PH government admits it’s unable to take over water operations

Lian Buan

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PH government admits it’s unable to take over water operations
In the event that Manila Water and Maynilad do not agree to the revision of contracts, Justice Secretary Menardo Guevarra says 'then we go to court'

MANILA, Philippines – The Philippine government is still unable at this point to take over water operations, Justice Secretary Menardo Guevarra said on Monday, December 9, even as the whole legal arsenal of the Duterte administration prepares for a showdown with private concessionaires.

“Unless and until the government is ready to efficiently run the distribution business, I guess for now we still have to rely on private concessionaires for the distribution of water supply,” said Guevarra.

Guevarra said lawyers from the Department of Justice (DOJ), Department of Finance (DOF), Office of the Solicitor General (OSG), and Office of the Government Corporate Counsel (OGCC) are working to revise the concession agreements with Maynilad and Manila Water, with a goal of removing almost a dozen “onerous” provisions.

If an agreement is not reached with Maynilad and Manila Water, Guevarra said the executive branch cannot unilaterally rescind the existing contracts with Maynilad and Manila Water which are valid until 2037. (READ: PUBLIC INTEREST, PRIVATE HANDS: How Manila Water, Maynilad got the deal)

“It’s only when the courts order the rescission of the water concession agreements that the government may open the field to competition, unless the government itself can take over actual operations, which is rather unlikely,” said Guevarra.

Guevarra said that if Maynilad and Manila Water do not agree to their proposed amendments, “then we go to court.”

“If the concessionaires do not accept the amendments to be proposed by the govt, the government will be compelled to take legal action,” said Guevarra.

‘Onerous’ provisions

Guevarra said the most important provision that needs to be revised is the clause that prohibits government from interfering in rate-setting. The other provisions subject to revision deal with what kind of expenses can be passed over to consumers. (READ: Gov’t not keen on ‘compromise’ with Manila Water – DOJ)

“Scattered throughout the agreement are provisions that would classify certain financial expenses that have no direct relation to actual operations (such as business taxes, penalties, etc) as expenditures which may be passed on to the consumer thru the water charges,” said Guevarra.

The issue of consumer rates is the root cause of arbitration, in which Manila Water recently won an arbitration case that now demands the government to pay them P7.39 billion in losses over non-implementation of rate hikes.

Arbitral ruling

The Duterte administration is also prepared to oppose the arbitral ruling at all costs.

“The OSG is thinking of appealing this arbitral ruling to the Singapore High Court or when this decision is enforced in Philippine courts then the Philippine government will surely oppose it on the ground that the arbitral ruling is against public policy,” said Guevarra.

Guevarra eased concerns over the effect of these conflicts on the water supply.

“We’ll have to deal with that if it comes, but I don’t think we’ll get that point when water supply in Metro Manila will be stopped simply because of this problem. This is a problem that can be solved. I don’t have any reason to believe that we should be worried about stoppage of water supply,” said Guevarra.

Enraged by the arbitral ruling, President Rodrigo Duterte ranted in a speech last week against the owners of Maynilad and Manila Water, threatening the Ayalas and tycoon 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. – With a report from Ralf Rivas/


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Lian Buan

Lian Buan is a senior investigative reporter, and minder of Rappler's justice, human rights and crime cluster.