Sanctity of contracts
HIDDEN AGENDA - Mary Ann LL. Reyes (The Philippine Star) - December 22, 2019 - 12:00am

Just recently, MWSS administrator Emmanuel Salamat assured that they have no intention of shutting down the two water concessionaires Maynilad and Manila Water Co.

What has been revoked, he clarified, is the MWSS board resolution outlining the terms of the extension of their concession agreement from the original expiration date of 2022 to 2037. The extension was approved in 2009 during the Arroyo administration.

Salamat explained that the extension will be renegotiated, which is fine with the two concessionaires who earlier said they are open to talks with the government. Both Maynilad and MWC have also said they were no longer collecting the P11 billion combined that the International Chamber of Commerce (ICC) had ordered the government to pay as a penalty for the previous Aquino administration’s inaction on their legitimately requested water rate adjustments.

Justice Secretary Menardo Guevarra has hinted that the government’s talks with MWC and Maynilad could happen after a Cabinet meeting at the end of the Christmas holidays, which means January 2020 at the earliest. He said that a team has already been formed to draft the revised CAs consisting of lawyers from the Office of the Solicitor General, Office of the Government Corporate Counsel (OGCC), and from the justice and finance departments.

If the government lawyers are aiming to find anything wrong or illegal with the existing CAs, then they may end up being disappointed.

According to sources, there is actually nothing in the agreements that prevents the concessionaires from passing on their corporate tax income if only to meet the contract-guaranteed rate of return.

It should also be remembered that government officials had to sweeten the deal given the pressure to privatize in 1997 during the time of former president Ramos, the strong public outcry to improve water services which the government then was providing very badly, and the need to attract investors at a time when nobody wanted to invest in water utilities.

The privatization process had to hurdle the scrutiny of a high-level advisory committee created by President Ramos headed by then executive secretary Ruben Torres and had for its members chief presidential legal counsel Renato Cayetano, justice secretary Teofisto Guingona Jr., chief government corporate counsel Oscar Garcia, finance secretary Roberto de Ocampo, and DPWH secretary Gregorio Vigilar. The MWSS board hired as lead adviser for the privatization the World Bank’s International Finance Corp.

Prior to 1997, about 3.7 million mostly poor informal settlers were unconnected to the water distribution system and it would take billions of pesos in investments to bring clean potable water to Filipino homes.

Then finance undersecretary Romy Bernardo recalled that FVR have had to make the concessions attractive enough to attract big-time investors not just because of the need for so much capital; there were other conditions then that would have otherwise deterred the big players from participating in the auction.

For one, the water privatization structure was perceived to be high risk as the government didn’t have a clear regulatory regime on water. Second, the country’s credit rating was below investment grade. And third, MWSS was very inefficient and nobody knew the condition of the underground pipes.

For his part, then NEDA director general Ciel Habito said the bidding process was transparent and competitive and open to public scrutiny, benefitting from the participation of the IFC which applied the highest standards of economic and financial responsibility.

More than anything, what government does from this point will determine largely how foreign investors will view the Philippines. If a valid contract can be set aside just like that, then what message are we sending the investment community at a time when the country badly needs to attract foreign investments?

Clear winner

Its entire gains for the country may not be immediately felt nor quantified, but the Philippines and its people definitely emerged as clear winners of the recent 30th Southeast Asian Games.

This early, it is estimated that more than P1 billion in tourism revenues have already been generated from the country’s hosting of the SEAG from Nov. 30 to Dec. 11, 2019. But with billions of audience in the region and in other countries watching what’s going in here for more than a week, imagine the exposure generated for our country and the number of tourists that it can attract.

Wei Jizhong, vice president of the Olympic Council of Asia, was among those who praised the Philippines for its hosting of the SEAG, saying the Philippines can host even bigger scale events.

 Considered the biggest games ever in the history of this regional competition, a total of  5,630 athletes from 11 countries took part in 529 events in 56 sports in different venues in Luzon. These included the New Clark City Sports Complex, where the swimming and track and field events were held. The fully equipped, first-rate facilities in the sports complex impressed foreign guests and participants in the events. 

Observers say that our impressive hosting of the 30th SEAG served to symbolize the country’s new status as a rising economic powerhouse in the region, signaling to the world that the Philippines, as one of Asia’s fastest growing economies, has now arrived and is ready to join the ranks of upper middle- income countries.  

From the opening ceremony at the Philippine Arena in Bulacan to the closing rites at the New Clark City in Central Luzon, the country earned praise and admiration for organizing, what many had described as spectacular events.  

The Philippines also emerged as the overall champion, winning 149 gold medals, 117 silver and 121 bronze, or a total of 387 medals.

 Philippine Southeast Asian Games Organizing Committee (PHISGOC) chairperson and House Speaker Alan Peter Cayetano said not only did we win in the SEA Games, the economy also won. 

Unfortunately, Senator Ping Lacson wants an investigation into how the funds were spent by the SEA Games organizers. Let us hope that this is really in aid of legislation because grandstanding will not do our country, nor our athletes, any good. But then Cayetano has said that PHISGOC has nothing to hide and that the Commission on Audit can even look into how the SEAG funds were spent.

 Meanwhile, Cayetano said that following the Philippines’ impressive hosting of the SEA Games, the country will help fellow ASEAN member Vietnam, organize the next one.

For comments, e-mail at mareyes@philstarmedia.com

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