Duterte diplomacy in ‘water war’ welcome, but real issues remain TMT

Duterte diplomacy in ‘water war’ welcome, but real issues remain Featured

The Manila Times
News
07 May 2020
Comments:DISQUS_COMMENTS
PRESIDENT Rodrigo Duterte earlier this week pleasantly surprised many people when he offered an olive branch to the Ayala-led Manila Water Co. Inc. and the Metro Pacific-led Maynilad Water Services Inc., apologizing to the two water concessionaires for his earlier verbal attacks and thanking them for contributing to the effort to stop the coronavirus pandemic.

The implication that Duterte is willing to work out an agreeable settlement to the government’s long-running dispute with the water distributors for the Greater Manila Area is certainly very welcome and eliminates the risk of a calamitous loss of water services. The President should not, however, let his new “softer side” get in the way of resolving the deeply troubling issues that exist in the two concession agreements, and which sparked his anger in the first place.

In a public briefing on Monday night, President Duterte apologized to top Manila Water officials Fernando Zobel de Ayala and his elder brother Jaime Augusto, and Maynilad Chairman Manuel V. Pangilinan for the “hurting words” he used against them in the past.

Duterte erupted at the water concessionaires late last year over the allegedly “onerous” contracts they signed with the government in 1997 to supply water to residents of Metro Manila and nearby provinces.

The President was outraged by the decision of the Permanent Court of Arbitration in Singapore, which had ordered the Philippine government to pay Manila Water P7.39 billion for the non-implementation of water rate increases for the years 2013 to 2017, based on the concession agreement requiring the government to indemnify the utility firm for losses resulting from regulatory action.

Maynilad had earlier won a similar ruling from arbitrators for a slightly lower amount of damages.

This news followed several months of controversy highlighted by a final ruling by the Supreme Court imposing stiff fines against both companies for not complying with the terms of the 2009 Clean Water Act, and several extended periods in which millions of consumers were left without water due to severe supply shortages.

Duterte threatened to charge the two concessionaires, their top executives, and former government officials responsible for crafting the concession agreements with economic plunder, and order the Department of Justice and regulator Metropolitan Waterworks and Sewerage System (MWSS) to create new contracts to replace the “onerous” deals.

The crisis at least briefly raised the serious, disturbing possibility that water services to the more than 15 million customers served by Manila Water and Maynilad would be interrupted, and the Philippines would become a pariah in the eyes of potential big-ticket investors.

Duterte’s willingness to find an amicable resolution avoids that disaster, but calm and goodwill alone does not resolve the parts of the concession agreements that are definitely disadvantageous to the government and the people.

First, the issue that prompted MWSS to reject the rate increase and sent the two companies to arbitration was the inclusion of corporate income taxes in customer charges. Any new concession agreement must explicitly prohibit this.

Second, the issue behind the fines imposed late last year by the Supreme Court, the non-provision of sewerage system connections in spite of the concessionaire’s collecting the money for those capital expenditures as part of customer rates must be resolved. Ideally, the companies must be obliged to carry out that work required by the 2009 Clean Water Act; alternatively, they should provide refunds to customers for the full amount collected over a more than 10-year period.

Finally, the dispute resolution mechanism which subjects Filipino public interests to the whims of foreign arbitrators managed by a business-backed organization (the International Chamber of Commerce, in this case) must be rejected in favor of competent authorities who can fairly carry out that role here in the Philippines. The Philippine Institute of Arbitrators and the Philippine Dispute Resolution Center Inc. are excellent organizations; if they cannot serve as the dispute resolution mechanism themselves for some reason, their knowledge and guidance in creating a just solution will be of great service to all concerned.000
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