Supporters and oppositors meet officials from IFC

While there is no question about the urgent need for the Carmen Bulk Water Project, the issue on the contract seems to be proverbial the sore thumb that sticks out in discussions.

Mayors of northern municipalities and their representatives have all pointed out to Bernard Sheahan, director of the Advisory Services of International Finance Corporation (IFC) who flew in from the United States, that there is really a dire need for water that can be addressed by the project in Carmen. The IFC is a member of the World Bank Group that finances and provides advice for private sector ventures and projects in developing countries.

However, lawyer Pablo John Garcia, a Capitol consultant, said that he suspects the Metropolitan Cebu Water District (MCWD) is diverting the attention of the people from the real issue, which is the P200 million development cost.

The money is to be paid to the Ayala-Stateland Consortium in case another bidder will win the rights to the project.

Sheahan also met earlier with Cebu City Mayor Tomas Osmeña, who is one of the officials that are most vocal against the charging of a development cost to the winning bidder. He also met with Mandaue City Mayor Thadeo Ouano, who supports the stand of the mayors from the northern towns, which stand to benefit most if the project pushes through.

Those who met the IFC official were Mayors Avelino Gungob of Consolacion and Antonio Dangoy of Compostela, vice-mayors Danilo Sinugbuhan of Cordova and Merilito Surita of Liloan, and Councilor Eugene Espedido of Lapu-Lapu City.

The same group had earlier expressed that they have no objections to the key provisions of the contract between MCWD and Ayala-Stateland Consortium saying that they have been apprised about the key provisions. They have also asked Gov. Garcia to endorse their letter to the National Economic Development Authority

The group told the IFC official that their local government units need water and they are not really picky on the supplier would be.

"Our constituents and the northern cities and municipalities of Cebu are the primary beneficiaries of the water project once it will be realized," the officials said.

They also told IFC official that the P200 million development cost ceiling is not their primary concern saying that it is the problem of the bidders who are willing to challenge the price offer.

Consolacion Mayor Gungob even took a dig at Mayor Osmeña will make it difficult for the project to be implemented, he may opt block the passing of the water supply in his municipality from Carmen.

Gungob reported to IFC that of the 21 barangay in his town, only 8 barangays have been serviced by MCWD while Dangoy also reported that only ten percent of the population in his town is served by MCWD.

"We worry that the further delay of the implementation of the Carmen Project will surely hinder the development of northern Metro Cebu because of unavailability of additional water supply," they said.

Pablo John Garcia however said that he suspects diversion when MCWD released documents that the Ayala-Stateland consortium agreed to lower the water rates and increase penalties for under delivery. "In the first place, it is not entirely accurate to say that the Ayala Consortium agreed to lower its rates, because under the BOT law, the price is determined by what is called a reasonable rate of return of investment. Thus, the parties are not free to peg a price that is not within what the law determines as reasonable rate," Garcia said in a press release.

Garcia said he is not convinced by the explanations of the MCWD and Ayala consortium, particularly on the reimbursement of the P200 million development cost, which is the real issue that both MCWD and the Ayala-led consortium have evaded.

Garcia explained, "if in a solicited bid, a bidder is not reimbursed for expenses incurred in the course of making a proposal, why should a bidder in an unsolicited bid be so reimbursed? Why should Ayala Consortium be paid for expenses incurred in making a proposal nobody asked to make?"

He added that if MCWD claims that the reimbursement is for "just compensation" for the "water rights" of Ayala, the latter is not entitled to such because under Section 6 of the Water Code, water rights is a mere privilege granted by the state and is conditioned upon beneficial use.

"If Ayala loses the bid, then it has no beneficial use of the water rights, and its permit is subject to revocation," Garcia said.

Earlier, an official from Manila Water, the biggest investor in the consortium said that the amount for development cost is not yet determined because all the expenses, like the conduct of feasibility studies, are still subject for audit. The official added that in case Ayala loses in the bid, it would voluntarily turn over the water rights without asking payment for it.

With regards to issue on "under delivery," Garcia said that "it is clearly diversionary," because the real issue is not under delivery, but the provision that binds MCWD to pay for a specified and guaranteed volume of water, even if it does not actually use it.

"This take-or-pay provision is not only obsolete, which has been scrapped as onerous in so far as other utilities such as power are concerned. It is also illegal under the BOT Law, as it partakes the nature of a direct government subsidy, because it binds the government to pay something without actually receiving anything of value in return," he stressed.

Garcia said the same diversionary tactics misled the mayors and other local officials to sign an "endorsement" of the project.

Sheahan however explained that P200 million may not be the exact amount that would be reimbursed to the Ayala-Stateland Consortium should the latter lose in a bidding.

"There is no such fixed figure and it is not clear where the figure originated," Sheahan said. He also said that any amount that would come out after proper audit should be definitely below P200 million.

Sheahan said that there should be a detailed audit of what Ayala-Stateland Consortium will be reimbursed for.

Sheahan then encouraged the Cebu City government and other interested parties to submit their comments and opinions to NEDA where the water project is now pending for review and approval.

Sheahan clarified that IFC does not have any personal interest in the investment and that their participation is but limited in giving expert opinion on technical, legal and juridical issues. However, it is reportedly up to the government agency whether or not to adopt the project.