There are simply some things private enterprise is better at doing. One of these is supplying a large and crowded metropolis with potable water.
Before the MWSS divided its service area into two and awarded them to separate concessionaires (to enable benchmarking of performance), many parts of the metropolitan area had no water. Worse, over half of the water produced was lost to leaks and illegal connections. The poor suffered the most, having water delivered to their homes at over 500% of the cost. Lining up for water became a way of life.
For a long time, until the mid-nineties, we had rotating brownouts and poor water supply. I remember this time with horror: waking up in the wee hours to wait for water to come or bringing the precious liquid up four floors by the bucket so that my children could bathe.
Government simply had neither the capital nor the knowhow to improve the system. When government insisted on doing the job of producing the water supply and delivering it efficiently to our households, it did the job poorly and lost lots of money.
When private concessionaires took over the business, water supply improved a thousand-fold. I do not have to fetch water from a pump. I have running water in my faucet all hours of the day. I am willing to pay ten-fold what I pay now for the secure supply of water.
The private concessionaires put in large investments to install larger pipes and more pumps to maintain the water pressure stipulated in their contracts. They had to invest in new filtering facilities to deliver more water. The more water they delivered, the more viable their business became. Their interest as businesses coincided with our interest as consumers: more potable water was good for everybody.
Those billions in investment to bring Metro-Manila’s water system to global standards was protected by contracts, of course. Without those contracts, banks would not lend to the concessionaries. When those contracts are breached, the lending rates will spike, making the business unsustainable — or the commodity more expensive.
When the contracts with the concessionaires were negotiated, consumers were willing to accept the conditions contained in them just so there will be ample water. At that time, ample water was a dream.
The situation is akin to what happened in the power sector. Plagued by brownouts because of poor and unreliable supply, government turned to private investments to modernize the industry.
When power supply was short, we realized no power was more expensive than whatever price private power generators might charge. When the contracts were negotiated, they contained take-or-pay provisions that ensured the viability of the businesses and the sanity of the financial charges they must absorb to make the investments.
When we had ample power, populist politicians tried to score popularity points by taking issue with the take-or-pay provisions (which affected price but only for as long as we had a large power surplus). The take-or-pay provisions mean nothing today while demand is nearly equal to supply. The issue with those contracts died a natural, economic death.
Now that we have ample water supply, populist politicians are again trying to score popularity points by asking the contracts with the concessionaries to be reviewed. Those contracts made the concessions viable businesses that now deliver a larger supply of water in a more efficient manner. Just to score popularity points, populist politicians now want to undermine the financial viability of the concessionaires.
Just by talking, populist politicians take an economic toll. They raise regulatory risks that eventually reflect in higher financing costs that will prohibit more investments in water sufficiency. They might make some of us happy in the short term, but they will make life miserable for all of us in the end. If the concessions become less viable as businesses, we will return to the misery of water shortages in due time.
One such populist politician is Sen. Antonio Trillanes, the man who holds the distinction of outspending his peers even while he was in jail.
Earlier this week, Trillanes delivered a speech at the Senate calling for a review of the contracts held by the water concessionaires. It was a speech that touched every populist chord among free riders who wanted more water at lower prices. It was a speech that was as thrilling as it was unenlightened.
Fortunately, there was Juan Ponce Enrile to push a pin on Trillanes’ overinflated populist balloon.
Enrile asked Trillanes a simple question: Who held the franchise to the water utility in the metropolis? Trillanes obviously did not study the matter well enough to know the answer to that simple question. He tried to cover up his ignorance by railing against Enrile’s “lawyering†for the water concessionaires.
That was the wrong tack. The simple question was pregnant will all that mattered in this issue. If this was a question of franchise (which is held by the MWSS), then the matter is in the exclusive domain of the House of Representatives and not the Senate. If it is a matter of the contracts between the franchise holder and the concessionaires, then the Constitution secures contractual obligations.
One of the reasons we get so little direct investments into our economy is because we are perceived a jurisdiction where contractual obligations are taken lightly, creating much business uncertainty. Trillanes, just by delivering that unenlightened speech, magnified the concern over the reliability of contracts.
Miriam Santiago completely obfuscates the debate by accusing Enrile of “bullying†a non-lawyer. I disagree with her assessment. Enrile was simply putting the issue in proper context and a voluble colleague in his proper place.