HomeEquality & JusticePhilippines' Duterte threatens oligarchs, woos poor in 'water war'

Philippines’ Duterte threatens oligarchs, woos poor in ‘water war’

The Philippine government increased pressure this week on the country’s two water concessionaires with an announcement that it is junking the “premature” extensions of the companies’ contracts.

The country’s Justice Secretary, Menardo Guevarra, made the announcement two days after President Rodrigo Duterte threatened to jail the owners of the companies for “economic sabotage.”

“We are being milked by billions (of pesos),” Duterte said in a talk pockmarked by slurs and threats on Dec. 3. “We are asked to pay penalties and fines,” he said.

Repeatedly using the word “oligarchs,” the president accused the concessionaires of treating water “not as a natural resource but as a commodity.”

He slammed his predecessors for the lopsided terms of the concessions, which foist on consumers operational losses, including penalties for non-compliance of service commitments and taxes.

Duterte ordered his Finance Secretary, Carlos Dominguez III, and Solicitor-General Jose Calida to draft a new contract that is “really favorable to government.”

Talks already ongoing

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Duterte’s ire stemmed from the government’s defeat last month at the Singapore-based Permanent Court of Arbitration, which ordered the government to pay of a total US$212 million to the private firms to compensate for the nixing of water rate hikes over the last four years.

The arbitration body awarded US$145 million to Manila Water owned by the billionaire Ayala clan. It ordered payment of US$66.6 million to Maynilad, which is controlled by tycoon Manuel V. Pangilinan.

The compensation was based on income losses from June 1, 2015 — when the country was still ruled by former president Benigno Simeon Aquino III — to Nov. 22, 2019.

Both firms have distributed water to separate sectors of the national capital region’s 13 million residents since the Philippine government privatized the water service.

Each company bagged 25-year contracts in 1997 when the government was headed by former president Fidel V. Ramos.

With more than a decade still to go, former president Gloria Macapaga-Arroyo approved a 15-year extension for both companies. Thus, the firms’ shelf lives were extended from 2022 to 2037.

Justice Secretary Guevarra said the agreements signed by the Arroyo government were “premature.”

Those contract extensions came with the government’s waiver of immunity from suit and enforcement of arbitration awards.

Wooing the base

Duterte’s speech earned approval from millions of national metropolitan residents irked by high water rates coupled by spotty service, which peaked during the sweltering summer months this year.

While the president gave an impression that the two firms were intransigent, their executives were already discussing a compromise on the hefty arbitration awards.

Manila Water said its head, Fernando Zobel de Ayala, had already started talks with Finance Secretary Dominguez before the president’s tirade.

Maynilad’s head, Pangilinan, had also told media earlier the company was willing to give up the arbitration windfall if it could reach agreement with the government on tariff issues.

The government’s 2019 budget also includes a US$256 million contingency fund for Duterte. Provisions for arbitration payments were included this year, something not found in last year’s budget.

Duterte risks alarming the business community with a demand to junk the 15-year extension contracts signed in 2009 for Manila Water and 2010 for Maynilad.

His recent moves, however, could give him a boost in popularity just as national year-end surveys are being undertaken.

Activists protest the rising cost of potable water and the building of a huge dam outside the Philippine capital to supply the water needs of residents in Manilla. (Photo by Maria Tan)

Rich vs poor

Supporters on social media praised Duterte for decisiveness. Critics, however, raised the possibility that his cronies were eyeing the two firms or were seeking concessions on water supply.

Militants also warned that the president could be preparing for draconian action against communities opposing major dam projects.

Reacting to the announcement, leftist group Bayan urged outright revocation of the water contracts.

The group, which has won previous complaints against the water firms, said it would “oppose any compromise … in the matter of the indemnification that they are demanding from taxpayers.”

Activists have been waging battles against the companies through the decades. Duterte acknowledged this in a sneering aside, saying activists had meant to jump the gun on him.

Bayan filed a complaint against Manila Water in March this year.

A month after, the regulatory agency fined the company US$25.5 million, roughly divided into penalties for failure to meet water supply requirements and for not developing a new water source.

The company, which had offered a US$10-million waiver on bill payments, accepted the fine and said it would not pass on the fines to consumers.

But Manila Water sparked public outrage in October when it threatened a 780-percent water rate hike if the Supreme Court did not reverse its decision on an environmental case.

Militants responded with notice of a new complaint.

In August, the High Court upheld a 2011 Court of Appeals ruling against Manila Water and Maynilad in an environmental case filed in 2009. It ordered each firm to pay US$18 million in fines.

The suit charged both firms for violating the Clean Water Act passed in 2004, claiming they had failed to install water treatment and sewage facilities within five years as required by law.

Former president Arroyo’s environmental secretary, Lito Atienza, filed the case two months after the government granted Manila Water’s contact extension.

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