POLICY ANALYSIS PAPER

The Water Privatization Policy in the Philippines

FACTS:

Privatization became an official government policy during the Marcos

administration by virtue of Presidential Decree 2029, which led to the creation of

Government-Owned and Controlled Corporations (GOCC), and by virtue of PD 2032

which promulgated privatization as a policy, prior to the People Power in 1986. The

implementation of the privatization policy started with the sale of particular GOCCs

(supposed white elephants or corporations owned by Marcos cronies) by virtue of

Presidential Proclamation 50. The scope of privatization widened and included the

water sector with the passage of the Aquino administration’s RA 6957 or the BOT Law

which defined BOT schemes as “ a contractual arrangement whereby a contractor

undertakes the construction, including financing, of a given infrastructure facility, and

the operation and maintenance thereof.”

The succeeding administration of Ramos warned of a national water crisis during

the early 1990s that became the justification for further privatization of the water sector.

From 1995-2000, it was estimated that national demand for water (outside Manila)

would jump by 75%. To address the crisis, the Ramos administration passed RA 8041

or the National Water Crisis Act of 1995 which provided President Ramos a one-year

emergency power that resulted to the privatization of the Metropolitan Waterworks and

Sewerage System (MWSS). It be noted however, that the privatization of MWSS was

part of the implementation of the neoliberal globalization framework in the Philippines

and due to mounting pressures from International Financial Institutions. Several laws
and Executive Orders were passed during this period that further intensified water

privatization. And on February 2004, President Arroyo signed EO 279, which aims to

reform the financing policies for local water service providers. By doing so, government

subsidy for local government-run water service providers will be cut and thus pave the

way for further corporatization and eventually, privatization.

Introduction/Background:

According to the 2002 Annual Poverty Indicators Survey conducted by the

National Statistics Office, 3.2 million families (20%) do not have access to potable

water. The same study showed that majority of families without access to clean drinking

water comes from the poorest 40% of families in the Philippines. The World Bank paints

a similar picture as to the Filipinos’ equal access to sufficient and safe drinking water. In

its 2001 Filipino Report Card on Pro-Poor Services, almost 8 out of 10 poor Filipinos do

not have access to home-piped water. Water consumption among half of poor and rural

households is unacceptably low at only 30 liters per capita per day.

The situation in rural areas is far worse. The same study showed that rural

communities and the major island of Mindanao are underserved as urban households

are more likely to be served by waterwork systems with individual household

connections. The same picture is true regarding Filipinos’ access to sanitation as 13.9

% of all families do not have a sanitary toilet. Due to the unequal access to sufficient

and safe water, a significant number of Filipinos get their water

needs from doubtful sources according to the National Resources Water Board. In fact,

the poor are three times more likely to source water from wells, springs, and communal

faucets as compared to rich Filipinos, leading to a high incidence of water-borne

diseases such as diarrhea, typhoid, gastroenteritis, malaria and dengue fever.

Unfortunately, the poor, despite having less access to water, pays more. The World

Bank study showed that on the average, the poor allocate proportionally more of their

monthly expenditure than the rich are, amounting to almost 9% of their household

expenditures to buy vended and low-quality water.

As a solution to the worsening crisis, the Philippine government has turned to the

privatization of the water sector in order to address the lack of and substandard water

management and supply systems. Although climate change, pollution, exploitation and

overpopulation contribute to and exacerbate the global water crisis, the occurrence of

‘water shortages’ (i.e. shortage for the poor), in fact, is primarily a direct result of the

globalization policies of privatization and commercialization of water. Privatization leads

to exorbitant rates and eventually, water cut-offs for the majority who are not able to

pay. Central to the water problem, is to recognize that the problem is not water scarcity

per se, but who owns and controls the water systems and resources.

(http://www2.ohchr.org/english/issues/water/contributions/civilsociety/WaterforthePeopl

eNetworkAsia.pdf. September 20, 2010)

The water shortage affecting parts of Metro Manila should prompt the

government to review its policy of privatization of the country’s water facilities, a network

of organizations focused on water-related issues said on Friday.

The Water for the People Network (WPN) said the Aquino administration should begin

looking into moves that would bring back to government control water provider

institutions like the Maynilad Water Services Inc. and prioritize improvement of water-

related services. (http://newsinfo.inquirer.net/breakingnews/nation/view/20100723-

282716/Govt-urged-to-review-water-privatization-policy)

Problem Statement

What are the alternatives that should be explored by the government as to the

management of water resources utilization and distribution systems aside from

privatizing it?

