through the years, except during the 2013 rate rebasing period.

In September 2013, the MWSS prohibited Maynilad and Manila Water to collect their corporate income taxes and company incentives such as recreation and travel expenses through pass-on charges.

The rate rebasing results reflected amounts lower than both companies’ petitioned rates.

Teddy Casiño, WPN spokesperson, said, “Show us the numbers. If water regulators truly prioritize public interest and want consumers involved in the rate rebasing process, they should make information in Maynilad and Manila Water’s petitions readily available to the public. Otherwise, these public consultations are a PR gimmick.”

During this period’s rate rebasing public consultations, water regulators and the consultants they hired to review water concessionaries’ proposals were reluctant to share pertinent details such as the rate increases requested and basis for the rates such as company earnings, expenditures, and future expenses.

They were also hesitant to answer if questionable charges prohibited in the 2013 rate rebasing process were also included.

WPN said that without vital rate rebasing information from the MWSS-RO, water consumers will be left in the dark and made vulnerable to the water companies’ onerous fees.

The group urged water regulators to uphold their mandate to protect public interest and ensure that Maynilad and Manila Water will not pass on unwarranted expenses to already burdened water consumers. #

On Consumer Welfare Month: 20 years of MWSS privatization, 20 years of violating the people’s right to water

By Water for the People NetworkThe 20th anniversary of the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) in August was considered a milestone by privatization proponents. The MWSS has often been used to showcase the supposed benefits of turning over water supply services to private corporations. But the start of government-declared Consumer Welfare Month is an opportune time to note that two decades of MWSS privatization has harmed the interests of the consumers and the general public. While ensuring huge profits for Manila Water Co. Inc. and Maynilad Water Services Inc., it has violated the people’s right to water, the various ways by which are listed below:

  1. MWSS privatization has resulted in soaring water rates as private concessionaires rake in massive corporate profits

Between August 1997 and August 2017, the basic tariff of Manila Water has soared by 969 percent. The basic tariff of Maynilad, meanwhile, has ballooned by 596 percent. The all-in tariff, which counts the basic tariff plus add-on charges, for Manila Water has increased by 762% during the same period. For Maynilad, it has jumped by 548 percent.

This translated to enormous profits with a combined accumulated income of Php94.5 billion from 2000 to 2015. Such soaring rates and massive profits for Manila Water and Maynilad were made possible by the concession agreements (CA) they signed with MWSS. Tariffs reflected the impact of inflation, adjustments in the foreign exchange rate, and the concessionaires’ petitioned basic charge which would allow them to supposedly implement their business plan and achieve a guaranteed rate of return in the succeeding five years.

Privatization guaranteed the profits of Manila Water and Maynilad not only by allowing them to pass on all the risks of running a business to the consumers. Privatization also legitimized the collection from the consumers of onerous and questionable charges by MWSS concessionaires.

During the last rebasing in 2013, it was exposed that Manila Water and Maynilad had been including questionable items in their application for new rates. As in previous rebasing exercises (2002 and 2007), they passed on to clueless customers the costs of their corporate income tax (CIT), unimplemented projects, advertising, donations, and recreation.

  1. MWSS privatization has seriously undermined the power and mandate of government to regulate the private concessionaires to protect public interests and welfare

The last rebasing also exposed a key feature of MWSS privatization which is how the power of the state to regulate businesses to protect public interest is greatly undermined. When the Regulatory Office (RO) prohibited the concessionaires from passing on their CIT and other questionable charges to the consumers, Manila Water and Maynilad promptly challenged the decision through international arbitration. This is a mechanism provided by the CA to settle disputes between the concessionaires and MWSS on the interpretation and implementation of the contracts’ provisions, including on the setting of rates. It is a secretive and undemocratic process that includes only representatives of MWSS and the concessionaires and without any public participation. It is being chaired by an unaccountable foreign third party that also represents big business interests.

