Arroyo not being hard on Maynilad, says Tiglao

President Arroyo has ruled that Maynilad Water Resources Inc. should bear the consequences of their concession contract and should not pass on their foreign exchange loses to consumers through water rate hikes, Presidential spokesman Rigoberto Tiglao said yesterday.

Tiglao, however, assured Maynilad that President Arroyo has allowed a government bail-out of the financial-strapped firm by suspending their payment of concession fees to the Metropolitan Waterworks and Sewerage System (MWSS).

In a radio interview yesterday, Tiglao disclosed this was precisely why President Arroyo ordered a "review" of the Memorandum of Cooperation (MOC) that Maynilad had entered into last week with MWSS which provided for a water rate hike to take effect July 1 to recover their financial loses due to the continuing peso depreciation.

Tiglao noted the controversial MOC itself stated that the government "recognized" as valid the complaints of Maynilad on their foreign exchange losses due to the peso depreciation since they won the concession contract in 1997.

"They (Maynilad) agreed to this kind of contract so they must be responsible for this. That is our basic main policy," Tiglao said.

"Not all exchange rate adjustment need to be shouldered by the government. There was a contract and we are just adhering to that contract," he stressed.

He said the President ordered Department of Public Works and Highways (DPWH) Secretary Simeon Datumanong, who sits as chairman of the MWSS Board of Trustees, to hold in abeyance the MOC until the Cabinet Cluster on Public Service conducts a review. Datumanong chairs the Cabinet cluster.

President Arroyo had previously ordered a study of the Maynila application for a water rate increase through an automatic Currency Exchange Rate Adjustment (CERA) due to the firm’s losses to the peso depreciation.

"What the President was saying is it must be understood that the bid of Maynilad had no provision for exchange rate adjustment. That was why their bid was low and why they won it," Tiglao said. "Now that there have been increases in the exchange rate, it is really a problem. What we’re saying is we have a contract and we cannot just change this contract," he pointed out.

Nonetheless, Tiglao said the Arroyo administration was not being hard on Maynilad’s financial problems on this issue. "We are bending backwards, in fact, in agreeing to help out Maynilad in their financing needs. But there are limits to this," Tiglao explained.