In January 1997, the Maynilad Water Services, Inc. (a partnership between global giant Suez and local elite Benpres Holdings of the Lopez clan), and the Manila Water Company, Inc. (owned by investors that include transnational United Utilities and leading local firm Ayala Corporation) won the West and East Zone concessions, respectively, of the Metropolitan Waterworks and Sewerage System (MWSS). The conclusion of the bidding process was a privatization undertaking hailed by the World Bank as the first large-scale water supply privatization in Asia.

As per the terms of the concession contract: private companies would manage existing facilities and provide water services to some 16 million Metro Manila residents, in exchange for revenues they would gain from collecting users' fees. They also promised a range of performance targets that included the lowering of water rates; uninterrupted water supply to connected consumers at no less than 16 pounds per square inch (psi) by year 2000; compliance with World Health Organization water and effluents standards by year 2000; virtually universal water supply by 2006; and the reduction of water losses from 56 percent to 32 percent in the first 10 years.

None of the above commitments has come significantly close to fulfillment, especially for the Lopez-Suez partnership of MWSI or Maynilad.

Ever-rising water rates

Within two years, Maynilad got the first of many tariff hikes that would be granted in only seven years under the privatized setup. (The East Zone concessionaire naturally availed of the rate hikes too.) Maynilad was first to demand for a tariff hike, and after being granted several more hikes, now charges PhP30.19/ cu. m. This represents more than a 500 percent rise from its original bid of PhP4.96/cu.m. in 1997. Meanwhile, water leakage problems have remained unresolved, with Maynilad's water losses rising from 57.4 percent in 1997 to 67 percent in 2000.

Threats to Public Health

Maynilad has failed to provide decent service to seven million residents west of Metro Manila. Up to now, water supply is intermittent and kept at low pressure. This was precisely the reason for the cholera outbreak that hit Maynilad communities in the West zone, where six people died and 600 more were hospitalized in 2003 from consuming contaminated water. A laboratory examination by the University of the Philippines Natural Sciences Research Institute (performed at the request of the Freedom from Debt Coalition or FDC) showed Maynilad's water as contaminated with E. Coli bacteria, at 16 per 100 ml of water or more than 700 percent the national standard of 2.2 per 100 ml of water.

The firm has consistently evaded accountability for failing to bring the West Zone up to minimum public health standards such as maintaining adequate water pressure and improving pipe infrastructure.

More debts for government

When Maynilad's rate hike petition was initially disapproved, it unilaterally opted to stop paying around PhP2 billion/year in concession fees to government. By end-2004, unpaid concession fees had ran up to PhP10 billion. Without the concession fees to pay for the old debts of MWSS, government has had to borrow US$21 million in 2001, US$260 million in 2003, and US$150 million and PhP780 million in 2004 to finance maturing obligations and avoid default.

The Lopez-Suez Rehabilitation Plan

Faced by bankruptcy from the mismanagement of its own business affairs, Maynilad has been pushing a corporate rehabilitation scheme that is predictably more advantageous to the profit-making interests of the Lopez-Suez tandem than the well being of the public at large.

Maynilad's rehabilitation plan intends to convert at least US$60 million of Maynilad's debts into equity for its bank-creditors. This will allow Suez and foreign creditors an 84 percent equity in the company-a clear violation of the Philippine Constitution which stipulates that companies operating public utilities should have a Filipino/foreign ownership ratio of 60:40. Government reportedly proposes to go around this legal impediment by using US$60 million of collectibles from Maynilad's performance bond to buy 71 percent equity in the bankrupt company, in which case Suez still remains as foreign partner.

The victims of Maynilad's contaminated water have yet to be indemnified, but their misery from unsafe water and reduced access may be far from over considering that Suez and Maynilad's rehabilitation plan prioritizes financially profitable areas, definitely not slum communities. It is also likely that government will again resort to more borrowings since Maynilad plans to stagger payment for accrued and accruing concession fees.

From where Suez and the Lopezes stand, adequate and affordable delivery of basic water service can happen only through profit-making and full cost recovery. The Manila privatization experience shows as much: a cautionary tale that where provision of water services is driven by profit, the basic right to water of all individuals, particularly the poor, will always be at risk.

Water is a human right! Stop the privatization of water services!
No to private profits from our water!
SUEZ out of water resources and services in the Philippines now!

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