NEDA: Demand to amend water concession agreements will not scare away investors

MANILA, Philippines — President Rodrigo Duterte's demand to amend the concession deals with the two major water distributors won't affect efforts to lure investors in the Philippines as he was questioning "unconstitutional" contract provisions, a Cabinet official said Wednesday.

Socioeconomic Planning Secretary Ernesto Pernia said investors would understand that the government is revising a deal that he said is "super onerous."

"I don’t think (it will affect efforts to attract investors) because it was really super onerous," Pernia said in a chance interview in Malacañang.

"If contracts are defective, are unconstitutional, they have to be revised. The sanctity of contracts, if they are not saintly, if they are not sanctum, holy, then they have to be revised," he added.

Pernia said the concession deals with water distributors are "unconstitutional" because the government was essentially "surrendering its power to regulate."

"It’s a sovereign surrender," Pernia added.

Business groups have been stressing the importance of the sanctity of contracts and policy predictability, noting that they are among the things that investors consider when making investment decisions.

The latest World Bank Group Doing Business report showed that the Philippines dropped to 124th place out of 190 economies this year from 113rd in 2018, with its rank in "enforcing contracts" slipping from 149th to 151st.  

Last week, Duterte threatened to file economic sabotage charges against water concessionaires Manila Water and Maynilad over contracts  that he said were "against public policy" and disadvantageous to the public. The President called for the removal of contract provisions that prevent the government from stopping rate increases.

On Tuesday, the president said he would "expropriate everything" from the water firms if he is not satisfied with the explanation of the concessionaires and the government lawyers that crafted them.

Pernia said the government has implemented policies that would make the Philippines an attractive investment destination.

"As long as we are implementing correct policies, fair policies for everybody, you know, that should lure investors. We have so many policy reforms that are really attracting the investors," he said.

"This is just a little blip in the thing, these concessionaires...They (concessionaires) should have some conscience. If the contract is onerous on government, it becomes onerous on the people because the water rates are passed on to the people. I think everybody should be happy that's being corrected now. We will then be experiencing low water rates."