MANILA, Philippines The new set of water contracts being firmed up by the government will not kill the country's largest water concessionaires but will in fact guarantee fairness to all parties, Justice Secretary Menardo Guevarra said. In an interview with CNN Philippines, Guevarra maintained that the new contracts would likely be ready in the next six months to replace the existing ones allegedly containing onerous provisions in favor of Maynilad Water Services Inc.

and Manila Water Co. Inc.

"A gun will kill you and it is not something that we will offer to the water concessionaires," Guevarra said. "Rather, it is something that will give life in the sense that it will be a better contract and the terms will be more equitable to the government and the people," he added.

In remarks after announcing yesterday the appointment of new officials at Malacaaang, President Duterte again assailed the water concessionaires, accusing them of engaging in a "conspiracy to defraud the government." The prohibitions on contracts in the anti-graft law "are really in the document itself," he said, referring to existing concession agreements.

"That contract was never shown to the public and it was kept out," he said. "You robbed us blind," he said, addressing the concessionaires.

"I will see to it that a billionaire goes to jail," he added, without naming names. Meanwhile, Guevarra admitted they are still processing inputs from various agencies, including the Department of Finance and the Metropolitan Waterworks and Sewerage System, as part of creating a new set of contracts.

"We don't exactly have the revised contract now, we only have it in our minds, we know what to remove, what to add but there are certain aspects that we need inputs from," Guevarra said. "We are awaiting all inputs before we come up with a consolidated draft that we can present to the water concessionaires," he added.

President Duterte earlier said the government is ready to take over Metro Manila's water distribution services if the two largest water firms refuse to accept the terms of a new contract to be offered to them. "The government will come up with a draft agreement that has no legally objectionable provisions, is fair and equitable, more transparent and advantageous to the consuming public," Guevarra said.

"I see no good reason why the water concessionaires will play hardball and induce the government to take extraordinary measures, like taking over their operations or nationalizing the water distribution service." Maynilad and Manila Water serve a combined 16 million customers under 25-year concession deals Duterte labeled as "onerous and disadvantageous" to Filipinos.

"A period of six months is enough to firm up everything, present it to the water concessionaires and they can react within that period also," he said. Unacceptable provisions

Guevarra said one of the major provisions in the existing contracts the government wants removed is the non-interference clause, which prohibits the government from interfering in rate setting.

Currently, only the MWSS Regulatory Office and the concessionaires have a say on rate adjustments. The government argued the MWSS-RO is not a product of an executive order or a legislative procedure.

The justice chief also said the government is removing the indemnification clause, especially the inclusion of certain business taxes, concession fees, cost of appeal which are part of expenditures but can be passed on to consumers. "Also, the water concessionaires being mere contractors of the MWSS.

There is no character of a public utility, which means that the water concessionaires can argue that CIT (corporate income tax) can be considered as an expenditure," Guevarra said. "We will make it very clear to the extent that CIT cannot be made a factor in setting of water rates chargeable to consumers," he added.

The DOJ has also proposed to remove provisions giving preference to existing water concessionaires for new water developments, as well appointing the concessionaires as agents of the MWSS in the exercise of the latter's power of eminent domain. "We find that legally not acceptable.

It is already a delegated power to the MWSS but you're giving it to a private party. A delegated power cannot be further delegated," Guevarra said.

Another questionable clause stipulates automatic acceptance by the MWSS RO of any proposed standard water rate if the RO does not act on such proposal within 30 days. The government also wants to remove a provision that will make it financially liable for any early contract termination.

Apart from removing the onerous provisions, the government will also inject provisions that would give RO more power. "At present, much of the decision making is in the hands of the concessionaires, RO is just more on the consultative side," Guevarra said.

As to the extension of the contracts, the justice chief said the matter can still be taken up in the renegotiation process. "It all depends on what agreement the government and concessionaires will have.

If it will benefit the consuming public then the government will be open to extend it beyond 2022. Otherwise, if the concessionaires will insist on things that the government will not like, then we will have to end it," Guevarra said. "For as long as these contracts subsist, they have exclusive right to the east and west zone, only when these contracts get terminated for some reason or another that the government may open it to other players," he added.

Prior knowledge

Guevarra emphasized that even the water concessionaires know very well that the concession agreements were crafted and executed at a difficult time for MWSS. He noted that at that time, the Philippine government did not have much exposure and experience in water distribution.

"Times have changed, circumstances have changed. This is the time to make the contracts more equitable," Guevarra said.

It was in 1997 when former president Fidel Ramos solicited bids for concession agreements with MWSS to address the water crisis in Metro Manila. The government unilaterally determined the terms of the agreements, then considered among the biggest in the world.

With Delon Porcalla, Evelyn Macairan

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