After more than a year, the government has finally completed and signed a new concession agreement with Manila Water, removing supposed onerous provisions that put the government at a disadvantage since the original contract was signed in 1997.

In his press briefing Monday, April 5, Presidential spokesman Harry Roque announced that the government has finished its renegotiations regarding the 1997 Metropolitan Waterworks and Sewerage System (MWSS) concession agreement with Manila Water.

The new agreement, according to Roque, was modeled after the New Clark City Joint Venture Agreement of the Bases Conversion and Development Authority (BCDA) as advised by the Asian Development Bank (ADB).

The Palace official said the completion of the new contract proved President Duterte's desire to advance the welfare of Filipinos.

"Patunay ito ang interes ng mga Filipino ang nasa puso at isip ng ating Presidente (This proves that President Duterte has the interest of Filipinos in his heart and mind)," he said.

"Kampante po kami na dahil po dito sa bagong concession agreement sa Manila Water ay protektado rin po ang gobyerno at ang mga consumers (We are confident that with the new concession agreement with Manila Water, the government and the consumers will be protected)," he added.

Advantageous to government

According to Roque, the new concession agreement removed government non-interference clauses. This means the government will no longer be liable when fulfilling its regulatory functions to protect consumers.

Manila Water will now be recognized as a public utility, which makes it more accountable to the government and the public.

The new contract removed and added provisions that play roles in the medium- and long-term government liabilities or contingent liabilities, such as the following:

• Removal of the National Government's Performance Undertaking for future debt which means the debt of Manila Water will not be the debt of the government;
• All debt and expenditures of the concessionaire must be reviewed and approved by MWSS;
• All fully recovered assets are immediately transferred to the government to ensure there is no double payment at the end of the contract;
• Material Government Adverse Action (MAGA) is limited only to actions of the Executive so that the National Government is not liable for things outside its control

Taxes

According to Roque, the new contract states that corporate income tax cannot be charged to the consumer, unlike the previous 1997 concession agreement.

There will also be a tariff freeze until December 31, 2022. Tariff adjustment for inflation will only be two-thirds of the Consumer Price Index, unlike the previous contract which had a 100-percent inflationary impact.

"Ibig sabihin, kung three percent po ang inflation, two percent lang ang pwede nilang itaas (This means if the inflation rate is at three percent, Manila Water can only hike its price by two percent)," Roque explained.

Meanwhile, the new contract also removed the Foreign Currency Differential Adjustment (FCDA). Roque said this will result in much lower tariff increases and protect the consumer from possible tariff spikes because of foreign exchange movements.

Maynilad is next

According to Roque, the government will soon start renegotiations of the concession agreement with Maynilad.

In 2019, water concessionaires Maynilad and Manila Water drew the ire of the President over alleged onerous provisions of the supply agreement. He likewise accused them of violating the country's anti-graft law for passing income taxes to consumers.

The government later moved to revise the water concession contracts to remove such controversial provisions, advising the two companies to just accept the new agreement.