Yet another round of water service interruptions, mounting unmet sanitation infrastructure obligations, and looming water rate hikes highlight the failure of water privatization. It is unconscionable that water firms’ profits continue to rise and they are even expanding abroad despite their failure to meet their domestic service obligations. Water privatization is failing to ensure people’s right to water and the government needs to take over this vital public service and run it well. Also, the cost of delivering a very vital public service as water being passed on to consumers by private water firms is excessive and in violation of the human right to water. Government should take charge of this public utility in order to ensure water accessibility and affordability.
Up to 17 million water consumers in Metro Manila and its surrounding areas again face interrupted water services from Maynilad Water Systems and Manila Water Company. This is reportedly due to low water levels in Angat Dam and Ipo Dam where the two concessionaires source water. The looming interruptions follow interruptions that started in March this year which caused monetary and circumstantial damages to millions of customers, who filed a petition to hold the water firms accountable.
Customers can also expect much more expensive water as Maynilad and Manila Water fully pass on the cost of sanitation projects to comply with Supreme Court (SC) directives. The Metropolitan Waterworks and Sewerage Systems (MWSS) stated that if approved, the two companies’ clean water infrastructure costs will be incorporated on a staggered basis in water bills after the next rate rebasing in 2022. The SC recently imposed Php1.8 billion in penalties on the two firms for violating the Clean Water Act.
Privatization-bred burdens
These problems that water consumers face are due to the failed approach of water privatization.
Water firms have the responsibility to ensure a continuous and safe supply of water. Yet putting water sourcing, distribution, and services delivery in the hands of private firms mainly concerned about their bottom-line has resulted in underinvestment in infrastructure and facilities by the concessionaires. Water firms have reaped huge profits through the years despite failing to ensure uninterrupted water services and sufficient sanitation projects.
The water firms are today claiming insufficient water supply as the reason for service interruptions. Yet Advocates of Science and Technology for the People (AGHAM) has for instance identified existing water sources and systems that can increase water supply by as much as 5,663 million liters per day (MLD). Even assuming some depletion of Angat, the bigger question is why these other water sources have not been tapped or developed.
The concessionaires’ non-compliance with the Clean Water Act is also a case of underinvesting in vital water services. Customers have been billed with increased environmental and sewerage charges for the past 21 years but only 14% of the total service area has been covered by the sewerage services of the water firms as of 2018. This is significantly lower than the combined 64% target that Manila Water (33%) and Maynilad (31%) should have at least already met by 2017, leaving 86% of the total service area to be covered for the 19 remaining years of the concession agreement (CA). The firms have also not established adequate sewerage systems vital for the clean-up of the Manila Bay, contrary to a 2008 SC directive.
Privatization-driven profits
And yet the water firms’ profits continue to rise. Manila Water’s net income rose from Php2.4 billion in 2007 to Php6.5 billion in 2018; Maynilad’s from Php1.3 billion to Php7.4 billion in the same period. These profits are ensured under the CA signed between the government and the private water firms when Metro Manila water and sanitation services were privatized in 1997.
Water customers are their main source of profits. There is rate rebasing every five years to compute the water rates consumers should be charged based on the firms’ past and future expenses and their guaranteed profit. Manila Water rates have increased by 879% and Maynilad’s by 574% between the start of the concession in 1997 to the first quarter of 2019.
As it is, potable water and water services already take up an increasing share of household budgets, especially of poorer and low-income families. In 2015, Philippine Statistics Authority (PSA) figures show that families in the National Capital Region spent about Php668 monthly on potable water and water services. Water for the People Network (WPN) has meanwhile found that informal settlers, who have the least ability to pay, frequently shell out close to Php1,000 or more for water which is so vital to survive.
In their quest for profits even at the expense of providing services, Manila Water and Maynilad have been expanding their water businesses outside their concession areas since 2009. Manila Water Philippine Ventures and Metro Pacific Investments, Corp. are spending billions of pesos to set up water concessions outside Metro Manila and even abroad.
Public service over profits
The public sector has to have the key and central role in providing water and sanitation services. These cannot be made dependent on the narrow profit-seeking motives of private corporations. As the Metro Manila water experience has shown, private water firms will invest to the extent that it serves their profit-making.
The poor service of water firms including under-investment and over-pricing in the concession areas must be ended with government taking control of these vital water utilities. The governments in the United States, Europe, Japan and elsewhere operated major water and sanitation services and financed these through general taxation. These countries were able to expand their water services and make it affordable for decades, although this reversed with the anti-people wave of privatization since the 1990s.
Public welfare and health demand that water services be publicly-provided and operated as a public service rather than for private profit. For a start, government should rescind the CA, which has allowed the firms to reap billions in profits despite glaring underperformance. ###
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