Gov’t stand on Maynilad seen ‘bad for business’

The business community warned that the government’s continued refusal to raise the tariff of Maynilad Water Services Inc.—despite the recommendation of an arbitration panel—would dampen the country’s investment climate and potentially dissuade prospective investors from pursuing public-private partnership (PPP) projects in the country.

Henry J. Schumacher, vice president for external affairs at the European Chamber of Commerce of the Philippines Inc., said that the ongoing conflict would be “bad for business.”

“First, the rules are changed midstream through a PPP. Second, the government does not even respect the decision to implement the arbitration ruling. Why would companies get involved in business here,” Schumacher said in a text message Wednesday.

Schumacher further pointed out that, by changing rules midstream, foreign direct investments tend to go not in the Philippines but somewhere else.

“When a Philippine GOCC (government-owned and -controlled corporation) does not honor its contract even after an arbitration decision rules against its position, the investment climate of the country is harmed. This case is being watched closely as it affects investor confidence,” added John D. Forbes, the American Chamber of Commerce of the Philippines’ senior advisor.

Also, Management Association of the Philippines president Francisco F. del Rosario Jr. said if the rate adjustment would result in better supply and services, then Maynilad should be allowed to implement the rate hike especially since the proposal was already approved by the appropriate board.

“However the consumers should not be burdened too much as the cost of living is already going up,” Del Rosario said.

Because the Metropolitan Waterworks and Sewerage System (MWSS) failed to act on the rate hike, Maynilad announced last month that it would go for arbitration anew to pursue its demand for compensation from the government.

The water concessionaire had served the government, through the Department of Finance, a notice of arbitration and statement of claim. The arbitration proceedings will be conducted in Singapore before a three-man panel.

Earlier, Maynilad claimed that the delays in the granting of a tariff increase resulted in revenue losses amounting to P3.44 billion for the period January 1, 2013, to February 28, 2015. The concessionaire is also said to be incurring revenue losses averaging P208 million for every month of additional delay in 2015.

In early 2013, Maynilad submitted to the MWSS-Regulatory Office a five-year business plan, which required an increase in the company’s basic charges by P8.58 per cubic meter. In response, the MWSS-RO issued orders directing Maynilad to cut rates by P1.46 a cubic meter for the five years until 2017, or 49 centavos a year.

Maynilad then sought and underwent arbitration with the International Chamber of Commerce. On Dec. 29, 2014, the panel decided to award Maynilad an average increase of P3.06 per cubic meter—on top of the current basic rate of P31.28 cubic meters—for the five-year rate rebasing period that runs until 2017.