Showing posts with label MWSS. Show all posts
Showing posts with label MWSS. Show all posts

Thursday, December 15, 2011

Pilipinas Forum 22: Maynilad Water Rate Hike, 2001

This is an exchange in more than 10 years ago, sometime in April and June, 2001. I cannot find Part 1 of the exchanges, but this one is good. This is 10 pages long, so as usual, get your popcorn and fave drinks :-)

Maynilad Water Rate Hike, Part 2

April 2001

Since 1998, Manila Water (Ayala) has asked for an increase in water rates - before Maynilad did. Since I have been studying the water sector, someone from Bechtel, the Ayala partner, invited me to a discussion wherein he presented the company's plans, such as the Laiban dam. The construction of this dam did not push through because of the very high social cost involved. This guy wants me to help him promote the plan as well as the need for the water rate increase because of negative profits. I was told (by a very reliable source) that the Ayala's underbid at P2/cu.m because they want to make it hard for the Aboitiz to enter the market here in NCR. The Aboitiz gave them a hard time in Cebu.

My study where I estimated the full cost of water (= private cost + user or depletion cost + external cost) was cited. I explained to him that the estimate is for the 'economic value' of water and the revenue from charging the full-cost price should go to the owner of the resource, which is the State as indicated in the constitution. The water distributor or the concessionaire should only get the return from the distribution cost, and the user and external costs of water should go to the State or its representative - the government. Dr. Solon, a consultant of MWSS also opposed the granting of the request of Manila Water.

There is really a need to increase water rates in order to reflect the opportunity cost or the social cost from using a scarce resource. Underestimation of the value of natural resources has resulted in over-exploitation and depletion. Just look at our forests, fisheries, groundwater, etc. The lack of valuation of the impact of water pollution – an external cost - has resulted in the use of water bodies as a free dumping ground of wastes. One issue is who should get the revenues if the full-cost price is charged. One can also argue from the equity aspect. Most of the households connected to the Level III service or piped water supply are middle to upper class who can very well afford a higher water rate. Most of the poor (based on the household survey conducted in 1997/98) buy water from peddlers at much higher rates compared to the concessionaires' rates or form a queue to get water from public faucets (very high opportunity cost of time). Before the privatization, the average price of water was P10/cu.m. The issue then was not the price, but the quality of service.

Tuesday, August 31, 2010

Privatization 5: Regulate Exec. Pay or Privatize Govt. Corporations?

The Senate of the Philippines is conducting a series of committee hearings and investigations on the executive pay and bonuses of certain government corporations. Their goal is to craft necessary legislation to regulate excessive pay and bonuses, if such thing will be needed, and limit the subsidies to losing corporations. I think there are other hidden objectives why the Senate is doing such kind of investigations.

Today, the favorite corporation is the Metropolitan Waterworks and Sewerage System (MWSS). Its website says its mission is "A world-class and financially stable corporation that efficiently and effectively manages its assets and resources and implements its projects." But today, it was reported in the Inquirer that "Water execs admit 25-month bonuses". Portions of the report said,

MWSS officer-in-charge Macra Cruz admitted that while their employees have been receiving 25 months worth of bonuses a year, the agency incurred about P3.5 million losses in 2008....

Before this, Drilon questioned the board chairman of the MWSS, Oscar Garcia, for receiving P5.4 million for attending 47 meetings in 2009 alone.
I think the Senators should focus their attention on privatizing most, if not all, government corporations in the next few years, rather than just regulating the pay, per diem and bonuses of Executives and appointed bureaucrats of thsoe corporations.

The main reason is the huge public debt and the high interest payment that the Philippine government, or rather us Filipino taxpayers, pay every year. This year, interest payment alone for both foreign and domestic debt by the national government alone will be P278 billion (US$ 6.18 billion at P45/$ exchange rate). Next year it will jump to P357 billion.

All government corporations are complacent. There is no threat of bankruptcy as there are always guarantees of subsidies and bail-out from Filipino taxpayers' money. All administrators and their "board of directors" are political appointees, meaning they have the backing of the highest political leaders of the country. And almost all government corporations are exempted from paying corporate income tax, even if small corporations like an ordinary bakeshop or internet shop are forced to part with 30 percent of their gross taxable income every year.

Some corporations are also exempted from slapping the value added tax (VAT) to their customers, like Pagcor. This is anomalous actually. Sick and dying patients have to bear with the 12% VAT on top of import tax on their essential drugs, but gamblers are exempted from paying VAT.

Corruption is a never-ending issue in the public sector, both in regular agencies and in government corporations. The above discussion just focuses on the fiscal aspect of the problem of debt and government corporations, not on the governance issue yet.

I posted this blog entry to a friend's facebook status who posted the Inquirer report that caught my attention. A statist Filipino based in the US swooped down on my comments and argued that
when Henry Sy/SM, Lucio Tan/PAL games the system by refusing to provide workers comp/benefits then what is the next maneuvering, Nonoy? At least in a govt corporation[ esp those dealing with vital public services] the public has some recourse to demand transparency and accountability... you come up with the most ludicrous proposition...privatization, deregulation same nonsense that led to america's demise. I don't see taxes the way you do. I prefer the govt getting my money since it's maintaining my police, airport, water treatment system, social sec. medicare and a million other things that you and rightwingers don't see...

I replied the following:
We have zero tax burden with any of those corporations by Henry Sy, Lucio Tan and other "big capitalists". Our burden rests on the big government and their big abuses, big taxes. My question was very simple: What's your alternative to the huge interest payment that we taxpayers here in the Philippines endure: P278 B this year alone, another P357 B next year. We keep breaking our back just to pay interests while govt corporations keep getting subsidies and not even paying corp income tax?... some activists who love big govt are telling us that we should endure those shameless govt bureaucrats, that we should pay taxes left and right for interest payment alone, so long as we keep them as govt corporations and not entertain privatizing those subsidy-hungry corporations. What a shame.

The statis replied back:
your philosophy is WRONG, WRONG! WRONG! You argue for low taxes, deregulation and privatization in the guise of promoting the common good when what you are truly doing is concentrating more wealth into fewer and fewer hands. 8 yrs of BUSH/Cheney/Palin/Koch brothers is testament to that and it is taking heaven and earth to fix it. To the detriment of everyone else. again WRONG! WRONG! WRONG! get it???

Look, i am just as incensed as anyone reading this article... but the answer is not privatization but to make government accountable. Hey, just in case you haven't noticed. henry Sy controlls 80% of the local credit want to stimulate
growth? work on that!!!

And I persisted,
Where is the ANSWER to my question earlier: What is your alternative to the huge interest payment that we taxpayers in the Philippines endure for those high interest payment, for those endless subsidies to those pampered govt corporations? where? where?
When cornered, statists normally become more defensive and cannot reply to simple questions that require definitive and explicit answer/s. That statist made my day for he/she voluntarily self-destructed.

See also: