In shutting the public out of negotiations for the revised water concession involving the MWSS, Manila Water and Maynilad, President Rodrigo Duterte’s government has crafted a lopsided water concession agreement that strengthens government control but not necessarily serving the public interest nor result in improved services.
First, the it needs to be stated that the new deal was undertaken without involving the public, when it had been the public itself that had raised the same issues on the concession agreements in the first instance.
Second, while the revised concession agreement raises the public character of the concession to the level of public utilities, it has drafted the revised concession agreement on unprecedented yet very onerous terms: favoring government, limiting private sector discretion but not necessarily benefiting the public, which should be the core interest in all of these negotiations.
One unprecedented feature is the requirement that all debt and expenditures be reviewed and approved by the Regulatory Office.
The provision destroys the nature of the concession as a PPP, effectively reducing the concessionaires into mere suppliers or vendors of government.
This contradicts private sector independence in investment and operations initiatives, which is a main feature in PPPs.
Effectively, government does not only exercise regulatory power over tariff, but also operational control.
Third, the immediate transfer to government of fully recovered assets prior to the expiration of the concession agreement absolutely makes no sense.
By undertaking an immediate transfer of assets, is government now taking on the burden of maintaining these assets while the concession agreement subsists?
Who will exercise control over these assets while the concession agreement subsists: will it be government or the concessionaire?
Certainly, the private sector will not agree that assets are transferred to government while undertaking the obligation of maintaining and repairing the same assets while the concession subsists.
With the Covid crisis constituting a strain on a great percentage of public funds, we cannot undertake new obligations on the upkeep of water assets while the concession subsists.
Fourth, the removal of FCDA, while beneficial to the public as it transfers foreign currency risk to the concessionaires, runs the risk of being challenged as a violation of equal protection, as the FCDA remains standing policy in other public utilities.
Government should first make a general policy statement that FCDA is now prohibited in all public utilities in order to surmount a possible constitutional challenge.
Government had a golden opportunity to correct lingering concerns on the existing water concession agreements yet it seems it has squandered it over its attempts at exercising greater control over water utilities.
At its core, government needs to answer what is truly more important: government control or public interest?
Because with this revised concession agreement, it has succeeded only in the former, not necessarily the latter.