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  Manila: CORPORATE RIGHTS VERSUS THE HUMAN RIGHT TO WATERMaynilad Knows its Priorities, Gloria Arroyo Must Be Reminded That These Are Not Hers The November 7 decision of the International Arbitration Panel frustrated Maynilad's attempt to terminate its contract. A favorable arbitration decision would have provided the company a generous reimbursement for money that it squandered during the last six years. The Arbitration Panel ruled that Maynilad cannot claim that it is encountering difficulties because government failed to do its part in ensuring the viability of the business. The arbitration panel said in effect that Maynilad president Rafael Alunan has only himself to blame for his company's financial distress. The ruling of the panel, however, also exonerates Maynilad from the government's counter-charge that the company breached its contract provided that it becomes current on its financial obligations to government within the next few days. Instead of asking for a reconsideration so that the Arbitration Panel will declare Maynilad in breach because of its well-documented failure to perform on all counts, the Government Corporate Counsel incredibly claims that Maynilad should now get on with the task of complying with its contract. But Maynilad, even if it suddenly gains the competence that it has never demonstrated in the past, is not about to resume investments. Its creditors and shareholders will not allow it. Maynilad will look for a bailout from government and consumers. Until their lawyers and politicians are able to secure the financial viability that they have not been able to achieve by selling water, water service will not be extended and tragedies such as the cholera outbreak in Manila will happen again and again in the months ahead. Maynilad owes MWSS P6.77 billion and has $80 million dollars in short-term loans to its creditors that have also fallen due a long time ago. Maynilad has also been collecting fees from its customers that the regulator says are unauthorized; these unauthorized fees amount to 40 percent of what the company has been collecting from consumers, these should be reimbursed to consumers. If Maynilad won its case against the MWSS through an arbitration ruling that declared the MWSS in breach of its contract it would then have the resources with which to settle all these liabilities and still manage to walk away with a hefty profit. For the past year, Maynilad has made no new investments in its concession area and there are no signs that this is about to change. The company is claiming that the revenues that it has been collecting monthly from its customers have not been enough to settle overdue commitments to the government, to customers and to its creditors. Maynilad has argued that it is barely able to make ends meet as far as operating the West Zone concession is concerned. That Maynilad can no longer deny today is that, relative to its original optimism, its operating expenses have been huge and its sales and revenues have been dismal. This has rendered the company unbankable in the long-term, notwithstanding an offer from the MWSS regulatory Office in December 2002 to increase rates from P19 per cubic meter to P25 per cubic meter. The MWSS Regulatory Office believes, however, that Maynilad has been accumulating substantial amounts of cash not enough to make it bankable but enough to pay for immediate investments that would replace old pipes, plug leaks, expand the service and keep the water pressure up. These are investments that would surely have been enough to avert the outbreak of cholera and gastro-enteritis in Tondo Manila. Maynilad, however, knows its priorities very well. Maynilad's decision to stop all investments, to collect fees even when explicitly declared by the government to be unauthorized, and to cease payments to government and its own creditors are the means for securing its financial claims regardless of the ruling that comes out of the arbitration panel. This will be its policy until government agrees to a rescue package to make it bankable. Maynilad's ability to continue to collect monthly cash revenues from customers and to hold on to the accumulated cash of the past year is its single biggest bargaining chip in negotiating with the Philippine government. Maynilad will use this to ask government for a bail-out and this will come in terms of i) a grace period on the P6.77 billion in concession fee payments, possibly a restructuring over many years ii) a rate increase beyond what was proposed by the MWSS Regulatory Office in December 2002 iii) a further reduction of service obligations iv) a reversal of a regulatory ruling that deemed P8.8 billion of investments and operating expenditures that it made during the first five years as being imprudent and therefore not chargeable to consumers v) a government guarantee for $350 million in loans that it seeks to secure from its creditors vi) demotion of government claims on West Zone cash flows relative to claims that creditors would want to make in case Maynilad ultimately goes bankrupt. Maynilad will argue that if it is to serve the West Zone concession and cause its creditors and shareholders to bring in the money it will need the cooperation of the Philippine government. But it is in no position to demand such. Until a few months ago Maynilad could have asked for these extraordinary concessions while threatening the government with the expensive lawsuit that it filed at the international arbitration court. The situation has totally changed. Maynilad can only delay the final turning of the screws through appeals and restraining orders and other means of legal dispute. It can no longer threaten the government with expensive lawsuits. It is now all up to Gloria Arroyo. Using the Arbitration Panel's own narrow and purely commercial view Maynilad will be in breach of its contract within ten days. Maynilad will only escape this fate if government offers to rescue it. The president should resist the deals that will be offered by the politically powerful Lopez family, no matter how tempting these may be in view of the upcoming presidential elections in May 2004. Influence peddlers are going to push for a second rescue of Maynilad and this will be on the president's agenda in the next few days. But there has already been a rescue! The president had authorized the amendment of the contract in October 2001 that led to tariff adjustments bringing the rates last year to 400 percent of what they were in 1997 and the Regulator has already proposed in December 2002 to bring these up to 500 percent of their 1997 levels. Yet Maynilad thinks that it deserves much more. It sued the MWSS because the latter, in Maynilad's view, was not being cooperative enough. Bantay-Tubig calls on the President to mobilize the state's police powers to secure the cash revenues of the West Zone as soon as the deadline for the payment of concession fees lapses. These funds should be used as the basis for investments in the West Zone. Immediately, the President should direct the MWSS Board and the Regulatory Office to use every means to stop the collection of 40 percent of fees that these agencies themselves declared as being unauthorized early this year. The peoples' right to affordable potable water should take precedence over the financial claims of Maynilad that, even today, shamelessly depicts itself as blameless. The president should know her priorities to rescue the six million consumers of the West Zone, not Maynilad. BANTAY TUBIG Network BANTAY TUBIG Network: AKBAYAN Party-list, Alliance of Progressive Labor, more resources
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