Manila’s Privitization, Manila's Water Woes, And The Wateraid Model

Candace Williams Tutorial Date: Tuesday October 2, 2007 Manila’s Water Woes: Arguments for the WaterAid Model What’s the problem? Manila’s water crisis has negative impacts on its development. Lack of access, dangerous quality levels, and pollution are the major threats. A report by the Asian Development Bank says that about 58% of the city is connected to the water network due to underdeveloped infrastructure. 10 million residents (93% of the population) have no access to sewer and waste systems. 2.2 metric tons of organic pollution produced annually contaminates 58% of the groundwater. A 2006 study monitored illnesses for a five-year period and found that 31% of all illnesses monitored were caused by water-borne sources. In 2006 and 2007, the WHO reported widespread outbreaks of diarrhea, cholera, malaria, and dengue caused by polluted water sources (pollution in water, increased numbers of mosquitoes lingering around water sources year-round, etc). Taken together, the annual economic losses caused by pollution total to USD $1.3 billion per year – this includes costs from health issues, loss of fisheries and ecotourism, and lost productivity. Aside from the issues of economic development, the human right to water is generally understood to fall under certain articles of the Universal Declaration of Human Rights, the International Covenant on Economic, Social, and Cultural Rights, and other domestic and international human rights instruments. Manila’s First Go at Privatization In 1997, Manila privatized the Metropolitan Waterworks and Sewage System (MWSS). The government and international financial advisors viewed this as the right step because of the high debt of the utility owed to international financial institutions, the fact that a majority of the population was disconnected from the 16-hour per day service, and because the Philippines was trying to transition into democratic institutions. Proponents of privatization argued that private owners would react to incentives created by the market and invest in new technologies and infrastructure development. The government made 25-year concession agreements with Maynilad Water Service, Inc. and Manila Water Company. The agreements established benchmarks for water quality, extending connections to 100% of the population within 10 years, reduced water loss (from 56% to 32%), and USD $7.5 billion in capital investments. The MWSS did not meet these goals and there were multiple emergencies caused by water treatment processes causing poisoning and outbreaks of deadly diseases. Due to a severe financial crisis in MWSS, the government re-acquired the utility and plans to reprivatize it within the next year. The government, along with DMCI-MCPI and the SUEZ Company are in the process of re-privatization. Economic analysts give a few reasons for the failure of the privatization scheme. First, the government was weak and had no regulatory power. Although the concession agreement created regulatory boards, these boards were not democratic in nature and they did not include many public representatives. Secondly, water tariffs reflected the minimum average financial costs of treatment and did not take economic costs (example: the opportunity costs presented by competing uses for water). This means that the pricing policies lead to water

Candace Williams Tutorial Date: Tuesday October 2, 2007 misallocation that favored lower-valued uses that often depleted groundwater, produced the most pollution, and had wasteful practices. Thirdly, the marginal costs of pipe rehabilitation, infrastructure changes, and replacing faulty meters that were prone to water theft, were higher than the marginal revenues of these changes. Fourth, the market conditions that were present when MWSS was privatized were prone to oligarchies and monopolies. Fifth, a majority of low-income households lived outside of the pipe distribution network or were not eligible for water connections due to lack of ownership titles to the land or permission from public and private owners of the land. Should Manila decide to re-privatize MWSS? Due to a severe financial crisis in MWSS, the government re-acquired the utility and plans to reprivatize it within the next year. As of December 11, 2006, the government, along with DMCIMCPI and the SUEZ Company are in the process of re-privatization. Even if the government of Manila decided to de-privatize MWSS, it does not have the capital to invest in infrastructure changes or to pay off the USD $150 million debt that the utility owes to international financial institutions. It is clear that Manila must have a system that combines private sector investment with public regulation and goal-setting. The WaterAid Model WaterAid is an international nongovernmental organization that works with international donors, consumers, civil society (media, other NGOs, etc), the government, and the private sector to create water solutions in developing countries. WaterAid advocates for context-based solutions that do not adhere to specific ideologies (‘free market’ vs. ‘liberal’, etc) but grows out of an understanding of a specific region’s problems. For example, WaterAid’s efforts in Mozambique, a nation with less infrastructure and wealth than the Philippines, have led to 100% sanitation coverage in the urban area of the capital city Maputo, and it has helped over 270,000 people gain access to water connections. Donor-imposed privatization policies lead to the dismantling of state-owned water companies that were inefficient. Due to weak conditions in the private sector, services were severely incapacitated when private contractors could not meet benchmarks for demand. Like the Philippines, the local and national governments of Mozambique does not have the human or financial resources to take over the water systems completely. WaterAid stepped in and provided private enterprise development schemes that provided training and assistance from international donors to local businesses that could provide water services to their communities. WaterAid also helped local governments research economic conditions and water markets so that they could impose the correct level of tariffs and understand the complex demand structure in communities. Next, WaterAid tried to increase the level of information and transparency by creating leadership boards and consultation processes that involved consumers. Also, WaterAid worked with other NGOs to create demand-side campaigns that educated consumers about water conservation, sanitation, proper irrigation, and other techniques to make their water usage more efficient and environmentally sustainable Manila can use this model. They can create a privatization scheme with an emphasis on local decision-making rather than large service areas and contracts.