Junk concession agreement with water firms, gov’t urged

April 8, 2014

by superadmin

IBON Networks | Water for the People Network | 7 January 2015 | Arbitration shows how water privatization favors the two water concessionaires, which have been found illegally passing on dubious and onerous charges

Advocacy network Water for the People Network (WPN) urged government and policymakers to terminate the concession agreement (CA) with private water concessionaires Maynilad and Manila Water. The group reiterated this call after the arbitration panel ruled in favor of Maynilad and granted an increase in its basic charge.

The group said that the concession agreement goes against public interest, as blatantly shown by the arbitration process. Under the CA, the two private water giants will resort to arbitration to settle disputes with the Metropolitan Waterworks and Sewerage System (MWSS) that cannot be resolved through negotiation. But arbitration shows how water privatization favors the two water concessionaires, which have been found illegally passing on dubious and onerous charges such as corporate income tax costs, advertising, donations, etc.

That consumers will shoulder the expenditures related to the arbitration process highlights further the fundamentally flawed concession agreement. The group said that the contract was drafted to make sure that water rates are regularly adjusted to guarantee the profits of the two private firms, as well as the repayment of loans incurred by the MWSS privatization. Aside from the rate rebasing every five years, the basic charge is also adjusted to include inflation adjustments, extraordinary price adjustment (EPA), environmental charges, etc.

Consumers are also being double-charged for currency fluctuations through the foreign currency differential adjustment (FCDA) and the Php1-currency exchange rate adjustment (CERA), which is incorporated in the basic charge of Manila Water and now in Maynilad’s. The FCDA and CERA are among mechanisms meant to protect the water concessionaires from losses brought about by forex fluctuations that could bloat their loans.

According to the WPN, the CA has practically eliminated effective public control and regulation over water service: it is overly pro-concessionaire, allows overbilling and under-servicing while guarantees profits for Manila Water and Maynilad. Proposing amendments to the CA, as was done in the past, is no longer viable, and demands the immediate termination of the agreement.

The group reiterated that this latest blow to water consumers affirms that the CA and privatization are detrimental to public welfare and interest. Water rates will never be just and reasonable under privatization and terminating the CA is a step towards resolving unjust water rates. The advocacy network urges policy makers to rescind the concession agreement and start reversing MWSS privatization. (end)

The WATER FOR THE PEOPLE NETWORK (WPN) is a broad national network in the Philippines that campaigns for people’s control over waterservices and resources. It has more than 100 member organizations from all over the country. Research group IBON is one of the convenors of WPN.