Failed privatization
This March, the motivations behind the Arroyo regime's deal with the Lopez family to save its companies from incurring continued losses and further boost their profits have been completely laid bare. Since last year, the regime has been repeatedly bailing out various Lopez-owned firms under their lead companies First Philippine Holdings Corporation and Benpres Holdings. Among them are Bayantel, Meralco, First Philippine Infrastructure Development Corporation (FPIDC) and Maynilad Water Services, Inc.
The government has bailed out the ailing Maynilad in a brazen agreement with the Lopez family in exchange for support and funds for Arroyo's candidacy and continued rule. It is a stark illustration of the collusion of imperialists, the comprador big bourgeoisie and big bureaucrat capitalists to protect their self interests and further squeeze the people dry.
The government bailout of Maynilad comes in the form of an outright purchase of the company through a "debt-to-equity" swap arrangement between the Lopezes and the government. Maynilad is a company owned by the Lopezes and the imperialist Suez-Ondeo group of France that was granted a concession to provide water services to western Metro Manila.
Under this agreement, Benpres is no longer obligated to pay for P8 billion in concessions fees that it owes. In exchange for cancelling this debt, 61% of Maynilad stocks held by Benpres will be ceded to the Manila Waterworks and Sewerage System (MWSS), the government agency that oversees water services.
Benpres has even been able to "gain" some P3.4 billion from this deal because its capital input for Maynilad comes to a mere P4.6 billion.
Aside from this, the P6.4 billion that Maynilad illegally charged consumers, and that the Lopezes and Suez-Ondeo pocketed in the last three years will no longer be returned to the public. The Lopezes and Suez-Ondeo will also be relieved of other debt obligations since 1999 amounting to P11 billion. It is the government that will assume all of these obligations.  |
Both Benpres and Suez-Ondeo deny turning Maynilad into a milking cow when they managed it, and refuse to accept responsibility for the company's debt-ridden state. But according to the company's own records, Maynilad's overall debt came to P19.1 billion while its recorded assets were worth only P16.9 billion as of December 2003. From 1997 to 2001, Benpres and Suez-Ondeo incurred unexplained expenses of up to P800 million. From 1999 to 2000, Maynilad paid P1.2 billion for the services of consultants and managers that Benpres Holdings and Suez-Ondeo assigned to Maynilad. Maynilad's computers and other equipment were also all contracted from companies owned by the Suez group.
But even if it is the government that has completely shouldered the costs of bailing out the ailing companies, it is Benpres Holdings that will continue managing them. Suez-Ondeo, the Lopezes' foreign business partners, will continue to control 19% of Maynilad's stocks. Benpres and Suez-Ondeo will continue squeezing funds from Maynilad through the large bills for the services of the consultants and managers they have assigned to Maynilad.
The Maynilad debt assumed by government will be passed on to the people. To pay for the debts it has assumed, the government will increase water service rates by up to 32%. This is in addition to the 227% increase in charges since Maynilad began handling water services in 1997. Meanwhile, rates charged by the Manila Water Company, a company owned by the comprador Ayala family, Bechtel-International Water of the US, United Utilities of the UK, and the Mitsubishi Corporation of Japan, which handles the water concession for eastern Metro Manila, have been hiked 350%. The growing cost of water services runs counter to the promise by imperialists and the puppet regime that privatization and deregulation will reduce water service costs.
In the face of all this, the privatization of water services has not brought about any good. Contrary to Maynilad's claims, up to 43% of Metro Manila still does not have continuous and efficient water service, while 1.5 million people in Metro Manila do not even have access to any water service.
When the government privatized the MWSS in 1997, it was dubbed the biggest example of public services privatization.
Developments since then have exposed the failure of all of the vaunted benefits of the policies of privatization, denationalization, deregulation and liberalization. They show how foreign capitalists and their local accomplices in business and in the reactionary government have actually been bleeding the ailing economy and the impoverished Filipino people.
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