Politics of water
DEMAND AND SUPPLY - Boo Chanco (The Philippine Star) - December 9, 2019 - 12:00am

We have two options according to President Duterte. Government takes back operations and responsibility of distributing water in Metro Manila, or his crony, Manny Villar, takes over from Manila Water and Maynilad.

Those who say they want government to take back control of water distribution don’t know what they are asking for. They are probably too young to have experienced how bad it was before the water distribution service was privatized.

Privatization happened precisely because government failed to efficiently perform. Where I used to live, we needed water pumps and storage tanks to assure water supply. All that changed once Manila Water took over… 24/7 water up to the second floor of our house.

As for letting a presidential crony take over… I like Manny Villar who was my batchmate at UP Diliman, but handing to him the two concessions on a golden platter smells rotten. He should win a competitive bid and not just because he is Duterte’s political ally.

Probably, the better option is to rebid the concession contracts which are going to end in June 30, 2022 anyway. Maybe the 15-year extension can be rescinded. The current concessionaires should consider that the price to pay to win back public confidence on the fairness of the contracts. That’s better than the mess of an outright revocation that Duterte is threatening to do.

The DOF has expressed displeasure over contract terms that prevents government from effectively regulating rates, the reason for the arbitration case that government lost.

But DOF must also know that a drastic fix on a live contract can negatively affect our credit rating. There goes Sec Sonny Dominguez’s goal of an A rating by 2022.

Indeed, those who have worked at the DOF and international financial institutions are saying they will not be surprised if our debt rating will now be put on a negative outlook, if not downgraded.

I know Duterte is angry, but things have to be patiently explained to him by the likes of Sec Sonny so we don’t shoot ourselves in the foot at the point of economic takeoff.

 The contracts may seem onerous today to some people but were seen fair when these were signed. The terms enabled the FVR administration to attract private investors to bail out MWSS.

FVR was very transparent about the terms, subjected everything to congressional hearings to make sure the terms are legally defensible. FVR also created a special advisory committee for the sole purpose of reviewing the concession agreement. Given the importance of the contracts, FVR must have also sought advice from a hotshot legal luminary, Rene Cayetano, his chief presidential legal adviser.

The potential investors were reluctant to bid as they were worried about government’s propensity of making political decisions that adversely affect the business model on which private investment decisions are made.

So, the contracts needed an iron-clad assurance that involves international arbitration in case of disputes. That’s because there was also zero trust on the independence of our judicial system in matters like these.

As for those who say water is free and shouldn’t be commercialized or made for profit, here is the view a former MWSS engineer posted on FB Messenger:

“The rain from the sky is free, but managing the watersheds and dams, treating water to be safe to drink, and transmitting that through hundreds of kilometers of pipeline to reach our faucets have a cost.”

I am not saying the concession agreement is perfect. I have yet to be satisfied with a good explanation why they are charging us for sewerage and development of new water sources all those years when they were not spending money on those… at least not at the level they are collecting.

Because circumstances have changed after over two decades, these contracts ought to be reviewed, but not politicized because once politics gets in, we all suffer.

Here is the view posted on Facebook by Raffy Alunan, a staunch Duterte supporter and was once president of Maynilad Water.

“If the government since way back professionally managed its public utilities like Napocor and MWSS, it need not have privatized them.

“Pressure came from international lending institutions, private and public, who refused to keep lending until those were privatized to ensure being repaid. The debt trap that the country found itself in led to privatization, which ideally was not a bad thing if properly regulated…

“We were Asia’s sick man for a long time. Let’s not forget the Asian Financial Crisis that took place on the same year that the water concessionaires took over from MWSS.

“The water contract as I recall was drafted by the World Bank and the government in the latter years of Ramos administration. It underwent a review by NEDA, the OGCC, the Department of Justice before recommending approval to the president.

“It was not perfect, which required an amendment of the contract in the early years of the Arroyo administration. Government should review the whole train of events to understand the complex context and see the situation from a broad perspective. And it should comprehend how endemic corruption keeps ravaging its service delivery and the privatized companies tethered to it.

“Most of all, it should look at the status of the regulator. Is it truly independent from the MWSS and the concessionaires? Does it have the right stuff to ward off pressure and temptation, and to make the hard decisions?

“On the one hand, the public must have adequate water supply and sanitation/sewerage services. On the other hand, the concessionaires need to make a decent profit, but not at the predatory expense of the public…”

Hopefully, the more responsible administration officials think through their next steps. What they do affects not just water, but our entire economy.

Let us not forget the job is to deliver water efficiently to consumers. Water is free as a natural resource, but only if you catch the rain water or draw from a river yourself.

Boo Chanco’s e-mail address is bchanco@gmail.com. Follow him on Twitter @boochanco

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