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Who’s to blame for the Metro Manila water crisis?

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Amelia H. C. Ylagan-125

Corporate Watch

Who’s to blame for the Metro Manila water crisis?

“Many areas in the metro have experienced weak to no water supply, with some areas having people line up for hours to get water from tankers,” BusinessWorld reported, as all other media did, in the anxiety of worse to come. The people are angry.

According to the Manila Water Service’s own update on Monday, March 11, at least 13 barangays in Mandaluyong City were affected (“no water”). In Marikina City, barangays experienced “low pressure to no water” service interruptions. In Quezon City, at least 83 barangays experienced “low pressure to no water” service interruptions last week. Several barangays in Antipolo, Rizal, were also affected, so with Pasig, Taguig, the Rizal towns of Angono, Taytay and Binangonan, as well as Makati, Parañaque, and Pateros (BusinessWorld March 11, 2019).

Manila Water, a publicly listed company and a subsidiary of Ayala Corporation, “won” the concession contract for the Eastern half of Metro Manila just as the Maynilad Water Services of the Lopez (Benpres) Group was awarded Western Manila for water services under President Fidel V. Ramos’s privatization program in 1997.

The separation of the East and West concessions draws from the initial distribution of water from the Angat Dam in Norzagaray, Bulacan, the major supply source for Metro Manila. From its La Mesa Portal, 60% goes to the nearby La Mesa Treatment Plant, in the western half serviced by Maynilad, and the 40% to the Balara Treatment Plant in the eastern half serviced by Manila Water. When both Balara and La Mesa Treatment Plants are in operation, the total processing capacity will be 4,000 million liters per day (mwss.gov.ph).

Blame both Manila Water and Maynilad for being too eager to get into the complicated water business. The very decision to split the service area was complicated, according to the observation of one of the government’s lead privatization negotiators then, Mark Dumol (“The Manila Water Concession. A Key Government Officials Diary of the World’s Largest Water Privatization”, World Bank, Directions in Development: 2000). He noted that three of the four pre-qualified bidders submitted tariff proposals 50-60% of the pre-privatization tariffs, with Benpres setting 57% for the West zone, while Ayala offered an extremely low bid of only 26% and 29% of the tariffs in East and West Manila respectively (Ibid.). That’s how the two won the “monopolies” in their areas.

In the first five years, tariffs remained close to the low levels promised until the first rate rebasing in 2002, followed by further significant tariff increases until the end of 2008. The tariff was, in real terms, 89% higher than the pre-privatization tariff in the West Manila and 59% higher in East Manila (Freedom from Debt Coalition March 2009). But the readjustment of targets were necessitated by the severe droughts of those first years, when the Asian financial crisis caused the concessionaires’ debt to double, and peso income decimated by the 50% devaluation of the peso. But through all this Manila Water made a profit as early as 1999. Maynilad could not do as well, and requested early termination of their contract in 2002. Despite approved tariff increases and the lowered other targets, Maynilad went bankrupt in 2003.

The government refused Manila Water’s offer to take over the entire Metro Manila distribution, and instead itself took over Maynilad and assumed its debts. In December 2006 a consortium of the Filipino construction company DM Consunji Holdings, Inc. (DMCI) and the Filipino telecommunications/real estate company Metro Pacific Investments Corporation (MPIC) redeemed Maynilad (gmanetwork.com Jan 24, 2007). In 2009, Manila Water’s concession was extended until 2037 instead of just to 2022 (ABS CBN News Oct 22, 2009). Maynilad’s profitability improved, and in April 2010, Maynilad’s concession was also extended until 2037 (Manila Bulletin April 23, 2010).

The concession contracts obliged the private companies to achieve an uninterrupted water supply and compliance with drinking water and effluents standards by the year 2000 (Freedom from Debt Coalition (op.cit.). These targets were not achieved, but there were notable improvements. For example, in East Manila between 1997 and the end of 2009 the share of customers with continuous water supply increased from 26% to more than 98% (Global Water Summit 2010). In West Manila it increased from 46% in 2007 to 82% in September 2011 (Maynilad/MWSS statement 2012). Before privatization, the Metropolitan Waterworks and Sewerage System (MWSS) provided water for on average only 16 hours every day to just two thirds of Metro Manila (Urban Studies “A tale of two concessionaires…”, 2008).

In its vision-mission statement, the MWSS declares: “We derive our mandate primarily from Republic Act 6234 which states the basic goals of the System and declares as its major policy the proper operation and maintenance of waterworks system to ensure an uninterrupted and adequate supply and distribution of potable water for domestic and other purposes and the proper operation and maintenance of sewerage systems in its service area which includes the whole of Metro Manila and parts of Cavite and Rizal” (mwss.gov.ph). It is clear whom the public should blame for the present water crisis.

The fact that there are two concessionaires for the Eastern and the Western sectors of the water delivery and service area does not clear the MWSS from its responsibility for water — the most basic of all utilities in the metropolis. A business, specially a profit organization (a non-NGO), will plan for its business, but the government (MWSS) should plan the macro — in this case, the guarantee of water availability for the people. The failure of the concessionaires to deliver water is the failure of the MWSS.

For the current crisis, Maynilad has graciously agreed to share 50 million liters per day from its water supply, to help out Manila Water with its deficits (ABS-CBN March 11, 2019). But Manila Water lacks around 150 to 280 million liters of water per day! The National Water Resources Board will allow the activation of deep wells to generate 100 million liters a day to complete about 200 million liters supply to East zone households (Ibid.)

Manila Water and Maynilad have had to work with the constraints of burgeoning demand (due to population explosion and the rising standard of living of OFWs and call center workers) versus depleting supply from aging dams (Angat is 40 years old). Manila Water has taken the initiative of constructing a treatment plant in Cardona, Rizal, to draw water from Laguna Lake, enough to cover some of their compounding supply deficit (ABS-CBN March 12, 2019). Businessman Enrique Razon is pushing to build with Manila Water starting the end of 2019 Wawa Dam, which can be the nearest major source of bulk water to provide 80 million liters per day by 2021 and 540 million liters daily by 2024 (Bloomberg March 14, 2019).

Meanwhile, one of the projects pushed under Pres. Duterte’s Build, Build, Build is the New Centennial Water Source-Kaliwa Dam project, which is expected to supply an additional 600 million liters of water daily to Metro Manila once completed in 2023 (Rappler March 13, 2019). Columnist JC Punongbayan says, “It is this project that the MWSS favored over the Laguna Lake project put forward by Manila Water despite warnings it could prove more expensive and already too late to avert an impending water crisis.” He points out that this P12.2-billion project is funded by a Chinese loan at interest rate of 2%, 8 times higher than Japanese loans, and for which it is required that the dam be built by a Chinese contractor, China Energy Engineering Corporation (Ibid.).

Is he saying we might have a problem deeper than the Metro Manila water shortage?

 

Amelia H. C. Ylagan is a Doctor of Business Administration from the University of the Philippines.

ahcylagan@yahoo.com

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