Better days ahead
HIDDEN AGENDA - Mary Ann LL. Reyes (The Philippine Star) - February 8, 2020 - 12:00am

Lost in all this inquiries into the concession agreements of Maynilad Water Services (Maynilad) and Manila Water Co. (MWC) is the fact that Metro Manila has the lowest water rates compared to other urban centers in the country and even to other big cities in the Asia Pacific region.  

Data from the Local Water Utilities Administration (LWUA) show that Metro Manila consumers using 10 cubic meters of water per month pay only about P104, which is actually the lowest among 12 metropolitan cities in the Philippines. 

In contrast, consumers in Baguio City pay the highest monthly rate of P370 for the same volume of water, or over three times the bill paid by users in the national capital.

San Jose Del Monte consumers pay the second-highest rate of P280 a month. Other urban centers with higher water rates than Metro Manila are Angeles, Bacolod, Batangas, Cabanatuan, Cagayan de Oro, Dasmariñas and Davao cities, along with  Metro Cebu and Metro Iloilo.

The same LWUA figures reveal that for consumers using a higher volume of 20 cu.m. per month, Davao City has the lowest rate of P281, followed by  Metro Manila with the second-lowest rate of P306. Baguio is still the highest at P775.

 When compared to select Asia Pacific cities consuming 15 cu.m., Metro Manila’s P18.28 per cu.m. is still reasonable, compared to Sydney, Australia’s P99.63 per cu. m. The lowest rate was reported in Kuala Lumpur, Malaysia at P7.53 per cu.m.

According to a media report, the rates in other Asia Pacific cities were sourced from the 2018 Global Water Intelligence Report and were computed based on a foreign exchange rate of P53.33 against $1.

 Consumers are enjoying cheap water rates in the west and east zones only because the concessionaires were able to offer lower-than-expected bids during the 1996 auction under the then-Ramos administration.

 The bidders had managed to offer low water rates for consumers because of the sweeteners that were included by government in the privatization contracts to attract the big players abroad, given the huge amount of money needed from the private sector to reverse Metro Manila’s water crisis resulting from MWSS’ mismanagement, incompetence and corruption. 

In his World Bank-published book on this privatization program, Mark Dumol noted said one proof that Metro Manila consumers benefitted from the contracts subsequently awarded to the two concessionaires in 1997 was that one main issue raised by politicians and the media after the 1996 auction was that the privatization was too good to be true because of the ability of the bidders to submit such low rates.

 In short, the bid rates were lower than expected. Thus, Metro Manila consumers get to enjoy cheap water rates up to now.

 Dumol was at that time the chief of staff of then-Public Works and Highways secretary Gregorio Vigilar, who was concurrent MWSS chairman and overseer of the water privatization program.

  Romeo Bernardo, finance undersecretary during the Ramos presidency and who was also privy to the water privatization program,  has explained that FVR had to make the water concessions attractive enough in 1996 to entice big-time investors not just because of the need for so much capital but because there were other conditions then that would have otherwise deterred big players from participating in the auction.

 For instance, the public-private partnership program (PPP) was very new at that time and, as such, was perceived to be high risk considering especially regulatory uncertainty.  The Philippines’ credit rating was below investment grade, unlike today’s “BBB+” investment rating, so that interest rates on treasury bills were high.

 Bernardo also pointed out that MWSS was a mess, very inefficient, over-staffed, had low productivity, was highly indebted and with high technical risks. There was intermittent water supply, very high water leakage and theft also at that time.

 The winning contractors in the 1996 auction had to absorb the dollar debts of MWSS to the tune of $800 million too.

 Back then, Maynilad and MWC needed to invest P208 billion and P166 billion, respectively, to connect people to the water systems and reduce the wastage from leakages and theft.

 Dumol made a similar cost estimate in his book, placing at a whopping $7 billion the amount that the eventual winning bidders would have to invest over the 25-year contract period when there were only 11 million Metro Manilans compared to today’s 18 million.

Today, water supply coverage is at 99 percent as government required the two concessionaires to distribute water even to millions of shanties in slum areas.

 Last year’s water service rationing was, as admitted by the MWSS, due to below-normal supply brought about by government’s failure to build for a half a century a new water source other than the Angat Dam in Norzagaray, Bulacan that supplies 97 percent of the national capital’s water needs. 

The status quo remains till the near future because MWSS administrator Emmanuel Salamat, in a January statement, assured the public that the  government was not trying to take the two water concessionaires out of the picture, and will honor the current contract with no significant changes.

He explained that what is being prepared is a new contract to be implemented after 2022, saying that the original contract that will end in 2022 still exists, and that what had been revoked only was its extension to 2037.

 Both Maynilad and MWC have said that they are open to talks with the government on their CAs.

 Industry watchers speculate that Maynilad and MWC are ready and willing to enter into renegotiation talks with this Department of Justice -led interagency team of government lawyers simply because they are confident that their 1997 contracts are clean, could stand intense scrutiny, from the pre-qualification of the bidders up to the awarding of the contracts.

In the meantime, it is business as usual for the two concessionaires.

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