45(1) 207229, January 2008

A Tale of Two Concessionaires: A Natural

Experiment of Water Privatisation in
Metro Manila
Xun Wu and Nepomuceno A. Malaluan
[Paper received in final form, October 2006]

Abstract
In February 1997, Maynilad Water Services, Inc. and the Manila Water Company,
Inc. were awarded concession contracts from Manilas Metropolitan Waterworks and
Sewerage System (MWSS) and split between them the service areas in Metro Manila. In
the years thereafter, the paths taken by the two concessionaires diverged dramatically:
Maynilad became bankrupt and was turned over to MWSS, whereas Manila Water
has prospered and is now a listed company in the Philippine Stock Exchange. The
co-existence of two concessionaires in the same city offers a rare opportunity to study
the role of internal factors in the privatisation of urban water systems because the
effects of many important external factors, such as political support, regulatory
structure and unforeseen events, are effectively controlled. The findings suggest that
corporate governance, financial management and operations management of privatised
water utilities are among the most important internal factors that determine success
of water privatisation in developing countries.

Introduction efficiency improvement (Dosi and Easter,

2003). In addition, water privatisation was
The 1990s saw an unprecedented wave perceived as a means to end government
of water privatisation around the world. subsidisation by depoliticising water pricing;
Public water utilities failure to expand public water utilities often priced water and
service coverage and improve service quality sanitation services at below cost-recovery
prompted municipalities in many developing level, creating enormous financial burdens
countries to turn to the private sector for for governments in developing countries.
investment capital, technical expertise and The political environment during the decade

Xun Wu is in the Lee Kuan Yew School of Public Policy, National University of Singapore, 469C Bukit
Timah Road, Singapore 259772, Singapore. Fax: 65 6468 6746. E-mail: sppwuxun@nus.edu.sg.
Nepomuceno A. Malaluan is with Action for Economic Reforms, 40 Matulungin Street, Central District,
Quezon City, 1100 Philippines. Fax: +63 2 426 5626. E-mail: nepo@aer.ph.

0042-0980 Print/1360-063X Online

2008 Urban Studies Journal Limited
DOI: 10.1177/0042098007085108
208 XUN WU AND NEPOMUCENO A. MALALUAN

was highly favourable to water privatisation than half of the residents in these cities do
as pro-market politicians rose to leadership not have water connections (Hewett and
positions in many countries and international Montgomery, 2001). Inadequate urban water
financial institutions were actively promoting supply systems place a greater financial burden
market-oriented reforms in the developing on the urban poor, as a disproportionately
world through loans and technical assistance high percentage of poorer households lack
programmes (Hall et al., 2005). By the end of access to piped water (Johnstone et al., 2001;
2000, at least 93 countries had experimented Marvin and Laurie, 1999). Studies have shown
with water privatisation in one form or that unit costs for water from vendors (who
another (Brubaker, 2001). often supply to the urban poor) can be as
The exuberant enthusiasm for the water much as 10 times higher than for water from
privatisation, however, was soon subdued piped connections (Crane, 1994; Chogull and
by harsh realities marked by renegotiation, Chogull, 1996).
termination and cancellation of privatisa- The importance of access to safe drinking
tion contracts and projects. A World Bank water to poverty reduction is highlighted by
database on infrastructure revealed that, the stated intention of the Millennium Devel-
by 2002, 75 per cent of contracts for water opment Goal (MDG) to halve the number
privatisation in Latin America and the Carib- of people without safe water access by 2015.
bean had experienced either renegotiation Enormous financial resources are needed to
or cancellation (Gmez-Ibez et al., 2004). reach this ambitious goal; estimates from
In Asia, the rate of water privatisation has the World Bank early in the new century
slowed considerably since the Asian financial indicated that developing countries would
crisis, as a number of high-profile water pri- need US$60 billion for the water sector over
vatisation projects have been abandoned or the next 10 years (Haarmeyer and Coy, 2002).
cancelled due to disputes over water tariff It is clearly unrealistic to expect governments
increases (Hall et al., 2004). in developing countries to finance this devel-
Some critics have argued that water pri- opment entirely on their own. Private-sector
vatisation is ill-fated because the public participation will continue to be among the
benefits of water services are inherently few options available to municipalities in
incompatible with the profit motive of the many developing countries and especially to
private sector (Estache et al., 2001; Birdsall the increasing number of fast-growing small
and Nellis, 2002; Smith and Hanson, 2003). and medium-sized cities.
Others have held that water privatisation Meanwhile, despite the many criticisms
compromises access to water as a basic human levelled at water privatisation, no empirical
right and that it harms the welfare of the poor evidence has emerged to suggest that fund-
(Gleick et al., 2002; Scanlon et al., 2004). ing problems are so inherent in the water
Although arguments against water pri- supply sector as to pose insurmountable
vatisation have gained currency in recent barriers to privatisation. In fact, one recent
years, the urgency of the water crises that led study (Galiani et al., 2005) has shown that
to privatisations during the 1990s remains water privatisation reduced child mortality
unchanged to the present day: more than by 57 per cent in Argentina, with the largest
1.1 billion people world-wide lack safe gains in reduction experienced by the poor-
drinking water and 2.4 billion lack adequate est population. Although some research has
sanitation (Kessides, 2004). The situation is shown that efficiency was not significantly
especially acute for many rapidly growing different in private and state-run water oper-
small cities in developing countries: more ations (Estache and Rossi, 2002; Kirkpatrick
 WATER PRIVATISATION IN MANILA 209

