Privatization is creating an artificial water shortage

Focusing on just Manila Water diverts the issue away from privatization as the central issue in, and underlying reason behind, the artificial shortage. As such, it also has the effect of absolving government of responsibility when in fact, the biggest accountability in all this lies with government for abandoning its duty to ensure water for the people.

By ARNOLD PADILLA
Bulatlat.com

MANILA — Metro Manila’s supposed water crisis is one that is not caused by lack of supply and new water sources, or as some would argue, by lack of foresight and preparations by regulators and Manila Water. Rather, it is caused by lack of effective state control over water resources after government allowed the privatization of Metro Manila’s water system 22 years ago.

There lies the artificial water shortage.

By official accounts, the available supply for Metro Manila’s water needs is still enough. But instead of taking on the role of ensuring that this water reaches the people for their basic domestic use, government has deferred to two separate private companies (Manila Water and Maynilad), each with their own profit motives and considerations, in determining how water reaches the end-consumers through their separate distribution networks.

Worse, these private concessionaires have not improved the infrastructure enough to maximize existing water supply despite massive increases in their rates (and profits) for the past two decades. Imagine this – every day, about 1,177 million liters of water are lost due mainly to defective infrastructure. That’s equivalent to almost eight times of the supposed deficit in water supply that Manila Water is grappling with.

As it is, according to the concessionaires’ own performance reports, almost 300,000 people in their service areas are already without 24-hour water supply even before the current supply issues began early this month. That is the “normal” situation for these people under the regime of privatized water. The actual figures could be higher, as government regulators do not seem to verify – or do not have the capacity to check – the performance of the concessionaires.

Both Manila Water and Maynilad source the water they distribute from Angat dam that based on official pronouncements still holds enough water to supply the needs of the capital region and nearby areas. Angat dam supplies 4,000 million liters per day (MLD) or 96 percent of Metro Manila’s water (the rest come from Laguna Lake, three percent and deep wells, one percent).

But while Manila Water has a deficit, Maynilad has surplus supply. How did that happen? When the Ramos government privatized the Metropolitan Waterworks and Sewerage System (MWSS) in 1997, its service area was divided into two and then bid out to private companies. The east zone was won by Manila Water and the west zone, by Maynilad.

As part of the concession agreement, Maynilad will get 60 percent of Angat’s raw water and Manila Water the remaining 40 percent. That translates to 2,400 MLD for Maynilad and 1,600 MLD for Manila Water. The said sharing arrangement was based on the population size of the concession areas awarded to them by government. At present, Maynilad services around 9.5 million people in the west zone and Manila Water, 6.8 million in the east zone.

The 150-million liter per day challenge

Manila Water claims that its 1,600 MLD from Angat is no longer enough as its requirements already rose to as high as 1,750 MLD. The 150-MLD deficit is being blamed for the water supply interruptions that have been affecting some half a million people in the east zone.

This reported increased demand from Manila Water’s customers could have been easily met if the government were in charge of water management and distribution. Under the present privatized setup, water that flows to Metro Manila is divided to the concession areas of Manila Water and Maynilad, and this creates unnecessary challenges for an effective and responsive mechanism in water allocation and distribution.

The water flows between the concessionaires are connected through cross-border pipes. As one of the stop gap measures to help address the supposed 150-MLD shortage in the east zone, Maynilad agreed to open some of these cross-border pipes so that 50 MLD of water allocated for the west zone could be directed to Manila Water’s concession areas.

If the MWSS were in charge of water distribution from the start, such option could have been resorted to much earlier and in a manner that is less complicated and bureaucratic (e.g., asking Maynilad’s permission first); more effective (e.g., redirecting more than 50 MLD, if needed); and much faster (e.g., under privatization, most of the cross-border pipes have been already cut and will need time to restore) to avoid the supply woes that tens of thousands of households are being forced to bear today.

Aside from the cross-border pipe arrangement with Maynilad, Manila Water is also expecting to have another 50 MLD from its new treatment plant in Cardona, Rizal (with a maximum capacity of 100 MLD when completed) and a further 100 MLD from existing deep wells.

Missing water

What is not highlighted amid all the frenzy in securing additional supply is the more than a billion liters of water wasted daily, mostly from leakages in the existing distribution infrastructure of Maynilad and Manila Water, or what the water industry calls non-revenue water (NRW).

