Duterte threatens Ayalas, Pangilinan after Manila Water arbitration win

MANILA, Philippines – Outraged that the government is being made to pay billions of pesos to water concessionaire Manila Water, President Rodrigo Duterte threatened the Ayala family and businessman Manny Pangilinan.

Manila Water is a subsidiary of Ayala Corporation. Pangilinan's Metro Pacific Investments Corporation owns a controlling stake in the other water concessionaire, Maynilad Water Services.

"If Ayala and Pangilinan are your friends, kindly tell them, hindi naman ako lumabas, kung may magyaya sa akin...'pag mag-abutan tayo maski ilang bodyguard, 'yung mukha mo, putang ina, kaya ko gawin 'yan," said Duterte on Tuesday, December 3, in Malacañang.

(I don't go out but if someone invites me out...if we see each other, no matter how many bodyguards you have, I can ruin your face, son of a bitch.)

"Hanapin mo nga si Ayala, puntahan ko (Look for Ayala, I'll go to him). They do not pay corporate income tax," said Duterte.

He claimed that Manila Water passes on the burden of paying corporate income tax to water consumers, by imposing a fee for water treatment.

In his newly sparked anger, Duterte revived his threat to scrap the concession agreements entered into by Manila Water and Maynilad with the Metropolitan Waterworks and Sewerage System, a government corporation.

He wants a new agreement crafted.

"I told [Finance Secretary Carlos Dominguez III] and [Solicitor General Jose Calida], craft a new contract that is really favorable to public, to government. Give it to them. 'This is the amended contract, accept it or nothing doing,'" said Duterte.

Why is Duterte angry? The President is seething over the recent victory of Manila Water in its case against the government for preventing it from raising water rates in violation of the concession agreement.

The Permanent Court of Arbitration (PCA) in Singapore ruled that the government has to pay Manila Water P7.39 billion for the company's losses from June 1, 2015 to November 22, 2019, and the amounts paid to the PCA and 85% of other claimed costs.

Manila Water sought arbitration in 2015 after the government failed to honor its claim amounting to P79 billion from 2015 to 2017, as the latter did not allow the company to raise tariffs.

Duterte had ranted about the decision during the Cabinet meeting on Monday night, December 2, then spoke publicly about it for the first time during his Tuesday speech.

Duterte's beef against concession agreement. Duterte called the concession agreement unfair to the people. Through these deals, "oligarchs" like the Ayalas and Pangilinan are using natural resources to "screw over" Filipinos, said the President.

"Let us stop this fucking business of milking people," he said.

In Duterte's understanding of the deal, the public would have to pay even when water services are interrupted by natural calamities. He also bristled at how the water concessionaires are able to run to arbitration courts every time the government intervenes for the best interests of the people. 

"We cannot raise or lower the price of water in this country. If we do that, they will sue us and for interference they go to file the arbitration, talo talaga tayo (We are bound to lose). Eh puro sila 'yun eh (It's just them there)," said Duterte, saying the court is influenced by a "brotherhood of corporations" who have each other's back.

DOJ review. The Manila Water win was discussed during the Cabinet meeting because the Department of Justice (DOJ) presented its review of the 1997 water concession agreements, which Duterte had asked it to undertake at the height of the water shortage in March.

The DOJ found a "dozen provisions" that were deemed "onerous or disadvantageous" to the government and consumers, Justice Secretary Menardo Guevarra explained to reporters.

Among these provisions was the prohibition against government interference in setting rates and the provision for indemnity for possible losses in the event of government interference.

The DOJ also found the extension of the concession agreements to 2037 as "irregular." The 25-year validity of the deals, granted in 1997, was supposed to end in 2022. In 2009, 13 years before the deals were to expire, they were extended another 15 years or until 2037.

Threat vs lawmakers. Duterte also vowed to go after lawmakers who helped in crafting the concession agreements, even if he did not explain how lawmakers could be involved in the deals.

He only floated one name: opposition senator Franklin Drilon, who has spoken critically about several Duterte administration policies.

"Senator Drilon, are you one of those who crafted the contract? I'm asking you.... Hindi kita tinatakot pero 'pag bumagsak ako, dadalhin talaga kita (I'm not threatening you but if I go down because of this, I'll bring you with me)," said Duterte.

He promised to file charges for "economic sabotage" against such lawmakers.

"We will expose them and I will insist that they will be tried for economic sabotage," said Duterte.

In other portions of his speech, however, the President sounded like he would file such charges against the concessionaires themselves or firms behind them.

The Manila Water concession agreement was signed in 1997, during the Fidel Ramos administration. It was supposed to expire in 2022, but in 2009, it was extended for another 15 years and will expire in 2037 yet. – Rappler.com

Pia Ranada

Pia Ranada covers the Office of the President and Bangsamoro regional issues for Rappler. While helping out with desk duties, she also watches the environment sector and the local government of Quezon City. For tips or story suggestions, you can reach her at pia.ranada@rappler.com.

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