et al., 2004), no empirical study has confirmed often more visible and thus more tractable
claims that private water companies are analytically than internal factors, because it
necessarily less efficient than their public is easier to obtain information on external
counterparts or that water privatisation factors than on internal factors, which may
hurts the urban poor. Given the importance not be readily available in the public domain.
of private-sector participation to the success Thirdly, statistical tools such as regression
of global efforts to alleviate inadequate and analysis may offer only limited insights on
unsafe water supplies, it is of paramount internal factors because localised peculiar-
importance to understand where, when and ities can be hard to quantify and to compare
how water privatisation could be successfully meaningfully.
implemented. The recent history of water privatisation in
The voluminous literature on water pri- Metro Manila presents a unique opportunity
vatisation offers little information about the as a natural experiment to analyse and com-
impact of privatised water utilities man- pare the effects of internal factors on the
agement practices on how privatisation success of privatisation efforts in an urban
has fared in developing countries. Studies context. When Manilas Metropolitan Water-
of previous water privatisation cases have works and Sewerage System (MWSS) was
typically focused on external factors such privatised in 1997, metropolitan Manila was
as political support, institutional structure, divided into two zones and concession con-
design of contract, transparency of bidding tracts were accordingly awarded to two com-
process, public perception and impacts of panies, Maynilad (West Zone) and Manila
unforeseeable events (Johnstone et al., 2001; Water (East Zone). Because the two conces-
Shirley and Menard, 2002). These factors, sionaires faced the same external factors
undoubtedly critical determinants in the for example, political support, institutional
success or failure of water privatisation, are structure, contract design, transparency of
nevertheless external conditions in the sense bidding process and locally shared unforeseen
that they are outside the control of privatised eventsthe analyst can concentrate on
water utilities. We argue here that privatisa- differences in internal factors and study the
tion involves transformation in ownership effects of these differences on the success and
structure and organisational culture within failure of water privatisation.
water utilities and that how the transformation The discussion continues by developing
is managed at the company level has a direct theoretical linkages between water privat-
bearing on the outcome of privatisation. isation and three internal factors: corporate
One plausible explanation for the lack of governance, financial management and
scholarly work on the impacts of internal operations management. An overview of the
factors on water privatisation is that it is meth- evolution of water privatisation in Metro
odologically challenging to assess what these Manila sets the stage for analysis and com-
internal factors are and how they function. parison of the performance of the two conces-
First, it is fairly difficult to disentangle the sionaires after privatisation, in terms of how
effects of internal factors from those of ex- differences in internal factors have contri-
ternal factors, as they are often intermixed buted to the different paths that they took
and shaped by particular conditions, such and the outcomes they experienced. The
that case studies detailing water privatisation final discussion summarises important re-
in a specific locality cannot usefully gener- sults of the analysis and addresses their
ate definite conclusions about the effects of implications for water privatisation policy
internal factors. Secondly, external factors are and for innovation in public water utilities.
210 XUN WU AND NEPOMUCENO A. MALALUAN

Internal Factors and Water (Dyck, 2001). Nestor (2005) observes that newly
Privatisation: Theoretical Linkages privatised companies with a widely dispersed
body of owners may fall prey to managerial
Because privatisation of public services such opportunisma problem that can become
as water utilities entails complex changes in especially pronounced in developing coun-
economic, social and even political structures, tries where market mechanisms for corporate
the process is unquestionably shaped by control have not become well established. In
various external factors such as political many transition economies, weak corporate
environment and regulatory structures. Yet governance has been exploited to loot state
privatisation also involves transformations resources through the privatisation process
in ownership structure, organisational cul- itself (Black et al., 2000).
ture and operations management; how such Some unique features of water privatisa-
transformations are managed, at the com- tion pose particular challenges to corporate
pany level, has a direct bearing on the out- governance. First, because water is perceived as
come of privatisation. In the present case, an essential good, privatised water companies
some theoretical linkages can be made are often subjected to close scrutiny from the
between internal factors (such as corporate public, who are likely to expect high standards
governance, financial management and of corporate governance. Aguas Argentinas
operations management) and the success of SA (AASA), the private water company in
water privatisation. Buenos Aires, experienced this firsthand:
the companys reluctance to employ compet-
Corporate Governance itive bidding in selecting contracts and its
Corporate governance refers to the distri- refusal to share information about its con-
bution of rights and responsibilities among tractors bred public distrust and growing
different participants in a corporation (the hostility, not only towards AASA itself but
board, managers, shareholders and other also towards the Argentine government and
stakeholders) and the rules and procedures regulatory agency (Bosman, 2005). Because
that have been adopted for making deci- consumers are such important stakeholders
sions on corporate affairs (OECD, 1999). in privatised water utilities, these companies
Three fundamental principles of corporate must adopt a broad concept of corporate
governance are accountability, transparency governance that recognises public satisfaction
and responsibility. Improvements in cor- as a primary goal.
porate governance are an important mechan- Secondly, the very nature of water supply
ism by which privatisation may enhance technology (which involves high fixed capital
performance. costs and increasing rate of return) determines
For example, state-owned enterprises that water utilities are natural monopolies
(SOEs) often suffer from a principalagent whether in governmental or in private hands.
problem whereby managers cannot be easily Thus market competition as an external
held accountable for their actions. Privatised mechanism for effective corporate control is
corporate governance offers the prospect of almost non-existent in the water sector and
tighter control of employee performance by regulatory agencies are the arbiter of last
linking job tenure directly to performance resort. However, regulatory agencies often
and accountability. Yet experiences in pri- suffer from information asymmetry and their
vatisation in recent decades have shown effectiveness may be further reduced by the
that transfer of ownership cannot guar- general weakness in regulatory capacity found
antee improvement in corporate governance in many developing countries.
 WATER PRIVATISATION IN MANILA 211

Thirdly, because of the substantial finan- is expensive (Ozkaya and Askari, 1999). In
cial and human resources needed to operate many developing countries where a domestic
urban water systems, privatised water utilities capital market is not well established, the
are often formed as joint ventures among only accessible sources may be foreign, a very
several partners, typically some combination expensive option because of the substantial
of domestic and foreign interests. Although amount of risk involved.
a strategic alliance among these different Uncertainty regarding regulatory actions
partners is necessitated by political, legal, and consumers sensitivity to tariff increases
financial and technical considerations, the further heighten the risks involved in water
potential for conflicts of interest among them privatisation projects. Haarmeyer and Mody
cannot be underestimated. Bad corporate (1997) describe the evolution of private finan-
governance can quickly lead to internal cing in the water sector as a three-step process.
conflicts that may bring out the worst in all The first step is limited-recourse financing,
involved (Bamford and Ernst, 2005). which is typically expensive because of risks
The fourth challenge confronting privat- within the sector as well as uncertainties asso-
ised water utilities is that water privatisation ciated with early development stages. The
often involves conglomerates that control second step is financing through returned
many subsidiaries through a complex web earnings, once a stable set of rate-paying
of pyramiding and cross-holding.1 Directors customers has been achieved and confidence
within these groups often sit on each others in the regulatory process has grown. The third
governing boards. Resulting effects include step is bond financing, much cheaper than
little independent scrutiny of individual limited-recourse financing but only available
company management and considerably for utilities with a track record of stable re-
weakened shareholder discipline (Nestor, venue sources. Privatised water companies
2005). Controlling shareholders could poten- might become financially stressed in the early
tially expropriate the benefits of minority stages of development, not because they fail
shareholders and other stakeholders through to achieve efficiency gains but because such
related-party transactions that are likely to gains fall short of covering the expensive
be detrimental to the operations of the pri- limited-recourse financing. Prudent financial
vatised water utilities as well as to the public management from the outset is thus a key
interest. to the success of the water privatisation in
developing countries.
Financial Management In preparing bids for water privatisation,
A primary consideration for water privat- potential bidders may suffer from the so-
isation in developing countries is the need called winners curse by underestimating the
to attract private investments into the water effects of potential risks such as political risk,
sector, but these private investments often currency risk and financial risk. This may
do not come cheaply. Newly privatised water improve the prospects of winning conces-
companies require substantial amounts of sions, but such bids may become unsustain-
capital for settling labour issues as well as able when unforeseeable setbacks arise. Water
for system renovation and expansion, and privatisation in Buenos Aires, for example,
they must rely heavily on capital markets had been seen as a huge success until, in the
to finance the deficit. However, because wake of the convertibility crisis between 2000
newly privatised companies are not known and 2002, the privatised utility found itself
in financial markets and carry the baggage heavily indebted but unable to attract fresh
of past public governance, access to credit capital to cover contractual obligations.
212 XUN WU AND NEPOMUCENO A. MALALUAN

