The 2018 report to the Securities and Exchange Commission (SEC) of Manila Water, a firm majority owned and controlled by the Ayala conglomerate, pointed out:
“As a result of certain actions by the MWSS and the Republic, which are covered by the provisions of the Sovereign Undertaking, the Company demanded indemnification from the Republic by reimbursing its losses in operating revenues to be realized for each remaining year of the Concession as such losses are realized, which losses are estimated to amount to P79 billion for the period 2015 up to 2037.”
The “certain actions” referred to by Manila Water were both the delay in authorizing the increase in their water rates and the magnitude of the increase. It claimed the water rates authorized by the government “denied the Company the rate of return allowed to operators of long-term infrastructure concession agreement in other countries having a credit standing similar to the Philippines.”
This is totally absurd, and more so, extremely unpatriotic. The regulatory body denied the rates that Manila Water had demanded, but still gave the water tariffs that generated for it an income of P55 billion from 2009 to 2018. Yet Manila Water still claims it didn’t get its appropriate profits, that it incurred losses which government must reimburse it for every year until 2037?
That’s what the Ayalas are fantastically claiming. But then they filed an arbitration case with the Permanent Court of Arbitration as registry in 2015. Did they get the idea from the filing by President Aquino 3rd’s an arbitration suit in 2013 against China, with the PCA also as registry?
Strangely though, while the Philippine case against China was heard in The Hague in the Netherlands, the hearings for the Manila Water case are in Singapore, the home of the Ayalas’ biggest business partner, the state-owned Temasek Holdings (through Singapore Telecoms).
The arbitration tribunal consists of two foreigners (V.V. Veeder and Kap-You) and one Filipino, retired Supreme Court justice Roberto Abad. Two foreigners could rule to order a sovereign state to pay a private firm P79 billion?
Whoever was the government official who agreed to the arbitration should be fired.
Maynilad
The other entity of the water monopoly in Metro Manila, Maynilad Water Services, controlled by the Indonesian tycoon Anthoni Salim, had filed a similar suit, but one that demanded immediate payment only for the period 2013 to 2017. The company has said though that it will file another arbitration case to cover the years up to 2037, which will demand P60 billion in reimbursement.
The arbitration tribunal ordered the government to pay Maynilad P3.4 billion for that period to 2017. The Supreme Court of Singapore last September struck down the Philippine government’s appeal to stop the award.
Have we become such a weak state that one Spanish-mestizo conglomerate and an Indonesian can bully it in tribunals abroad? Or are those who run our state really minions of oligarchs?
Even if, let’s say, Manila Water and Maynilad Water Services, had the legal right to claim those fantastic amounts, can’t their owners be patriotic and pro-poor enough to just donate the P140 billion to government for it to build, and even accelerate the construction of, water reservoirs to prevent the water shortages that the metropolis experiences every month?
And to think — believe it or not — that the two water companies were given two astonishing benefits.
How Manila Water can have billions in profits.
One is that they don’t pay a single centavo to government for the water they get from state-built dams, for which water they charge consumers so high they have generated super-profits.
This has resulted in the fact that, in the case of the Ayala company (for which we have detailed data), Manila Water earns 68 centavos for every peso paid by a consumer. This is almost entirely due to the annual increase in tariff granted by government. Remember that it is a monopoly that does not compete with anybody else.
So even as consumption per connection fell by 17 percent from 2009 to 2018, Manila Water’s water tariffs had increased by 36 percent, and its annual net profit doubling from the 2009 level of P3.2 billion in 2009 to P6.5 billion in 2018.
A second astonishing advantage given by government in the concession agreement for the water monopoly is that the concessionaires pass on to consumers, through the tariffs the latter pay, their corporate income taxes.
As astonishing is their defense when the Supreme Court ruled in 1998 that Meralco cannot do this — that is, pass on their income tax to consumers, which had amounted to a mammoth P28 billion in overcharging of customers.
How did the water firms argue so that they would not be required to follow the Supreme Court precedent?
They claim that per the concession agreement, they are not public utilities, merely agents of MWSS.
When presidential spokesman Salvador Panel claimed the other day that there were onerous terms in the concession agreement with the two water firms, he wasn’t at all exaggerating.
Which administration should be blamed for these onerous concession agreements, that Manila Water and Maynilad Water are exploiting to get a foreign arbitration tribunal to order the government to pay them P140 billion?
The Second Yellow Regime, after that of Cory: the Fidel Ramos presidency, which entered into the contract with the two firms in 1997.
Can’t a sovereign state rescind very onerous contracts with private firms, which run public utilities that provide an essential basic need of its citizens, such as water?
More and more, I am convinced that this country has been run by oligarchs who deliver mammoth profits not just for themselves but for the global rich — foreign firms are among their biggest stockholders. And worse, they control media so tightly we don’t even realize we are being so exploited to get the kind of profits they have.
Email: tiglao.manilatimes@gmail.com
Facebook: Rigoberto Tiglao
Twitter: @bobitiglao
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https://www.manilatimes.net/water-companies-demand-p140b-more-from-govt/538002/
https://www.manilatimes.net/water-companies-demand-p140b-more-from-govt/538002/
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