Maynilad:
The rotten experience of privatization

Basahin ang artikulong ito sa Pilipino

Since the reactionary government sold the MWSS (Metropolitan Waterworks and Sewerage System) to Maynilad Water Services, Inc. (Maynilad) and Manila Water Company, Inc. (MWCI), the people have been plagued by successive water rate hikes. Despite the already huge increases in water rates, the companies are pressing for more.

Last December, Maynilad threatened to return its concession to the government if the latter rejects the company's petition for another water rate hike. The Macapagal-Arroyo regime is deathly afraid that widespread protests would erupt if it approves Maynilad's petition.

Maynilad has threatened to return its concession should its petition be rejected, claiming insufficient revenues. Maynilad is also demanding that the government refund its $303 million investment.

When Maynilad acquired its concession on February 21,1997, it assumed the bulk of the MWSS' $800 million debt. As a result of the Asian financial disaster of 1997 which depreciated the peso from P26 to P52 to the dollar, however, its debt increased from P20 billion to P50 billion. In March 2001, Maynilad suspended the payment of concession fees to the MWSS supposedly to recoup its losses resulting from the peso devaluation. Since then, the MWSS has shouldered the debt payments, with the government borrowing funds from foreign banks for the purpose. Maynilad's unpaid concession fees to the MWSS have gone up to P5 billion. The reactionary government has turned its back on its obligation to pay the MWSS' debts, saying that Maynilad should assume the burden. Maynilad, however, has passed back the responsibility to the government for the debts that have since grown severalfold. The debts will be borne by none other than the people.

Added burden on the people

The privatization of the MWSS has brought nothing to the people but serial water rate increases. It has not delivered on its promise of lowering service rates. The original contract prohibits the two concessionaires from arbitrarily hiking rates within 25 years. So in October 2001, the Macapagal-Arroyo government colluded with Maynilad and MWCI to amend the agreement and allow rate increases. Aside from the basic charge, the only other charge Maynilad and Manila Water are allowed to collect is the currency exchange rate adjustment (CERA) fixed at a peso per cubic meter.

The agreement was amended ostensibly to allow the two companies to recover their losses due to the plunge of the peso. It is, however, clear that all the new charges are meant to ensure the biggest possible profit for the two companies. Contrary to the original 1997 contract which provided for a 25-year period for the companies to recover their investments, Maynilad and MWCI are trying hard to achieve this in five years.

The new agreement allows the two concessionnaires to charge consumers the following: (1) accelerated-extraordinary price adjustment (AEPA); (2) foreign currency differential adjustment (FCDA); and the (3) special transitory mechanism (STM).

Collection of the AEPA started in 2001 at P1 per cubic meter, which was incorporated into the basic charge. Maynilad collects an estimated P2.6 bilyon from the AEPA.

The FCDA is a mechanism for the automatic adjustment of charges based on fluctuations in the peso-dollar exchange rate. This is the same mechanism used by the NAPOCOR and the PLDT to pass on to consumers losses resulting from the fluctuating value of the peso. The FCDA automatic price adjustment comes on top of the CERA, which is pegged at a certain rate.

Collection of the FCDA began this year at 35.73% of the basic charge for Maynilad and 49.6% for MWCI.

The water companies started collecting the STM in July 2002. Aside from this, Maynilad collects several other charges (see sample billing statement). All of the added charges have no relation to water consumption.

In spite of the successive increases, Maynilad's services remain poor�the water is not always safe to drink, there is no assurance of a 24-hour water supply and almost every month, there are times when no water is available for days on end. There have also been many instances when Maynilad billed consumers who have already paid to subscribe to its services even if not a single drop of water has flowed from their faucets.

January 2003
English Edition

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