Consumer Rights


Admin’s avid push for market-driven measures will run over the poor majority

The new year seems to usher in more difficulties for Filipinos in accessing basic goods, public utilities, and services amid government’s exclusionary policies, research group IBON said. The market-driven policies that have been prioritized by the Duterte government such as the Tax Reform for Acceleration and Inclusion (TRAIN), Build, Build, Build, amendments to the Public Services Act, and easing restrictions on foreign ownership and participation will hugely benefit only oligarchs, foreign investors and their allies in the bureaucracy, said the group.

IBON said that the newly-enacted first package of TRAIN relieves the rich by lowering personal income, estate, and donor taxes. The second package, which Congress is set to tackle soon, will propose to lower corporate income taxes as well. But the poorest 10 million Filipino families whose incomes fall way below the family living wage of Php1,039 per day will soon bear the brunt of TRAIN-triggered higher prices of food and goods,and service fees, said the group. It noted that TRAIN’s measly Php200 monthly social protection is slated only for 2018 and will be insufficient to cushion the impact of added taxes on oil and sweetened beverages, electricity, and shipping.

In terms of government’s infrastructure program that will be funded by foreign and private sector loans, public-private partnerships (PPPs), and unsolicited proposals, IBON added, contracts stipulate that the State will ensure interest and risk guarantee payments to the lenders and corporations for largely transportation infrastructure. But on the other hand, the public will be obliged by the ‘user pays principle’ with the likes of higher toll fees and more expensive fares.

IBON also said that proposed amendments to the Public Service Act will open up services such as transportation and telecommunications to foreign ownership. This will purportedly lower the prices of these services due to competition. Based on experience, however, monopolies or only a few companies instead prevailed and dictated the prices due to the absence of strong and genuine government regulation that upholds public interest. Proposed amendments will also allow ‘public utilities’ such as water and power service providers to treat corporate income tax as an expense. According to IBON, this will mean higher rates as consumers will be made to shoulder the companies’ tax obligations.

Relatedly, said IBON, more foreign corporations may be enticed to do business in the Philippines upon the modification of the foreign investment negative list (FINL) even before foreign restrictions could be removed through a more cumbersome Charter change. The FINL is a mechanism to limit foreign ownership in and protect Philippine industries, stressed IBON. However, the Duterte administration’s proposed modification will allow foreigners to further enroach on local professions, construction, retail trade, businesses, media, and education. Once government steps aside from its duty to provide goods and services, people’s access and capacity to afford these will be left at the mercy of corporations.

The Duterte government’s prioritization of the above-mentioned measures shows its determination in completely opening up the Philippine economy to big business and foreign corporate plunder at the cost of people’s welfare and national sovereignty, IBON said. This year onward, these State-facilitated neoliberal policies will further attack the people’s lives and livelihood,  and undermine the public’s rightful control and access of the country’s  resources. These social and economic woes will most likely increasingly face public scrutiny and opposition for now and the years to come, said IBON.

From via Bulatlat

The government’s assurance of private profits from day one has led to the Metro Rail Transit (MRT) 3 woes that has put commuter welfare on the line, said research group IBON.  The latest series of train breakdowns and mishaps is but the tip of the iceberg and will persist under a privatized light rail system. By assuring corporate profits, the government has neglected to ensure efficient and affordable public transport, said the group.

IBON said that the government still paid private firms with public funds even if they did not deliver on the MRT 3 line services they were contracted for. According to a Commission on Audit (COA) report, the government paid a Php54.5 million monthly maintenance fee to South Korean company Busan Rail Inc. (BURI) in 2016.  But during that same year the MRT 3 has had 2,619 incidents of train removals, 63 service interruptions and 586 incidents of passenger unloading or an increase of 20%, 26% and 164%, respectively, compared to 2014. BURI also failed to overhaul old light rail vehicle (LRVs) and replace the signaling system.

The Department of Transportation (DOTr) also paid Php527.76 million to Chinese corporation Dalian Locomotive and Rolling Stock Co. Ltd for useless LRVs that are incompatible with the power supply and signaling system of the MRT 3.

Yet the public still pays despite such poor service, said IBON. Since 2000, the government reported that it has been paying Php610 million monthly as rental fees to the Metro Rail Transit Corporation (MRTC), the private owner of the MRT 3. This is to pay for a 15% return on investment and US$485.5-million loan to the project’s financiers. Around 85% of MRT 3 fares goes to servicing principal and interest payments.

