Water rate dispute worries Japanese business group
The Japanese Chamber of Commerce and Industry of the Philippines (JCCI) backed local investors’ concerns on the negative effect of the water rate rebasing dispute that prompted Maynilad Water Services Inc. of the Pangilinan-Consunji group to seek international arbitration.
“We view the (Metropolitan Waterworks and Sewerage System) MWSS’ unilateral and arbitrary act of changing the terms or interpretation of the concession agreement, in total disregard of the contractual rights and intent of the parties, with grave concern,” the JCCI said in a letter to the Department of Trade and Industry.
International commercial lenders and international financial institutions share that concern, the JCCI said.
Particularly alarming, the JCCI said, was the MWSS’ decision to disallow the recovery of corporate income tax in determining the tariff “contrary to the parties’ consistent understanding, agreement and practice.” The JCCI cited documents for the 1996 bidding of the water concessions, the rebidding of the West service area (served by Maynilad) in 2006, the mechanism used in previous rate rebasing exercises and the practice employed in similar public-private partnership projects (PPP) overseas, such as in the United Kingdom.
“Since any change in the rate of corporate income tax is beyond the control of the concessionaire, it should be allowed to recover the same so that the concessionaire does not have any unnecessary buffer or margin in the tariff that is allowed to charge,” JCCI said.
Maynilad on Friday filed a dispute notice with Paris-based International Chamber of Commerce (ICC) against regulator MWSS for ordering water rate cuts over five years instead of allowing proposed rate increases which were meant to recover service investments. Ayala-led Manila Water Co. earlier said it was filing a separate dispute notice. The two companies also said there would be no rate adjustment while arbitration is ongoing.
In the meantime, the enforcement of contracts is among the many points that the National Competitiveness Council (NCC) wants to improve, noting that foreign investors seek stable regulatory and business environments, especially when exploring infrastructure projects. The DTI is the public sector co-chair of the NCC.
The Philippine Chamber of Commerce and Industry (PCCI), the country’s largest business organization, the Employers Confederation of the Philippines (ECOP), the Foundation for Economic Freedom (FEF), and the Management Association of the Philippines (MAP) have said in a joint statement, “We caution against actions that undermine faith in the seriousness of the government’s commitment to its own flagship PPP program.”
The PCCI, ECOP, FEF and MAP have warned that gains made under the MWSS PPP must not be put at risk so that the United Nations’ Millennium Development Goal of universal access to potable water could be achieved.
Among the many MDGs which the Philippines committed to reach by 2015 is to improve the number of people with access to safe drinking water and sanitary toilet facilities. So far, Manila is on track, according to the National Statistical Coordination Board.
“Demands for tariff adjustments need to be framed strictly within the agreements, and be mindful of the public’s need—not just for reliable clean water, sewage and sanitation services—but for other sorely lacking infrastructure—mass transport, toll roads, ports, power, and others, which would be affected by any ill-considered decision on this case,” the business groups said.
