Will 2018 bring a closer working relationship between the government and the two private concessionaires in charge of supplying potable water to Metro Manila and surrounding provinces?
The two concessionaires, Maynilad and Manila Water, are hoping that the Metropolitan Waterworks and Sewerage System (MWSS) now headed by Administrator Reynaldo Velasco would be able to resolve the longstanding arbitration issue that had soured relations in the past.
The International Chamber of Commerce’s (ICC) arbitral tribunal in Singapore has ruled that Maynilad is entitled to just compensation from the Philippine government for its multibillion-peso foregone revenues, resulting from the refusal of MWSS in the past administration to grant its periodic rate adjustments as so provided in the 1997 concession agreement. Manila Water also filed a separate arbitration case against the government before the same tribunal for the same reason.
The settlement of both these cases stands to benefit over 15 million water consumers in the west and east zones as this would allow the concessionaires to carry out their respective expansion plans to further improve water supply and wastewater-management services in Metro Manila.
Maynilad has allocated P35 billion in the next five years for its capex program, shifting its focus to wastewater-treatment services. Last November the company announced that it would allocate over P10 billion to expand sewer lines in its West Zone concession area within the next five years. Late last year, Maynilad also announced a P239-million budget for pipe-laying projects in Cavite that would connect some 23,000 new customers.
Maynilad’s sister company—Metro Pacific Water Investments Corp.—is eyeing 26 projects outside Metro Manila, in partnership with local water districts.
Maynilad has spent over P47 billion thus far to improve and expand its water services since DMCI-MPIC Water Co., a joint venture between Metro Pacific Investments Corp. and DMCI Holdings Inc., took over Maynilad and launched a five-year investment program to rehabilitate the company and its operations.
As a result, over 9 million people in the West Zone—from Valenzuela City in Bulacan to Cavite City—now enjoy safe, reliable water supply.
The MWSS has commended Maynilad for the vast improvement in overall service and efficiency levels in Metro Manila’s West Zone. Velasco noted that Maynilad’s customer base in Metro Manila’s West Zone rose 94 percent from 678,000 to 1.3 million within a 10-year period, covering 94 percent of its service area.
Before the privatization of the water-distribution service in Metro Manila, according to the MWSS, water service was erratic, limited and consumers often experienced low water pressure. Sewerage coverage was also minimal and the implementation of projects was often delayed.
With privatization, Velasco said water-service delivery expanded to 96 percent in terms of population coverage and water availability.
Metro Manila’s water-supply services has vastly improved since the 1997 takeover by Maynilad and Manila Water, and the World Bank even cited the restructuring and privatization of operations as a model of a successful public-private sector partnership.
Economist Raul Fabella even described the turnover of MWSS operations to the two concessionaires as “a singularly successful structural reform in the annals of Philippine political economy” as the private sector has proven to be more competent in the delivery of water and sewerage services than the state.
Maynilad and Manila Water are hoping that the Duterte administration would protect MWSS from the mistakes of the past administration by honoring the Singapore court ruling on the arbitral award long due them.
Up before the Supreme Court are petitions by the two water concessionaires for the High Tribunal to rule on whether they are entitled to recover from consumers their corporate income taxes, whether the performance undertakings issued by the government are valid, and whether the two firms’ claims are covered by the undertakings.
On the part of Maynilad, it wants the Philippine government to honor the decision of the international tribunal to pay them P3.42 billion as compensation for revenue losses from the unimplemented water-rate adjustments.
E-mail: ernhil@yahoo.com.
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Mr. Hilario, MWSS Administrator Velasco has indeed praised the water PPPs, saying that this would provide enough water for Metro Manila, Rizal, Cavite and Bulacan within the next five years.
Luckily for us water consumers, the Duterte administration has stated from the start that it would honor government contracts, unlike the populist but ruinous policies of the past administration that questioned those contracts, leading to the Singapore arbitration.