Water Forum: Ayala's Carmen Bulk Water Supply Project

12 July 2006
MCWD Social Hall, Metro Cebu Water District
Cebu City, Philippines
[Organized by MEU, AGWWAS & PSI Asia-Pacific]

In September 2004, the Metro Cebu Water District/MCWD Employees Union (MEU) declared their strong opposition to the take-or-pay Carmen Bulk Water Supply contract, as proposed by the Ayalas. MEU cited several lopsided provisions of the draft agreement, which they described as a 'backdoor method of privatization':

- MCWD to TAKE OR PAY 50,000-60,000 cu m/day of treated water from the Ayala-Stateland consortium, whether or not this amount of water is actually sold by MCWD; however, contract is so stated such that there will NEVER be an instance where the consortium pays liability if it fails to deliver on the contracted amount;

- AUTOMATIC (usually upward) adjustment in water rates due to inflation, power costs, and other cost adjustments, but adjustments/changes due to factors which could pull down water rates (e.g., decrease in construction-based risks, savings) are still SUBJECT TO NEGOTIATION;

- A performance bond for construction security for ONLY ~2 YEARS required for the private proponent, vs a surety bond to cover ALL its undertakings for 25 YEARS required for MCWD in case of unfavorable changes in law or circumstances, MCWD is not provided any relief; but private proponent is safely cushioned with a proviso on the buy-out price more than adequate to cover a handsome return of investment;

- When the private proponent defaults, MCWD may assume all assets and LIABILITIES of the system; but when MCWD defaults, private proponent can take-over all or part of the operations, EXCEPT its LIABILITIES. Moreover, MCWD take-over may be occasioned by the simple failure to pay the monthly dues for allocated water; additionally, there is no fixed timeframe within which the take-over is to take effect.

- Moreover, the dislocation of the affected civil servants would not be unlikely nor farfetched.

Overall, MEU opposed the Carmen bulk water draft agreement because it was inimical to the interests of MCWD’s concessionaires (customers), a threat to MCWD’s own existence and the security of tenure of its employees.

(Read related paper at: http://www.tni.org/water-docs/waterdemocracyasia.pdf?, pp 58-59)

PSI Southeast Asia Subregional Secretary KATHERINE LOH welcomed participants to the July 2006 forum. Water Forum speakers were (L-R):

ATTY MICHAEL ENRIQUEZ, President, Freedom from Debt Coalition-Cebu;

VIOLETA CORRAL, Public Services International Research Unit (PSIRU-Asia);

ENGR ED BORELA, President, Manila Water Company Employees Union;

ENGR ARMANDO PAREDES, MCWD General Manager, discussed the status of the MWCD-Ayala negotiations -- Carmen project would be a 4-year BOOT; water priced at PhP 25.55/m3 for daily delivery of 28,000-39,000 m3; reduced hydrology risk; and other issues.

VIOLETA CORRAL raised the following issues:

- Carmen project is not a prudent expense since Ayala's water wouldbe 70% more expensive than MCWD water, cost of which would be passed on to consumers;

- At 68% System Recovery Rate, 32% of expensive Ayala water -- or ~PhP11 million/month -- would go down the drain, another cost to be borne by customers;

- Project costs include PhP700 million to build 30-km transmission pipeline, a cost that would be better channelled to repair leaks and reduce NRW, improve collection efficiencies, and hence increase water supply;

- Risky take-or-pay provisions, as in the Philippine power utility's deals with independent power producers, eventually led to the bankruptcy and privatization of the utility;

- EIA and social acceptability issues, including availability of raw water supply and other community water uses;

- Conflict of interest where World Bank's International Finance Corporation/IFC was MCWD transaction adviser, while at the same time holding 7.4% equity shares in Ayala's Manila Water Company;

- Undertake a full options approach, including looking into Public-Public Partnership (PUP) options between MCWD and local governments, to ensure that access to and control over water resources remain in public/community hands.

ED BORELA informed the forum of challenges faced by their union in the privatized Manila Water Co -- massive contractualization; Discrimination; No more security of tenure; Rduced income and benefits of workers; Exploitation; Union membership erosion; Unions are weakened or threathened.