Objectives

This policy paper analysis aims to recommend collaborative inputs for the
government, non-government organizations like the Water for the People Network
(WPN) and the water service providers in the country to address various constraints in
water privatization.

It also provides a clear analysis on the policy that will provide better options that
shall be implemented by all stakeholders to achieve effective water services in
promoting the quality of life for all.

Options

Water is life. More than anything else, people need water to physically survive.
Further, people need water for a better quality of life – for sanitation, for food production,
for production of basic needs, for leisure, and more. The Philippines has abundant
water resources, much more than Thailand, China, or India. Access to potable water
should not be a problem for its people but the majority of the people face water scarcity,
which will increase further in the near future.
 Over and above problems of environmental conservation, over-consumption, and
degradation of water resources, the people face a fundamental problem of inequity in
access to water whether for individual household use or for livelihood as irrigation for
farmers or aquatic resources for fishing. Now the Filipino people face an even greater
danger as neoliberal policies of privatization, deregulation, and liberalization are being
implemented in various sectors, including the water sector of the country. Water supply
infrastructure like dams, and water utilities and services are turned over to global
transnational corporations (TNCs) and their local partners.

Consequently, water has become a commodity for TNC profit. Water resources
are now under the control of corporations and allocated for their needs instead of
fulfilling the basic human needs for water by the people. As a result of their commercial
priorities and increase in water rates, the poor and marginalized sectors that comprise
the majority of the people are principally victimized and lose access to water.

As such the following options are presented:

A. Conservation and rehabilitation of water resources and freshwater

ecosystems
B. Development and management of sustainable and pro-people water
supply infrastructure
C. Water services/utilities is the responsibility of government and
privatization must be reversed
D. Effectively provide water for peoples’ use
E. Promote democratic governance in water supply management and
water services

Analysis of Options

While privatization of infrastructure development in the water sector is a relatively

recent policy, private control of water resources in the form of water rights is an age-old
practice in the Philippines. Section I Article XIII of the 1935 Constitution mentioned
“water rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power.” The exact phrase was retained in Section 8 Article XIV of
the 1973 Constitution and Section I Article XII of the 1987 Constitution. Water right is
fundamentally different from the right to water. The former allows private and profit-
oriented monopoly control of water resources while the latter essentially means human
right to access and use water.

At present, the following provide the legal framework for water governance in the
Philippines:
1. The 1987 Constitution
2. PD 1067 in 1974 or the Water Code of the Philippines
3. RA 8041 or the National Water Crisis Act of 1995

Article XII (National Economy Patrimony) Section 2 of the 1987 Constitution

mandates that all water resources are owned by the State and shall not be alienated.
Furthermore, it maintains that the exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. But it says as well
that while the State may directly undertake such activities, it may also enter in a
maximum of 50-year co-production, joint venture, or production-sharing agreements
with the private sector including Filipino citizens, or corporations or associations at least
60% owned by Filipino citizens. In other words, the Constitution allows private sector
participation in water resources management and infrastructure development.

Meanwhile, the basic principles and framework relating to the ownership,

appropriation, utilization, exploitation, development, conservation and protection of
water resources in the Philippines are embodied in the Water Code. The NWRB has
been tasked as the main government agency to implement the Water Code. Created in
1974, the NWRB is the authoritative government organization to coordinate and
integrate all activities in water resources development and management.
 The Water Code allows the appropriation of water by the public and private
sector. Appropriation refers to the acquisition of rights over the use water or the taking
or diverting of water from its natural source for the following purposes: Domestic,
irrigation, fisheries, industrial, municipal, power generation, livestock raising, and
recreation.

The appropriation of water is expressed through the “water right”, or the privilege
granted by government to appropriate and use water. Government owned and
controlled corporations and other government bodies, private corporations 100% or at
least 60% owned by Filipino, and Filipino citizens may be granted a water right, which is
evidenced by a document called a water permit. A water permit may last for as long as
the water is 'beneficially used”. The beneficial use of water pertains to the utilization of
water in the right amount during the period that water is needed for producing the
benefits for which it is appropriated. Under RA 8041, the State declared its policy to
adopt urgent and effective measures relevant to the nationwide water crisis including
but not limited to supply, distribution, finance, privatization of state-run water facilities,
the protection and conservation of watersheds and the waste and pilferage of water.
This law gave then President Fidel Ramos a one-year emergency power to enter into
negotiated contracts under the BOT Law (RA 6957 as amended by RA 7718) for the
financing, construction, repair, rehabilitation, improvement, and operation of water
facilities and projects relating to increasing water supply, treatment and distribution.

