CORPORATE WATCH

11, 2019).

Manila Water, a publicly listed company and a subsidiary of Ayala Corporation, “won” the concession contract for the Eastern half of Metro Manila just as the Maynilad Water Services of the Lopez (Benpres) Group was awarded Western Manila for water services under President Fidel V. Ramos’s privatization program in 1997.

The separation of the East and West concessions draws from the initial distribution of water from the Angat Dam in Norzagaray, Bulacan, the major supply source for Metro Manila. From its La Mesa Portal, 60% goes to the nearby La Mesa Treatment Plant, in the western half serviced by Maynilad, and the 40% to the Balara Treatment Plant in the eastern half serviced by Manila Water. When both Balara and La Mesa Treatment Plants are in operation, the total processing capacity will be 4,000 million liters per day (mwss.gov.ph).

Blame both Manila Water and Maynilad for being too eager to get into the complicated water business. The very decision to split the service area was complicated, according to the observation of one of the government’s lead privatization negotiators then, Mark Dumol (“The Manila Water Concession. A Key Government Officials Diary of the World’s Largest Water Privatization”, World Bank, Directions in Development: 2000). He noted that three of the four prequalified bidders submitted tariff proposals 50-60% of the pre-privatization tariffs, with Benpres setting 57% for the West zone, while Ayala offered an extremely low bid of only 26% and 29% of the tariffs in East and West Manila respectively (Ibid.). That’s how the two won the “monopolies” in their areas.

In the first five years, tariffs remained close to the low levels promised until the first rate rebasing in 2002, followed by further significant tariff increases until the end of 2008. The tariff was, in real terms, 89% higher than the pre-privatization tariff in the West Manila and 59% higher in East Manila (Freedom from Debt Coalition March 2009). But the readjustment of targets were necessitated by the severe droughts of those first years, when the Asian financial crisis caused the concessionaires’ debt to double, and peso income decimated by the 50% devaluation of the peso. But through all this Manila Water made a profit as early as 1999. Maynilad could not do as well, and requested early termination of their contract in 2002. Despite approved tariff increases and the lowered other targets, Maynilad went bankrupt in 2003.

The government refused Manila Water’s offer to take over the entire Metro Manila distribution, and instead itself took over Maynilad and assumed its debts. In December 2006 a consortium of the Filipino construction company DM Consunji Holdings, Inc. (DMCI) and the Filipino telecommunications/real estate company Metro Pacific Investments Corporation (MPIC) redeemed Maynilad (gmanetwork.com Jan 24, 2007). In 2009, Manila Water’s concession was extended until 2037 instead of just to 2022 (ABS CBN News Oct 22, 2009). Maynilad’s profitability improved, and in April 2010, Maynilad’s concession was also extended until 2037 (Manila Bulletin April 23, 2010).

The concession contracts obliged the private companies to achieve an uninterrupted water supply and compliance with