Operations Management customer-focused companies commensurate

Water privatisation involves two crucial with their private-sector status, such legitim-
activities at which privatised water utilities acy could be challenged because of the natural
rarely excel: the transformation of a public monopoly that characterises water utilities
utility into a private company and the man- and because of information asymmetry.
agement of public expectations. Employees Privatised water companies can build cor-
in public water utilities, as in other SOEs, porate legitimacy through disclosure to
are often guaranteed life-long employment customers and image management (Ogden
and thus are not motivated to improve per- and Clarke, 2005). In many developing coun-
formance. Developing an efficient incentive tries, the most likely allies in support of a
system is an essential part of organisational privatised water utility would be the urban
restructuring in newly privatised firms poor who do not have water connections.
(Ozkaya and Askari, 1999). Employees in the They often pay several times more than con-
public sector are also often slow in respond- nected residents while suffering from the
ing to customers demands because there is worst service quality (Johnstone et al., 2001).
almost no competition to supply the services Privatised water companies can significantly
they provide. Concessionaires ability to build strengthen their corporate legitimacy by
an organisational culture that promotes a aligning their interests with those among
commercial, customer-driven working envir- the poor who strongly demand coverage for
onment is essential to the success of the underserved communities.
transformation from public to private water In the following two sections, we show that
company. water privatisation in Manila offers a rare
Management of public expectations is opportunity as a natural experiment to study
of critical importance to a privatised water the effects of these internal factors on water
utilitys survival. Because water is perceived privatisation.
as essential good, there is often controversy
over whether the private sector is fit to operate Water Privatisation in Manila
the water system. In addition, public water
utilities generally keep prices below costs; the Comprised of 12 cities and 5 municipalities,
expectation usually is that privatisation will Metro Manila has 11 million inhabitants,
not change that. Although this is virtually about 13 per cent of the total population of
always an unrealistic notion, how to contend the Philippines, and is densely populated, with
with imperatives for price increases in the about 16 000 persons per square kilometre.
face of unrealistic public expectations is a Privatisation of water services was first
challenging task. A recent World Bank study proposed in the mid 1990s when MWSS,
discovered that most water and sewerage pro- the state-owned water utility responsible for
jects that were cancelled had been confronted providing water and sanitation for Metro
with conflicts between price increases and Manila, had become unable to expand
difficulties in collecting from consumers coverage adequately to a rapidly growing
(Harris et al., 2003). population. By 1996, MWSS was only able to
Two useful strategies for dispelling opp- supply an average of 16 hours of water per
osition to water privatisation are to build day to two-thirds of its coverage population.
corporate legitimacy and to establish strategic Its efficiency as measured by non-revenue
alliances. Although concession agreements water (NRW)2 and number of staff per 1000
may contain mandates that privatised water connections was the lowest among major
companies must establish their legitimacy as Asian cities (see Table 1).
 WATER PRIVATISATION IN MANILA 213

Table 1. MWSS service compared with other major Asian cities, 1996
Non-revenue
Water Water coverage water (NRW)
Population availability (percentage of (percentage of Staff/1000
City (millions) (hrs/day) population) production) connections
Manila 10.6 16 58.7 63 9.8
Singapore 3.0 24 100 7 2.0
Hong Kong 6.3 24 100 36 2.8
Seoul 10.6 24 100 35 2.3
Kuala Lumpur 1.4 24 100 36 1.4
Bangkok 7.3 24 82 38 4.6
Source: Second Water Utilities Data Bank, Asian and Pacific Region, Asian Development Bank,
October 1997.

The urban poor were hurt the most by International financial institutions were
MWSSs ineffective and inefficient oper- closely involved in the privatisation process
ations. According to a 1995 household survey, from the very beginning. In 1995, the Asian
poor households that relied on private water Development Bank (ADB) provided a tech-
vendors paid prices up to 13 times higher nical assistance (TA) grant amounting to
than the rates for MWSS household water US$582 000 as a part of its UmirayAngat
connections (David and Inocencio, 1998). Transbasin Project, to assist MWSS in pro-
Furthermore, with water and sanitation ser- moting privatisation activities. The Inter-
vices priced below costs, MWSS had to rely national Finance Corporation (IFC) of the
on periodic government subsidies to service World Bank acted as the lead advisor for
its debts, placing a heavy financial burden to the design and the implementation of water
the government. privatisation.
Water privatisation thus appeared to be A critical feature in the design of water
an attractive solution to the looming water privatisation in Manila was that the service
crisis. The Ramos administration believed that areas in Metro Manila were divided into two
water privatisation could improve operations zones (see Figure 1), which according to the
efficiency, raise financial resources for water bidding rule could not be operated by a single
investments and end the need for government concessionaire. There were three reasons for
subsidies (David, 2001). In 1995 the Water the split: it gave regulators more leverage in
Crisis Act was enacted, giving the president their negotiations with concessionaires; it
the authority to privatise MWSS within one provided opportunities for benchmark com-
year. The government wasted no time in laying parisons between the two zones; and, the
the groundwork, which was closely patterned arrangement served as a safety valve, such
on the example of Buenos Aires. The water that if one concessionaire got into financial
tariff was increased by 38 per cent in August trouble, the other concessionaire could take
1996 in anticipation of pressures for an in- over (Dumol, 2000).
crease during the process of privatisation; in In January 1997, in what has been known
the meantime, the MWSS labour force was as the worlds largest water privatisation deal,
cut by 30 per cent. Both strategies helped to competitive bidding was held to privatise
boost private-sector interest in participating MWSS. Four consortia submitted bids for
in water privatisation (Dumol, 2000). both the East and West Zones. In accordance
214 XUN WU AND NEPOMUCENO A. MALALUAN