While the existing legal and policy environment already allows for substantial
private sector participation in the water service and resource management, the national
government still feels that important reforms must be implemented to further promote
water privatization and corporatization. According to the NWRB, the Philippine
government has gone through a wide range of problems to effectively managing water
resources in the country such as extreme weather events, increasing demand conflicts,
and environmental degradation.
A. Conservation and rehabilitation of water resources and freshwater ecosystems

1. Sustainable, pro-people policies and programs to conserve freshwater ecosystems

should be put in place. Consequently, corporate logging, large-scale corporate mining
and similar large-scale corporate exploitation of natural resources as well as large
development projects that destroy freshwater ecosystems must be terminated.

2. Effective conservation and rehabilitation programs for freshwater resources and

ecosystems such as lakes, rivers, wetlands, groundwater and the like must be
implemented, and renewable freshwater supply developed.

3. Degradation and pollution of water systems by large industrial concerns, large-scale

mining, export zones and industrial estates, military bases and camps, water transport
systems and the like must be immediately stopped.

4. Because of its particular devastating impact on the ecosystem, the policy and
program for large scale dams must be terminated.

B. Development and management of sustainable and pro-people water supply

infrastructure

1. A new paradigm for infrastructure development for water supply management must
be developed and the current paradigm that is premised on large-scale dams that
require large investment through official development assistance (ODA) loans and
global TNCs participation and control must be ended.

2. In particular, small-scale hydropower systems and community-based and controlled

irrigation and water supply systems must be developed as the overall alternative.
3. Large-scale water supply systems for densely populated areas like Metro Manila and
Metro Cebu should maximize and develop available renewable water supply based on a
rational allocation and sustainable utilization of resources.

4. Multi-purpose infrastructure development projects for lakes, river systems, and

wetlands should not dramatically alter or destroy ecosystems nor divert utilization of
water resources towards the few.

C. Water services/utilities is the responsibility of government and privatization

must be reversed

1. Institute a policy of public control and management of all water infrastructure, utilities,
and services such as dams, irrigation systems, hydropower plants, and public water
services at various levels of government down to municipal or barangay level.

2. Government should dismantle, take over or nationalize, as appropriate, the control of

private companies over any or all aspects of operations of water-related infrastructure
and water services.

3. Government water services must be premised on full respect and realization of

workers’ rights and welfare.

4. Water as a public good must be upheld. End the commoditization of water and water
services, such as the promotion of bottled water as basic source of drinking water or
regularization of water service fees.

D. Effectively provide water for peoples’ use

1. The people’s interests must be upheld at all times in all matters related to water. In
the development and allocation of water resources, public consumption must be the
paramount concern.
2. Ensure access to water for all, especially the poor and marginalized. Provide safe
and potable clean running water for all households, urban or rural.

3. User fees for water services to households must be scrapped and instead a
socialized fee structure that charges for water use beyond basic household
consumption should be put in place.

E. Promote democratic governance in water supply management and water

services

1. Consultation of affected communities and sectors must be ensured in the design and
conceptualization of water supply infrastructure, and their participation must be ensured
in every step of the implementation of such projects.

2. Consultation and participation of affected sectors must be ensured in the operations

and policy formulation of water services and utilities.

3. Transparency and accountability in financing and management of projects in the

water sector must be ensured. Collusion between government bureaucrats/agencies
and corporation involved in construction and water services should be ended and all
forms of graft and corruption must be investigated and punished.

Recommendation

It is hereby recommended to take Option B as an alternative course of action:

B. Development and management of sustainable and pro-people water

supply infrastructure
1. A new paradigm for infrastructure development for water supply management must
be developed and the current paradigm that is premised on large-scale dams that
require large investment through official development assistance (ODA) loans and
global TNCs participation and control must be ended.

2. In particular, small-scale hydropower systems and community-based and controlled

irrigation and water supply systems must be developed as the overall alternative.

3. Large-scale water supply systems for densely populated areas like Metro Manila and
Metro Cebu should maximize and develop available renewable water supply based on a
rational allocation and sustainable utilization of resources.

4. Multi-purpose infrastructure development projects for lakes, river systems, and

wetlands should not dramatically alter or destroy ecosystems nor divert utilization of
water resources towards the few.

For the sake of equality among businessmen and the common people to water, I
believe that pro-people water supply infrastructure is necessary. This is to provide equal
opportunities among stakeholders.