Revised draft of water deals ready by year-end: DOJ


    THE government panel reviewing the “onerous” water concession agreements with Maynilad and Manila Water will complete its work and come up with its draft of proposed revisions by the end of the month, Justice Secretary Menardo Guevarra said yesterday.

    Guevarra said the draft revisions will be presented to President Duterte and to the Cabinet in their first meeting scheduled for January next year.

    “We intend to finish the revised draft, the government side, before the end of this month.

    When that is done, we will present it to the Cabinet meeting in early January,” Guevarra said.

    Once the draft is approved, Guevarra said the team of lawyers from the DOJ, Office of the Solicitor General, Office of the Government Corporate Counsel and the Department of Finance will sit down with representatives of the two water utility firms and renegotiate the onerous and “disadvantageous” provisions of the original concession deals.

    “Once it is approved by the Cabinet, then that is the time that we could call the private concessionaires to a meeting. So we don’t know when exactly that meeting will be but that’s got to be after the Cabinet meeting,” he said.

    Aside from removing the onerous provisions, Guevarra said other matters might be included in the revised draft agreement such as rate setting.

    ‘If there are others that might be included then that is the subject matter of an ongoing study. If we have any modifications like in the rate setting mechanism that has to be studied (and the) corporate income tax included in the water charges, those are things that we need to consider. But definitely those provisions that we have already identified as onerous, we will have them deleted from the revised version,” he added.

    Guevarra sees no roadblock in the renegotiation of the concession agreements as he noted that both water concessionaires have already signified their readiness to sit down with the government.

    He clarified, too, that government is merely renegotiating and not revoking the contracts with Maynilad and Manila Water.

    “We are not even thinking about that. We are just renegotiating their contracts. So, if we don’t have any agreement then we have to go to court since the rescission of the contract may be actually done,” Guevarra said.


    Guevarra reiterated the primary reason for the review and renegotiation is the welfare of the people, but acknowledged that the recent controversy involving the water industry might have negative effects on foreign investments in the country.

    “This may have some temporary negative effects on foreign investments but these are the kinds of foreign investments that we do not want. What we want are foreign investments that practice a sense of corporate social responsibility, that is the kind of investment that we want to attract,” he said.

    Finance Secretary Carlos Dominguez expressed confidence the review of the water concession agreements with Maynilad and Manila Water will not have an adverse effect on investor confidence in the country since it was the water firms themselves that have expressed their willingness to do the review.

    “People have to understand that what is being reviewed, are terms that are onerous to the Philippines, to the nation, it’s not the government. It’s the taxpayer,” Dominguez said on the sidelines of the Sulong Pilipinas Agribusiness Summit at the SMX Convention Center in Lanang district in Davao City.

    “And what I have seen is that the concessionaires have signaled that they’re willing to revisit those terms, so I think that should be a good signal to the rest of the investing community that you know, people look at the interest of the nation as a whole. And this is not abrogation of the contract, but a review of the contracts, which I think should be done regularly,” he added.

    Dominguez was also asked if the review could set a precedent to other existing contracts between the government and the private sector, to which he said that if these were onerous contracts, it’s only right for the administration to review them.

    “And in this particular case, the concessionaires have signaled that they are willing to review,” Dominguez said, adding: “It should be a signal to everybody that the private sector and the government are working together for the benefit of the nation, for all the taxpayers.”

    But while Dominguez was optimistic about the situation, shares in Manila Water tumbled 39 percent to a 14-year low on Tuesday, even as the company sought to ease investor concerns over its concession deals following legal disputes with the government.

    Investors have been perplexed over the decision of the government last week to cancel the 15-year extension of concession deals it signed with Manila Water and unlisted Maynilad, the country’s two largest utilities, after pressure from President Duterte.

    The firebrand leader described the concession agreements as “onerous and disadvantageous” to the public, after the two firms won arbitration cases in Singapore, which ordered the Philippine government to pay the utilities a combined P10.8 billion in compensation.

    Patrick Ty, chief regulator of the Metropolitan Waterworks and Sewerage System, told Reuters that the government plans to revise its penalty system, a day after Manila Water said it was willing to negotiate with the government and find a mutually acceptable solution.

    “We… want to improve the mechanism for fines and penalties. All of these are to further protect the interest of the public,” Ty said.

    Shares in Manila Water, which serves seven million customers mainly in the capital, slumped as much as 39 percent on Tuesday to their lowest in more than 14 years.

    It has dropped by nearly 70 percent in two weeks, losing $450 million in market value, since Duterte ordered the filing of criminal charges against the water utilities and their billionaire owners on December 4.

    Shares in conglomerate Ayala Corp, which owns Manila Water, dropped 1.9 percent to a near three-year low, widening its 2-week loss to $1.14 billion.

    DMCI Holdings Inc. and Metro Pacific Investments Corp, both shareholders of Maynilad, also lost around $150 million and $420 million in their market value, respectively, in the same period.

    The companies had said they would forfeit any damage claims to avoid angering the president who enjoys high public approval ratings, thanks to his man-of-the-people style. – With Angela Celis and Reuters