CEBU CITY – FDC Cebu scored the Asian Development Bank (ADB) and Metropolitan Cebu Water District (MCWD) last Wednesday for maintaining that there were no plans to access a loan by the latter from Bank when technical preparations for the project have already begun.

At the Cebu City Council Executive Session last March 7, FDC Cebu revealed provisions of the Memorandum of Understanding (MOU) inked between ADB and MCWD, belying previous statements issued by the water district that all talk about taking out a loan with ADB as mere speculation.

Earlier this year, the MCWD Employees Union (MEU) bared MCWD’s plan to apply for a US$400M loan with ADB. This was denied by MCWD Management, flatly dismissing the revelation as baseless and untrue.

Unsurprisingly, Paul van Klaveren, ADB Project Officer of the Urban Water Supply and Sanitation Project (UWSSP), declared that there was no loan application.

Van Klaveren’s statement parroted MCWD General Manager Armando Paredes’ pronouncement that the water district did not apply for a loan with the Bank. Paredes issued this statement at the February 22 public hearing held by the Cebu City Council on the issue.

While both ADB and MCWD insist on the non-existence of the US$400 million disclosed by the MEU, Paredes asserted that ADB has a standing offer to avail of a loan with the Bank. Instead of an offer, however, van Klaveren disclosed at the Executive Session that a Memorandum of Understanding (MOU) was executed between the Bank and the water district. No less than van Klaveren revealed that he drafted the MOU.

Under the MOU, a Multi Tranche Financing Facility (MFF) with a total value of US$200 million will be made available for MCWD. The first tranche amounts to US$70 million. The same amount is reflected in the ADB website (www.adb.org) but denominated as a loan application.

The loan will be paid applying full cost recovery tariffs. Under the MOU, the full cost principle will be maintained over the Project period. The UWSSP has a project period of ten (10) years, from 2012-2022.

Essentially, this means that the entire project cost will be passed on to consumers through increased water rates. Consumers will thus be made to pay US$200 million for a period of ten (10) years.

In addition, despite the categorical denial by MCWD and ADB, FDC-Cebu observed that even in the absence of meaningful public participation, the Bank approved a US$2.2-million project preparatory technical assistance (PPTA) for the UWSSP. The PPTA, which covered a period of 2 years, from 2008-2011, came in the form of a grant from the French Government.

Aside from the PPTA, it was discovered that preparatory processes to the project such as the holding of workshops had already been undertaken.

The total investment cost for the UWSSP has been pegged by ADB at US$800 million for both MCWD and Davao City Water District. According to van Klaveren, the projection does not mean that a loan has been applied for. The US$800M estimate, he said, is based on the Bank’s assessment of the investment needs for water supply.

It must be pointed out, however, that while an official denial was issued both by MCWD and ADB, the fact remains that the entire amount could be availed of both by MCWD and DCWD as disclosed by van Klaveren.

FDC-Cebu originally sought the intervention of the local legislative body to inquire into the reported deal between MCWD and ADB; hence, the Cebu City Council public hearing on the matter.

At the Executive Session, FDC Cebu lobbied the City Council for the creation of a Working Group on Water as a governance mechanism to ensure meaningful participation of water stakeholders in any financial arrangement that MCWD intends to enter. The proposal arose amidst the rising clamor of different sectors for a probe into MCWD’s financial mismanagement and ADB’s lack of due diligence in approving loans to the latter.

In the past, MCWD was able to access funding from the Bank under the Local Water Utilities Administration (LWUA) - (Loan No. 251-PHI: Provincial Cities Water Supply) for US$16.8 million in 1975 and (Loan No. 545-PHI: Water Supply Sector) for US$46 million in 1981.

In 1990, ADB extended a US$16M loan (Loan 1056 [SF]/1057) to MCWD intended to “improve/rehabilitate piped water supply system in the urban area”.

FDC Cebu seeks for an assessment and serious evaluation of the impact of these previous loans to MCWD’s delivery of services. As a case in point, the 1981 loan intended to benefit the urban poor did not produce the desired result. -30-

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