The water crisis since the concession agreement between the MWSS and the two water companies (Maynilad and Manila Water) was amended in October 2001, water prices in Metro Manila have increased sharply. In Maynilad areas, the basic water tariff has increased from P6.58 per cubic meter (January to October 19, 2001) to P15.46 (March 2002)-a rate increase of 135%. In Manila Water areas, rates have jumped from P2.95 (January to March 2001) to P6.75 (March 2002) or by 128%.

Along with the sharp increase in water prices, service remains dismal and expansion targets unmet. On top of these, Maynilad is petitioning for rate-rebasing at P30 per cubic meter. If approved (within the next three months), it will mean another 94% increase in Maynilad water prices by January 2003.

While price levels are the focus of public protest, the issue cuts to the core of the water privatization process in the Philippines:

1.) The inefficiency and greed of water concessionaires who now control a vital public utility. Water companies, especially Maynilad, claim that their losses stem mostly from the 1997 financial crisis that caused their dollar-denominated debts (assumed from the MWSS) to balloon. It is apparent, however, that poor management has resulted in Maynilad’s dismal financial position. Moreover, the new provision for FCDA (Foreign Currency Differential Adjustment) included in the amended contract, is designed not only to recover past forex losses, but is also applicable to future, anticipated forex fluctuations. In other words, Maynilad is passing on its losses to consumers, charging them for things other than the water they have consumed.

2.) A flawed and weak regulatory system. In the original concession agreement, the Regulatory Office (RO) process to evaluate petitions for petitions were quite clear-cut. However, due to the exclusivity of the process, as well as the corrupt elements within the RO who colluded with water companies, these processes were undermined. Instead of objectively assessing the technical merits of the petitions, the Chief Regulator himself (Rex Tantiongco, now retired) lobbied for the demands of the concessionaires and pushed for the amendments to the original contracts. The MWSS Board, meanwhile, merely approved his recommendations.
The regulatory system likewise does not provide for consumer participation in decision-making processes. Although public consultations are held before impending price hikes, public input in such consultations carries no weight in the final deliberations of the RO and the MWSS.

3.) A national government which refuses to recognize that its privatization policy has failed. Under the Arroyo government, the original terms of the water concessionaires’ bids were altered. This happened with the full knowledge and consent of the Executive via the MWSS Board (whose chairman is the Public Works Secretary) and an inter-agency committee composed of line agencies such as the Department of Finance and the National Economic Development Authority (NEDA). Despite overwhelming evidence of the two concessionaires’ dismal performance and the predictably negative consequences of contract amendments, the national government approved their demands. It appears that the national government considered the political clout of the clans behind the water corporations over and above the negative impact on consumers and the integrity of its privatization policy.

From May to August of 2001, AKBAYAN, the Freedom from Debt Coalition and the Institute for Popular Democracy waged a campaign to stop the illegal increases, the Memorandum of Cooperation (precursor to the contract amendments) and to revamp the RO. The campaign was able to delay the MOC for four months via intensive lobbying, mass actions, legal cases, etc. However, the contract amendments proceeded in September 2001 with the consequences that we see now. Public response was timid due to 1) persuasive tactics of water companies (no increase, no water) and 2) the complexity of the issue which required an appreciation of the technical aspects of privatization and regulation.

Early this year, however, the full impact of the contract amendments has become apparent to consumers in the form of successive and dramatic price hikes. The growing clamor against doubling water rates and the proximity of the rate rebasing process make it an opportune time to launch an intensified public information campaign on water issues.