Filipino taxpayers now face the possibility of shouldering as much as Php82 billion in additional burden if the concessionaires are able to secure favorable decisions from international arbitration. Already, the arbitration panel that heard Maynilad’s case ordered government to pay Php3.4 billion. These amounts represent the supposed losses of the concessionaires when the RO disallowed the continued collection of the CIT and other questionable charges. As stipulated in the CA, government has committed to pay for these supposed losses through what is called sovereign guarantee.

As early as 1998 or a year into privatization, Manila Water had already sought international arbitration to compel the RO to increase the firm’s rate of return contained in its original bid. Aside from the arbitration mechanism, concessionaires also resort to blatant arm-twisting to force favorable decisions from government. In 2001, the original investors of Maynilad blackmailed government to amend the CA to allow it to increase rates or else it would terminate the contract.

  1. MWSS privatization has further weakened the people’s right to water amid questionable claims by the concessionaires of improved water services

The soaring water rates and onerous charges being imposed by Manila Water and Maynilad have effectively marginalized poor households from enjoying the right to access water for domestic use. Amid depressed wages and chronic unemployment, water services along with other basic daily necessities, have put increasing pressure on ordinary families’ budgets.

While both concessionaires claim almost universal water supply coverage, poor communities in their service areas do not enjoy the same quality of service that well-off customers like richer households and commercial areas have. Instead of individual connections, poor communities have to make do with bulk meter connections. Aside from compromising the safety and quality of water, it is also not unusual that the water supply in these poor communities is not available 24/7.

Based on the latest available data, the number of persons per connection for Manila Water is seven, and nine for Maynilad, indicating the prevalence of bulk connections – mainly among urban poor communities – in the MWSS concession areas. Thus, while the concessionaires claim outstanding performance (which the RO apparently could not even independently verify), the truth is that many households, in particular the poor, are not individually connected to the water supply system, which is supposed to be the standard. The poor also end up paying more as block tariff rates apply on these bulk connections.

Aside from universal and 24/7 supply coverage, the concessionaires also promised to provide improved sewerage coverage, which they substantially failed to do amid limited investments despite skyrocketing water rates. In their original service targets, Maynilad committed to achieve 31% sewerage coverage by 2016 and 52% for Manila Water. As of December 2013 – the latest available data – Manila Water has only achieved 12% and Maynilad, 11 percent.

  1. MWSS privatization has deepened corporate and foreign control over vital infrastructure and key services in the country

From the onset, MWSS privatization has been an agenda of big corporate and foreign interests.  Foreign creditors World Bank, Asian Development Bank (ADB), and Japan Bank for International Cooperation (JBIC) pushed for the privatization of MWSS, which then owed them some US$800 million in debt. The World Bank’s International Finance Corp. (IFC) served as government consultant in MWSS privatization and designed the concession agreement.

The IFC is now an investor in Manila Water, raking billions of profits from a contract it designed itself. Manila Water is led by Ayala Corporation and United Kingdom (UK)-based United Utilities. Aside from the IFC, other foreign investors include Japanese giant, Mitsubishi Corp. as well as First State Investments of the UK, Singapore-based global fund manager Aberdeen Asset Management plc, and US-based equity mutual fund Smallcap World Fund Inc.

Meanwhile, Maynilad is currently controlled by Manny V. Pangilinan through the Metro Pacific Investments Corp. (MPIC) and DMCI Holdings of the Consunji family. MPIC , of course, is backed by  Indonesia’s Salim group. Other foreign interests in Maynilad are MCNK JV Corp., a unit of Japanese giant Marubeni Corp., and Lyonnaise Asia Water Limited, a unit of French firm Suez, one of the world’s largest water companies.

Water privatization is being challenged worldwide – from France where some of the first water privatization took place and where the world’s largest water firms are based – to Jakarta, Indonesia which privatized its water system the same year as Metro Manila and used the same model.

Water privatization must be reversed. There is no way out of the trap of exorbitant water rates and unreliable service for the poor unless the concession agreements with Manila Water and Maynilad are junked and the operation of the water supply system is taken over by a reformed public sector. # (Ibon.org)