Water privatization in the Philippines

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Water privatization in the Philippines was initiated by the government of Fidel V. Ramos throught the privatization of the Metropolitan Waterworks and Sewerage System (MWSS) for Metro Manila.^[1]

The plan to privatize MWSS emerged from the inability of the public utility MWSS to expand coverage to the growing population. By 1996, MWSS only provided water supply for on average 16 hours each day to two thirds of its coverage population. According to the Asian Development Bank, the share of non-revenue water (NRW), water which is not billed e.g. due to leakage and illegal connections was more than 60%, an extremely high percentage even compared to developing countries and much higher than in Seoul (35%), Kuala Lumpur (36%) and Bangkok (38%).^[2] Furthermore, MWSS depended on government subsidies due to poor cost recovery.

In 1995, the Water Crisis Act was passed, providing the legal framework for the privatization of MWSS. The private participation was implemented through a concession contract, in which the concessionaires were given the task to operate and manage the facilities, whereas MWSS preserved the ownership of the infrastructure.^[3] In order to facilitate benchmark comparisons, the service area was divided in two zones. In 1997, the Maynilad Water Services, Inc., a joint venture by the French Suez and the Filipino Benpres Holding was awarded the concession contract for the West Zone, whereas the Manila Water Company, Inc., consisting of the Filipino Ayala Corporation as well as the British United Utilities and the US company Bechtel was awarded the East Zone. The concession contracts were expected to last for 25 years and included targets concerning coverage, service quality and economic efficiency. An objective was to increase water coverage in Metro Manila to 96% by 2006. The companies were expected to be regulated by the newly created MWSS Regulatory Office, financed by the concessionaires.

After the concession came into force, public opposition soon emerged due to repeated tariff increases. However, it is worth mentioning that tariffs at first decreased after privatization in 1997 and did not reach the pre-privatisation level until 2001/2002. Moreover, the concessionaires suffered from a severe drought and the Asian financial crisis. Because of the rapid currency devaluation, MWSS' dollar-denominated debt service doubled. Consequently, tariffs continued to rise and targets concerning coverage and NRW were adjusted downwards with agreement of the regulatory agency. After all, Maynilad went bankrupt in 2003 and was turned over to MWSS in 2005. On the other hand, Manila Water had begun to make profit by 1999 and performed well financially as well as concerning reduction of NRW.^[4]

[edit] See also

Water supply and sanitation in the Philippines

[edit] References