17 September 2003
The public has been conveniently excluded by the International Appeals Panel from taking part in the arbitration between the Metropolitan Waterworks and Sewerage System and Maynilad Water Services.
Ironically, the arbitration to determine who is at fault over the early termination of Maynilad’s concession contract greatly affects the public as the government will use taxpayers’ money to pay Maynilad’s 21 billion-peso claim, if MWSS prevaricates and loses the case.
It is the public who suffers from the dismal performance of the West Zone concessionaire and the ongoing monthly overcharges amounting to more than P400 million. And who will shoulder the burden of additional loans being made by the MWSS so that it can meet obligations dropped off by Maynilad?
The public, today, shall not be ignored. Under the leadership of the Freedom from Debt Coalition, mass leaders and their constituents proclaim the people’s verdict on Maynilad’s early contract termination.
We hold Maynilad guilty of violating its contract and desecrating human right to water on the following counts:
· Refusal to pay more than P5 billion concession fees since March 2001
One of the promises of privatizing the MWSS was to ease the government’s fiscal burden. The concessionaires, Maynilad and Manila Water, upon winning the right to use MWSS’s assets and distribute water to Metro Manila consumers, agreed to pay concession fees which the government relies on to service old debts and fund the operations of the MWSS Corporate Office and the Regulatory Office.
In March 2001, Maynilad unilaterally stopped paying its concession fees in what seemed as retaliation to government’s initial refusal to institute a mechanism that would allow it to collect forex losses without securing the approval of the Regulatory Office. MWSS set March 2003 as the final deadline for Maynilad to settle its obligations but the concessionaire refuses to honor these.
MWSS could have had a recourse by confiscating Maynilad’s performance bond, the $120 million-fund required by the concession agreement in the event that they do not fulfill their commitments. However, the International Appeals Panel twice prevented the MWSS. First, by ordering that MWSS cannot touch the bond unless Maynilad does not meet its June 30 deadline to renew its performance bond with an additional $30 million dollars. Second, by reneging on the first directive and extending Maynilad’s deadline by another 45 days.
· Close to $200 million in new government debts
Maynilad’s nonpayment of its concession fees has forced the government to apply for new loans to avoid being in default with its creditors which include the World Bank, the Asian Development Bank and the Japan Bank for International Cooperation. In May 2002, MWSS acquired a short-term loan of $100 million from Deutsche Bank to pay for old debts supposed to be covered by Maynilad’s concession fees. In October, MWSS again obtained $15 million from Keppel Bank. These new loans are part of the intended MWSS’s new borrowings worth $190 million, as confirmed by MWSS Chief Finance Officer Estrellito Polloso.
MWSS renewed its 100 million-dollar loan from Deutsche Bank when it matured in August 2003. It plans to do the same when the loan from Keppel Bank matures in October this year.
· More than P5 billion in overcharges
Despite repudiating concession fees to MWSS, Maynilad continues to collect the full amount (P4.07 per cubic meter) of the Foreign Currency Differential Adjustment—a mechanism to recover current forex losses arising from its supposed payment of dollar-denominated MWSS’s loans as well as Maynilad’s loans. Since Maynilad has defaulted on its payment obligations to MWSS and its foreign debt amounts only to $125.5 million as compared to old MWSS loans of $800 million, Maynilad should be charging consumers less than 15% of the FCDA.
In addition, West Zone consumers still get billed the Accelerated Extra-ordinary Price Adjustment (AEPA) amounting to P4.21/cu.m. even when implementation of this forex loss recovery mechanism was only authorized from October 2001 to December 2002. Maynilad gets extra monthly income of more than P400 million out of the nonstop imposition of the FCDA and AEPA on hapless consumers.
· Dismal provision of water services to the public
The government has granted Maynilad several rate increases which raised its water tariff from P4.96 to P19.51 per cubic meter. Despite such hefty booty, Maynilad only bungled in providing water service to the public: low water pressure, intermittent water supply, broken pipes and postponement, even abandonment of projects to provide piped water connection.
In retrospect, what kind of service can we expect from a company who can only collect payment for 30% of the total water it distributes? Maynilad’s inability to arrest its rising nonrevenue water (water lost due to pilferage and leaks) is the cause of the company’s financial crunch but still, the company has the audacity to ask for repayment of its investments by blaming the government.
The public has had enough of Maynilad’s mismanagement and inefficiencies. Maynilad should get out of our water sector. Now!