Water: The next big crisis
Once upon a time, Metro Manilans took it for granted that they can drink clean water straight from the tap. You can still do that in some places in the metro area but more and more people believe they have to buy bottled water just to be on the safe side.
In a December 2005 report, the World Bank noted that water quality does not meet government standards, and that waterborne diseases remain a public health concern. Ramon Alikpala, executive director of the National Water Resources Board (NWRB), pointed out to Business World that water from the Angat River, Ipo River and the La Mesa Dam — Metro Manila’s major sources — is treated and tested “on a daily basis and is safe for drinking.”
Of course that guarantee is not iron clad. We all know that somewhere down in the distribution system, contamination happens… if water even gets there at all. There are still large areas of Metro Manila, the Parañaque area for instance, that have no access to piped water. Residents there are paying through the nose for the little water that they get from subdivision associations insisting on monopolizing water distribution or from water vendors delivering water by tanker trucks.
It is about to get worse. The next big crisis to hit us with pretty grim effects involves access to water… or the lack of it. It is going to hit us because we, or more accurately, our government leaders, are thinking of money they can make out of big water projects instead of the needs of our people. The dry spells we have had in recent years should have made them act proactively.
For those of us in Metro Manila, the problem will simply be one of supply. Angat Dam is no longer capable of supplying the growing needs of an expanding metropolis and also the needs of Bulacan farmers who are growing our food supply. For residents in Parañaque and Las Piñas who have exhausted their supply of underground water, the crisis had been on for years with no relief in sight.
Actually, there was this water supply project that government should have undertaken many years ago designed to provide some 300 million liters of water a day to help meet the needs of the growing bedroom communities of Southern Metro Manila. It involves filtering water from Laguna de Bay through a technology using reverse osmosis. It is something like what is used in water desalination plants in places that have little or no access to natural fresh water.
Government, through the MWSS, had dillydallied on that project for years. It was such that the two water concessionaires, Maynilad and Manila Water were getting antsy about future water supply. Maynilad wants to just be allowed to undertake the project on its own and I understand, has started to prequalify construction companies for this P1.5 billion project. The previous head of MWSS reportedly allowed them to do that.
But with a new head, there is a change of mind on the part of MWSS. Now, I am told, MWSS wants a B-O-T arrangement. I guess they have some group already in mind… some group close to you-know-who. I understand it even cost the last MWSS Administrator his job because he cautioned its sponsor of a potential backlash to Ate Glue. The plan is to give this favored entity a contract to run the facility and sell water to the concessionaires on a take or pay arrangement and the usual automatic escalation clauses, similar to the contracts government signed with the IPPs in the power sector.
This is going to be a mistake. Based on our recent experiences, the ideal approach is for government to build the project itself using a long term, low cost development assistance financing from a foreign government or a multilateral financial institution. This way, the cost of the water to be produced would be a lot cheaper than in a B-O-T arrangement with a private entity who will use commercial financing. Maynilad and Manila Water will pay for the project with a commensurate increase in the concession fees they are paying now.
There are projects that government must simply undertake and not use the B-O-T approach. Subic Tarlac expressway is a good example of an infrastructure project that couldn’t have been built by a private entity using commercial credit. The traffic volume wouldn’t have justified it. Or, the toll rate would have been unaffordable to intended users. In this case, government was right to use foreign assistance financing from
The EDSA MRT is another example of a project that wouldn’t have been that expensive for government today if it were undertaken with low cost development assistance financing. Government is now trying to buy out the private sector investors in order to save money.
Actually, the 300 MLD water processing project is not the only vital water supply project long pending with MWSS. There is still the Laiban Dam that had been studied and talked about for years but had not yet managed to get off the planning stage. Laiban will also be essential in meeting the water needs of Mega Manila, not just Metro Manila, in the coming years. This billion dollar project should also be undertaken as a government project financed by low interest development assistance loan.
It is thus disturbing to learn from an announcement of the MWSS Administrator that they are considering a B-O-T proposal for the Laiban Dam project from a private entity. CalEnergy had reportedly submitted an unsolicited proposal which allows for a Swiss challenge where another company can seek to better the
Cost recovery for the $1.1-billion proposal of CalEnergy for the Laiban Dam project, the MWSS chief told media, will take 15 years. This early, he warned that “water from the dam would be more expensive than that currently being sold by Manila Water Co. Inc. and Maynilad Water Services, Inc.” How expensive, he is not saying. But it would definitely be more expensive than if government undertook the project using low cost development financing.
It is amazing that MWSS is even considering going the BOT route for Laiban. We only need to recall that the problems with the power sector IPPs happened in the context of a serious power supply crisis. In hindsight, people are now saying that those contracts, with their take or pay provisions, are onerous. But then again, those power plants we badly needed at that time of crisis wouldn’t have been built without the take or pay provisions that the financial institutions required for credit to be granted.
Quick action on the part of government is key if we want to avoid being put in a corner again. Yet, it seems that the strategy of the MWSS bureaucrats is to precisely wait for the water crisis to happen and then award those projects to favored BOT contractors who will demand onerous take or pay clauses too.
For something as basic as water which is so price sensitive to the end consumer, government must undertake such big ticket projects like Laiban and the Laguna Lake 300 MLD plant to be able to access low cost development loans and thus keep rates to end consumers low. The private sector should be limited to water distribution, as they are now.
Government needs a coherent water policy, strong political will, and low cost capex financing. Government officials must disabuse their minds that just because private concessionaires are now in water distribution in Metro Manila, the state is relieved of the responsibility of ensuring the provision of safe water for the citizens.
If this CalEnergy BOT project pushes through, we will likely find ourselves with the same kind of problems we now have with power sector IPPs, except that water is even more basic than power in our hierarchy of needs and thus, a water crisis can be more socially disruptive. We must be gluttons for punishment.
Lawyers
Vincent Chua sent this in for today.
The sign on the door of a lawyer’s chamber reads:
Where there is a will, there is a way; where there is a way, there is law; where there is law, there is a rule; where there is a rule, there is a loophole; where there is a loophole, there is a lawyer; and so here I am.
Boo Chanco’s e-mail address is [email protected]
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