An agreement that would be rammed into the throats of water concessionaires



By Rose de la Cruz


Other than the much-published ranting and announcement by President Duterte of a new concession agreement, which he said the current contract holders must adhere to, nothing much is known about its content, except the alleged removal of “onerous provisions” in favor of the concessionaires.


Considering that this administration claims that it is a strict follower of transparency and its fighting corruption—in and out of government—its conduct of business and governance leaves much to be desired in these barometers.


It is just right then that Rep. Bernadette Herrera of the Bagong Henerasyon partylist and secretary general of the Partylist Coalition Foundation Inc. requested Malacanang to publish in full, on its official Facebook pages and in a newspaper of general circulation, the Cabinet-approved proposed new water contracts with the concessionaires—Manila Water Company Inc. of the Ayalas and Maynilad Water Services Inc. of the Pangilinan-DM Consunji groups.


“I believe full transparency and disclosure are necessary for this issue of great magnitude. The Filipino people must never again be forced to suffer the consequences of onerous and unconstitutional water service contracts,” she stressed.


She also asked the Philippine Competition Commission to issue anti-monopoly regulations covering all public utilities, including water districts and electricity service jurisdictions nationwide. These anti-monopoly regulations should head off any ongoing and future attempts to establish public utility monopolies outside of Metro-Manila. 


Govt. bullying


Economist Calixto Chikiamco, president of the Foundation for Economic Freedom, said the government's offer of new contracts to Metro Manila's water concessionaires is a "case of bullying."


"It's like putting a gun on their heads," said Chikiamco citing the "take it or leave it" pronouncement of the President to concessionaires. The contracts may have a negative impact on investments and the country's credit rating, Chikiamco noted. 


Interviewed by Channel 2 (another outfit that the President is hell-bent in selling to his crony),  Malacañang earlier said it was giving water concessionaires Manila Water and Maynilad the "option" to accept a new contract that will replace existing deals that supposedly had onerous provisions.


If the two firms refuse the new agreements, President Rodrigo Duterte said he would order the cancellation of their existing concessions and the "nationalization of water services" in their respective areas.


Chikiamco said this move would have a "reputational cost" for the country. If the concessionaires accept the new contracts, the impact on investments will be limited to deals involving public-private partnerships, he said. 


"But if the outcome is cancellation and nationalization, that will have a negative impact across the board, all foreign investments," Chikiamco said in an interview with ANC.


"Any unilateral cancellation, abrogation will have a negative impact on credit rating," he added. 


The capital's water security will also be affected by a government takeover of water distribution. 


"We know already what happens whenever the government runs something, whether that's the MRT or even the old Nawasa."


The Metropolitan Waterworks and Sewerage System (which used to run the utility miserably until it was privatize during Ramos’ presidency), meanwhile, said there are no plans yet to nationalize the water distribution system. 


MWSS Administrator Emmanuel Salamat said:  “Wala pa naman tayong plano.”


He added they are also awaiting a copy of the new concession agreement (along with both concessionaires) and wait for their reactions.


Justice Secretary Menardo Guevarra said the concessionaires will be given the chance to discuss and renegotiate the agreements that the government is drafting. 




Ayala-led Manila Water went up 12.3 percent to P10.78 at the end of trading Tuesday. 

Its shares went down to as low as P6.03 per share following Duterte's threats to cancel the company's contract in December last year. 

The Pangilinan-led Maynilad is not listed on the stock exchange


Another stroke of bullying


President Duterte urged Wednesday the Philippine capital region’s water distributors to accept the government’s offer of a new water concession contract, telling them to “pray that nobody will be interested” in the new deal.


“So tanggapin ninyo ‘yan (Accept it). Pray that nobody will be interested because I will really if somebody... if I decide to go after you, I will see to it that a billionaire goes to prison,” Duterte said in a speech during the oath-taking ceremony of newly appointed government officials in Malacañang. Speculations have been rife that he had offered or planned to offer the concessions to his cronies—Prime Water’s Manuel Villar (whose operations in the provinces is criticized vociferously as they leave much to be desired) and his Chinese buddies.