The group said that the government has now granted an original proponent status to the unsolicited proposal of the MRT 3 private owners to rehabilitate, operate and maintain the line. This means that if the proposal is unchallenged and approved, the entire MRT 3 will be in private hands. Under this proposal, commuters will face fare increases after two years. Light Rail Transit (LRT) and MRT 3 fares already increased by 50-87% in January 2015.

IBON said that privatized rail transport like the MRT 3 has failed to bring about the efficient and affordable service promised by the government. The group said that it is time for the government to reverse this policy and fulfill its responsibility in providing affordable, reliable and safe mass transport. ###

From Pointwest

By Arnold Padilla

(Released at the launch of consumer network Samahan at Ugnayan ng Konsyumer para sa Ikauunlad ng Bayan (SUKI))

When President Rodrigo Duterte told striking jeepney drivers and operators “Magtiis kayo sa hirap at gutom”, he could be as well speaking to all poor Filipinos who struggle with ever-rising cost of electricity, water and other basic necessities.

If one of the Duterte administration’s priority and urgent bills pushes through, consumers of water, power, telecommunications, transport and other public services, an overwhelming majority of them are poor, will have to pay more for these basic needs.

House Bill (HB) 5828 deepens what is wrong with privatization where public services are run for the private gains of local oligarchs and foreign firms. Not only does it allow public utility operators to compute profit rates using methodologies of any investor seeking maximum profits. It will also allow them to include their corporate income tax in doing so. All these will be shouldered by consumers who are left with no choice but to pay for the exorbitant fees and charges.

Priority and urgent legislation

This is contained in House Bill (HB) 5828 – a consolidation of five bills introduced in the House of Representatives (HoR) by the President’s party-mates and allies including former President Gloria Macapagal-Arroyo – that amends the Public Service Act or the Commonwealth Act No. 146. It is one of the 28 priority measures that the Legislative-Executive Development Advisory Council (LEDAC) under the Duterte administration has identified as part of its Common Legislative Agenda (CLA) for the 17th Congress. HB 5828, which the LEDAC Executive Committee (Execom) also listed as among the 14 urgent bills out of the 28 priority measures, has already been approved on third reading by the HoR last September. As defined by the LEDAC Execom, an urgent bill means that it needs to be passed within the year.

Counterpart bills have also been filed at the Senate including Senator Grace Poe’s Senate Bill (SB) 1441, Sen. Win Gatchalian’s SB 1594, and Sen. Bam Aquino’s SB 695. All are pending at the Senate’s committee level. SB 1441 contains mostly similar provisions with HB 5828 but for discussion purposes, this article focuses on HB 5828 that has the backing of Malacañang.

A major agenda of HB 5828 is to liberalize public services like telecommunications and transportation by narrowing the list of what are defined as “public utilities”. Under the bill, public utilities shall refer to a person that operates, manages and controls a) power distribution, b) power transmission, and c) water distribution and sewerage pipeline systems.

The implication is that other public services not defined as public utilities (e.g., telecommunications and transportation) would be exempt from the Constitutional restriction on foreign ownership of public utilities. Consequently, the effective control of Filipinos of the economy and of economic activities that have significant public consequence would be further undermined.

War against consumers

Pres. Duterte it seems is ready to declare war against the consumers with his administration’s planned amendments to the Public Service Act. In its report endorsing the HoR approval of HB 5828, the committee on economic affairs chaired by recent PDP-Laban recruit Rep. Arthur Yap said that one of the objectives of the amendment is “to provide a mechanism for rate fixing that allows a reasonable rate of return to attract investments into public utilities”. Unfortunately for consumers, this means that the profitability and commercial viability of public services take precedence over the provision or delivery of services that are basic necessities in nature.

One of the alarming issues in HB 5828 is its insertion in Section 16 (c) of Commonwealth Act 146 of the following new provision:

“The maximum rate of return shall be equal to the post-tax weighted average cost of capital for the same or comparable businesses computed using established methodologies such as the capital asset pricing model. Income tax shall be allowed as a cash outflow for rate-determination purposes. This provision shall not bar the application of performance-based rate regulation should the administrative agency regulating such public service deem it efficient and in the public interest. 

The Philippine Competition Commission (PCC) is hereby mandated to conduct regular studies on whether deregulation is warranted in a sector and submit its recommendation to Congress.”