Figure 1. Service areas of Maynilad and Manila Water

Source: MWSS.
 WATER PRIVATISATION IN MANILA 215

with the rules for the bidding, the Maynilad became a major source of tension and con-
Company, a joint venture by Suez and Benpres troversy soon after privatisation because
Holding (controlled by the Lopez family), was both the level of ADR and the validation of
awarded the concession contract for the West various assumptions for computing rates
Zone; the Manila Water Company, Inc., a joint of investment were subject to regulatory
venture by Ayala, United Utilities and Bechtel, discretion.
was awarded the East Zone. Both concession Another critical feature of water privat-
contracts were to last 25 years and the targets isation in Manila was the extremely low
for improvement in service coverage, water bids offered by the two winning consortia
quality, service quality and reduction in especially by Manila Water, which proposed
NRW were specified in the contracts. The two a base rate amounting to only one-fourth
concessionaires in combination were expected of MWSS tariffs at the time of bidding (see
to increase water supply coverage from the Table 2). In fact, the bid was so low that offi-
then-current 67 per cent level to 85 per cent by cials administering the bidding process had
2001 and to 96 per cent by 2006 and beyond. to confirm with Manila Water that it was
In addition, the two concessionaires were to indeed the water tariff that was meant, and
pay roughly US$1.2 billion in concession fees3 not the discount (Dumol, 2000). The overall
over the 25-year period to service the exist- impression among the policy-makers was
ing debts of MWSS and to finance the oper- that the generally low bids reflected both
ations of the MWSS Regulatory Office, which the inefficiency in MWSS and the private
had been established to oversee the imple- sectors confidence. In retrospect, although
mentation of concession contracts. the low bids ensured an easy sell of the con-
The concession contracts also specified cession agreements to water consumers in
tariff adjustment mechanisms. Three grounds Metro Manila, they planted the seeds for
were deemed acceptable for rate adjustments: public outcry about rate increases in the years
inflation, extraordinary price adjustment following the privatisation process.
(EPA) and rate-rebasing. The concessionaires Two unforeseen events deeply under-
would be allowed to adjust base rates auto- mined the financial models used by the two
matically according to the consumer price winning consortia in the bidding process,
index. Tariffs could be adjusted annually to making them grossly inaccurate. The first
recoup the financial effects of certain events was that just after the concessions were
unforeseeable to the concessionaires, such granted, the Angat Reservoir, from which
as sharp devaluation and changes in laws and 98 per cent of Manilas water supply is drawn,
regulations. A rate-rebasing exercise would be had experienced an unprecedented drought;
conducted every five years so that return on the amount of water available to the two con-
investment, or appropriate discount rate cessionaires decreased by 30 per cent. The
(ADR), would not exceed a fair return. The second was the Asian financial crisis under
original intention of rate-rebasing was that which currency devaluation almost doubled
the concessionaires would be allowed to MWSSs dollar-denominated debt service
reap efficiency gains during the interval of burden. The financial obligation for the two
two consecutive rate-rebasing exercises; rate concessionaires increased accordingly, as the
adjustments every five years would ensure concession agreements had stipulated that
that consumers also shared the benefits of MWSS debt service was to be paid for from
the efficiency improvement. Unfortunately, concession fees.4 The financial crisis also made
tariff adjustments through rate-rebasing it more expensive for the concessionaires to
216 XUN WU AND NEPOMUCENO A. MALALUAN

access the financial market for their capital Not surprisingly, the low tariffs that were
investment projects, because of the sudden to be achieved through water privatisation
jump in risk premiums. proved too good to be true (Fabella, 2006);
tariffs began to rise gradually through 2001
Table 2. Bids received and winning bids and accelerated after October 2001, when a
Bid contract amendment was granted by the
Pre-privatisation rate 8.56 Regulatory Office (see Table 3). In the public
eye and among civil society groups, the
West zone
government had been perceived as fairly
AyalaInternational Water 2.5140
accommodating to the two concessionaires
BenpresLyonnaise des Eaux 4.9688
(Maynilad) Winning bid
demands. A foreign currency differential
AboitizCompagnie Gnrale des 4.9941 adjustment (FCDA) was granted to allow the
Eaux concessionaires to recover automatically from
Metro PacificAnglian Water 5.8738 the foreign currency losses at an accelerated
International rate; also, the appropriate discount rate
East zone (ADR) was adjusted significantly upwards
AyalaInternational Water (Manila 2.3169 in the rate-rebasing process held in 2002. In
Water) Winning bid addition to accelerated recovery of foreign
AboitizCompagnie Gnrale des 5.5209 currency losses and higher ADR, targets
Eaux for expansion and NRW were also adjusted
Metro PacificAnglian Water 5.6638 downwards in the contract amendment so
International that the two concessionaires could reduce
BenpresLyonnaise des Eaux 6.1275 their capital expenditure requirement in the
(Suez) early years of operation.
Note: bids in Php.

Table 3. History of tariff rates before and after water privatisation

Average base tariff Average all-in tariff a
Manila Water Maynilad Manila Water Maynilad
Pre-privatisation 8.56 8.78
Post-privatisation
1997/98 2.32 4.96 4.02 7.21
1999 2.61 5.80 4.37 8.23
2000 2.76 6.13 4.55 8.63
2001 2.95 6.58 4.78 9.17
2002 4.51 11.39 9.37 19.92
2003 10.06 11.39 13.38 19.92
2004 10.40 11.39 14.00 19.92
2005 13.95 19.72 18.55 30.19
2006 14.94 21.12 19.73 32.34
a
All-in tariff = base tariff + CERA (currency exchange rate adjustment) + FCDA (foreign currency
differential adjustment) + EC (environmental charge) + VAT (value added tax).
Note: tariff rates in Php per cubic metre.
Source: MWSS Regulatory Office.
 WATER PRIVATISATION IN MANILA 217

