FDC Statement on the proposed extension of MWSS’ concession contracts
16 March 2009
As efforts are heightened towards brokering a ten-year extension of the Metropolitan Waterworks and Sewerage System’s concession agreements with Maynilad and Manila Water, the Freedom from Debt Coalition (FDC) hereby expresses its vehement opposition to such proposals. Although neatly and deceivingly packaged as a compromise deal to temper projected water rate increases for the following years, an extension of the concession contracts fails to address the inherent flaws of the privatization deal between MWSS and its two concessionaires.
A ten-year extension of the concession agreements, as what is now being brokered, is nothing more than a band-aid solution to what has now been shown as a cancerous deal that serves only to prioritize corporate interests over consumer welfare. The protection of consumer interests requires a thorough multi-stakeholder review of the concession agreement and its impacts, not a blind extension of the same contract that brought on unmitigated water rate increases and delayed fulfillment of service targets.
FDC urges the MWSS to reject the proposed contract extensions for the following reasons:
1. There is no guarantee that extending the concession agreement would significantly mitigate water rate increases for the coming years. Maynilad and Manila Water can, and have been historically shown to be capable of pushing for rate increases beyond and against their promises and initial projections. The privatization deal was built on promises of lower rates and no significant rate increases for the first ten years, yet rates have monumentally increased by 665 and 891%. Only two months ago the people were also promised that no price increases would take place for at least this year, yet automatic increases for currency adjustments were approved. The entire record of eleven years reeks of promises similar to those now being offered to sweeten the proposed contract extension, all of which have been broken without a moment’s hesitation in line with the demands of Manila Water and Maynilad.
2. Contrary to present propaganda that the contract extension is being considered in response to the global economic crisis, Manila Water has been brokering for such an extension since 2007. Maynilad has indicated similar interest since it exited corporate rehabilitation in February 2008.
3. Projected water rate increases are not based solely on the proposed capital investments of Manila Water and Maynilad. Included also, but not disclosed to the general public during “public consultations,” are corporate income taxes, debt payments, and operational expenses including corporate salaries and benefits that are all being passed on to consumers. The notion that preventing water rate increases automatically results in a cut-down on capital investments belies a stubborn refusal on the part of Maynilad and Manila Water to cut down or review these other expenses.
4. Many of the problems that need to be addressed are borne of the concession contracts themselves. Among the problematic provisions in the contract are those that provide for full recovery of cost through consumer billings, the inclusion of business and corporate taxes as operational expenses, automatic adjustments for currency fluctuations, and automatic servicing of all MWSS loans when due. The concession agreement must be reviewed, not extended.
5. Proceeding with a contract extension only repeats the same error which brought us here – that of blindly relying on the private sector and the market to provide an essential service that by its very essence is both a natural monopoly and a public service. The desire to wash its hands off of the responsibility of appropriating the necessary attention and budget to water service provision was the source of government’s wrong decision to enter into the privatization deal. This is the same framework still being employed by the proposal to extend the contract.
Rather than exploiting the present global crisis in order to railroad a disadvantageous and unnecessary extension of the concession agreements, it is time that we put a stop to the damage brought on by the privatization of Metro Manila’s water service.