BANTAY
TUBIG
Citizens’
Network for Adequate, Potable and Affordable Water
When private means are used to deliver public services,
several things happen. The private sector is given occasion to
dip its fingers into public coffers. The profit motive is
entrusted with the pursuit of the public good. And the pressure
builds up for governments to set up mechanisms to enforce the
promises of the private sector.
The promise is that through privatization, public service
sectors are able to tap financial markets in innovative ways.
Services that might otherwise fail to get financing from
government get financing from bankers and investors. The private
sector’s technical prowess is also harnessed and services are
delivered efficiently and quickly. As for the rights of citizens
to minimum services, privatization advocates would claim that
private providers are bound to deliver, or else they lose their
business, their reputation, not to mention their performance
bonds.
From
the experience of private involvement in the water and
sanitation in Metro Manila, several things are clear:
First,
at least one of the private concessionaires (Maynilad) has been
unable to tap the financial markets as planned, and
consequently, it has failed to deliver on its service
obligations. The company’s own excuse is that it had the
misfortune of inheriting 90% of
the dollar-denominated debts of MWSS and when the peso
fell in 1997, the money they needed to service those debts
immediately doubled, leaving them with little resources for
investments and operations. While this is partly true, the
concession contract did provide for the recovery of these losses
throughout the life of the contract. However, Maynilad demanded
immediate recovery of these losses, resulting in a 135% increase
in their water rates starting in October 2001. In contrast, the
other concessionaire (Manila Water) raised money on the strength
of the financial position of the Ayala group of corporations,
shielding their consumers from an abrupt rise in water tarrifs.
There is also ample evidence that would demonstrate gross
technical inefficiency on the part of Maynilad in the high rate
of Non Revenue Water (NRW) and high operating costs.
Maynilad is now asking government for three things: a) a
postponement of its service obligations (less connections, less
than 24-hours water availability, low water pressures, etc.) b)
a rate increase that will raise the cost of water to P30 pesos
per cubic meter by January 2003 (more than 500% of its original
bid) and c) a government guarantee on its $350 million loan from
the Asian Development Bank and commercial banks. If these things are granted, nothing of the original gains from
privatization would have been preserved.
Second,
both concessionaires have succeeded in changing the contract. Through
Amendment Number 1 effected last October 2001, both companies
succeeded in changing the parameters of their original bids in
terms of the allowable pace and amounts of rate increases and
service and expansion targets. Manila Water has succeeded in
doubling its allowable profit by an upward adjustment in its ADR.
Maynilad has been allowed to collect its debt payments at an
accelerated pace even if it has failed to reach its target
number of connections. The improvement in the contract of
Maynilad benefits Manila Water, and vice versa.
Third,
the regulatory agency that is tasked with enforcing the
concession contracts has been unable to stand its ground. Key
regulators became advocates for the concessionaires. The government entity that is party to the
contract—the MWSS—on the other hand, has been unable to
police the concessionaires’ compliance with the original
contract and thus failed to safeguard the gains from
privatization in the form of efficiency, low prices and the aim
of near-universal service coverage.
Fourth,
there are no effective mechanisms for the exercise of consumer
power in this crucial public utility. Although consumers have the greatest incentive for
defending the gains of privatization, there is no mechanism for
empowering and harnessing consumer voice under privatization. There is no
consumer representation in the MWSS Board. There is no formal
mechanism for making information accessible to the public and
the media. Public hearings conducted by the MWSS Regulatory
office do not give weight to consumer input and grievances.
A
better arrangement is possible!
BANTAY
TUBIG, a citizens’ network for adequate, potable and
affordable water, calls for the following:
1.
A
review of Amendment Number 1 that will reinstate incentives and
penalties in relation to water companies’ compliance to
service obligations.
In other words, we want Maynilad and Manila Water to stick to
the contract: if they cannot deliver, they should not be allowed
price hikes, much less, allowed to stay in the business of
running a public utility.
2.
A
stop to the rate rebasing exercise that will raise water rates
to 25-30 pesos per cubic meter. Previous rate hikes by Maynilad remain contested, a public
hearing in Congress is in progress and the rate-rebasing process
remains a mystery. We want a public accounting of the basis of
these rate proposals.
3.
The
establishment of an independent regulatory body that will
enforce service obligations and contractual commitments on both
private and public providers of water service. The current Regulatory Office is a creation of the
contract between government and the concessionaires, hence its
imperviousness to public demands. We propose a quasi-judicial
body in the mold of the Energy Regulatory Commission that will
evaluate petitions for price increases and monitor
service-obligation. This body must perform these functions not
only for Metro Manila but for the entire country.
4.
The
creation of institutional mechanisms for consumer
representation.
One proposal is for consumers to own the two water companies,
given that we pay for items apart from our actual consumption.
At the minimum, there should be consumer representatives in the
MWSS Board. Another approach would be for Metro Manila mayors to
appoint representatives to the MWSS Board and to establish
formal forums where instructions are taken directly from public
consultations in Metro Manila towns and cities. In the short
term, clear procedures for public hearings must be established,
and clear and enforceable terms of reference between community
representatives and the private providers must be put in place.
5.
That the national government through its pertinent
line agencies, local governments, together with private
concessionaires, specify an
agenda for water provision based on the principle that water is
a basic human right, and that all citizens must have access to
adequate, potable and affordable water.
BANTAY
TUBIG is composed of the following organizations:
Akbayan
Citizens’ Action Party * Alliance of Progressive Labor * Focus
on the Global South* Freedom from Debt Coalition * Institute for
Popular Democracy
Posted
to the APL website
18-June-2002
Bantay Tubig
or Water Watch is composed of the following organizations: Akbayan Citizens' Action Party, Alliance of Progressive
Labor (APL), FOCUS Philippines, Freedom from Debt Coalition (FDC)
and the Institute for Popular Democracy (IPD). This paper was
prepared as part of Bantay Tubig's general assembly on 15 June
2002.
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