These substantial rate increases and lowered the East Zone was selling at a huge discount
targets granted by the Regulatory Office off the pre-privatisation rate, and it has been
nevertheless failed to prevent Maynilad from profitable ever since. In 2004, Manila Water
descending into bankruptcy in 2003. The firm posted net income of Php 1.335 billion. On
never made a profit during its eight years 18 March 2005, Manila Water was listed on
in operation. At the start of its concession, the Philippine Stock Exchange as the first
Maynilad had targeted a reduction in NRW IPO in the Philippines after the Asian finan-
from 64 per cent in 1997 to 31 per cent in cial crisis.
2001; instead, NRW rose to 69 per cent, and,
as a result, the volume of billed water was
only half of the target level. Maynilad stopped Internal Factors and Water
paying its concession fee in April 2001, despite Privatisation in Manila: Maynilad
the numerous rate increases that had allowed vs Manila Water
it to recover foreign exchange rate losses
Corporate Governance
due to the Asian financial crisis. The unpaid
concession fees had accumulated to over A striking feature of corporate governance
Php 6.8 billion by the end of 2003, forcing in the Philippines is the concentration of
MWSS to assume short-term loans to service economic power in an extremely small
the debts. In December 2002, Maynilad filed number of family conglomerates. The largest
a notice of termination of its concession family conglomerate controls 17 per cent of
contract, blaming the government for the the nations total market capitalisation; the
firms difficulties in sustaining business in largest 10 families control more than 50 per
the West Zone and seeking reimbursement cent (Wu, 2005). The interlocking nature of
of more than US$303 million that the firm corporate control within these conglomerates
claimed to have invested. Bankruptcy was presents special challenges for discipline in
formally declared in November 2003, after the corporate sector (Saldana, 2001). Two
the international arbitration panel ruled in of the three largest of these family conglo-
favour of MWSS. Court documents show merates, Lopez and Ayala, became involved
that Maynilad had accumulated unsecured in the water privatisation in Manila. Lopez
liabilities of Php 17.4 billion against recov- controlled Maynilad through Benpres Hold-
erable assets of only Php 2.4 billion. In 2005, ings, a publicly listed holding company, and
Maynilad was turned over to MWSS under a Ayala controlled Manila Water through the
so-called debt-for-equity exchange, in which Ayala Corporation, another publicly listed
Benpres relinquished its shares to MWSS pure holding company. Both conglomerates
and other creditors in exchange for unpaid have used pyramiding and cross-holding to
concession fees and debts. control business interests in real estate, bank-
Manila Water took a completely different ing, construction, telecommunication and
path. Although its bids seemed to be un- electricity production and distribution.
realistically low at the outset and even more The involvement of multinational water
so in light of the unanticipated events that companies in water privatisation in Manila
followed, and although it missed some key added another dimension of complexity to
targets in the early years after privatisation, the corporate governance of the two concession-
company performed well financially. Its NRW aires. Strategic alliances with multinational
was reduced from 58 per cent in 1997 to 35 per water companies were considered key induce-
cent in 2005. Remarkably, the company had ments for Lopez and Ayala to participate, as
begun to make a profit by 1999, when water in neither had technical expertise in operating
218 XUN WU AND NEPOMUCENO A. MALALUAN

urban water systems. The possibility arose, Maynilads computers were purchased from
however, that problems might develop from IBM France, an affiliate of Suez. Compared with
multinational partnerships, owing to differ- Manila Water, the East Zone concessionaire,
ences in management styles and corporate Maynilad spent, per employee, 80 per cent
cultures. A more important consideration was more on computers (Diokno-Pascual, 2004).
that their interests might not always be aligned, Table 4 shows comparatively higher operating
especially likely insofar as the participating costs for Maynilad on almost all categories; the
companies all had other subsidiaries and exception, utilities cost, is due to higher pump-
affiliates whose interests might in turn be ing requirements for Manila Waters service
affected by operational decisions made by the area. It is especially curious that Maynilads
two concessionaires. operating costs (see Table 5), especially non-
The concessionaires responses to these personnel operating costs, actually increased
challenges differed markedly. In Maynilad, dramatically while its financial woes were
contracts for services and consultancies went worsening; one would expect to see exactly the
largely to Suez and Benpres, as well as to their opposite in a financially distressed company.
subsidiaries or affiliates. For example, a And related-party transactions led to more
management consultancy contract went to than these high operating expenditures: they
Lyonnaise des Eaux Philippines (LDEP), a aggravated tensions between the two partners
subsidiary of Suez; a programme management (Benpres and Suez) that had plagued the
contract went to Safage Consulting and water privatisation initiative from the very
Montgomery Watson, both affiliates of Suez; beginning.5
service contracts went to First Philippine Manila Water, in comparison, has main-
Balfour Beatty and to Philippine Steel tained an arms-length relationship with
Fabricators, Inc., both subsidiaries of First subsidiaries of Ayala Corporation and other
Philippine Holdings Corporation, which is partners in the joint venture. It has outsourced
a subsidiary of Benpres Holdings. The size to some 75 contracting companies much of
of such contracts was often substantial. For its work for replacing outdated water mains
example, in 2001, when Maynilad decided to and repairing leaks; only one of those is
stop paying its concession fee because of heavy affiliated with Ayala Corporation. Manila
indebtedness, 11 French consultants were Waters more successful practices in corporate
reportedly paid Php 168 million, of which governance certainly have not gone unnoticed:
Php 110 million was for consultancy services in 2005, Asiamoney voted it the best-managed
(Santiago, 2002). company in the small capital category.
Because related-party transactions were Although a private water companys
shielded from competitive bidding, Mayn- management determines the quality of its
ilad incurred exorbitant costs. For example, corporate governance practices, the public

Table 4. Operating costs, Maynilad and Manila Water, 2000

Manila Water Maynilad
Average annual staff wage (Php) 304 673 403 674
Utilities cost (Php/cubic metre billed) 0.37 0.15
Services (Php/cubic metre billed) 0.23 0.26
Chemicals (Php/cubic metre billed) 0.13 0.17
Materials and supplies (Php/cubic metre billed) 0.13 0.17
Source: MWSS Regulatory Office.
 WATER PRIVATISATION IN MANILA 219

Table 5. Comparison of costs in Maynilad and Manila Water

OPEXa/BWVb Personnel cost/BWV Non-personnel cost/BWV
(Php per cubic metre) (Php per cubic metre) (Php per cubic metre)
Manila Water Maynilad Manila Water Maynilad Manila Water Maynilad
1997 7.20 6.43 4.10 4.93 3.10 1.50
1998 6.15 5.15 2.64 4.79 3.50 2.36
1999 5.12 7.03 2.33 4.65 2.78 2.38
2000 4.79 6.70 2.17 4.17 2.63 2.53
2001 4.52 7.20 1.87 3.48 2.65 3.72
2002 5.06 9.47 2.33 4.30 2.73 5.17
a
OPEX: operating expenditure.
b
BWV: billed water volume.
Source: MWSS regulatory office.

