Duterte orders crafting of new water concession agreements

MANILA, Philippines – President Rodrigo Duterte ordered the justice department and Office of the Solicitor General to craft new water concession agreements more "favorable" to the public compared to the current deals with Manila Water and Maynilad Water Services.

"The Chief Executive has directed the Department of Justice, together with the Office of the Solicitor General, to draft and prepare new covenants that are favorable to the State and the Filipino people," Presidential Spokesman Salvador Panelo said in a statement on Wednesday, December 4.

Duterte also ordered the filing of criminal, civil, and administrative charges against "all those involved" in the concession agreements of Manila Water and Maynilad with the Metropolitan Waterworks and Sewerage System (MWSS), a government corporation.

The charges would cover the owners of the water concessionaires, their "agents," and even government lawyers who helped craft the deals.

"It is apparent that some members of the government have not only looked the other way, but have in fact purposely guided the hands of those who have raped our economy for their own personal aggrandisement," said Panelo.

Can Duterte just cancel existing agreements? The Manila Water and Maynilad concession agreements are valid until 2037. They were originally 25-year agreements signed in 1997, during the Fidel Ramos administration.

But in 2009, 13 years before they were set to expire in 2022, the deals were extended for another 15 years.

The government had entered into these deals because it lacked the resources and funds for water treatment and distribution, something the private sector could provide. Manila Water and Maynilad were set up for this purpose. With the private firms' help, MWSS was able to improve its water services throughout Metro Manila. 

In exchange, the government agreed to terms allowing the firms to recover their investment.

But for Duterte, the concession agreements unduly favor the concessionaires at the expense of the public. Upon a review ordered by Duterte back in March when Metro Manila and nearby provinces suffered a water crisis, the DOJ found a dozen "onerous" provisions.

According to Malacañang, Duterte is empowered to cancel these deals because Manila Water and Maynilad have "abused" their arrangement with government and are treating it as a "money-making venture."

But government's respect for the validity of contracts it enters into with the private sector is an important factor in building investor-confidence.

Duterte's latest move will likely again spook business groups and firms looking to enter into government deals or invest in the country.

The President, known for his unpredictability, had just lashed out  against two of the biggest names in Philippine business – the Ayalas and tycoon Manny V. Pangilinan.

The Ayala Corporation counts Manila Water as its subsidiary while Pangilinan's Metro Pacific Investments Corporation owns a controlling stake in Maynilad Water Services.

Duterte's outburst had been prompted by Manila Water's victory against the government at the Permanent Court of Arbitration in Singapore.

The court ruled that the government must pay Manila Water P7.39 billion for losses it incurred when the government stopped the concessionaire from raising water rates starting in 2015, during the administration of Benigno Aquino III.

In 2017, the Duterte government had also been ordered to pay  Maynilad P3 billion, also for the delayed implementation of rate hikes. – Rappler.com

Pia Ranada

Pia Ranada is a senior reporter for Rappler covering Philippine politics and environmental issues. For tips and story suggestions, email her at pia.ranada@rappler.com.

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