Below is the statement prepared by the Freedom from Debt Coalition in reaction to the outcome of the hearing conducted by the House Committee on Natural Resources last August 13 and in response to the joint position paper prepared by the MWSS, Manila Water Company, Inc. and Maynilad Water Services, Inc. Said committee hearing was conducted to deliberate on the privilege speech of Akbayan Rep. Risa Hontiveros-Baraquel re: Human Right to Water.
02 September 2008
The Freedom from Debt Coalition challenges the statements forwarded last Wednesday by MWSS, Manila Water and Maynilad to the House Committee on Natural Resources which claimed that the MWSS privatization “clearly” resulted in more gains for the public, “all at no additional cost to the government.”
In blatant violation of its independence as a regulatory body and in denial of conflicting interests -- MWSS submitted a ten-page paper prepared in collaboration with Maynilad and Manila Water. The joint paper was submitted in response to the FDC’s call for a comprehensive assessment of the privatization scheme due to its failure to address the plight of waterless communities, non-fulfillment and arbitrary amendments that pushed for ballooning rates, the scheme’s propensity to generate further debts, and the lack of transparency and accountability in the Maynilad bail-out and regulation.
Their joint collaboration, however, was not so well-coordinated and not very coherent. Contrary to their claims, the privatization of MWSS has cost everyone more than it was worth.
They claim that heavy State subsidies to MWSS operations have ceased thanks to the concessionaires’ assumption of MWSS’ debts. And yet MWSS had to take on a $100M loan from BNP Paribas in 2003 to cover MWSS debts then due when Maynilad refused to pay. The arbitration proceedings between Maynilad and MWSS alone cost $3M.
They claim that service levels drastically improved and non-revenue water lost to leaks and pilferages were substantially reduced. Yet today’s service levels are nowhere near what they promised when the concessions were first awarded to the private concessionaires. Service targets which were provided to all bidders in 1996 were severely compromised when they entered into questionable amendments that not only lowered their service targets, but also provided the concessionaires more room for profit. Clearly, these amendments cost the people.
According to the three, such costs and amendments are valid and just. They say that contract amendments giving way to additional charges for the consumers was a result of the non-fulfillment of certain “assumptions” that were considered upon entering the contract. Among the assumptions they harp on were the completion of the Umiray-Angat Transbasin Project by 1999, the completion of the Bulk Water project known as the Laiban Dam by 2007, and the construction of a 300Mld Water Supply for Maynilad by 1999.
It is at this point, however, that they end up shooting themselves on the foot.
The projects they have come to label as “assumptions” are clearly set out as obligations under their concession agreements. The fulfillment of the UATP, for instance, is very clearly stated to be under the supervisory responsibility of MWSS in the concession agreement for the west zone. They would thus reason that due to their failure to fulfill the obligations they set out for themselves, the amendments that provided for additional charges and lowering of service targets were valid and just. That rationale escapes us.
The concession agreement between MWSS and the concessionaires allows them to set a floor rate every five years based on the projected expenditures of the concessionaire for the next five years. In this way the concessionaires are ensured of recovering their costs for implementing these projects. But if the projects are not really being pushed through, then what are we paying for? If “major infrastructure development plans are prone to modifications,” as they so assert, then why are consumers paying rates pegged to cover the projected expenses of these infrastructure development plans?
How long, for instance, have consumers been paying for the expenses of the 300Mld Water Supply project despite the fact that such expenses have not actually been incurred? The status of the300Mld water supply project for Maynilad, still uninitiated after 10 years, is not a mere “modification”.
During the committee hearing, MWSS administrator Diosdado Allado questioned the existence of waterless communities, only to be contradicted when Maynilad president Rogelio Singson admitted that Maynilad was presently able to service only 6.2M of the 9M population in the West zone. In their “joint collaboration” of a paper they categorically declare that “Maynilad improved its service coverage to 89.7% by the end of 2007 ” in one page and then display a 71.1% service coverage for Maynilad in 2007 on the very next page.
They had better collaborate further on what the real figure is. A figure too low dampens the image they paint of a highly-successful privatization scheme. A figure too high, on the other hand, weakens the necessity of Maynilad’s newly-acquired $365M loan which comes just in time to be figured in on this year’s rate-rebasing procedure for Maynilad.
With all the glaring inconsistencies in their statements, FDC believes that nothing less than detailed financial documents and a thorough assessment of these ten years will suffice. Are revenues lost through non-revenue water being diluted into the bills of unsuspecting customers? Have we been made to pay for the expenditures of projects that have yet to materialize or that have been overpriced? These are questions made more urgent by the present economic crisis and in the light of plunder and graft charges being thrown around from within MWSS.