Metro Manila’s two water concession firms have yet to recover some P105 billion in costs spent over the last decade and a half, yet some regulators want to change the rules—and these firms’ ability to recover their investments—midway through the game.
Given this predicament, four major business groups yesterday warned that unilateral moves to modify or abrogate the agreements of Manila Water Co. and Maynilad Water Services Inc. would “undermine faith” in the sanctity of contracts between government and private investors.
In a joint statement, the Employers Confederation of the Philippines (Ecop), the Foundation for Economic Freedom (FEF), the Management Association of the Philippines (MAP) and the Philippine Chamber of Commerce and Industry (PCCI) scored the “reckless statements” and calls for unilateral changes, even abrogation of contracts, made by various parties and even government agents whose responsibility was to deliver the obligations under those contracts.
“Such statements, if accepted, could reinforce perceptions that there are risks to investing under the Philippine public-private partnership (PPP) program—something we do not believe the government intends. We caution against actions that undermine faith in government’s seriousness of commitment to its own flagship PPP program,” the groups stressed.
Manila Water (controlled by the Ayala group) and Maynilad (under the PLDT group) have invested a combined P105 billion to improve water service facilities in Metro Manila’s east and west concession zones.
Company sources disclosed that Manila Water was set to start recording positive cash flows on its investments only by 2018, while Maynilad would do so by 2017. Their concession agreements run until 2022.
In its statement, the business groups pointed out that the Manila Water and Maynilad deals were some of the most successful examples of PPP projects, the model for which has even been replicated overseas. And under this PPP program, investors and financiers are asked to commit huge sums of money on projects with long recovery periods, 20 years or longer, on the promise that the government will honor its contract obligations and will do so with consistency and fairness.
“We note that the 16-year-old Philippine Water PPP has contributed much to improve public welfare by having more than doubled the number of customers served, provided a 24-hour water service availability level that meets health standards, while addressing the needs of millions in the poor communities. None of this was available before,” the statement read.
“The improvements in service delivery came after the two concessionaires poured in a combined P105 billion in investments to expand and upgrade the water and sewage network, achieved without adding to government’s fiscal burden or public debt exposure,” the groups said.
“What’s a pity is that this successful, internationally recognized model PPP has not been replicated outside Metro Manila where the water situation remains at woeful pre-privatization MWSS (Metropolitan Waterworks and Sewerage System) standards. Poor water and sanitation pose significant health risks to millions of people, while a well-run utility creates much positive benefit to its customers, and to the environment,” the groups said.
The gains made under the PPP program with the MWSS must not be put at risk. Rather, these gains ought to be imitated elsewhere across the country through similar PPP arrangements so that the UN Millennium Development Goal of universal access to potable water could be achieved, the groups further said.
“We, therefore, urge Philippine authorities to faithfully adhere to the terms of the concession agreements, including following the provisions on dispute settlement that call for international arbitration in the event of differences. Demands for tariff adjustments need to be framed strictly within the agreements, and be mindful of the public’s need,” they added.