MWSS aborts 2009 pact

The revocation was in line with President Rodrigo Duterte’s pronouncement that the previous concession agreement is disadvantageous to the government and consumers.

State regulator Metropolitan Waterworks and Sewerage System (MWSS) unilaterally canceled a 2009 resolution authorizing the extension of the concession agreements with Manila Water Company Inc. and Maynilad Water Services Inc.

This was confirmed by MWSS administrator Reynaldo Velasco who said the decision came about after an emergency meeting of the agency last week.

Velasco said the revocation was in line with President Rodrigo Duterte’s pronouncement that the previous concession agreement is disadvantageous to the government and consumers.

The original 25-year agreement expires 2022 but it was extended during the time of former President Gloria Macapagal-Arroyo in 2009 to a full term that ends 2037.

In an address in Malacañang, Mr. Duterte warns the two firms of expropriation if their explanation regarding the onerous agreements are not satisfactory.

“If you fail to satisfactorily explain, I will expropriate everything. You can file cases against me, anyway it will only be two years remaining for me,” he said in his speech.

The two beleaguered water firms, meanwhile, waived P11 billion which an arbitral court based in Singapore ordered the government to compensate both concessionaires.

The water concessionaires also vowed to defer the approved water rate hike scheduled this January.

Despite the retreat, Chief presidential legal counsel and spokesman Salvador Panelo said the government’s plan to file complaints against those behind the deal will continue.

Mr. Duterte reiterated the government has an airtight case against both firms particularly in violation of Republic Act 3019 or the Anti-Graft and Corrupt Practices Act.

During the hearing of the House committees on good government and public accountability and public accounts into the concession agreements, Manila Water President and CEO Jose Almendras and Maynilad President and CEO Ramoncito Fernandez announced the decision of both firms after President Rodrigo Duterte ranted about the supposed onerous provisions in the deal.

“Yes, [we will no longer ask payment of the P7.4 billion]. We will follow the directive of the government, the President,” Almendras said.

“We will also no longer implement the approved water rate hike this January 2020,” said Almendras.

Fernandez, for his part said: “We are not going to collect the arbitral award that was given to us in 2017 as directed by the President.”

The Permanent Court Arbitration in Singapore recently ordered the government to pay Manila Water P7.4 billion for losses it suffered on account of the government’s breach of its obligations. In October last year, the same court upheld the arbitral award of at least P3.4 billion to Maynilad for supposed loses due to refusal of the MWSS to implement its tariff adjustment from 2013 to 2017 which included recovery of payments for corporate income tax.

According to Almendras, Manila Water is now in talks with the MWSS as to the deferment of the approved water rate increase.

“We wrote to MWSS last 3 December to express our intention to have an agreement to defer the water rate hike,” said Almendras.

Fernandez, for his part said Maynilad is “open” to delaying the plan even as he said that delaying the hike might have long term implication in future investments.

During the hearing, the water concessionaires also agreed to remove the supposed onerous provisions in their contract with the government, particularly the provision that allows them to pass corporate income tax payments to consumers.

Earlier reports stated that according to the 2018 financial statements of the two water firms, Maynilad and Manila Water have passed on to consumers around P2.8 billion and P2 billion of corporate income tax, respectively.

“Your corporate income tax, this is being paid by the public. Is it okay with you if we remove this as long as we have consideration of a fair return of what you have invested?” asked Public Accounts Chairperson Anakalusugan Rep. Michael Defensor.

To this, both Almendras and Fernandez answered in the affirmative.

The representatives of the concessionaires likewise agreed to remove other the other questionable provisions in their respective contracts with the government.

“We comply with the directives of the President to review some provisions in the agreement,” Almendras said.

Fernandez stated: “We are ready to talk and reach an agreement that would be beneficial to government, to investors and to customers who relies on continued services.”

According to Panelo, despite the recent moves of the water firms, there is still a crime and the President will push through with his plans to sue them.