HB 5828 institutionalizes market-oriented rate-setting methodologies by public utility firms that allow for the full-cost recovery of actual and projected expenses as well as the cost of all risks resulting to guaranteed returns for the investors but unreasonably high charges for consumers. In the bill, as already mentioned, the maximum rate of return shall be equal to the post-tax weighted average cost of capital (WACC) for the same or comparable businesses computed using established methodologies such as the capital asset pricing model (CAPM).


CAPM captures the expected or required return in an investment (cost of equity) factoring in the prevailing market rates and risks (e.g., commercial bank rates, stock market rates). Using CAPM means assuring public utility operators that the tariffs or charges they could collect from their consumers would give them their expected or required return that is guaranteed higher than prevailing commercial bank rates and stock market rates. This means further exposing users of basic needs such as water, electricity, telecommunications, transportation and others to the vagaries and abuses of the market. WACC, on the other hand, captures the cost of equity (expected return) and cost of debt (interest rates) and measures whether or not an investment is worth pursuing – i.e. a rate of return should be at least equal to or greater than the WACC for an investment to be profitable. But public services should be measured beyond profitability as these deliver necessities of public consequence and help ensure decent living for the people.


In addition, HB 5828 legitimizes the use of so-called performance-based regulation (PBR), which consumer groups have already questioned in the past because they could easily be taken advantage of by public utility operators such as the rate-setting methodology for Meralco rates or the similar rate rebasing exercise for Maynilad and Manila Water where the cost of future expenses (which would also include future corporate income taxes under HB 5828) are already collected from the users of the public utility. In several instances, these future expenses included expansion projects that were not even implemented or projections (like future demand) are bloated to justify high rates.


Income tax as an expense


The use of these methodologies in the computation of profit rates acceptable to big business is the bill’s provision allowing the inclusion of income tax in their expenses thereby bloating capital cost that would in turn be used to determine rates that would be charged to consumers.


HB 5828 thus in effect legitimizes and institutionalizes the passing on the cost to consumers of public service/utility operators of their corporate income tax. This would make household expenses on monthly water and power bills among other basic public services even more onerous than they already are. The Supreme Court (SC) in a 2002 decision on the case of the power distribution giant Manila Electric Co. (Meralco) has barred all public utilities from including income tax in their computation of operating expenses (opex). Including the income tax in their opex artificially bloats Meralco’s expenses that could be deducted from their gross revenues (net income) where their allowed rate of return is based as a regulated public utility. HB 5828 seeks to overturn this landmark ruling with the above-mentioned stipulation.


In arguing against the inclusion of income tax as operating expense for rate-determination purposes, the High Court argued that: “Income tax paid by a public utility is inconsistent with the nature of operating expenses. In general, operating expenses are those which are reasonably incurred in connection with business operations to yield revenue or income. They are items of expenses which contribute or are attributable to the production of income or revenue.” Income tax, on the other hand, is imposed on an individual or entity as a form of excise tax or a tax on the privilege of earning income, said the court.

The SC decision has forced Meralco to refund consumers for overcharging. The same SC ruling has also been used as basis in the rejection of huge water rate hikes sought by Manila Water Co. and Maynilad Water Services Inc. in 2013. Regulators even actually ordered the water concessionaires to bring down their rates but which the latter challenged through international arbitration and the local courts. The public faces an enormous Php82 billion in additional burden, mostly representing the cost of the private water concessionaires’ corporate income tax whose inclusion in rate-setting the regulators have prohibited. Corporate income tax represents a huge portion of the amounts that water firms want to fully recover from end-users through rate hikes and their monthly bills. Maynilad, for instance, has publicly admitted that 65% of its tariff hike would be for the recovery of its income tax.

Worse, HB 5828 mandates that deregulation – e.g., rate adjustments are automatic and no longer regulated – should be an option for any public service sector if the Philippine Competition Commission (PCC) deems that it is warranted and approved by Congress.

Public services or utilities are natural monopolies that meet certain basic needs of a society and demand for them is inelastic. By allowing their private operators to set rates based on the maximum profits they could rake in as dictated by the market, HB 5828 sets up hapless consumers who do not have a choice but to use the services that a public utility provides to grave abuses.###




From Positively Filipino

By Glenis Balangue

The Duterte administration has suspended classes on October 16-17, anticipating that the transport strike of jeepney drivers and operators to protest the phaseout of jeepneys may paralyze transportation nationwide. Yet, the government has been sweeping under the rug concerns not only of small drivers and operators but also of the riding public: displacement, lost livelihoods and impending fare increase. The replacement of jeepneys is referred to as transport modernization and those against it as anti-modernization. But behind the seeming noble objectives are big business interests that the government refuses to compromise.

