A foreign business observer and several other groups of economists and academicians have cautioned the public against heeding populist appeals to scrap existing water concessionaire agreements as such could prove more costly for consumers and the government in the long run.
According to Peter Wallace, one of the most prominent political and economic forecasters in the country, these agreements have the force and effect of law, and without any concrete violation of such, the Metropolitan Waterworks and Sewerage System (MWSS) is mandated by law to respect them.
Wallace added that foreign investors would think negatively and have a bad impression on the administration of Presient Benigno Aquino 3rd, and impact upon future public private partnerships (PPP).
“I am very concerned that a goverment agency like MWSS can put at risk one of the very few successful PPP projects. One that has successfully brought water into almost every home from the time when less than 60 percent had water. And incredibly not recognize that tax is a normal business cost in every business,” Wallace told The Manila Times.
Business groups such as the Philippine Chamber of Commerce and Industry (PCCI) claimed there was little or no basis at all for charging water firms of violating these deals while Wallace believes that what water firms have done during these past years was just to keep their end of the bargain.
Majority House Leader Neptali Gonzales 3rd also said that this issue of alleged violations of the water deals should be viewed objectively and dispassionately.
“These issues cannot be oversimplified since these essentially involve the question of what was the financial return agreed upon by the government with the concessionaires at the time the concession agreements were entered into 16 years ago,” Gonzales told reporters.
“Private investors made huge investments and assumed significant risks based on an understanding of the resulting financial return to them. We have to remember that not even government can unilaterally vary the financial terms of its contracts without violating the non-impairment clause provided by the Constitution,” he added.
Gonzales also said the current concessionaire system was “widely recognized internationally as one of the few successful cases of water privatization in developing countries.”
The lawmaker stressed that calls for the scrapping or rescission of water concessionaire agreements might send a wrong signal to foreign investors wanting to do business in the country. Gonzales said that any move or call for a rescission should be studied carefully, since an unilateral move might affect the existing water services being enjoyed by the public.
Former National Economic and Development Authority (NEDA) chief Felipe Medalla agreed echoed Gonzales’ views and added that the concessionaire agreements were crafted by government with the intention of the public’s welfare at heart.
The concessionaire agreements were products of intensive study by academics, economists and government policy makers, he said. The two water firms, Maynilad and Manila Water had nothing to do with the study and the creation of the deals, saying that they only took part in the competitive bidding which international groups once referred to as “the most transparent competitive bidding” ever at that time.
Water firms signed and agreed with what government thought as the best options to improve water distribution services.
Medalla said the prime consideration of government back then was entice private firms to participate in improving the water distribution system in Metro Manila. Had Maynilad and Manila Water decided not to participate in the biddings, water services in the metropolis would have gone from bad to worse.
The economist also exonerated the two water firms in the issue of income tax charges, saying such a practice has been incorporated into the concession agreements to make those deals attractive.
Maynilad, through their chief financial officer Randy Estrellado, denied that they collected their income tax charges from customers, saying that it was impossible since they are still enjoying a tax holiday.
Under the agreement, Maynilad can only charge what they already invested or have included in their business plan.
“We are only allowed to recover costs already incurred and it is MWSS which approves of these costs, not us. We also do not recover these costs immediately. We spread it within a period of time.”
During the Ramos administration, water services in the metropolis was underdeveloped.
More than seventy percent of Metro Manila and environs lacked 24-hour water services.
Water quality was also a problem. Many areas got brackish and non-chlorinated water.
Several high areas of the metro had little or no water pressure.
Public interest lawyer Argee Guevarra agreed with Medalla and said that contracts should be honored. Guevarra admited that consumers got tremendous benefits from the contracts. Prior to 1997, the water distribution system was underdeveloped. More than 70 percent of Metro Manila was without adequate supply of water. Now, consumers enjoy uninterrupted 24-hour services, enjoying safe potable water at their homes.
Guevarra hinted of sinister moves being made by other big business groups who plan to manage their own concession area. He said that one or several big business interests were laughing behind the backs of several groups demanding a rescission of these deals.
Coalition of Filipino Consumers convenor Jason Luna feared that once these agreements are scrapped, water services will be affected that will directly affect the lives of Metro Manila residents. He likewise feared that groups attacking water concessionaires have their own political and economic agenda.
There is no assurance, says Luna, that opposition groups would do a better job of managing water distribution if they successfully convince the MWSS to change their concessionaires.
Luna urged leftist groups pretending to be consumer groups to reveal who funds their campaigns and who are those business interests backing their activities. The people, said Luna, have the right to know.