Orientation Workshop on Benchmarking Philippine Water Districts & PUPs

24 October 2007, MCWD Social Hall
Metro Cebu Water District
Cebu City, Philippines
[Organized by AGWWAS]

Benchmarking is used to measure performance of a water utility through a set of technical, financial, social indicators. The ultimate goal is to improve quality and performance. If undertaken on a regular basis, benchmarking supports utilities in assessing own progress, and promotes accountability by making information available to public, decision-makers, regulators. Of the more than 500 water districts all over the country, only less than 200 have been benchmarked so far. Clearly, there is a need for all stakeholders to be able to contribute to the task of assessing the performance of water utilities in the Philippines.

As a key stakeholder, the Alliance of Government Workers in the Water Sector (AGWWAS) is committed to building quality public water services and can contribute more pro-actively to benchmarking activities. The whole-day orientation workshop aims to raise more awareness on benchmarking as a key management tool wherein workers can be able to participate and contribute more effectively to improve the performance of water districts.

AGWWAS and ENGR ARMANDO PAREDES, General Manager/GM of MCWD welcomed the participants of the forum.

VIOLETA CORRAL of Public Services International Research Unit (PSIRU-Asia) presented “What is Benchmarking & Initiatives in the Philippines and AsPac” which focused on key indicators, benchmarking networks and practical uses of benchmarking as a management and decision-making tool, and labor-management cooperation in benchmarking as a Public-Public Partnership (PUP) model. PUPs are new partnerships developed between public water operators, communities, trade unions and other key groups, without profit motive and on a basis of equality.

Key performance indicators include: Water supply coverage; Water availability; Consumption; Production per person; Unaccounted-for water; Connections metered; Operating ratio; Accounts receivable; Collection efficiency; Average tariff; Average capex over last 5 years/connection; New connection fee; Staff/1,000 connections. Efforts should be made to develop sustainability (or water resources management) and good governance indicators, among others.

Key benchmarking networks include: IBNET (International Benchmarking Network for Water and Sanitation Utilities), a global network set up by the World Bank in the late 1990s; OFWAT that International comparisons Australia, Netherlands, Canada, US; ADERASA in Latin America; Water Utility Partnerships (WUPs) in Africa; SEAWUN (Southeast Asia Water Utilities Network), set up in 2004, and SAWUN (South Asia Water Utilities Network), set up in 2007, both created under the 'Water Operators' Partnerships/WOPS' of Asian Development Bank/ADB.

As a practical management tool, for instance, through benchmarking activities undertaken by Asian Development Bank (ADB) in 1997 and 2002, ADB was able to conclude that Asian water utilities only performed ‘marginally better’ in 2002, and only in certain limited aspects:

• Customer satisfaction up;
• Water resources management improved;
• HRM generally better;
• Gains in service coverage & NRW minimal;
• Overall financial management seemed worse, i.e., revenues from tariff still not able to cover O&M costs, much less financing costs & capex;
• PSP concessions in Jakarta & Manila poor performers.

ENGR PABLITO PALUCA, Chair of PAWD Technical Committee (and GM of Dipolog City Water District), presented PAWD’s new project on “Benchmarking Philippine Water Districts & Critical Indicators” , which was initiated in 2006 through a questionnaire survey, and his proposal to make benchmarking a regular function of PAWD.

VICTOR CHIONG, AGWWAS National President, discussed “Workers as Key Stakeholders in the Water Sector & in Building Quality Public Water Services” and emphasized that workers are a key and largely untapped resource in expanding water services for all. Workers are close to the production and know a lot about how the services are run and what users’ needs are. Workers know about problems in running the operations. Workers will often have suggestions how to improve productivity and avoid bottlenecks. (Paper available at
http://www.adb.org/AnnualMeeting/2007/ngos/vchiong-presentation.pdf)

DR. BUENAVENTURA DARGANTES, Associate Professor of Socio-ecology of the Institute for Strategic Research and Development Studies/Visayas State University (VSU) in Leyte, Philippines, focused on “Water Resources Management & Key Indicators” and proposed WRM indicators that may be of interest to water districts. These include: Total actual renewable water resources; Water dependency ratio; Access to improved water sources; Water poverty index; Informational capacity.


Finally, ENGR ROMEO CALARA, PAWD President (and GM of Olongapo City Water District), offered his support and agreed in principle to undertake the joint PAWD-AGWWAS benchmarking initiative, as proposed by AGWWAS. (Read paper on this PUP benchmarking inititiative at: http://www.tni.org/water-docs/waterdemocracyasia.pdf?, pp 9-11)