sector has ample opportunities to influence (and with weak regulatory capacity as well),
corporate governance practices through the it also offered the concessionaires a yardstick
bidding process, regulatory actions and asset for assessing and containing the potential
ownership. Government officials guiding negative impacts of related-party transactions.
the bidding process would be wise to pay Perhaps the most important benefit was that
careful attention to each bidders corporate the information available through benchmark
governance practices, as these could be an competition helped to dissipate the publics
indicator of how that bidder might perform anxiety in dealing with tariff increases.
if awarded the contract. Government can also
include good corporate governance practices Financial Management
in concession agreements. Mark Dumol, a The financial models used by the two conces-
government official who was extensively sionaires for the bidding in early 1997 were
involved in the bidding process in Manila, prepared at a time when foreign capital was
has particularly emphasised the potential of pouring into the Philippines, begging for
utilising regulatory tools to constrain bad investment opportunities. The Asian financial
corporate governance practices: crisis abruptly and completely changed the
landscape that the two new concessionaires
If I can rewrite the privatization rules, I confronted. Easy credit was no longer avail-
would put in tougher provisions against the
able and creditors had become extremely
shareholder-related companies, especially
the foreign partners, making a quick buck meticulous in the due-diligence process.
from transactions with the local concession- Manila Water made some critical ad-
aire company (Landingin, 2003). justments to its financial management in
response to the crisis. First, it focused on
In retrospect, benchmark competition estab- domestic lenders for capital expenditure
lished by having two concessionaires seems by leveraging on Ayala Corporations good
to have worked from the perspective of the reputation and successfully settled for small-
public. Having two concessionaires oper- size loans from several local banks, starting
ating in the same city and subject to the same at a level of about US$20 million in 1998
political environment not only helped the and gradually increasing in cumulative levels
Regulatory Office to overcome the information to US$25 million in 1999, US$55 million in
asymmetry associated with water privatisation 2000 and US$67 million in 2001. Secondly,
220 XUN WU AND NEPOMUCENO A. MALALUAN

it slowed down its capital expenditure con- capital expenditure has increased significantly
siderably as compared with the original bids. since 2002 (Figure 2), which should help it to
Although this resulted in Manila Waters fail- achieve its targeting in the years to come.
ure to achieve some goals in the early years, the The same prudence in financial manage-
slowdown may have been a sensible strategy ment is not evident in the case of Maynilad.
for protecting the company against substantial It focused on immediately securing a huge
financial risk before it could use less expensive US$350 million term loan from the Asian
means of financing. Thirdly, Manila Water Development Bank, European Investment
targeted the areas that were most likely to pro- Bank and a syndicate of foreign commercial
duce financial improvements with a limited banks with the participation of COFAGE as
amount of capital expenditure, such as innov- political risk insurer, for its capital expenditure
ative approaches in reducing NRW. projects. This strategy failed as the huge bor-
Manila Waters cautious approach to finan- rowing proved to be very difficult to close. The
cial management paid off. It is remarkable prospective long-term lenders set stringent
that the company was able to make a profit as conditions and only initially agreed to a
early as 1999, when the water in East Zone was US$100 million bridge loan.
still selling at a significant discount compared While this should have allowed the com-
with the pre-privatisation level. Small but pany to make strategic capital investments to
well-targeted capital expenditure right after improve financial performance, the anticipated
privatisation allowed the company to solidify opportunities never materialised. Despite
its bottom line, enabling it to secure less ex- substantial capital expenditure, Maynilad was
pensive financing later on. Manila Waters very slow to attend to some critical aspects in

Figure 2. Capital expenditures, Manila Water and Maynilad

Source: MWSS Regulatory Office.
 WATER PRIVATISATION IN MANILA 221

improving its financial standing. For example, Manila Water management viewed them as
until 2004 Maynilad did not have a database invaluable and indispensable resources for
that could provide area-specific estimates of building a strong new company. Rather than
water losses due to theft versus losses due relying on imported talent, Manila Water
mainly to the bad state of pipes and inefficient sent these veteran employees abroad for
metering (Esguerra, 2006). In the meantime, training and exposure to relevant operational
the negotiation for the full-term loan became environments (Chotrani, 1999). Similarly, the
protracted and the large capital investment companys middle and senior management
without resulting operational efficiencies led positions were mostly staffed by former
to more accumulated financial losses that MWSS employees, with only a very few top
eventually bankrupted the company. In March positions filled by representatives seconded
2003, Maynilad defaulted on its payment of from Ayala and its foreign partners. The
the bridge loan and closure of the term loan employee-retention strategy took hold:
has inevitably fallen through. more than 5 years after privatisation, 95 per
cent of Manila Water personnel were former
Operations Management MWSS employees (UTCE and Japan PFI
The two concessionaires jointly inherited a Association, 2004).
highly centralised organisational structure Manila Water also adopted several innov-
that retained some of the common charac- ative approaches in operations management
teristics of state-owned utility companies to target NRW. Although improved corporate
in many developing countries. Most MWSS governance practices and prudent financial
employees were accustomed to a system management helped to control operating
that was rule-based and procedure-driven. costs and capital expenses, a key to the com-
Consequently, they performed their jobs panys financial success was its persistent
with little concern for effectiveness and effort towards reducing NRW, which has
efficiency (Beer and Weldon, 2000a). To directly contributed to the revenue increase.
overcome the difficulties of transforming a Within less than a decade of privatisation,
public utility into a customer-driven private Manila Water reduced NRW significantly,
water company, Manila Water developed from 58 per cent to 35 per cent of former levels,
strategies centring on a few core objectives: to whereas in the West Zone NRW increased
build a corporate culture focused on honesty, from 64 per cent to 69 per cent (see Figure 3).
effective performance and customer service; This dramatic success was mainly due to two
to create a new organisational structure with innovations in its operations management:
a clear chain of responsibility through de- territory management and the Water for the
centralised decision-making; to alter work Community programme.
procedures towards better communication Territory management, a part of Manila
and co-operation; and, to establish a reward Waters management decentralisation initi-
system aligning pay with responsibility and ative, partitioned its service areas in the East
results (Beer and Weldon, 2000b). Zone into smaller and more manageable
A hallmark of Manila Waters approach clearly defined territories. The East Zone was
to these objectives was its effort to instill divided into seven business areas, which were
trust and confidence in former MWSS em- in turn sub-divided into a total of 43 oper-
ployees, which was backed with sufficient ational districts, termed demand monitory
retraining and support. Instead of treating zones (DMZs). Each DMZ had approximately
former MWSS employees as a collateral 10 000 water connections and was sub-divided
liability in securing the concession contract, into several district metering areas (DMAs),
222 XUN WU AND NEPOMUCENO A. MALALUAN

