Water and sanitation privatization in metropolitan Manila, Philippines

Success by profitability and privatization of profits, the recipe of the World Bank in one of the biggest metropolitan areas of the world to ensure its vision on the "right to water"


Description
Until 1997, water services in metropolitan Manila were ran by the public company Metropolitan Waterworks and Sewerage System (MWSS). The company faced several problems: it had a US$880 million debt, non-revenue water was around 60%, infrastructure was old, it was unable to provide water to one third of the households and those connected to the service had an intermittent supply of 17 hours a day on average. These problems justified the decision of president Ramos to privatize the water service in 1997 with the support of the World Bank. Following the advice of the International Finance Corporation (IFC), the WB’s private sector arm, Metropolitan Manila was divided into two areas: the east zone, ran by Manila Water Company Inc. - a joint venture between Ayala (Philippines), United Utilities (UK), International Water Limited (USA) and Mitsubishi (Japan) – and the west zone, ran by Mayniland Water Services Inc. – formed intially by Benpress (Philippines) and Ondeo Water, a Suez subsidiary (France), and nowadays also by the Philippine Government -.  Perhaps the most worrisome feature of the privatization design was that it defined the water corporations as “contractors,” not public utilities in their own right. This means that the only obligations that can be enforced are contractual, and those only by the so-called “parties” to the contract. It also exempts Manila Water and Maynilad from being regulated as public utilities - for instance, exempting them from the legal maximum of 12% return on assets allowable for public utilities, as contrasted with Manila Water’s 1999 return, which exceeded 40%.12 They have also succeeded in passing their corporate income taxes on to consumers, which are prohibited for public utilities 90% of the existing debt was allocated in Mayniland and the reaming 10% in Manila Water. Consequently the performance of each concessionary has been disparate over the years. While the WB has presented Manila Water as a successful case of privatization, in 2006 Mayniland sold 84% of the company to the government shifting its debt into the public authority in an almost complete re-nationalization. Due in part to the devaluation of the Peso that doubled the value of the debt within a couple of months after privatization, concessionaires demanded an extraordinary price adjustment within two years, changing the agreements in the initial contact, which allowed them to shift losses directly to consumers. Since then, water prices have soared, with increases between 450% - 850% for residents of each zone (Many different calculations have been used to quantify the tariff increases, although all agree the raise has been over 300%. The 450% - 850% statistic is sourced from the official Resolution taken by the Philippine legislature in July, 2010). Hundreds of communities remain waterless with the high price of water pipe connections beyond reach for many. Quality has also suffered with severe health consequences; in one October 2003 case, 600 residents were sickened, and eight died when Maynilad’s E. Coli level exceeded seven times the national limit [3]. The much-needed infrastructure investment which was used to justify the privatization has failed to materialize [2].  As a result, water users began to protest against water privatization through different local organizations as Water for the People Network, Freedom from Debt Coalition, Bantay-Tubig (Water Watch), community People’s Organization (POs) or the fisherfolk alliance Pamalakaya. The principal claims stress out that poor citizens, specially informal settlers that have to rely on more expensive water vendors , have no access to connections, with 55% of the households lacking service in 2010. They pointed out as well that wealthier consumers, tourists and commercial establishments have a preferential access to water. Concessionaires have connected poor communities under special and well-publicized campaigns: however, these are being successful through the implication of local POs or cooperatives, that have been acting as sub-contractors at community level with no governmental control. Finally, according to Corporate Accountability International, "The Manila story is important for two key reasons: (1) It demonstrates how the World Bank’s definition of a successful water project has been defined more by profitability than by actual access to water - and challenges their use of this case as a supporting example for promoting further water privatization, and (2) It is archetypical, illustrating most of the key problems with water privatization: while the water system legitimately needed infrastructure investment, this was an inappropriate justification for the privatization, as the structure of the deal ensured that the private companies didn’t need to actually risk any of their own capital, instead incurring further debts for taxpayers and water users, making a bad situation worse."
Basic Data
NameWater and sanitation privatization in metropolitan Manila, Philippines
CountryPhilippines
ProvinceNational Capital Region
SiteMetropolitan Manila
Accuracy of LocationMEDIUM regional level
Source of Conflict
Type of Conflict (1st level)Water Management
Type of Conflict (2nd level)Water access rights and entitlements
Dams and water distribution conflicts
Water treatment and access to sanitation (access to sewage)
Specific CommoditiesWater
Project Details and Actors
Project Details
Metropolitan Manila has been divided in two separated managerial areas: the east zone covers 8 cities, parts of 2 cities and 12 municipalities, while west zone covers 8 cities, parts of 2 cities and 7 municipalities.
See more...
Type of PopulationUrban
Potential Affected Population6.2 million for Manila Water / 8 million for Maynilad
Start Date1997
Company Names or State EnterprisesManila Water Company (MWCI)
Maynilad Water Servicies Inc (MWSI)
Suez Environnement from France
Relevant government actorsMetropolitan Waterworks and Sewerage Systems (public entity).

