Idiotic

The opposition KNP is trying to score political points by making absolutely idiotic statements. By doing so, they degrade the political debate and demean the electorate.

Last week, it became evident that the KNP was trying to prop up its weakest senatorial bets by having them do mindless stunts. Amina Rasul Bernardo and Boots Anson Roa filed a puzzling suit before the Supreme Court asking the tribunal to cross the great divide of the separation of powers principle and force the sitting president to step down – simply because the President’s continued governance created an uneven playing field for other presidential contenders.

Former senator Francisco Tatad, too, came out with puzzling – and unsubstantiated – allegations that probable bidders for the LRT capacity expansion program were asked to donate to the President’s campaign. His is pure gossip passed on to get media attention.

"Event engineering" is a legitimate way to win exposure for electoral aspirants. But the events engineered for media impact could either be edifying or mystifying. So far, the events being engineered seem intended to obscure public understanding and fuel mindless passions.

The degrading depths of this effort to reduce political debate to idiocy was reached the past few days when KNP propagandists mangled with great malice the issue concerning the work out of Maynilad Water – throwing in some truly horrible intrigue about ABS-CBN and the comedian Dolphy. Both Maynilad, until it went into receivership, and ABS-CBN are companies associated with the Lopez family.

For entirely separate reasons – mainly its rivalry over ratings with the Lopez-owned network – GMA-7 played up the maliciously contrived story about Maynilad, ABS-CBN and Dolphy. The Inquirer, GMA-7’s print partner, echoed the line.

Forget about that thing about Dolphy and allegations of political concession. That issue does not deserve repetition.

The more important thing concerns Maynilad Water. It is a tragic case that deserves close review. It is a complex case that has been twisted and tainted in the public mind by ignoramuses saying things for mere political effect.

Within the limited space of this column, and the limited attention span of the average reader, let me try and put some perspective on the Maynilad case.

The privatization of the MWSS in the mid-nineties was the largest water utility privatization in the world. It is a privatization case watched closely by all other nations contemplating privatization of their own utilities.

In that privatization process, the metropolitan area was subdivided into two water districts. The intention here was to introduce benchmarking and competition among the private concessionaires.

The eastern district was bid out to a consortium headed by the Ayala group. The western district was bid out to a consortium led by the Lopez group.

The two water districts are very different from each other. The district awarded to the Lopez group covered a larger area and had the more ancient system that needed larger capital outlay to modernize. That district also inherited 90 percent of the debt of the metropolitan water system.

Many of the pipes laid down during the Spanish era did not even have a map that will enable engineers to locate them. To this day, the Maynilad service area has 69 percent non-revenue water. This refers to the water delivered to the system for which the company is unable to collect revenue from either because they leak through old pipes underground, are lost to illegal connections or are simply stolen.

In a word, Maynilad was the more challenged enterprise from the start. It had to pay down a much larger portion of the inherited MWSS debt on top of the concession fees it pays government. It had to borrow more for capital outlay to fix an ancient water distribution system.

Add to all these the faulty regulatory system we have in place where water tariffs is highly politicized. A private utilities company could not simply charge the real rates to cover the real costs of delivering the service. It had to deal with governments sensitive to the most mindless agitation in the streets.

Whatever shortcomings may be attributed to the quality of management of this firm is merely icing on a problematic cake.

Why did the Lopez Group accept this concession considering the odds? Charge that to the heady optimism that prevailed in the years prior to the 1997 Asian financial crisis.

The Asian crisis doubled the peso costs of dollar loans Maynilad incurred in its initial investments along with the indebtedness it inherited as part of the concession. The regulators, however, were hesitant to court public wrath by raising prices to cover costs.

Bankruptcy was inevitable. Maynilad eventually found itself unable to service its debts, borrow money to improve its system, finance its operations and meet all its other obligations. The company decided to return the concession to government.

An international arbitration body was formed to reconcile the claims of all the parties: the company, the creditors and government. Complex legal suits were filed. The whole water distribution system for that service area was in peril.

Eventually, a formula where all parties lose but where the company would have a chance of survival was arrived at. The interest of those who need a water service, namely half the metropolis, was clearly the principal concern.

The creditor banks saw they money either converted partly to equity in a company nobody wants in its present form or to long-term loans to be paid down at lower interest rates. Government gets only part of the concession fees owed it. The Lopez Group lost P3.8 billion it had invested. It French partner likewise had to write off about P2.5 billion of its own investment in Maynilad.

How this could possibly be described a "sweetheart deal" escapes everybody’s mind.

Loren Legarda, who turned against her former employers and became the mouthpiece for this malicious interpretation of a painfully complex deal, must explain to the public her claims that this deal is a political concession. Earlier, she had already caused a minor panic in the investment community by saying something that vaguely sounded like a policy of debt repudiation should her principal win.

The Maynilad deal is a painful one for all affected by it. But it is the least painful option. We cannot afford to have water services shut down for half the city. It will benefit all of us if we focus our attention instead on how to make this service financially sustainable into the long future.