“You know, when the crime has been committed, even if you return, there is still a crime. And the President is mandated to enforce the law and the law said any transgression will have to be prosecuted,” Panelo told reporters.

However, Panelo could not say if President Duterte will be banning the water concessionaires from ever entering into any agreement with the government regarding water distribution even if they already complied with the Chief Executive’s demands.

“That I do not know. I cannot answer that now, I will have to ask the President,” Panelo said.

Panelo said among the onerous provisions in the deal included: During the lifetime of the contract, if for any reason there are businesses losses then we will have to pay for these; Number 2, government. cannot interfere in fixing the water rates and Number 3, they find it anomalous that the agreement is being extended even prior to the expiration of the same.

Panelo, however, expressed belief that if the onerous provisions are removed, the water concessionaires may stay.

Senator Christopher Lawrence “Bong” Go lamented the unfair and unjust provisions in the concession agreements in a privilege speech at the Senate.

“I strongly believe that such a decision is not only disadvantageous to the Filipino people, it is also wrong,” Go remarked, adding that many provisions in the said agreements are “unfair and unjust to the Filipino people.”

Go then enumerated some of the unfair practices that water concessionaires engage in to make a profit, saying that the companies continue to take advantage of Filipinos.

“Manila Water, through its ‘fixers,’ have continuously opposed several water projects that would improve our water systems. Why? So they could build their own water provider and raise prices anytime?,” he added.

The senator clarified, however, that he is not against businesses turning a profit, saying “I strongly believe that promoting a culture of entrepreneurship and fostering a country that is conducive for business and commerce are crucial in creating a better life for us all.”

But he stressed that “business without conscience is just greed.”

The senator then questioned those who furnished and negotiated the contracts. Proposing a way forward, the senator urged the renegotiation and rework of the agreements “to eliminate or neutralize those provisions which are unduly disadvantageous to the government and align both governmental and private interests to one common goal: public interest.”

He also urged the MWSS, the government agency that is in charge of water privatization in the country, to “explore the possibility of terminating the extension of the concessionaire agreement.” “The President might also ask that you do this eventually,” Go said.

Justice Secretary Menardo Guevarra said disputes arising from burdensome provisions of the water companies will never happen in the future.

Guevarra said he received feelers from Maynilad and Manila Water that they decided not to pursue the billion peso claim from the government.

“Yes, I also received these feelers from Maynilad and Manila Water. This is a very positive development. Although the president has said that the government will not pay these arbitral awards, at least during his term anyway,” said Guevarra adding, this gracious manifestation on the part of the water concessionaires nonetheless removes a potential liability from the books of account of the government.

Guevarra though reiterated, “But as i said before, the issue of paying the arbitral award is not as important as ensuring that disputes arising from burdensome provisions of the water concession agreements will never happen again in the future.”

Yesterday, the two water firms revealed they are no longer asking the government to pay for revenue losses related to unimplemented rate adjustments in the past years.

Manila Water president and CEO Jose Almendras and Maynilad president and CEO Ramoncito Fernandez has told the House Committee on Good Government and Public Accountability that their respective companies are no longer pursuing their arbitral win from a court in Singapore.

Almendras said during the committee hearing they are heeding the request of President Rodrigo Duterte for the government to no longer pay Manila Water P7.4 billion for revenue losses under the provisions in their concession agreement.

He said they will follow the request of the president not to pay the said amount given to them by the permanent arbitral court in Singapore.

This was also the position of Maynilad who likewise won in October 2018 as the arbitral court ruled in favor of the company’s P3.44 billion compensation from the Philippines government as a result of revenue losses from the unimplemented water rate adjustments.

Likewise, Almendras said the scheduled water rate increase in January 2020 will no longer be implemented.

Maynilad said they are open to delaying the implementation of its own rate increase, but that further discussions on the matter are needed as it may cause long-term problems.

Last week, Duterte threatened to run after individuals responsible for the supposed disadvantageous agreements entered into by the government with Maynilad and Manila Water.