Water firms also suffered from spotty 1997 contracts

GOTCHA - Jarius Bondoc (The Philippine Star) - December 18, 2019 - 12:00am

A review of Mega Manila’s two water concessions will reveal the whys and wherefores of the 1997 privatization. Everything was rushed. Congress had just passed a Water Crisis Act, recalls former Interior Secretary Rafael Alunan III, also ex-CEO of one of two consequent concessionaires, Maynilad Resources Inc. Foreign creditors were demanding loan repayment from the government’s underperforming Metropolitan Waterworks and Sewerage System. MWSS could service only 63 percent of demand, then-administrator Angel Lazaro adds the historical context. Water supply was, at best, only half the day. No Filipino knew about waterworks-sewerage franchising of the magnitude of the capital region’s west and east zones. World Bank experts had to be called in to draft the contract terms of reference. Conglomerates were wooed to join the public bidding. Enticements were thrown in.

Twelve of those are deemed today, 22 years hence, as onerous. Like, the concessionaires may charge to customers their corporate taxes, banquets and other expenses not directly related to water distribution. Too, MWSS was barred from interfering in rate setting, with indemnities set for losses from such interference. Based on the latter, Maynilad and Manila Water Co. won P3.6 billion and P7.4 billion damages, respectively, from arbitration in Singapore.

Government now says those provisos must go. It is preposterous for any firm to enjoy tax-free status, except if a pioneer in a high-risk field and only for a limited period. Too, government cannot surrender its regulatory power under any scenario. Maynilad and Manila Water are willing to forgo their multibillion-peso awards, an acknowledgment of the proviso’s dubiousness.

 Certain commissions and omissions burdened the concessionaires, on the other hand. Alunan recounts:

• Though standard in public utility contracts then, they had no stipulation for currency fluctuations. It so happened that weeks before Maynilad and Manila Water took over the west and east zones in Sept. 1997, the Asian financial crisis struck. The peso dropped from P22 to P37 to a dollar. Then too, Maynilad’s west concession was tasked to absorb 90 percent of MWSS’ loans -- about $800 million. The Lopez Group that controlled Maynilad bore the sudden losses, until MWSS introduced a currency exchange rate adjustment five years later, in 2002. Manila Water found CERA relief for its 10-percent loan assumption, about $100 million.

• Some MWSS contracts that the concessionaires absorbed were padded 300-500 percent. Crooked officials had earned kickbacks from them. Yet those too the concessionaires had to implement.

• On record Maynilad was supposed to take over 4,000 km of pipes. On audit three years later Lopezes’ French partner discovered there were only 3,000 km. A thousand km of pipes either had been stolen or were never laid at all. Maynilad had to take on the pipe laying. When Lopez Group later returned the franchise, MWSS had Maynilad’s new owners, Consunji and Pangilinan Groups, continue.

• Malacañang required Maynilad and Manila water to connect water even to millions of squatter shanties. But it took years to allow the needed rate hike from one centavo to five centavos per liter. Yet squatters instantly were relieved from buying at 11-15 centavos from black marketeers.

Today 99 percent of Mega Manila has tap connection, Lazaro says. Sewerage is delayed, however; thus the Supreme Court recently fined MWSS and the concessionaires P1 billion each. Supply in some areas is spotty, due to lack of alternative to Angat Dam as source, largely due to MWSS’ fault. Twice it had told Maynilad and Manila Water to desist from developing new sources, as it would do so itself. Apparently new kickbacks were to be made from new loans and constructions.

Also today one contract revision is called oppressive. The 25-year concessions were extended 15 more years to 2037, by mere MWSS board resolutions, no public bidding or hearing. That happened in 2009, when the concessions were but 12 years old and had 13 years to go till 2022. The extension enabled the concessionaires to contract longer-term loans for infra-works. Nonetheless, it’s easy to identify the MWSS trustees then – for possible punitive indictment, as President Rody Duterte growls today. Interestingly the “water expert”-congressman who’s bragging to be feeding info on the “two oligarchs” is himself facing and will be slapped with more graft raps, so is desperate to cling to a savior.

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A big win for earth care is San Miguel Corp.’s new tack on plastics. Already the industrial giant shuns plastic-heavy business, and devises novel uses for plastic wastes. Next is to pioneer in biodegradable packaging, from pollutive single-use plastics.

SMC is to bag feeds and cement in decomposable polypropylene. Tapped for the shift is Philippine Bio-Resins, which has tested the method for the past five years. The woven sacks are fully certified by DOST as biodegradable. Environmental Technology Verification rated it 64.65-percent decomposed within 24 months, compared to only 4.5 percent for common plastic.

“We have always been looking for innovative environmental technologies, and we are excited about this,” says SMC president Ramon Ang. “This is just the beginning, as they are developing other technologies in this field.”

Being the country’s most diversified conglomerate, SMC’s shift is a game changer. Quezon City, the country’s most populous, is to ban plastic and styrofoam grocery bags, dine-in cups and cutlery, straws and plates starting next month. Single-use materials, the biggest piles in landfills, clog waterways and kill marine life. The Philippines is the third worst ocean plastic polluter, next to China and Indonesia.

SMC earlier shuttered its bottled water line, despite profitability. It buys water bottles and plastic bags for fuel in its cement plants. It also uses discarded rubber tires and industrial sewage as secondary fuel. “We help turn plastic wastes into much needed products, like cement for buildings and roads,” says Ang. Speaking of which, SMC last Mar. teamed up with leading materials science firm Dow Chemicals to use hard-to-recycle plastics as alternative road surfacing. It also volunteered to clean up trash-choked Tullahan River as part of Manila Bay’s rehab.

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“I always loved stand-up. You say something, and a whole room full of people laughs together. Say something else, they laugh again. The fact that people come to see that and participate in that ... I don’t know, it’s just like magic.” Join the magic with America’s most off color stand-up comedian Dave Chappelle live at Solaire, Jan. 14 and 15, 2020. Only he can get away with his nigga, sexist jokes. For, “people still do have racial hang-ups, but one of the reasons I can joke about it is people are shedding those racial hatreds.”

Check online quick for tickets; they can run out fast.         

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Catch Sapol radio show, Saturdays, 8-10 a.m., DWIZ, (882-AM).

Gotcha archives: www.philstar.com/columns/134276/gotcha


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