At present, by MWSS’s own account, the NRW of Manila Water is at 11 percent while that of Maynilad is at 39 percent. Looking at the volume of water that flows through their respective systems, water losses in Manila Water’s concession area is around 176 MLD and about 1,001 MLD in Maynilad’s for a total of 1,177 MLD.

On its website, Maynilad claims that as of 2018, its NRW is 27.1 percent. On the other hand, Manila Water’s own website claims they deliver 1.3 billion liters out of their 1.6 billion Angat dam allocation, or an NRW of 12 percent. Using these figures, the total volume of water losses from both concessionaires is still huge at 888 MLD.

Based on the original targets when MWSS was privatized, the volume of water losses should have already been reduced to less than a billion liters a day (around 732 to 976 MLD) as early as 2001 or 18 years ago. Instead of the promised reduction, the volume of water losses has increased (per MWSS’s NRW estimates) amid a growing service area that has expanded by about five million people in the past two decades. This even as present all-in rates (i.e., basic charge plus other charges, supposedly to recover investments used to improve water supply) have grown about 3-4 times of their 1997 level in real terms.

Note that Maynilad still has a surplus supply despite wasting more than a billion liters of water per day, while Manila Water, which has a much lower reported NRW than its west zone counterpart suffers a deficit. This further underscores the inefficiency and wastefulness of water resource management and the artificiality of water shortage under MWSS privatization.

The combined water losses of both Manila Water and Maynilad is more than 28 percent of the estimated current water supply of 4,167 MLD from the Angat dam, Laguna Lake and active deep wells. The MWSS is saying that the international standard is 20 percent while other studies suggest that the apparent economically reasonable NRW is between 10 and 12 percent.

In any case, halving the current total NRW (as estimated by MWSS) could produce an additional 588 MLD in water supply. It is interesting to note that the controversial P12.2-billion Chinese-funded Kaliwa dam (which government, using the metro water shortage as pretext, wants rushed amid unmet environmental compliance) has a projected capacity of 600 MLD. In other words, addressing the issue of water losses substantially lessens the pressure of building new dams and avoiding the unnecessary environmental, social and economic costs they entail.

Finding accountability

To be sure, urgent demands to make Manila Water and their operator led by the Ayala group and their foreign partners accountable for the current water woes in Metro Manila are justified and legitimate. But they should be made to account outside the narrow framework of their commitments under the concession agreement (or privatization contract), and instead be held liable in the context of the assertion of people’s rights to water and reversing MWSS privatization.

The privatization contract, by design, heavily favors the private concessionaires. When the World Bank (through the International Finance Corp. or IFC) crafted the concession agreement in 1997, it ensured that the private concessionaires will be able to operate profitably in order to pay back the World Bank and other foreign creditors the hundreds of millions of dollars in debts that MWSS owes them. The IFC itself, as the World Bank’s private investment arm, is an investor in the MWSS privatization through Manila Water. Thus, from the onset, MWSS privatization was never about the provision of water services but the collection of private profits for foreign investors and creditors and their local partners.

The MWSS itself, for instance, is saying that it appears there is nothing in the concession agreement that they can use to penalize Manila Water for causing the current water supply problems in its service area. Regulators claim that they can use the concession agreement’s rate rebasing exercise (when concessionaires ask for higher basic charges) but that will not happen until 2022. There is also no assurance of accountability as Manila Water (as well as Maynilad) could always question and reverse the decision of regulators through an international arbitration mechanism provided under the privatization contract.

Focusing on just Manila Water absolves Maynilad and its operators led by Manny Pangilinan’s group and its Indonesian backers (Salim group) and Japanese investors (Marubeni) of accountability, and reinforces the wrong notion that the issue is simply mismanagement on the part of Manila Water. The prevailing impression today is that Maynilad customers are “fortunate” when in reality, Maynilad’s very high NRW deprives all consumers in Metro Manila and nearby areas of valuable water supply.

Most importantly, it diverts the issue away from privatization as the central issue in, and underlying reason behind, the artificial shortage. As such, it also has the effect of absolving government of responsibility when in fact, the biggest accountability in all this lies with government for abandoning its duty to ensure water for the people.

As long as water remains in the hands of unaccountable, profit-oriented private and foreign interests, the people of Metro Manila and adjacent provinces will continue to face insecurity in supply amid ever skyrocketing rates. This is the real water crisis that we face, and one that is permanent – El Niño or not – as long as there is no policy shift in the way that water resources are managed.

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