Maynilad and Manila Water’s Conundrum

Following the enactment of the Clean Water Act (CWA) of 2007, the two water and wastewater services providers of Metro Manila, Maynilad and Manila Water Company (MWC), were given five years to connect the existing sewer lines of homes and commercial establishments to the main sewerage system of the city. Both companies failed to meet the deadline due to various reasons which I will explain later. Suffice it to say, the Supreme Court ruled against the two companies and slapped each of them with a P921.5 million fine, plus rolling penalties until the interconnection is completed.

It will be recalled that back in 1997, the government-run Metropolitan Waterworks and Sewerage System (MWSS) turned over its operations to the private sector following an acute water crisis. Maynilad won the concession for the western zone of Metro Manila while MWC won the concession for the east. Their concessions are valid until 2037.

Both companies assert that the Supreme Court’s decision is unfair. I looked into the matter and this is what I found.

First, the five year deadline for 100% interconnection of sewer lines was apparently superseded by another directive of the Supreme Court. In the case of the MMDA vs The Concerned Residents of Manila Bay, the Supreme Court mandated both concessionaires to submit (before a deadline of June 30, 2011) their plans for the construction of wastewater treatment facilities, including its network of sewer lines, up to the year 2037. This directive effectively moved the deadline to 2037.

Secondly, The Supreme Court itself pointed out that full compliance of the CWA cannot be done by the concessionaires alone. It requires a collaborative effort between the Department of the Interior and Local Government (DILG), the Department of Environment and Natural Resources (DENR) and the Department of Public Works and Highways (DPWH). These government agencies were assigned specific tasks to effect the Clean Water Act.

The DENR was designated as the lead agency to implement the CWA. Hence, it was ordered by the Supreme Court to formulate the Water Quality Management Area (WQMA) Action Plan within 12 months from the enactment of the law. The WQMA should contain the goals, targets, and timetable for the sewerage program for the eastern and western zones of Metro Manila.

For its part, the DPWH was mandated to come up with the National Sewerage and Septage Management Program (NSSMP). This program should provide, among other things, a priority listing of sewerage and septage for local government units.

As for the DILG, its part was to compel the local governments to inspect wastewater treatment facilities and piping works in their respective constituencies. The DILG was ordered to provide the concessionaires with a list of factories, commercial establishments and private homes that have not yet complied with the CWA and those without proper sewerage lines.

The plans and lists from these government agencies were to serve as the guide for the concessionaires as they plot their respective construction plans to comply with the CWA.

Problem was, neither the DILG, DENR nor the DPWH delivered what they were ordered to do. How, then, could the concessionaires fulfill their part within the timeframe given? In this sense, I agree with the concessionaires — the Supreme Court’s decision is unfair.

Exacerbating the situation is that both concessionaires are being fined a rolling penalty of some P320,000 per day until 100% interconnection is accomplished. This puts both Maynilad and MWC in a conundrum.

See, assuming the concessionaires rush to lay down some 1,000 kilometers of sewerage pipes within the city, the traffic they will cause will be cataclysmic and they will be blamed for it. Worse, the massive capital needed to pull this off will necessitate an adjustment in water toll rates. This will be unfair to Juan dela Cruz, not to mention be a politically contentious move.

On the other hand, should they go about laying the pipes based on a reasonable work plan and timetable, it must face the P320,000 fine per day.

It is a damned if you do, damned if you don’t situation.

This is why the concessionaires are appealing to the Supreme Court to reconsider its decisions. They are asking the high tribunal to reverse its decision declaring the concessionaires solely responsible for failing to meet the deadline and for the reversal of the steep fines slapped upon them.

Notwithstanding this, both concessionaires continue to connect sewer pipes to the main sewer network. However, the effort is stymied by the willingness (or refusal) of the homeowners or business owners to interconnect. The concessionaires cannot enforce mandatory connection as it is only the DENR that can do so and lawfully impose sanctions for non-compliance.

In compliance with the directive of the Supreme Court, both concessionaires submitted their timetable of work to achieve 100% connection by the year 2037. As far as Maynila is concerned, they are ahead of schedule with 20% connectivity as of today. By 2021, they should achieve 47% connectivity, 68% by 2026, 87% by 2032, and 100% by 2037. This is a far cry from only 6% connectivity before Maynilad took over.

As for MWC, they are spending P115 billion from hereon to complete its sewerage program by 2037, which includes laying down 500 kilometers of underground pipes and interconnecting them. MWC, too is on track.

Again, the full implantation of the CWA can only be achieved if both the government and the private sector fulfill their parts. It is unjust to pin the blame solely on the private sector (and fine them severely) when in fact, their work was contingent on the DENR, DILG, and DPWH.

And lets not forget, per the Supreme Court ruling of 2011, the concessionaires were given until 2037 to complete their respective wastewater treatment programs and interconnectivity of sewerage pipes. It is not fair to penalize them for something they have 18 years more to do?

I stand in defense of the private sector as I think decisions like these — decisions that compromise private investors while indemnifying equally culpable government agencies — that give our justice system a horrid reputation. It only validates the notion that the justice system is inhospitable to private investors.

Instead of being a obstacle to the success of private businesses, the justice system should be an enabler. Lets hope the Supreme Court will be magnanimous in this instance.

Andrew J. Masigan is an economist.