Two girls filling their water buckets. Credits: Friends of the Earth France, IPD Philippines.

The failure of water privatisation in Manilla

The water system in Manilla had for a long time suffered from major problems. The government-owned Metropolitan Waterworks and Sewerage System (MWSS) were managing the systems and were a hugely inefficient and unpopular government agency(4). To get loans to improve the system the authorities were put under pressure by the World Bank and other international institutions to privatise the water system. In 1997 Manila 's waterworks were privatised and the city was split up in to two areas. Mayniland Water Services, Inc., a joint venture between the Lopez family and Suez subsidiary Ondeo won the concession for the western zone(5).

All went well for a start, but after two years Ondeo failed to make the investments they had promised. Less than three years into the privatisation scheme, both water concessionaires sought for price adjustments owing to the depreciation of the peso. This gravely affected their capacity to service the loans they inherited from MWSS, which was brought about mainly by the Asian Financial Crisis and to an extent the El Nino or drought weather phenomenon. The government gave in by allowing price increases in 1999. Despite these accommodations from the government, Maynilad still had difficulties keeping the company afloat.(6)

Man at a public water-pump. Credits: Friends of the Earth France, IPD Philippines.

The system suffered from l ow water pressure and leakages. In six years the water prices increased with 400 %. Poor areas where the companies had promised to expand the network, were still without water. One million poor people in the whole city remained without water access, forced to buy water in buckets at 7-10 times higher price than for piped water. In October 2003 the water was contaminated and seven persons died of cholera and 700 had to be hospitalised for severe gastroentritis. The company has still not been held responsible for this health disaster. When the Suez CEO was asked this disaster by Friends of the Earth France in November 2003, at the occasion of the European Social Forum, he refused to answer and left.

In early 2001, Maynilad decided to stop its concession fee payments to MWSS. As a result of various disagreements, both MWSS and Maynilad sought the termination of the contract before an International Arbitration Panel in Paris, France. On November 7, 2003 the appeals panel rendered a decision denying both parties' claims for termination of the concession agreement. However, up to this date, the government and the private water firm remain trapped into a deadlock of messy litigations and lawsuits. Recently, the government bailed out the bankrupt water company through a debt-to-equity swap mechanism. Public money was thus used to rescue a private group. The general public and consumers, unfortunately, cannot participate in the on-going litigation because they are not part of the concessionaire agreement.(7)

Conclusion and comments
The world's largest water privitisation has failed to provide clean and safe water to Manilla's most needy communities. According to Mary Ann Manahan from Focus on the Global South, the private sectors failure in delivering potable water comes when the population it serves are poor. This failure stems from the fact that the private companies are organized to make profit rather than to fulfil a social responsibility of providing universal access to water and sanitation, which has been the traditional role of the State. The consumers are at the loosing end in the privatisation process, where people's rights to water subjugated to the "right" and might of private capital to profit from the business of water.

Young girls going for water. Credits: Friends of the Earth France, IPD Philippines.

Sébastien Godinot from Friends of the Earth France said: "Because of the privatisation failure, Suez wanted to pull out. But instead of asking Suez to pay the concession fees it didn't, the Government helped to rescue the company! Without radical changes of the contract, real public participation and a fight against corruption, this new strategy will not improve the situation. And it will increase the public Philippinian debt which is already huge."

He added: "Local population, despite many requests, have not been associated to the water management. The public private partnership, imposed in Manilla by the World Bank and the corrupted government, is a failure. The government should implement participative processes for water management, such as those successfully working in Dacca (Bengladesh), Port-au-Prince (Haiti) or Porto Alegre ( Brazil). These alternative models are the most democratic, the most effective and the cheapest ones".

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All main information and photos, except when referred differently, on this case was provided by Sebastian Godinot at Friends of the Earth France . Specifically footnoted information is researched by Linda Nilsson, Friends of the Earth Europe. Editorial work has been done by Linda Nilsson and Sebastian Godinot .

4. Manahan, Mary Ann B., Access to water and the role of IFIs, TNCs, and the States, Focus on the Philippines Number 45, 16 Dec, 2004, focus on the Global South,
5. Ibis.
6. Ibis.
7. Ibis.