Philippine government

National Water Resources Board (NWRB)
International and Financial InstitutionsInternational Finance Corporation (IFC)
The World Bank from United States of America
Asian Development Bank (ADB)
Environmental justice organisations and other supporters- Bantay-Tubig (Citizens’ Network for Adequate, Potable and Affordable Water)

- Water for the People Network (https://waterforthepeople.wordpress.com)

- Freedom from Debt Coalition (http://www.fdc.ph)

- Institute for Popular Democracy (http://www.ipd.org.ph)

- IBON Foundation (http://www.ibon.org)

- Progresibong Alyansa ng mga Tagatangkilik ng Tubig sa Kamaynilaan (PATTAK) (Progressive Alliance of Metro Manila Water Consumers)

- Fisherfolk alliance Pamalakaya (https://pamalakayaweb.wordpress.com)
The Conflict and the Mobilization
Intensity of Conflict (at highest level)MEDIUM (street protests, visible mobilization)
When did the mobilization beginPREVENTIVE resistance (precautionary phase)
Groups MobilizingFishermen
International ejos
Local ejos
Local government/political parties
Neighbours/citizens/communities
Social movements
Trade unions
Ethnically/racially discriminated groups
Forms of MobilizationCreation of alternative reports/knowledge
Development of a network/collective action
Development of alternative proposals
Involvement of national and international NGOs
Lawsuits, court cases, judicial activism
Public campaigns
Impacts
Environmental ImpactsVisible: Surface water pollution / Decreasing water (physico-chemical, biological) quality, Groundwater pollution or depletion
Health ImpactsVisible: Deaths, Malnutrition, Infectious diseases
Socio-economic ImpactsVisible: Lack of work security, labour absenteeism, firings, unemployment, Violations of human rights, Increase in Corruption/Co-optation of different actors
Outcome
Project StatusIn operation
Pathways for conflict outcome / responseInstitutional changes
Court decision (undecided)
Strengthening of participation
Technical solutions to improve resource supply/quality/distribution
Public information campaigns on pricing and regulatory issues
Protests against regulatory failings and discretionary behaviour of the two concessionaires
Congressional inquiries on various aspects of water privatization
Pursuing legal action
Documenting cases of community resistance
Community-based water governance alternatives, as informal networks of water distribution
Development of AlternativesRemunicipalization of water and sanitation service
Do you consider this as a success?No
Why? Explain briefly.Privatization of water and sanitation services have worsened the living condition of inhabitants of Manila.
Sources and Materials
Legislations

Republic Act No.6957(1990) as amended by Republic Act No.7718 (1994): Build-Operate-Transfer (BOT) Law
[click to view]

National Water Crisis Act of 1995 (Republic Act No.. 8041)
[click to view]

Executive Order 311, s. 1996: MWSS Privatization Framework
[click to view]

References

Esguerra, J. "The Corporate Muddle of Manila's Water Concessions. New Rules, New Roles: Does PSP Benefit the Poor?" WaterAid and Tearfund (2003)
[click to view]

Nai Rui Chng. "Even Flow: Water Privatization and the Mobilization of Power in the Philippines". PhD thesis, London School of Economics and Political Science (2013)
[click to view]

Links

[2] Corporate Accountability International - Case Study: The Human Toll of Water Privatization in Manila
[click to view]

[3] Freedom from Debt Coalition report: Recalibrating the Meter: A ten-year overview of the MWSS
Privatization Deal. 2008. 31.

Other Documents

Freedom from Debt Coalition group The Freedom from Debt Coalition group dramatizes their protest on Wednesday against the Asian Development Bank 45th Annual Meeting in Manila. The group says privatization of the energy and water sectors, which the ADB has been promoting, is not helping the poor. (http://news.abs-cbn.com/image/images/05/02/12/group-protests-adb-annual-meeting)
[click to view]

Meta Information
ContributorAndreia Francés Silva, Máster en Gestión Fluvial Sostenible y Gestión Integrada de Aguas, Asignatura ‘Ecología política y gestión de Aguas’
Last update16/09/2016
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