Water Privatization

THE front pages of newspapers in the past two weeks speak about the rants—and threats—of Duterte against water concessionaires Maynilad and Manila Water. Last October he threatened to have government take over the control of the water distribution. He even wanted to file plunder, corruption and economic sabotage cases against officials who negotiated the deal back in 1997. Then there were talks to rescind the contracts. Now it has become milderk—to renegotiate the contract to take away the alleged onerous provisions. Among these is the requirement for the government to pay for the companies' business losses while prohibiting it from interfering in fixing the water rates. Based on these provisions, the Permanent Court of Arbitration (PCA) in Singapore ordered the government to pay Manila Water 7.4 billion pesos for losses stemming from rejected water rate hikes back in 2015. In 2017 the government was also ordered to reimburse 3.4 billion pesos for Maynilad’s losses. In total that would be a whopping 10.8 billion pesos! Duterte fumed and categorically said that the government will not pay! Besides, the deal is claimed to be anomalous because the contracts were extended to 2037, a decade before the original expiration of the agreements in 2022.

The Ramos administration signed Republic Act No. 8041, or the National Water Crisis Act, in 1997, which paved the way for full privatization of the capital’s water sector. For the past two decades, Manila Water, owned by the Ayalas, and Maynilad, originally owned by the Lopezes but now by the Pangilinans, have dominated Metro Manila’s water supply under concessionaire deals with the Metropolitan Waterworks and Sewerage System (MWSS). The MWSS is the government agency tasked to ensure a stable and adequate supply of water. Ayala’s Manila Water has control over Metro Manila’s East Zone, which covers 23 cities and municipalities, including the business districts of Makati and administrative city of Quezon City. Panglinan’s Maynilad, meanwhile, controls the so-called West Zone, which covers 17 cities and municipalities, including large parts of old Manila. Back in 1997 the deal was hailed as one of the most successful large-scale privatizations in the developing world. Today the Metropolis has the world’s most expensive water utility service. What has gone wrong?

Yes, there may have been corruption along the way. Both concessionaires may have been very inefficient too. But what is deeply wrong is the privatization of basic services. Water is one basic service, so also is transportation and electricity. It is no brainer to see that the private business companies do not primary engage in business to serve the people. They do business to gain profit. That is the raison d’etre of business.  If they do serve, the service given may just be a by-product of their business. On the other hand, government has the mandate to serve. It is supported by the people’s taxes so that it may serve, especially the basic services that the people need. The government engage in basic services not to gain but to serve. The people pay them for this. So why give basic services to private business? The reason usually given is that private business is more efficient than government. Should this really be so? Government too can be efficient as we see in many countries. Private business can also be inefficient, and when they are, it is at the cost of the people, as our experience now with our metro-rail systems, our electricity, and our water rates and services. The services are poor, and very poor; and the rates are high, very high. Where is government in this? Is it there to support big business or to serve the people?