Half-step forward

The government has laid down the groundwork for the eradication of existing jeepneys by 2020 through a series of issuances. The Department of Transportation (DOTr) issued the Omnibus Guidelines on the Planning and Identification of Public Road Transportation Services and Franchise Issuances or Department Order 2017-011 (Omnibus Franchising Guidelines) on June 19, 2017. This order concretizes the planned phaseout of public utility vehicles (PUVs) that are considered not roadworthy. It also lays down new franchising rules that only allow corporations or cooperatives with a fleet of 15 vehicles and up to apply for new routes. It restricts jeepneys and other small-capacity vehicles on major roads.

Local government units (LGUs) have to come up with local transport plans, which will detail the route network, modes, and required number of PUVs for each mode to deliver services. This will be the Land Transportation Franchising and Regulatory Board (LTFRB)’s basis for establishing the PUV route in the locality, the mode of transport and the number of franchises that will be issued. A new route rationalization plan that aims to limit the routes that small-capacity PUVs like jeepneys ply will also be based on the Omnibus Franchising Guidelines.

Aiming to have less emissions and more efficient mass transport is laudable. The transport sector accounts for 70-80% of air pollution in Metro Manila. But the government is doing this without regard to hundreds of thousands of drivers and small operators who will be displaced for as long as it is able to usher in a new arena for big business. Ironically, the government is once again making the poor pay for the cost of government neglect of mass transport.

Two steps backward

The government targets to replace some 250,000 jeepneys nationwide. The jeepney phaseout will impact drivers and small operators and the riding public in three major ways: 1) unaffordability of allowed substitutes despite the loan offered by the government; 2) corporate capture; and, 3) higher fares.

The Omnibus Franchising Guidelines requires a certain make of PUVs in order to qualify for a franchise. Pending unit specifications to be issued by the LTFRB, public utility jeepneys (PUJ) should be “below seven meters in length with door locations that allow boarding and alighting only from curbside, not from the rear”. Other features include a Global Navigation Satellite System (GNSS) receiver, free Wi-Fi, closed circuit television (CCTV) with continuous recording of past 72 hours of operation, automatic fare collection system for units within highly urbanized independent cities, a speed limiter, and dashboard camera. The LTFRB has yet to provide for the age limit of PUVs based on the year of the oldest major component such as chassis and engine/motor of the vehicle.

The Omnibus Franchising Guidelines also mandates the LTFRB to give priority to brand new and “environmentally-friendly” units in the allocation of certificates of public convenience (CPCs), the franchise needed to be qualified as a public utility vehicle, and deployment, based on route categories. The requirements are: a) units with electric drive and/or combustion engine that complies with Euro IV or better emission standards, b) units that comply with LTFRB-set age limit of oldest vehicle part, and c) refurbished/rebuilt vehicles that pass the type approval system test and issued a Certificate of Compliance with Emission Standards (initial registration) and roadworthiness test (renewal) of the Land Transportation Office (LTO).

There is a glaring lack of high capacity transport modes at present. Yet, the Omnibus Franchising Guidelines also restricts jeepneys on major roads, only allowing them as feeder services, operating in arterial and local roads to link neighborhoods and communities to other higher capacity modes such as rail and bus. PUJs are designated to serve routes with passenger demands of 1,000 passengers per hour per direction (pphpd). In cities, they will operate on a maximum length of 15 kilometers while in others, 35 kilometers.

Expensive units, insufficient financing scheme

Drivers and small operators have repeatedly decried the phaseout because they cannot afford electric or e-jeepneys (airconditioned: Php1.4 to Php1.6 million; non-airconditioned: Php1.1. to Php1.4 million), jeepneys with Euro IV engines (Php1 – 1.5 million), solar-powered vehicles (up to Php1.6 million). According to transport group Piston (Pinagkaisang Samahan ng Tsuper at Opereytor Nationwide), most of the jeepney operators only have Php200,000-400,000 as capital per jeepney and most are single operator (operator is also the driver or driver is a family member) units.

