Updated @ 3:18 a.m., Dec. 11, 2019

MANILA, Philippines — Former Presidents Fidel V. Ramos and Gloria Macapagal-Arroyo may be charged if they could be proven to have connived in the crafting of the “onerous” 1997 agreements with Manila Water and Maynilad to distribute water in Metro Manila and nearby areas.

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“If they are part of the conspiracy. But if they are not, they cannot be included,” presidential spokesperson Salvador Panelo said at a press briefing on Tuesday.

Panelo made the remarks when asked if the former presidents might be included in the charges that the government would file against former government officials involved in the drafting and approval of the water concession agreements.

On Monday, President Rodrigo Duterte said he would want to talk first to the water concessionaires and the government lawyers who prepared the contract which the Department of Justice found to be disadvantageous to the government and consumers.

At first, he said he would not agree to a compromise with the water concessionaires, but later he clarified that he would not settle until he had met with the former state lawyers and executives of the concessionaires.

Gregorio Vigilar

It was in 1997 during the Ramos administration that Manila Water and Maynilad bagged the contracts to distribute water in the metropolis and parts of Cavite and Rizal provinces.

The firms signed the 25-year concession agreements with the Metropolitan Waterworks and Sewerage System (MWSS), then chaired by Public Works Secretary Gregorio Vigilar.

The MWSS had to give up its function of distributing water because at that time it could provide water to only 65 percent of consumers in and around Manila for an average of just 16 hours daily. It had also been plagued by water pilferage and system losses of more than 50 percent.

Concession deals

Under the concession deals, however, the government was barred from interfering in setting water rates, a provision that the two firms used in filing a suit against it in the Singapore-based Permanent Court of Arbitration.

Last month, the tribunal awarded Manila Water P7 billion for forgone revenue after the government blocked the increase of P5.83 per cubic meter in its basic charge for 2013-2017.

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The international court ordered the government in 2017 to pay Maynilad P3.6 billion because the firm was not able to raise its rate by P8.58 per cu. m. during the five-year period. The contracts allow concessionaires to seek an increase every five years.

Under the Arroyo administration, Maynilad’s 25-year concession agreement was to expire in 2022 but was extended in April 2010 to 2037, after the firm was required to increase and accelerate its wastewater investments.

Manila Water’s agreement was likewise set to expire in 2022 but was extended in 2009 to 2037.

Taxes paid by customersBefore the contracts were extended, the Arroyo administration through the MWSS adopted a resolution in July 2004 recognizing the two private firms not as public utilities but as mere agents of the government agency, allowing them to pass on income taxes to consumers via tariffs.

In 2008, the MWSS approved the business plans of Manila Water and Maynilad that considered income taxes and other items as part of operating expenses that could be recovered from customers.

Justice Undersecretary Markk Perete said on Tuesday that public officials were barred under the Anti-Graft and Corrupt Practices Act (Republic Act No. 3019) from entering into contracts that are grossly prejudicial to the government or to public interest.

Perete told radio station dzMM that the provision in the concession agreements that prohibits the government from regulating water rates violated the MWSS law, which provides that the MWSS board of trustees should fix the rates while the National Water Resources Board will determine whether the increase is reasonable.

Arbitration cost

The contracts also allow the two firms to pass on to consumers the expense of going to arbitration, according to Perete.

He said that one of the things “that also riled up the President” was the penalty-clause provision should the concessionaires fail to put up a wastewater treatment facility.

“In the course of events, [the government] collected the penalty but the concession agreement also provided that the penalties can be passed on as cost to the consumers. So that is one of the things that made the President angry,” Perete said.

Panelo said the government could temporarily take over the water distribution if Manila Water and Maynilad would not agree to remove the onerous provisions in the contract. “Most likely after that there will be bidding for a private company to take over,” he said.

Panelo said the government would block the enforcement of the arbitral court’s award to the two firms.

“With respect to the arbitration award in Singapore, we intend to file an appeal before the Supreme Court of Singapore. Or if they will enforce it in the Philippines by filing a petition in our lower courts, then we will oppose it,” he said.

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