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OK new deals or face raps, Duterte tells water firms

/ 04:58 AM January 08, 2020

MANILA, Philippines — It’s an offer that two water concessionaires may not be able to refuse.

President Rodrigo Duterte has offered Maynilad Water Services Inc. and Manila Water Co. Inc. new contracts to distribute water in Metro Manila and nearby areas without what he called “onerous” provisions.

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Should the companies reject the new deal, the President said on Tuesday he would order the nationalization of the water distribution system and push through with his plan to prosecute officials of the two firms for economic plunder or large-scale estafa, a nonbailable offense.

‘Null and void’

Duterte reiterated that the 1997 agreements that allowed Maynilad and Manila Water to distribute water were “null and void from the beginning” because these violated Philippine penal laws, such as the Anti-Graft and Corrupt Practices Act.

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Consumers could also file their own cases against the water companies, he said.

“I cannot stop anyone, especially a Filipino and a consumer of water to file any case they want, damages, anything. That’s the worry of the concessionaires. That is not my worry actually. I don’t care about that,” the President said.

His spokesperson, Salvador Panelo, said all those involved, directly or indirectly, in the arrangement that led to the present suffering of the Filipino people would be prosecuted.

‘Putting a gun to their head’

Manila Water and Maynilad did not immediately respond to requests for comment.

The companies took over water distribution from the government in 1997 after a water crisis in Metro Manila, caused in part by the system’s heavy debt and a notoriously inefficient pipe network.

Solicitor General Jose Calida presented to the Cabinet the new water contracts “to supplant the constitutionally flawed water concessionaires agreements that violated every prohibited act in the antigraft law.”

Analyst Calixto Chikiamco said the offer was “like putting a gun to their (concessionaires’) head” and risked leaving investors wondering if agreements could be unilaterally changed.

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“If the outcome is cancellation and nationalization, that will have a negative impact across the board for foreign investments,” Chikiamko told a local TV program.Shares up

The market cheered the news that the two companies, which serve some 16 million customers, would be allowed to continue to operate if they agreed to the government’s conditions.

Manila Water, whose share price fell as much as 73 percent and lost as much as P27.8 billion in market value last month, rallied nearly 15 percent on Tuesday after the announcement, while its parent company, Ayala Corp., which shed up to P43.75 billion in market capitalization, gained 1.5 percent.

The share prices of Maynilad owners, Metro Pacific Investments Corp. and DMCI Holdings Inc., rose 3.2 percent and 3.9 percent, respectively, on Tuesday. The two companies collectively lost as much as P72 billion in market value after Mr. Duterte’s criticism.

Last month, the state water regulator, Metropolitan Waterworks and Sewerage System, canceled a 15-year extension of the companies’ contracts after pressure from Duterte. The existing concessions will expire in 2022.

Cabinet meeting, deadline

At a press briefing, Panelo said the issue was extensively discussed in a Cabinet meeting in Malacañang on Monday night, during which the President arrived at the decision.

The new water distribution contracts were prepared by the Office of the Solicitor General and the Department of Justice.

Justice Secretary Menardo Guevarra, however, said the draft documents were still being consolidated. In a text message, Guevarra said the government would integrate inputs from the Department of Finance on “the financial and economic aspects.”

In an interview with reporters in Malacañang, the President said there were no ready contracts yet to be given to Manila Water and Maynilad.

“What we are ready to give to the parties, the distributors, is a draft, which we would like to be enforced instead of the old one,” Duterte said. “I have this draft, it’s either you accept it or not. You do not accept it? Then there is no contract.”

He said he did not have a deadline for the companies to decide, but maintained that he would not pay a single cent for their compensation claims.

Duterte would allow the companies to review it and give their comments.

“As sure as the sun will rise in the east in the morning, the onerous provisions will have its sunset,” he said.

During the Cabinet meeting, the President “stressed that water is a God-given natural resource which cannot be treated as a mere commercial commodity and exploited to rake in billions of pesos in profits at the expense of the Filipino people.”

Corporate income tax

“The provisions that would surely be taken out pertain to the inclusion of certain business taxes in the determination of water rates, including corporate income tax, the prohibition against the interference of the state in rate-setting and indemnification for losses in case of government interference,” Guevarra said.

The President’s pronouncements came more than a month after he threatened to charge the Ayalas of Manila Water and Manuel Pangilinan of Maynilad with economic sabotage, plunder and syndicated estafa for the 1997 deal.

The government also questioned the extension to 2037 of the 25-year water concession agreements years before these were to expire.

Arbitration ruling

Earlier, an arbitration court in Singapore ordered the Philippine government to pay Maynilad around P3.4 billion and Manila Water P7.39 billion as compensation for forgone revenue from rate increases that were rejected by regulators.

The ruling drew Duterte’s ire. The companies have said they will forfeit any damage claims to avoid angering the President, who enjoys high public approval ratings.

In his tirade last week, Duterte called the owners of the two water firms the “biggest fish” in corruption.

From 2013 to 2018, the combined cumulative profits of the two firms stood at P82.43 billion — P36.71 billion for Manila Water and P45.72 billion for Maynilad.—With reports from Marlon Ramos and the wires

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TAGS: Manila Water, Maynilad Water, Rodrigo Duterte, water deals
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