Deal full of holes

Agra’s opinion was used as basis for the extension of the deals by 15 years to end in 2037 that was backed by the authority of then President Gloria Macapagal- Arroyo through former Finance Secretary Margarito Teves.

The basis for the extension of the 2009 service contract for Manila Water Company Inc., aside from not being provided under the original deal, the conditions that the government attached to it were not even complied with.

Former justice secretary Alberto Agra, who was then government corporate counsel, advised the regulator Metropolitan Waterworks and Sewerage System (MWSS) that an extension of the 25-year concession agreement of Manila Water has to satisfy a list of conditions to be “legally undertaken.”

According to the legal opinion, obtained by Daily Tribune, a renewal or an extension, even before its expiration, is possible if the concession agreement especially the legal framework, do not prohibit an extension thereof; MWSS has a statutory obligation to ensure the uninterrupted and adequate supply and distribution of potable water at rates that are deemed just and equitable; application of doctrine of last antecedent allows for an extension; and the extension of the concession agreement falls within the sole administrative discretion of the MWSS.

The other requirements are that the bidding procedure and legal framework was tailor-fitted to address the unique and unprecedented magnitude of the privatization of MWSS; the extension of the concession agreements may even prove to be an invaluable aid to the economic plans of the national government; the extension of contracts or agreements imbued with public interest, like the MWSS concession agreement, is not unprecedented and the Water Crisis Act together with the terms and provisions found in the concession agreements allow for its extension without the need of public bidding.

Agra’s opinion was used as basis for the extension of the deals by 15 years to end in 2037 that was backed by the authority of then President Gloria Macapagal Arroyo through former Finance Secretary Margarito Teves.

In the letter of undertaking, the Department of Finance stated that “the Republic shall not interfere with the mechanism contained in Article 9 of the agreement relating to the setting of rates and connection charges for water and sewerage services.

Among the commitments of Manila Water were to “mitigate” tariff increases, increase total investments from P187 billion to P450 billion to comply with the Clean Water Act and the Supreme Court (SC) ruling on the clean up and preservation of Manila Bay.

The SC, however, had fined the Manila Water and Maynilad Water Services Inc. more than P1.8 billion for non-compliance with the Clean Water Act.

The tribunal directed each of the water firms to pay P900 million. The fine was likewise imposed on MWSS.

The two firms and MWSS were fined an additional P322,000 per day for non-compliance with the law.

The ruling resolved the consolidated cases of Maynilad Water Services Inc. vs The Secretary of DENR, et al., GR 202897, Manila Water Co. Inc. vs The Sec. of DENR et al., GR 206823, and Metropolitan Waterworks and Sewerage System vs The Pollution Adjudication Board, et al., GR 207969.

The SC ruling proved that the Manila Water did not comply with its undertaking for the extended contract.

In 2009, the Department of Environment and Natural Resources imposed on MWSS and the two water concessionaires a P29.4 million fine for the period 7 May to 30 September per day for failure to fulfill obligations under RA 9275 which required the two concessionaires to provide wastewater treatment facilities and to connect sewage lines in all establishments to an available sewerage system.

In his regular Daily Tribune column Going Forward, Senator Christopher Lawrence “Bong” Go said the actions taken by President Rodrigo Duterte against the water concessionaires were never anti-business.

“Contrary to what our detractors and their well-funded PR machines might want you to think, the President and I are not and will never be anti-business,” Go wrote.

He cited his recent privilege speech at the Senate regular session on 9 December, which emphasized “governmental obligation of fostering a country that is conducive for business and commerce as it is crucial in creating a better life for us all.”

“It is time to put to rest the erroneous notion that rich people and their businesses are entirely ‘self-made’.”

“Like I said during my speech, business without conscience is just greed. And it is the job of the government to protect public interest from such greed,” Go indicated.

“The government must not be prevented from performing its duty and right to enforce the law. Private interest must not take precedence over the public good. Any provision in a contract which effectively prohibits the government from doing its job should be considered void,” the legislator averred.

“Businesses will not thrive without the land that serves as their home, a government that supports their economic endeavors, employees who keep their businesses functioning and most importantly consumers who patronize their products and services,” according to the senator.

“Sadly, what the present controversy on Metro Manila’s water services seems to prove is that it is all about the money for these two concessionaires. It is all about the profit,” he noted.

He added: “Not only do they pay nothing for the water supply they get from the country’s natural resources, they also pass the burden of paying their corporate income tax to their consumers.”

He recounted that since the execution of the contracts in 1997, the concessionaires have passed on the burden of paying corporate income taxes to the consuming public.

“This is in spite of the fact that the Supreme Court, in Republic vs Meralco, ruled that public utilities can no longer pass the burden of paying the corporate income tax to consumers as expenses, and the MWSS issued a resolution that bars the concessionaires’ recovery of their corporate income taxes as expenses or costs,” stressed Go.

He noted that on top of these corrupt practices, “the concessionaires continue to exploit the onerous provisions in the water concession agreements to bleed Filipinos dry.”

Anti-debt group Freedom from Debt Coalition (FDC) also labeled the recent Permanent Court of Arbitration in Singapore order for the government to pay P7.39 billion for supposed losses and other arbitration related costs to Manila Water as improper.

Manila Water and Maynilad waived the award from PCA after a series of fierce criticisms from President Rodrigo Duterte.

“Can you imagine, after losing the arbitration case and being ordered to stop forcing their customers to shoulder the company’s income taxes in 2015, Manila Water turned around and asked government to pay them a total of P79 billion until 2037? That amount supposedly represents the income they stand to lose until the end of the extended concession term. Basically, they are asking government to shell out money on the basis of income projections. But even a small ‘kikiam’ vendor can tell you income projections don’t always materialize. Why should public funds be used to guarantee the profits of a private corporation?” according to FDC.

FDC explained that Manila Water’s claim is based on the Letter of Guarantee issued by the Philippine government in favor of the company which basically commits the government to compensate them should they fail to realize their expected profits.

“This is the face of corporate impunity. On top of economic sabotage, the water concessionaires should be charged with violating the Covenant on Economic, Social and Cultural Rights, of which the Philippine government is a state party.”

As a state party to the Convention, it is the legal obligation of the Philippine government to call out and censure violators, including non-state actors.

Citing General Comment No. 15 of the international treaty adopting the right to water, FDC stressed that “the human right to water is vital to a life of human dignity. It is a requirement for the realization of other human rights.”

FDC recalled that the “disadvantageous contract” with the water concessionaires came with Metro Manila’s water privatization in 1997.

“Since then, consumers have borne increasing water rates of over a thousand-fold, including shouldering the water companies’ tax obligations. Yet Manila Water and Maynilad have not kept their part of the deal to provide adequate and sustained supply of drinking water. The recent Metro Manila-wide water crisis is clear evidence of their failure,” said Flora Santos, an informal sector leader and Secretary General of the women’s group Oriang.

“We have been and continue to be punished for a deal that makes a commodity out of a need as essential to life as water,” she added.

FDC noted Indonesia’s reversal of Jakarta’s water privatization, which was modeled after Metro Manila’s, upon finding the corporate contracts disadvantageous to Indonesian consumers.

“We support the effort to scrutinize these agreements because they are clearly onerous. When the Ramos government signed these agreements in 1997, and the Arroyo government extended them by another 15 years, they basically threw Metro Manila’s water consumers under the proverbial bus. Our government basically promised that any loss suffered by the water companies would be shouldered by taxpayers. To add insult to injury, consumers were already being made to shoulder the corporate income taxes of these giant corporations,” FDC pointed out.