Figure 3. Non-revenue water (NRW), Manila Water and Maynilad

Source: MWSS Regulatory Office.

each servicing 5001000 connections. Each The Water for the Community programme
DMA was to be managed by a territory team (Tubig Para sa Barangay), begun in 1997,
consisting of a territory business manager, focused on extending water supply services to
DMA officers, meter consumption analysts, areas containing numerous clusters of lower-
site officers and service providers. The terri- income families. Under this programme,
tory teams would be responsible for customer several households (typically two to five) can
services, monitoring and control of NRW, share one connection and thus split its cost
and new service development; they also were of consumption among them. Where such
empowered to make decisions pertaining to an arrangement is not feasible, one bulk con-
their customers water and wastewater needs, nection is provided to the whole community
funding and implementation. Because of (up to 100 or more households) and costs of
this clear tiered division of responsibilities, connections are shared by all. By 2005, more
evaluation and compensation of employees than 500 projects in the East Zone had been
and managers could be geared to quality of completed under the programme, benefit-
performance. One improvement resulting ing approximately 850 000 people in poor
from this structure was quicker response to communities (Manila Water, 2005). A unique
customer demand. Within a few years of its feature of the initiative is that it brings water
inauguration, the average time to repair leaks only to the edge of a community, next to a main
was reduced to 4 days in Manila Waters East road, where shared meters for a group of
Zone (compared with 11 days in Maynilads households, or the entire communitys bulk
West Zone) and 97 per cent of customer ser- meter, can be positioned (see Figure 4). Water
vice complaints were communicated and is then billed at the volume passing through
resolved within 10 days (UTCE and Japan PFI these meters at the community entry point;
Association, 2004). The territory management it is the responsibility of the community to
system remains in operation today. distribute the water from thence to individual
 WATER PRIVATISATION IN MANILA 223

Figure 4. Service expansion model for the Water for the Community programme at Manila Water
Source: UTCE and Japan PFI Association (2004).

households and to protect against leakage and organisations and foreign government donor
illegal connections. Manila Waters service organisations concerned with supplying
connections under Tubig Para sa Barangay water to the poor.6 The success of the Water
have effectively imposed a zero-NRW rule in for the Community programme suggests
areas plagued in the past with rampant illegal that public benefits and private-sector profit
connections. motives may not be inherently incompatible
Given that private water companies often in water privatisation. Perhaps the most
encounter political opposition to privatisa- remarkable aspect of this achievement is that
tion in general and to tariff increases in particu- projects targeted at water supply for the poor
lar, the Water for the Community programme were not specified in the 1997 concession
helps Manila Water to build legitimacy. contracts.
Because the company has been able to provide The situation was completely different at
water services to poor communities that the Maynilad. A large number of employees from
public water utility had failed to reach, these Benpres Holdings and its subsidiaries were
communities have become political allies in transferred to Maynilad, most of them with
the companys efforts to reduce opposition to no experience in the water sector; incomers
water privatisation. The Water for the Com- from Suez took up most of the new companys
munity programme also makes business and management positions. Former MWSS
financial sense for the company. Because employees felt they were being treated as
Manila Water in effect imposes a zero-NRW second-class citizens in the new company and
rule on projects under the programme, it has morale sank.7 The company did not invest as
actually helped to reduce overall NRW by much as needed to upgrade its employees
minimising illegal connections, leaks and capabilities; in its first years of operation, an-
water contamination in areas where these nual expenditure on such training averaged
problems are the most severe. The programme only Php 1500 (about US$30) per employee
has also played an important role in attracting (UTCE and Japan PFI Association, 2004). The
support, in the form of low-interest loans mentality, mindset and behaviour of former
or equity investments, from international MWSS employees who had remained with
224 XUN WU AND NEPOMUCENO A. MALALUAN

the company had scarcely changed from pre- 2004). Thus it comes as no surprise that NRW
privatisation days.8 continued to rise in these communities as the
Ironically, the idea of territory manage- programme expanded. Maynilad eventually
ment had been initiated by employees at halted Bayan Tubig because of the financial
Maynilad right after the privatisation,9 but difficulties the programme had created.
the company had passed over this option in
favour of a system-wide approach to dealing
Concluding Remarks
with NRW problems.10 It did not, however,
promptly inaugurate a centralised monitor- While many of the criticisms levelled at Manila
ing plan for pinpointing leaks in the system: water privatisation have focused on signifi-
the first reliable and consolidated report cant rate increases and slower-than-expected
on leakage was not introduced until 2000 service expansion (Buenaventura et al., 2004;
(UTCE and Japan PFI Association, 2004), Esguerra, 2003), the performance of privat-
although billions had already been deployed isation should be assessed in a historical
in capital expenditures for laying new pipes. context. It is true that both concessionaires
Maynilad also created a programme for raised their water tariffs substantially in their
supplying the poor, a Water for the Commun- first years of operation, but the magnitude of
ity programme (Bayan Tubig). Its expansion increase in part reflects their extremely low
model was more generous than Manila bids: Manila Waters winning bid was only a
Waters: families usually received individual quarter of the rate before privatisation. Given
connections, with meters near their houses unforeseen events such as the Asian financial
(see Figure 5). This arrangement left the lines crisis of 1997 and the unprecedented drought
exposed, so that unconnected households that afflicted Angat Reservoir, it is highly
could tap into the system before the water plausible that MWSS would have increased
reached the meter for connected households. its charges to the same level even had it not
In fact, a connected household could even de- been privatised, or else the government would
cide to tap its own connection before it reached have had to assume a substantial financial
the meter (UTCE and Japan PFI Association, burden.

