Rising water rates and poor services after the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) highlight the failure of water privatization in the Philippines. Newly formed Water for the People Network vows to take this issue as well as other cases of corporate monopoly control of water distribution systems and water resources.
For six years since the Philippine government privatized the Metropolitan Waterworks and Sewerage System (MWSS), Filipino consumers have been burdened by rising water rates and poor water services.
"We don’t have cheaper rates, we don’t have efficient service, and there are issues in supply and sanitation. Government should thus review its privatization policy," says Arnold Padilla, senior researcher of IBON Foundation.
The national government through the MWSS used to shoulder the delivery of water supply including sanitation and sewerage services to residents in Metro Manila and nearby provinces. But since 1997, two private concessionaires – Maynilad Water Services Incorporated of Benpres and French water giant Suez; and Manila Water Company Incorporated of the Ayala Corporation and American company Bechtel – have taken over the operations of the MWSS. Maynilad services the West Zone of the MWSS service areas while the Manila Water covers the East Zone. In terms of the number of customers, Maynilad services around 7 million residents, while Manila Water covers 4.7 million.
Failed Promises
When the Ramos government privatized the MWSS in 1997, consumers were assured there would be no increases in water rates for the next ten years. This, in turn, would ensure greater public access to water and a more efficient delivery of water services.
But since 1998, water rates have increased astronomically. In the case of Maynilad, water rates have increased by 253%, from its initial rate of P4.96 per cubic meter in 1998 to P17.52 per cubic meter in 2003. Manila Water, meanwhile, hiked its rates by 427%, from P2.52 per cubic meter to P6.75 last year. The Concession Agreement provides both firms with automatic adjustment mechanisms to recover financial losses and to enable them to pay concession fees to the government.
Despite the rate hikes, the performance of both concessionaires did not substantially improve. Maynilad for instance, promised to deliver 100% water supply coverage to five areas by 2001, but was able to provide only two areas – Quezon City and Manila. In the case of Manila Water—though it exceeded its targets in certain areas—other areas within its coverage, particularly in Rizal, still have not enjoyed even a drop of water from its services.
Worse, the government remains locked in a dispute with Maynilad, which wants to nullify its contract with the MWSS. The dispute stemmed from MWSS’s refusal to allow Maynilad to hike its water rates to P34 per cubic meter. Government, fearing public protests, only offered P26.75 per cubic meter. For Maynilad and its creditors, however, the rate proposed by the MWSS is not enough to enable the firm to pay its concession fees.
In its termination notice, Maynilad cited profit losses amounting to P3 billion from 1997 to 2001. "But it’s important to know that Maynilad doesn’t have an external auditing, and doesn’t file financial statements to the SEC (Securities and Exchange Commission)," Padilla explains.
"What is clear is that Maynilad has incurred questionable expenses, including P15 million in advertising and P1.2 billion in consultancy fees. In the first place, if you have a captive market of 7 million, why the need to advertise?" Padilla adds.
Last November 2003, the International Appeals Panel, which handled the MWSS-Maynilad row, decided that Maynilad should stay and pay its concession fees worth P6.7 billion. The MWSS, in turn, would allow Maynilad to increase its water rates in order to pay the concession fees.
The two sides locked horns again after the government suggested that Maynilad pay its P6.7 billion worth of concession fees from the company’s performance bonds as stated in the contract. The performance bonds worth $120 million are bonds that the government can pull out in case problems arise with the concessionaire’s service responsibilities.
Maynilad disagreed, citing further financial distress to the company once the bonds are used. It then filed an appeal to the Quezon City Municipal Trial Court, which decided in favor of Maynilad. The decision suspended the payment of its debts, including the concession fees, and blocked the government from using the performance bonds. The MWSS meanwhile have appealed to the Supreme Court to reverse the lower court’s decision.
Padilla, however, says that the arbitration was not credible because it was held away from public scrutiny and without consultation with consumers, considering that the issue involves public interest. "More importantly, the government’s position in its dispute with Maynilad did not consider the general failure of privatization," Padilla argues.
People’s campaign against water privatization
As water rates continue to increase while services deteriorate, advocacy groups and people’s organizations have begun to consolidate their actions and struggles to oppose and reverse water privatization.
The Bagong Alyansang Makabayan (BAYAN), IBON Foundation, Kalikasan People’s Network for the Environment (KPNE), Center for Environmental Concerns (CEC), Confederation for Unity and Action of Government Employees (COURAGE), and other groups launched the Water for the People Network.
"There is a need to consolidate various campaigns on water-related concerns because Filipinos would have to face these issues sooner than later. In many regions and provinces, there have been ongoing campaigns on various water issues such as the issue of local water districts in Cebu, Negros, Davao, Laguna and the Cordillera Region, the issue of large dams and how it affects communities as well as water sources, and of course, the effects of further privatizing water utilities," says Teddy Casiño, BAYAN Secretary General.
Casiño warns consumers of the growing threat of privatizing not just water utilities but major water sources as well. "It seems that even rivers and underground water sources are programmed to be privatized under different projects by the World Bank and the Asian Development Bank. This is a threat to people’s access to water."
The Water for the People Network, according to Casiño, will support water-related struggles in different parts of the country. It will also serve as an information and resource center as well as a coordinating body for national and international actions and campaigns against water privatization.
