31 July 2007
EXACTLY TEN YEARS AGO, and after a pronouncement of a looming water crisis, the government has embarked on what was dubbed “the biggest water privatization scheme in the world,” declaring the privatization of the Metropolitan Waterworks and Sewerage Services (MWSS) a viable solution to recover its losses, and to ascend from the quicksand of its ballooning debts.
Following through a course of a bidding process to identify the winning bidders to operate in a MWSS privatized setup, it was declared that Metro Manila will be divided into two concession areas- the West and the East Zones. Maynilad Water Services Inc., managed by a concession by local magnate Benpres Holdings and international corporate mogul Suez, operates for the West Zone; while a partnership between local form Ayala Corporation and transnational corporation United Utilities, supervises the East Zone.
Bound by the Concession Agreement, the utilities are obligated to deliver service targets specified within their 25-year contract. The hard sell promises of privatization include:
- 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
- 100 percent water service coverage within 10 years
- Non-revenue water (NRW) reduced significantly from 56 percent to 32 percent in the first 10 years
- US$7.5 billion in investments for new infrastructure
- Some US$4 billion in income tax revenues over 25 years
- Waste water program with 60 percent coverage in 15 years
The present year marks the 10th anniversary of MWSS privatization, with the concessionaires operationalizing exactly on August 1, 1997. The Freedom from Debt Coalition, within years of steadily researching and monitoring the scheme of MWSS privatization, concludes that after a decade of privatization, sugarcoated in their goal of delivering efficient water supply to the public, especially the poor, is a failure.
Looking back on the decade that was, MWSS privatization has:
• Paved way for skyrocketing water tariffs. The MWSS privatization resulted in the immediate lowering of water tariffs by 73.6 percent in the East Zone (Manila Water’s service area) and 43.5 percent in the West Zone (Maynilad’s). This was due to the extremely low winning bid rates (dive bids) of PhP 2.32 per cubic meter (m3) for the East and PhP 4.96/m3 compared to then current tariff of PhP 8.78/m3. However, public euphoria did not last that long. Two years later, the concessionaires began a series of rate increases through the implementation of several tariff-adjustment mechanisms, which even necessitated changing the provisions of their Concession Agreements. The government entered into these bail-out schemes when Maynilad Water threatened to periodically cut off water supply (a water “blackout”), citing financial incapacity to continue its operations. Presently, water tariffs have gone up to 565 (Php 32.99/ m3) percent in the West Zone and 791 percent (Php 20.68/ m3) in the East zone.
• Failed on its targets to lower non-revenue water. Recent data shows the Maynilad is still struggling on their 62 percent NRW, failing to meet the target. Although Manila Water, lauded by the creditors as the “better” concessionaire (basing on the downright failure that was Maynilad) has lowered its NRW significantly by 35 percent, the latter still poses a threat in the lives of communities, specifically that of the Rizal area.
• Held no one accountable on Maynilad’s evasion on its accountability on the 2003 cholera outbreak. In 2003, eight people died and 800 more were hospitalized due to ingestion of contaminated water. All victims were residents of communities within Maynilad’s service coverage area. Small outbreaks of cholera and gastroentiritis also occurred in Manila Water’s jurisdiction but the company was quick to deny its culpability, oftentimes citing illegal connections as the main reason for water contamination.
• Let go of Maynilad’s failure to deliver targets. Because of claiming to be financially incapacitated to run Maynilad and to deliver service targets, Maynilad filed for a notice of early termination, asking for the government to refund its investments amounting to US$303 million. Instead of deliberately filing a notice of early termination, MWSS and Maynilad still worked their way to preserve Benpres’ and Suez’ management of Maynilad, under a corporate rehabilitation plan.
• Failed to address major issues on delivering water supply service to 100 percent of its consumers. The 212 waterless communities as identified by the National Anti-Poverty Commission alone serve as a proof that their targets are not met. Until today, these communities remain waterless.
• Government incurred more debts. Because Maynilad ran away with its non-payment of concession fees amounting to PhP10 billion, which MWSS needs for its expenses and operations, the government was forced to incur more debts to suffice its needs: US$21 million in 2001 from the Philippine National Bank and Banco de Oro; US$260 million in 2003 from Keppel, Deutsche, First Metro Investment Corp., Rizal Commercial and Banking Corp., etc.; US$150 million in 2004 from BNP Paribas; and P780 million in 2004 MWSS bonds.
• Violated basic sectors’ rights. Of the total 7,370 MWSS employees, only one percent was left with the Residual MWSS (48 percent women, 52 percent men). Six months later, the original MWSS workforce further shrank by 40 percent due to so-called early retirement (27percent) and voluntary/ involuntary separation (13 percent). Also because of the privatization, both female and male employees close to 15 years of services forfeited lifetime pension benefits. According to one office worker, women employees, especially the old timers in support staff positions (clerks, typists, administrative), chose early retirement because they feared they could not ‘compete’. They also felt that they fell short of the necessary skills (such as using computers) to survive in the new set up.
• Shielded Manila Water and Maynilad of their public accountability. In late 2004, the Freedom from Debt Coalition exposed the questionable MWSS Board Resolution granting the two concessionaires the status of mere agents and contractors—not as public utilities as explicitly stated by law. Being “mere agents and contractors”, these two water and sanitation service providers are practically shielded from their accountability to the public. The resolution clouds the terms of these companies’ obligations in accordance to the people’s right to safe, adequate and affordable water because:
- It exempts the concessionaires from the 12 percent profit margin limitation under Section 12 of the MWSS Charter. This means that Manila Water, which was found by the Commission on Audit to have registered a 40.92 percent rate of return on rate base (RORB) in 1999, could easily walk away with PhP 281 million excess income.
- They are freely charging consumers with additional PhP1.55 (Manila Water) and P4.14 (Maynilad) per cubic meter of water. This translates to about P6.33 billion (Manila Water) and P56.018 billion (Maynilad) worth of corporate income taxes being passed on to the public.
- They may invoke the Resolution in refusing to extend their services to anyone within their jurisdiction.
- They are, in effect, now exempted from the provisions expressed in Article XII, Section 11 of the 1987 Constitution, which limits foreign ownership of public utilities to 40 percent.
With all these indicators, it is enough to say that privatization of MWSS has failed not to address the problems affecting water service provision, but also deprived the public of their inherent and inalienable right for their access to safe, reliable, and affordable water supply. As long as water, a public utility, remains in private hands, corporate interest would continue to be prioritized all at the expense of public welfare – just like what it is within a decade of MWSS privatization.10 Years of Water Privatization is Enough!
End Water Privatization Now!