Water Privatization - Boon or Multinational Corporate Conspiracy?

MANILA - Supporters call it a model for the future. But critics say it is a conspiracy by multilateral financial institutions to privatise water supplies and open the floodgates for multinational corporations (MNCs) to reap profits from Asia's poor.

Manila Water, a private company with multinational links, is bringing 24-hour water supply to the poor by working with peoples' cooperatives in Manila slums.

"Addressing the needs of low-income communities is a priority for Manila Water," said Tony Aquino, president of the company.

Manila Water was one of two companies that entered into a 'concession agreement' with the 119-year-old Metropolitan Waterworks and Sewerage System (MWSS) when it was privatised in 1997. It was the world's first and largest effort. Manila Water was supposed to manage, operate, repair, decommission and refurbish all fixed and movable assets of MWSS and was required to provide water delivery and sewerage services in the eastern zone of Manila -- or about five million people -- for 25 years.

While the other concessionaire, Maynilad Water Services, had to be bailed out by the government from potential bankruptcy in 2004, Manila Water has been hailed by international funding agencies such as the Manila-based Asian Development Bank (AsDB) as a role model for other Asian countries.

Manila Water is a joint venture between the giant Ayala Corp, two U.S. companies and the Japanese Mitsubishi Corp.

Manila Water loves to get foreign visitors to the shanty village of Alitaptap as its showcase on how water supply could be made affordable to poor communities.

"Before, all these people were unemployed," said Romeo Escober, chairman of the Alitaptap multipurpose cooperative, pointing to workers busy making parts for Manila Water's water distribution pipelines. "We hold Manila Water in high esteem because we have nine regular employees in the coop and they support 15 families working here."

But Jude Esguerra, executive director of the non-government Institute for Popular Democracy, said companies such as Manila Water use peoples' organisations to build the infrastructure and deliver water to poor communities, and then take over without compensating them. "What we need is a system where these communities could set tariffs and share the (water supply company's) dividends," he said. "What we have is a band-aid solution."

Manila Water is adamant that it is building a system that is economically viable and beneficial to communities, especially the poor ones.

"Very early in concession period, we made sure that we aligned our social and environmental goals with our business goals. This meant that we had to understand the communities we were supposed to serve and that we delivered the right services," said Aquino.

"To do that it was necessary to develop large infrastructure in these communities (such as) replacement of pipes and metering so that 24-hour water availability will be realised," he added.

K. E. Seetharam, water and urban development specialist at AsDB, said the relationship between civil society groups such as cooperatives and private water companies could be like that of a wholesaler and a retailer. "If (cooperatives) know how to organise themselves and if private water utilities like Manila Water are better (than public utilities), then they could be utilised as suppliers," he said. "But we have to understand that there will be a transaction cost for the end users (and) if this could be negotiated in such a way that it serves the people, then that is okay."

One problem in the poor communities is that most of the households occupy the land illegally. As a result, public utilities could not provide direct services to such households and private companies are reluctant to go against the law. What Manila Water did was provide a water pipeline up to the community perimetre and installed "mother meters". The community cooperative then organised individual pipelines into the households and collected the tariffs.

"We provide one metre for five families," explained John Raymundo, territorial business manager of Manila Water. He said the consumption reflected in the mother meter is divided into five, for each household.

Esguerra however said this system is a cop-out because Manila Water "lets the communities make the investments so that they don't have to fight the landowners."

Not so, said Aquino. He said the company meets with the local government units to get an assessment on how long the community will stay in the area. "When we learn that they will be there for a few years and the local government tells us it is okay, we proceed with the project."

According to Aquino, Manila Water has implemented about 600 projects that have benefited more than one million poor people. He pointed to a map of Manila where most of the eastern part of the city was covered in green. In 1997, he said, most of the areas were in red -- indicating that they were waterless communities.

"Only 26 percent of the area was green in 1997, now you can see that 98 percent of the area is green. The residents in these areas have 24-hour water supply," Aquino said.

Manila Water set up the 'Kabuhayan Para Sa Barangay' or livelihood programme that engages community-based cooperatives to provide services and products to the company. "This is a community-building mechanism designed to engage community-based coops to the MWSS supply chain," said Lyn Almario, sustainable development manager of Manila Water.

In Alitaptap, Manila Water helped the cooperative set up a printing press, creating employment for four people. The company places orders for its stationeries and T-shirt logos to the printing press.

"The business was set up by the homeowners' association and Manila Water gave us seed money for additional capital," said Joan Reyes, director of business affairs of the Alitaptap multipurpose cooperative. "We have 55 (coop) members and most of them have invested their money in this."

Escober said Manila Water gave a loan of 50,000 pesos (1,170 US dollars) and the cooperative now has a net worth of 1.3 million pesos (30,423 dollars).

On the shores of Laguna lake at the eastern fringes of the Philippines some of the poorest communities who live on houses on wooden stilts recently received piped water supply through the KPSB. The project is a joint venture between Manila Water and the Lupang Area Muslim-Christian Development Cooperative (LAMCDC) through a scheme similar to that of Alitaptap.

The local cooperative also set up a workshop to build parts for Manila Water's billboards and pipe joints.

Mike Salgado, chairman of LAMCDC, said their membership grew to 100 within six months after Manila Water gave them the water distribution contract for the community. He said water is distributed even to non-members of the cooperative, which now has assets worth almost one million pesos (23,400 dollars).

"We provide funding and training to our suppliers," said Almario. She said the cooperative buys materials from suppliers using purchase orders from Manila Water. "They don't have to lay out cash. It's like we have a guaranteed credit line."

"We are hoping that this will be the beginning of change because there is a chance for us to participate in the development of the community," said Al Pulleda, board member of LAMCDC. "This is a big beginning and I hope by next year there would be an improvement in our situation."

(*This story is being distributed by IPS Asia-Pacific under a communication agreement with the Asian Media Information and Communication Centre in Singapore, which produced it.)

(c) 2007 Inter Press Service