The government approved a jeepney loan program through the Land Bank of the Philippines (LBP) worth Php1 billion. Borrowers can avail of a loan package of Php1.2 million to Php1.6 million to buy either an air-conditioned electric, hybrid or Euro-IV jeepney. The LBP estimated that it could finance 650 to 700 units of e-jeepneys. Those who will avail of the loan would pay a downpayment and pay the rest using a “boundary” (the amount a jeepney driver needs to turn over to the operator per day, net of fuel expenses) payment scheme of Php800 a day for seven years at 6% interest. After seven years, the borrower will own the jeepney. The LBP will finance up to 95% of the acquisition cost of the jeepney, while the borrower will pay the remaining amount as equity. The Development Bank of the Philippines (DBP) has also set up a loan portfolio of Php1.5 billion to fund the acquisition of some 700 to 900 PUV units.

The government meanwhile approved a subsidy of Php2.2 billion to subsidize the equity of the jeepney loan of around 28,000 drivers/operators in the next three years starting with 250 borrowers in 2018. This is equivalent to a subsidy of Php80,000 per borrower, which will be coursed through the LBP.

Even then, drivers and small operators will find it hard to pay for the Php800 loan amortization daily for seven years as they already have difficulties paying the current Php450 boundary. Even the prospect of owning the jeepney after seven years is not enough for them to accept a scheme that will compel them to cough up such high payment conditions.

Impending fare hikes

Fare hikes are inevitable. One of the reasons why PUJ fares remain affordable is the relatively low capitalization, operation and maintenance expenses. Global Electric Transportation Ltd. (GET), the operator of COMET (Community Optimized Managed Electric Transport – a fleet of around 30 lithium battery-powered vehicles), admitted that because they are competing for the market of PUJs, they have to base their fare rates on that of PUJs.

Filipino commuters have been burdened by fare hikes with the government’s policy of putting mass transport in the hands of private corporations. The government’s turnover of the LRT 1 operations and maintenance to a private corporation resulted in the assurance of fare hikes for the private operator. The government also increased rail fares by as much as 87% in 2015 in order to make mass transport projects attractive to private investors.

Corporate capture

The Omnibus Franchising Guidelines basically mandates the LTFRB to consolidate operators and favor the establishment of “bigger coordinated” fleets of PUVs, including giving incentives and higher priority to operators with larger fleet sizes. The LTFRB will determine and implement the rule of “least possible number of operators” in a given route.

As part of the route rationalization policy, the government will require a minimum of 15 units per PUV fleet to be granted a franchise on new and development routes. Effectively, with the implementation of the Omnibus Franchising Guidelines, the government will close or shorten traditional PUV routes to reserve these for high capacity transport such as light rail transit and rapid bus transit, therefore displacing PUVs on these routes altogether.

These provisions will assure that current jeepneys will be replaced and new types of PUVs will be introduced. Hence, the scale of operation will also shift from single-operator or small fleet operator to corporations that have the capitalization to provide and maintain a big fleet of PUVs.

The government argues that drivers, instead of being subjected to the “boundary” system, can be salaried workers of these corporate fleet managers, with benefits as workers. However, transport group Piston claims that, in their experience fleet management still practices a quota system, which, like the boundary system, subjects drivers to high quotas, and therefore longer work hours, before they can receive their wages. Piston also decries that older drivers may have lesser chances of meeting education and age requirement of fleet managers, hence losing their source of livelihood completely.

Facilitating foreign interests

Finally, while drivers and small operators find e-jeepneys or jeepneys with Euro IV engines to be unaffordable, replacing some 250,000 jeepneys in the country would mean big business not only for foreign manufacturers of parts and assemblers of vehicles. Based on the minimum cost of Php1.2 million per unit, the replacement of 250,000 jeepneys is a market of Php300 billion.

The government is planning to use public money to subsidize foreign car manufacturers to facilitate their entry to this big, new market of PUV assembly. Under the Comprehensive Automotive Resurgence Strategy (CARS) Program, the government will fund assemblers of so-called eco-friendly PUVs. The CARS program has a Php27-billion subsidy for six years for assemblers to be given fixed investment support (FIS) and/or Production Volume Incentive to revive the car assembly industry in the Philippines beginning 2016. The Board of Investments has closed the third slot of CARS (the two being Mitsubishi and Toyota) in order to focus on PUV assemblers. For 2018, the Department of Trade and Industry (DTI) is asking Php1.64 billion to fund the incentive promised to carmakers.

This faulty version of jeepney modernization underscores the fundamental weaknesses of our economy. The government’s replacement for jeepneys will again be largely assembled from imported components by local assemblers or imported already built. Even PUVs assembled in the Philippines under the CARS program will still be primarily imported as the main platform and rolling chassis will still be built abroad by foreign companies such as Hino, Isuzu, Fuso and Foton while Euro IV engines will be sourced from India, China and Japan.  Even the COMET was designed and manufactured by US company, Pangea Motors, LLC. Likewise, one of the largest makers of the e-jeepney at present is a Taiwanese company and member of the Electric Vehicle Association of the Philippines (EVAP), Teco Electric and Machinery Co. Ltd. It has exported e-jeepneys from its factories in Taiwan to fleet managers in Metro Manila such as the Ejeepney Transport Corp. plying the business district of Makati.

 Why not palit jeepney and driver-managed cooperatives?

If indeed the government wants to usher in clean transportation, it should ensure that the burden is not on the shoulders of drivers and operators who only try to eke out a living. Instead of prioritizing subsidies for foreign car manufacturers, the government can use the CARS fund to initially subsidize jeepney drivers/operators so as not to displace them by the mere cost of new units. It is a noteworthy investment for the government to do so, given that the proliferation of this mode of transport has been a result of the chronic lack of livelihood opportunities and neglect of mass transportation in the first place.

The palit jeepney program can be complemented by an assured regular maintenance program at no or minimal cost to the operator/driver. This should address the added burden of having to be subjected to expensive maintenance for a technology that is still concentrated on a few big businesses.

This palit jeepney program, which can occur in phases, can be done through a program for government procurement of jeepneys based on a scaled-down price through volume. It can be complemented by a program of technology transfer to ensure that a genuine domestic PUV manufacturing sector, not only of body parts but primarily of the main components, is being developed.

The government should also maintain the option of single operators/drivers for franchising. At the minimum, it can restrict corporate fleet managers in cities to only one route. It can also limit franchises to genuine cooperatives or associations composed of small operators/drivers that are already operating. The government should set a fare-setting policy that is not market-based but founded on the principle that public transportation is a service that has to be reliable, safe and affordable for commuters. This rests on the recognition that public transport is a public utility and should not be left to the profit-seeking interest of the market.



​By Water for the People Network- The 20th anniversary of the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) in August was considered a milestone by privatization proponents. The MWSS has often been used to showcase the supposed benefits of turning over water supply services to private corporations. But the start of government-declared Consumer Welfare Month is an opportune time to note that two decades of MWSS privatization has harmed the interests of the consumers and the general public. While ensuring huge profits for Manila Water Co. Inc. and Maynilad Water Services Inc., it has violated the people’s right to water, the various ways by which are listed below:

  1. MWSS privatization has resulted in soaring water rates as private concessionaires rake in massive corporate profits

Between August 1997 and August 2017, the basic tariff of Manila Water has soared by 969 percent. The basic tariff of Maynilad, meanwhile, has ballooned by 596 percent. The all-in tariff, which counts the basic tariff plus add-on charges, for Manila Water has increased by 762% during the same period. For Maynilad, it has jumped by 548 percent.

This translated to enormous profits with a combined accumulated income of Php94.5 billion from 2000 to 2015. Such soaring rates and massive profits for Manila Water and Maynilad were made possible by the concession agreements (CA) they signed with MWSS. Tariffs reflected the impact of inflation, adjustments in the foreign exchange rate, and the concessionaires’ petitioned basic charge which would allow them to supposedly implement their business plan and achieve a guaranteed rate of return in the succeeding five years.

Privatization guaranteed the profits of Manila Water and Maynilad not only by allowing them to pass on all the risks of running a business to the consumers. Privatization also legitimized the collection from the consumers of onerous and questionable charges by MWSS concessionaires.

During the last rebasing in 2013, it was exposed that Manila Water and Maynilad had been including questionable items in their application for new rates. As in previous rebasing exercises (2002 and 2007), they passed on to clueless customers the costs of their corporate income tax (CIT), unimplemented projects, advertising, donations, and recreation.

  1. MWSS privatization has seriously undermined the power and mandate of government to regulate the private concessionaires to protect public interests and welfare

The last rebasing also exposed a key feature of MWSS privatization which is how the power of the state to regulate businesses to protect public interest is greatly undermined. When the Regulatory Office (RO) prohibited the concessionaires from passing on their CIT and other questionable charges to the consumers, Manila Water and Maynilad promptly challenged the decision through international arbitration. This is a mechanism provided by the CA to settle disputes between the concessionaires and MWSS on the interpretation and implementation of the contracts’ provisions, including on the setting of rates. It is a secretive and undemocratic process that includes only representatives of MWSS and the concessionaires and without any public participation. It is being chaired by an unaccountable foreign third party that also represents big business interests.

