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Groups dare Aquino: Scrap ‘unjust’ water contracts

By Christine F. Herrera | Jul. 01, 2013 at 12:02am
CIVIL society groups on Sunday demanded that President Benigno Aquino III rescind the “onerous and immoral” contracts with two private water companies after they were found to have passed on to consumers their corporate income taxes and operating expenses of P15 billion over the last five years.

“The two concessionaires, Maynilad and Manila Water, have effectively turned water service into a profitable business while consumers shoulder the burden of onerous charges and taxes,” said

Sonny Africa, lead convenor of the Water for the People Network (WPN).

“We demand that President Aquino rescind the contract with the two water firms now,” said Africa, who is also executive director of the private think tank IBON databank.

The Metropolitan Waterworks and Sewerage System, which oversees the operations of the concessionaires, declared the pass-on charges “grossly unjust” earlier last month, after the Office of the Government Corporate Counsel found them to be “illegal and without basis.”

Africa said from 2007 to 2011, Maynilad posted a profit of P17.1 billion while Manila Water earned P16.9 billion.

The group demanded an immediate refund from the two firms.

“The two concessionaires said they would contest the legal opinion and the MWSS resolution and if an arbitration is pursued, under the concessionaire agreement, the cost that will be entailed from the arbitration will also be passed on to consumers. How onerous and immoral can that get?” Africa told the Manila Standard.

“We opine that income taxes are not included in the term ‘Philippine Business Taxes’ nor are they considered as operation expenses that would be recovered from MWSS’ consumer base,” said the chief government counsel, Raul Creencia.

The two firms invoked Section 9.4 or the pass-on provision in the concessionaire agreement, arguing that corporate income taxes are covered by the term “Philippine Business Taxes.”

But Creencia said the phrase referred to indirect taxes such as the value added tax, the excise tax, the documentary stamp tax, the percentage tax and real estate taxes, not direct taxes such as corporate income taxes and operating expenses.

In a forum hosted by the WPN and attended by several civil society groups at the University of the Philippines over the weekend, MWSS acting chief regulator Emmanuel Caparas reiterated his position that the pass-on charges were grossly unjust.

“Allowing the concessionaires to pass on their income taxes to consumers is effectively giving the concessionaires a profit on an investment that they did not make,” Caparas said, affirming the MWSS resolution.

The group challenged President Aquino to heed the legal advice of the Office of the Government Corporate Counsel, especially since his appointed Cabinet secretaries Rogelio Singson and Rene Almendras were former executives of Maynilad and Manila Water.

Singson was president and CEO of Maynilad before being appointed Public Works and Highways secretary, Africa said.

Almendras, he said, was President Aquino’s former schoolmate in Ateneo and dubbed ‘the little president,’ and had also held various executive positions in several Ayala business interests aside from Manila Water.

“Malacañang has kept mum over the questionable practice of the water concessionaires, despite protests from water consumers,” Africa said.

Africa said the business groups involved in Maynilad and Manila Water were also among those who have cornered lucrative private-public partnership (PPP) projects offered by the Aquino administration.

For instance, he said, the Ayala group (Manila Water) clinched the first PPP project of the Aquino government, the Daang Hari-SLEX Link Road Project.

The Pangilinan group (Maynilad) and the Ayalas have also teamed up to bid for the P60-billion LRT 1 extension, the largest PPP of the Aquino administration, he said.
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