Tomfoolery at the MWSS

Japanese Prime Minister Shinzo Abe announced the grant of $2 million in emergency aid (this is approximately 164 million Japanese yen) for the Philippines to help in the rehabilitation of a man-made calamity in Zamboanga City. Mr. Abe made the announcement last Wednesday after his bilateral meeting with President Benigno “Noy” Aquino III in Brunei Darussalam.

The two leaders met on the sidelines of the ongoing 23rd ASEAN (Association of South East Asian Nations) Leaders’ Summit being held in Bandar Seri Begawan, the capital city of Brunei. The Japanese grant is for the benefit of some 120,000 people of Zamboanga City, especially those still in the evacuation centers after the end of the 20-day siege by disgruntled elements of the Moro National Liberation Front (MNLF), who are loyal followers of its erstwhile chairman Nur Misuari.

Japan has been actively participating in the search for peace in Mindanao through the ongoing negotiations between the Philippine government and the Moro Islamic Liberation Front. It is part of the International Monitoring Team that supervises the GRP-MILF ceasefire agreement.

More than the peace process, Japan has a lot of interests in the Philippines, including business and economic activities that also benefit them. 

No less than Takashi Ishigami, president of the Japanese Chamber of Commerce and Industry of the Philippines (JCCIP) echoed bullishness about the country’s economic performance in the last few years. He expressed this vote of confidence in a letter dated Sept. 26 sent to Trade and Industry Secretary Gregory Domingo.

“We are glad to note that the Philippine economy continues to flourish, and is one of the best performing economies in Asia today. It is our hope that the success of the Philippine economy continues, and that the Philippines continue to attract foreign investors to further fuel its economy,” Ishigami said.

In the same letter though, the JCCIP president expressed concern that investors’ confidence on the country’s economic performance might be adversely affected by recent cases involving concession agreements under the Philippine government’s privatization program.

Going direct to the point, the JCCIP leadership questioned the actions taken by the Metropolitan Waterworks and Sewerage System (MWSS) defying provisions of concession contracts it entered into during the previous administration in 1997.

Specifically, the JCCIP took the cudgels for the concession contracts of the Ayala-owned Manila Water Services Inc. and Metro Pacific’s Maynilad. 

As the government regulatory body in charge of the two water concessionaires, both Manila Water and Maynilad were hurting over the MWSS actions that virtually glossed over their sovereign contracts inked with the Philippine government more than 16 years ago.

“We view the 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,” Ishigami stated in his letter to the DTI Secretary.

Ishigami echoed the concern of the foreign business community like Japanese investors on the “consistency in the regulatory framework” of PPP projects being promoted under the administration of President Aquino.

“The decision of foreign investors to invest in long-term PPP  projects in the Philippines is due to a large extent to their belief  that the Philippines has a stable and predictable regulatory environment, and is a country that guarantees the binding effect and sanctity of contracts. International commercial lenders and international financial institutions share the same concern,” Ishigami pointed out.

With the PPP as the centerpiece of investment promotion campaign of the administration, the government could not afford to be perceived as lacking consistency, much less lacking permanency of policies in the last three and a half years left of President Aquino’s term in office.

Following the provisions of their concessions, both Manila Water and Maynilad sought tariff re-basing. The two concessionaires filed last year formal petitions before the MWSS.

Instead of reviewing the tariff hike petitions — to mitigate impact to water consumers serviced by Manila Water and Maynilad — the MWSS ordered the two concessionaires to reduce their rates.

In a resolution it issued on Sept. 12, the MWSS denied a petition of Maynilad — west zone concessionaire —  to raise by 28.35 percent to P8.58 per cubic meter its average basic charge. Instead the regulator approved a downward adjustment of 4.82 percent or P1.46 per cubic meter in five equal tranches of minus 0.964 percent or P0.29 per cubic meter a year.

The MWSS board, on the other hand, ordered the Manila Water a minus 29.47 percent adjustment to be implemented in five equal tranches of -5.894 percent a year. This was contrary to the Manila Water petition seeking a basic rate increase of P5.83 per cubic meter on its average basic water charge of P24.57 per cubic meter.

Last week, Maynilad sought for official arbitration of alleged violations of contractual obligations of the Philippine government before an international body. It filed a notice of dispute with the International Chamber of Commerce (ICC) to resolve its dispute with MWSS.

Last Sept. 24, Manila Water filed a dispute notice before the ICC after MWSS also denied their proposed rate increase to customers in the east zone concessionaire.

The rate reductions would have been a very popular move, especially for harangued consumers. But at what expense, if this would result to bleak outlook in the capability of both concessionaires to ensure uninterrupted water service.

And worse, a potential water shortage looms anew in Metro Manila and suburbs if no new water infrastructure is installed to meet rising demand.

We, as taxpayers, will foot the bill for foreign lawyers the MWSS would hire to defend them before this international arbitration court.  Aside from the excessive bonuses given to MWSS board members and top executives, public funds will be spent for legal expenses to defend the tomfoolery of MWSS for violating its own concession contracts.