Filipino taxpayers now face the possibility of shouldering as much as Php82 billion in additional burden if the concessionaires are able to secure favorable decisions from international arbitration. Already, the arbitration panel that heard Maynilad’s case ordered government to pay Php3.4 billion. These amounts represent the supposed losses of the concessionaires when the RO disallowed the continued collection of the CIT and other questionable charges. As stipulated in the CA, government has committed to pay for these supposed losses through what is called sovereign guarantee.

As early as 1998 or a year into privatization, Manila Water had already sought international arbitration to compel the RO to increase the firm’s rate of return contained in its original bid. Aside from the arbitration mechanism, concessionaires also resort to blatant arm-twisting to force favorable decisions from government. In 2001, the original investors of Maynilad blackmailed government to amend the CA to allow it to increase rates or else it would terminate the contract.

  1. MWSS privatization has further weakened the people’s right to water amid questionable claims by the concessionaires of improved water services

The soaring water rates and onerous charges being imposed by Manila Water and Maynilad have effectively marginalized poor households from enjoying the right to access water for domestic use. Amid depressed wages and chronic unemployment, water services along with other basic daily necessities, have put increasing pressure on ordinary families’ budgets.

While both concessionaires claim almost universal water supply coverage, poor communities in their service areas do not enjoy the same quality of service that well-off customers like richer households and commercial areas have. Instead of individual connections, poor communities have to make do with bulk meter connections. Aside from compromising the safety and quality of water, it is also not unusual that the water supply in these poor communities is not available 24/7.

Based on the latest available data, the number of persons per connection for Manila Water is seven, and nine for Maynilad, indicating the prevalence of bulk connections – mainly among urban poor communities – in the MWSS concession areas. Thus, while the concessionaires claim outstanding performance (which the RO apparently could not even independently verify), the truth is that many households, in particular the poor, are not individually connected to the water supply system, which is supposed to be the standard. The poor also end up paying more as block tariff rates apply on these bulk connections.

Aside from universal and 24/7 supply coverage, the concessionaires also promised to provide improved sewerage coverage, which they substantially failed to do amid limited investments despite skyrocketing water rates. In their original service targets, Maynilad committed to achieve 31% sewerage coverage by 2016 and 52% for Manila Water. As of December 2013 – the latest available data – Manila Water has only achieved 12% and Maynilad, 11 percent.

  1. MWSS privatization has deepened corporate and foreign control over vital infrastructure and key services in the country

From the onset, MWSS privatization has been an agenda of big corporate and foreign interests.  Foreign creditors World Bank, Asian Development Bank (ADB), and Japan Bank for International Cooperation (JBIC) pushed for the privatization of MWSS, which then owed them some US$800 million in debt. The World Bank’s International Finance Corp. (IFC) served as government consultant in MWSS privatization and designed the concession agreement.

The IFC is now an investor in Manila Water, raking billions of profits from a contract it designed itself. Manila Water is led by Ayala Corporation and United Kingdom (UK)-based United Utilities. Aside from the IFC, other foreign investors include Japanese giant, Mitsubishi Corp. as well as First State Investments of the UK, Singapore-based global fund manager Aberdeen Asset Management plc, and US-based equity mutual fund Smallcap World Fund Inc.

Meanwhile, Maynilad is currently controlled by Manny V. Pangilinan through the Metro Pacific Investments Corp. (MPIC) and DMCI Holdings of the Consunji family. MPIC , of course, is backed by  Indonesia’s Salim group. Other foreign interests in Maynilad are MCNK JV Corp., a unit of Japanese giant Marubeni Corp., and Lyonnaise Asia Water Limited, a unit of French firm Suez, one of the world’s largest water companies.

Water privatization is being challenged worldwide – from France where some of the first water privatization took place and where the world’s largest water firms are based – to Jakarta, Indonesia which privatized its water system the same year as Metro Manila and used the same model.

Water privatization must be reversed. There is no way out of the trap of exorbitant water rates and unreliable service for the poor unless the concession agreements with Manila Water and Maynilad are junked and the operation of the water supply system is taken over by a reformed public sector. ###

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