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‘NAGAUGTAS AKO’: Approval of BACIWA-Prime TOR ‘hurried,’ ‘without proper study’ – GM

Visayas Today

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.

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)

Health workers vow to block Fabella’s closure

Health workers and urban poor residents protested at the gates of the Dr Jose Fabella Memorial Hospital in downtown Manila today to denounce its impending closure by the Benigno Aquino government on June 9.

Alliance of Health Workers (AHW) members said that as many as 2,000 patients per day, including hundreds of mostly poor birthing mothers, will lose free medical services offered by the 700-bed hospital when it closes. Read more