MAP Insights
By Filemon T. Berba, Jr.
Metro Manila and adjoining provinces are facing rotating water service interruptions again despite the onset of the rainy season.
Angat Dam, from which comes all the raw water of Maynilad and Manila Water comes, is almost at “critical level” necessitating mandatory cuts in the water supply by both water distribution concessionaires.
BACKGROUND
The 1997 Privatization Act — Republic Act No. 8041, known as the “National Water Crisis Act,” was signed into law by President Fidel V. Ramos.
The Act paved the way for the transfer of water distribution from the Metropolitan Waterworks and Sewerage System (MWSS) to the private sector — the West Zone to Maynilad and the East Zone to Manila Water. The terms of the bidding provided that Maynilad would get 60% and Manila Water 40% of the water from Angat Dam.
At the time of the privatization in 1997, MWSS was losing water heavily and could not provide reliable potable water service to the residents of the metropolis. Practically all customers were without continuous daily supply and many without even a few hours of regular service. Water loss in the distribution system averaged more than 65% — through leakages and illegal connections.
The Privatization program was considered a success by analysts — based on the terms imposed by MWSS and its adviser, the International Finance Corp. (IFC).
Both Manila Water and Maynilad have actually provided much better service than MWSS, giving 24 hours of potable water to almost all the residents in their respective zones.
Manila Water was cited by the Harvard case study series and by the Asian Development Bank (ADB) for successfully providing water service as good as those in the Asia Pacific Region, sometimes even better in terms of reducing lost water in the system (non-revenue water, or NRW).
WHAT’S WRONG WITH THE CURRENT SITUATION?
The current problems were predictable from the start of the privatization program.
When top representatives of the IFC visited Manila Water in early 1997, we discussed the following with them:
1. They advised solving the wrong problem when viewed from needed long-term solution. The terms of reference for bidding required that the interested companies bid the lowest tariff rate they could offer compared with the rate of MWSS (winning bids: Manila Water at P2.32/cubic meter (cu m) for the East Zone; Maynilad at P4.17/cu m for the West Zone). Yet, the MWSS tariff rate of P8.78/cu m at that time was not what people were complaining about — rather it was the non-availability, unreliability, and quality of water service. The guidelines did not consider the need for another major dam to back up Angat Dam, the only source of water for Metro Manila and adjoining provinces.
2. The low tariff rates would be initially welcomed by the residents, but that would regularly require upward adjustments to address increased costs due to foreign exchange rates on the foreign loans passed on by MWSS to the concessionaires. Any rate increase would then be meeting with negative response and opposition by many. (For example, an increase from P2.32/cu m to P3.50/cu m at Manila Water would be viewed as an unacceptable 50% increase.)
3. The terms of the bidding should have kept the P8.78/cu m rate and required the bidder to offer the highest “concession fees.” At P8.78/cu m, the concessionaires would have very good cash flows, from which the “concession fees” could be drawn by MWSS.
4. The high concession fees would then be used by MWSS to fund the construction of the second major dam for the long-term needs of Metro Manila and the neighboring provinces.
5. The Laiban Dam construction project had already been in place earlier, and even the diversion tunnel had been started during the previous Administration. Somehow that project was stopped.
PREDICTABLE RECURRING SHORTAGES
Unless another dam like Angat is built and put into operation soon, the current problem of shortages will continue.
Any solution by both Manila Water and Maynilad will only be temporary, short term, and provide small supplemental supply.
Both water concessionaries will always bear the brunt of criticism and even threats from the government to cancel their contracts. The real culprits are the government planning and regulatory bodies that continue to procrastinate on the urgent need for a second major dam to complement Angat Dam.
Unless such a new dam is built, the whole Metro Manila and adjoining provinces face dire consequences if anything happens to Angat Dam. In fact, this was the subject of a privilege speech of congresswoman Michaela Antonio recently.
WHAT TO DO NEXT
Pray that our government planning and regulatory executives decide to act before it is too late.
We know that water crisis will recur almost every year without a new “Angat Dam.”
The risk of damage to Angat Dam is a real one should “The Big One” happen.
LET US PRAY!
The article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines.
Filemon T. Berba, Jr. is the Chairman of Philippine Foundation for Science and Technology, the former MAP President in 1982, and the first President of Manila Water Company, Inc. in 1997.
For previous articles, please visit map.org.ph.