Figure 5. Service expansion model for the Water for the Community programme at Maynilad.
Source: UTCE and Japan PFI Association (2004).
 WATER PRIVATISATION IN MANILA 225

Although the system expansion still falls privatisation. First, while both concessionaires
short of what is specified in the concession involved family conglomerates (Lopez and
contracts, the two concessions had increased Ayala) and multinational companies (Suez,
connections by 30 per cent during their first five United Utilities and Bechtel), corporate gov-
years of operationa feat that MWSS would ernance practices differed considerably be-
have taken 30 years to achieve on the basis of tween the two from the outset. For example,
its historical performance. Impressively, much Maynilad generally awarded management
of that expansion occurred in economically and technical consultancies to subsidiaries
distressed areas, directly benefiting the urban of its French (Suez) and Filipino (Benpres)
poor who had formerly relied on more ex- partners. Such related-party transactions
pensive water supply alternatives. were partly responsible for internal conflicts
Worker productivity increased significantly reported between the two partners, but also
after privatisation. Consolidated figures for led to higher costs for start-up and enhance-
the two concessions show that number of ment operations. Manila Waters trajectory,
staff per 1000 connections dropped from 9.4 involving few dealings with related parties,
in 1996 to 4.1 in 2003. Both concessionaires avoided such problems.
managed to resolve overemployment from Secondly, the concessionaires different
pre-privatisation levels through early retire- financial management practices were critical
ment programmes, with little or no social determinants of their success in the years
disruption in the corporate setting. following privatisation. In adjusting to the
Our investigations show that generalised Asian financial crisis, Manila Water went
conclusions about water privatisation in for smaller loans at the beginning targeting
Metro Manila should not be ventured with- operating efficiency and service improvement,
out carefully differentiating between the and then gradually scaled up borrowing to
two concessionaires. There are pluses and produce a virtuous financing cycle of invest-
minuses in the external factors surrounding ment and efficiency improvement. Although
water privatisation in Manila, some of which this strategy deviated from Manila Waters
are related to intellectual discourse beyond contractual commitment to capital expend-
the scope of this essay; but Manila Waters iture, it shielded the company through the
more successful experience compared with turbulent years immediately following the
Maynilads suggests that studies focusing on crisis. Maynilad, by contrast, did not make
external factors alone may be too limited. similar adjustments and large capital invest-
Water privatisation without improvements ment without resulting operational efficiencies
to management systems for the privatised led to more accumulated financial losses that
utilities severely reduces the chance of success, eventually bankrupted the company.
even under favourable external conditions. Thirdly, the concessionaires relative success
On the other hand, Metro Manilas experience with water privatisation was linked to their
shows that innovative management practices attention to two critical factors that have sel-
in privatised water utilities can help to over- dom been managed well: the transformation
come obstacles introduced from the external of a public utility into a private company; and,
environment. management of public expectations about
Our analysis suggests that decisions regard- the services the utility is pledged to deliver.
ing internal factors such as corporate govern- One key to Manila Waters overall success was
ance, financial management and operations that it catered its operations management
management were key factors in the divergent towards these two considerations from the
paths taken by the two concessionaires after very beginning. Employees transferring from
226 XUN WU AND NEPOMUCENO A. MALALUAN

MWSS were perceived as having valuable by water concessionaires in Metro Manila, the
prior experience and were given training to subject of our study here, offers some encour-
adapt to the new privatised organisational agement to municipalities struggling with
culture and to its innovations, some of which, failing public utilities and an unfavourable
such as territory management, were designed external environment for water privatisation.
to improve employee performance. Manila By learning from the best practices of privat-
Water has also been sensitive to objections to ised water utilities, public utilities can envision
water privatisation and has made concerted and achieve improvements in water services
efforts to dispel such opposition through through internal restructuring within the
initiatives such as its Water for the Community public context. The current slowdown in pri-
programme. In comparison, Maynilads ap- vatisation does not mean that public water
proaches have been less well conceived. For utilities should remain unchanged. Manila
example, management and employees im- Waters successful tactics show that innov-
ported from outside the pre-existing public ation in internal management, especially
company often had no experience of water attention to performance incentives and re-
supply utilities and lines installed in poor wards for experienced personnel, can help
neighbourhoods were not designed to prevent to close the gaps in water services to the
unauthorised taps. urban poor.
The results of our exploration of the effects
of internal factors in water privatisation Notes
have several important policy implications.
1. Pyramiding is defined as owning a majority
Analyses that ignore the importance of such
of a stock of one corporation that in turn
internal factors may lead either to over- holds a majority of the stock of another, a
subscription to the general notion of privat- process that can be repeated a number of
isation or, conversely, to underestimation times; cross-holding is defined as a company
of its potential for water supply solutions. further down the chain of control having
Privatisation will not automatically bring some shares in another company in the same
efficiency gains unless privatised companies business group (Claessens et al., 2002).
can allocate substantial resources towards 2. Non-revenue water (NRW) refers to water
reorienting internal organisation and oper- that is not billed because of leakage through
holes in the pipes, illegal connections or meas-
ations; but to reject privatisation outright,
urement problems due to faulty meters.
on the basis of inherent incompatibility be-
3. The concession fees were split 90:10 between
tween the private sector and water business, Maynilad and Manila Water, reflecting the
may deprive the public of a valuable option. utilisation ratio of capital from MWSS bor-
Our emphasis on internal factors is not rowings prior to the privatisation. It was
intended to imply that public policy cannot expected that Manila Water (East Zone) would
play an active role in shaping the outcome of incur higher capital expenditure because
privatisation. On the contrary, there are ample it included new development areas where
opportunities for governments and the regu- connections were yet to be installed. Few con-
latory agencies to influence private corporate nections were envisioned for the West Zone
(Fabella, 2006).
decisions on internal factors through the
4. The heavier burden fell to Maynilad because
bidding process, through regulatory actions of the 90:10 split in concession fees.
and through asset ownership (in the case of 5. Interview with a senior manager in Maynilad,
concessions). July 2006.
We also point out that the importance of 6. Interview with Mr Tony Aquino, CEO of
internal factors to the quality of performance Manila Water, May 2006.
 WATER PRIVATISATION IN MANILA 227

7. Interview with a senior official in the MWSS Claessens, S., Djankov, S., Fan, J. P. H. and Lang,
Regulatory Office, July 2006. L. H. P. (2002) Disentangling the incentive and
8. Interview with Ms Macra Cruz, Deputy entrenchment effects of large shareholdings,
Administrator of MWSS, July 2006. Journal of Finance, 57, pp. 27412771.
9. Interview with Mr Tony Aquino, CEO of Crane, R. (1994) Water markets, market reform and
Manila Water, May 2006. the urban poor: results from Jakarta, Indonesia,
10. Interview with a senior manager in Maynilad, World Development, 22(1), pp. 7183.
July 2006. David, C. (2001) Private sector participation in
water supply and sanitation: realizing social
and environmental objectives in Manila, in:
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