Should Maynilad and Manila Water refuse the contract, Duterte said he could "nationalize" water services and "prosecute them for plunder or estafa on a large scale."


“I gave them the choice, not an ultimatum. We do not do that because we do not own government. At sinabi ko sa kanila, ‘sign the new contract because if you don’t I will nationalize, take over the operations and I’ll send you to jail.’ I have two years to do that and I can do it,” the President said.
The government, through the Department of Justice and Office of the Solicitor General, is drafting a new contract that will be presented to Maynilad and Manila Water in 6 months, Justice Secretary Menardo Guevarra said Wednesday.


“There will be a process of discussion and renegotiation. It's not a 100-percent take it or leave it thing. We are reasonable in so far as this matter is concerned," Guevarra told DZMM radio.


Duterte’s spokesman Salvador Panelo earlier assured the public that there would be no third player in Metro Manila’s water distribution system should Maynilad and Manila Water reject the new contract.


Dictatorial pronouncement


The President’s offer of a  new contract to the concessionaires comes with a warning that the government will take over water distribution services and pursue charges against Manila Water Co., Inc. and Maynilad Water Services, Inc. should they reject the new terms and conditions.


“It’s either they accept with no guarantee they will not be prosecuted or if they do not accept it, then I will nationalize the water system and prosecute them for plunder or estafa on a large scale,” Mr. Duterte said during a briefing in Malacañang on Tuesday afternoon.


“I said I’m proposing a new contract, you accept it and if it’s to your liking, sign it. If you don’t, then there is no water. I will order the military to take over and I will nationalize the water….and then I will file the corresponding charges.”


Representatives of Maynilad and Manila Water did not immediately respond when asked to comment, but they had said late last year that they would want to sit down with state agencies to come up with new deals.


“Should Maynilad and Manila Water refuse to accept the new agreements, the President will order the cancellation of their present water contracts, order the nationalization of water services in their respective areas of operation, and prosecute all those involved directly or indirectly in the arrangement that led to the present suffering of the Filipino people,” Panelo explained.


Panelo said the new water contracts will replace what he called a constitutionally flawed concession agreements that violated the provisions of the anti-graft law.


The new contracts were prepared by the Office of the Solicitor General (OSG) together with the Department of Justice and presented to Duterte during a Cabinet meeting last Monday, said Panelo.


Duterte was quoted as saying that water is a natural resource “and therefore cannot be used merely as a commercial commodity and exploited to rake in billions of pesos in profits at the expense of the consumers.”


Panelo, however, said the new contracts had yet to be sent to the concessionaires, and a meeting with officials of the two companies may not be necessary. A deadline was not discussed during the Cabinet meeting.




MWSS Chief Regulator Patrick Lester N. Ty told BusinessWorld that he has not seen a formal copy of the new contract yet.


He said nationalization of water services had previously been brought up by the government. On the question of prosecution, Ty said this would be best answered by those who prepared the contracts.


The concession agreements were first signed in 1997 during the administration of former President Fidel V. Ramos. Their validity is until 2022, but in 2009 then-President Gloria Macapagal-Arroyo approved the contracts’ extension to 2037, a move questioned by Mr. Duterte.


Late last year, the water concessionaires were accused of economic sabotage by the president after Manila Water disclosed on Nov. 29 that it had won P7.39 billion in an arbitration case with the government.


The international arbitration came after the Ayala-led company called on the government to honor its pledge to reimburse foregone operating revenues arising from a significant reduction in the rate of return committed in its concession contract.


Separately, Maynilad was granted by a Singapore tribunal on July 24, 2017 an arbitral award of at least P3.42 billion for losses resulting from the refusal of the MWSS to implement the concessionaire’s water tariffs.


Both companies during congressional hearings late last year said they would not collect the amount awarded by the arbitration court.


MPIC is one of three Philippine units of Hong Kong-based First Pacific Co. Ltd., the others being PLDT, Inc. and Philex Mining Corp. Hastings Holdings, Inc. — a unit of PLDT Beneficial Trust Fund subsidiary MediaQuest Holdings, Inc. — maintains interest in BusinessWorld through the Philippine Star Group, which it controls.


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