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Governance Crisis in Water Services in the Philippines: A Need for Rethinking and Reframing Development Policies in the Country

Ma. Genesis T. Catindig-Reyes *

Division of Agricultural Extension and Rural Studies, Agricultural Systems Institute, College of Agriculture and Food Science, University of the Philippines Los Baños and Program Manager Asian Partnership for the Development of Human Resources in Rural Areas (AsiaDHRRA)

* Corresponding author: Ma. Genesis T. Catindig-Reyes

ABSTRACT

Toward the end of 2019, headlines in the Philippines featured controversies surrounding private in- vestments in public utilities, which spurred renewed debates over privatization and state-control. In the 1990s, at the height of globalization-driven economic growth in East Asia, the Philippines target- ed to become an industrialized country by 2000. Confronted with environmental crisis and poor public utility services, the country ventured into privatization of public goods, such as water services, to aid in rapid industrialization. However, experiences from neighboring newly industrialized countries (NICs) in East Asia (or the Asian Miracles) proved that protection should come prior to liberalization.

This essay aims to contribute to the evolving field of political sociology, specifically in the discourses on state-economy relations, reflecting on the current socio-political situation in the Philippines. Re- cent literature maintains that water service privatization failed to deliver on its promises due to market (capitalism), state (vested interest), and governance failures. This essay calls for the reframing of socio-political structures and institutions through policy reforms, alternative and pluralistic models of public goods management, and a new breed of statesmen and community, political, and industrial leaders.

Keywords: political economy analysis, political sociology, sociology of development, state and devel- opment, state-economy relations, water privatization

INTRODUCTION

During the latter part of 2019, headlines in the Philippines bannered controversies surround- ing private investments in public utilities, such as but not limited to the granting of permit to operate to Dito Telecommunity, a consortium that includes the Chinese government- owned China Telecom, as the country’s third telephone company player; Chinese nationals holding key leadership and management positions in the National Grid Corporation of the Philippines (NGCP), the franchise holder that manages the country’s power grid; and, most recently, the premature revocation of existing water con-

cessionaire contracts. These issues once again spurred debates over government intervention in private businesses managing public utilities, as well as the impacts of public-private invest- ments on local communities and the environ- ment.

For instance, in response to the increasing wa- ter demand in Metro Manila, the government ventured into a public-private partnership (PPP) involving the construction of a new water source traversing protected areas and ancestral lands in Rizal, Laguna, and Quezon provinces. The project, dubbed as the New Centennial Water Source - Kaliwa, Kanan, and Laiban Dams,

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would be funded through the Chinese govern- ment’s Overseas Direct Assistance (ODA) and managed by the Metropolitan Waterworks and Sewerage System (MWSS), although the facil- ities are expected to be corporatized or privat- ized later.

The project is expected to augment water sup- ply in Metro Manila and neighboring provinces.

Water supply in the Metro is said to be deplet- ing due to climate changes and increasing ur- banization. Several advocacy groups, including PAKISAMA (2017), a national network of farm- ers’ organizations, and HARIBON Foundation (2019) argued, however, that the Centenni- al Dam project is not economically viable and would be disadvantageous to the general public in the long run.

Current economic policies and structures pre- vailing not only in the Philippines but also in- ternationally were largely shaped by Cold War experiences. The Cold War period saw the dominance of Keynesian economics, which em- phasized public expenditure and fiscal control to boost economic growth. During this period of heightened state protection and regulation, rad- ical individualism has also increasingly found footing in promoting the liberalization of econ- omy from state intervention (Palley, 2014). As Neuman (2007) puts it, the post-Cold War era saw the diffusion of neoliberal state-economy arrangements.

These “state-economy relations” have been among the central concerns of political sociolo- gists in the last few decades. The field of political sociology has existed since the late nineteenth century, providing explanations on new political regimes and the need for civic participation. It has since evolved and focused on understand- ing and providing alternatives for governing so- cio-political institutions (Neuman, 2007).

According to Neuman (2007), political sociology in the 21st century needs “to incorporate more sophisticated and cross-discipline modeling”

toward understanding different state- economy

relations, interactions, identities, and cleavages brought about by globalization and advance- ment of technology, among others.

This essay aims to contribute to the evolving field of political sociology, specifically in the dis- courses on state-economy relations and global- ization, reflecting on the current socio-political situation in the Philippines. It examines how pri- vatization, as a form of globalization of capital shaping state-economy relationship, is failing to fulfill its development promises. Zeroing in on the experiences and controversies surrounding water service privatization in the Philippines, this essay calls for the rethinking of state-econ- omy relations in the country through policy and structural reform. Recent literature maintains that water service privatization failed to deliver on its promises due to market (capitalism), state (vested interest), and governance failures (Bak- ker, 2010; Water for People Network [WPN], 2017; Tadem and Tadem, 2019).

The height of privatization efforts in the country during the mid-1990s was geared toward trans- forming the country into a newly industrialized country (NIC) by 2000. This essay briefly re- flects on the state-economy relations of neigh- boring NICs in East Asia that have successfully transformed from agricultural to industrialized societies. This brief yet important comparison was made to illustrate how state-economy re- lations impact a country’s development orienta- tion.

METHODOLOGY

Using political economy analysis (PEA), this es- say examines political developments vis- à-vis public utility management, focusing specifi- cally on the emergence of privatization in the Philippines in the last four decades. The PEA approach focuses on power relations, distribu- tions, and contestations within society, as well as on the influence of political structures and/

or governance on resource use and econom- ic development (Department for International

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Development [DFID], 2009). It is often used to assess aid effectiveness or development initia- tive outcomes to inform programming and poli- cymaking.

Figure 1. Drivers of Change Framework for Macro-Level PEA (DFID, 2009) Discussion is limited to macro-level analysis

through review of narratives or accounts and case studies on privatization of water utilities in the Philippines and in selected neighboring countries. Cases reviewed include Esguerra (2003), Japan International Cooperation Agency (JICA) (2003), Chia et al., (2007), Chng (2008), Rivera (2014), and WPN (n.d., 2017). This pa- per examines the interplay of structures (social organizations, etc.), institutions (policies, pow- er relations, etc.), and actors (political leaders, private sectors, etc.) in influencing the manage- ment of public utilities, particularly water utilities, in the country.

RESULTS AND DISCUSSION

State-economy relations influence the distribu- tion of benefits, such as public goods or utilities, to the members of society. In managing public goods, some prominent approaches to distrib- utive benefits include utilitarianism and libertar- ianism. Both theories, while somewhat oppos- ing views, tackle the relationship of society’s development and growth with the individual’s interests and rights. Utilitarian view supports the notion of maximized distribution of benefits for the common good while libertarian philosophy favors individual freedom and property rights.

In the Philippines, liberalism is the prevailing po- litical-economic paradigm since the post- Cold War period. Policies and programs that paved

way for privatization and/or commodification of public goods have heavily accompanied the country’s transition toward industrialization. A classic example is the privatization of water utili- ties in Metro Manila during the 1990s. According to JICA (2003), this has been one of the largest water supply privatizations in the world.

Libertarianism and Liberalism in the Philip- pines: The Technocrats and the Private Con- cessionaires from the 1970s-90s

Libertarianism upholds individualism and prop- erty rights or self-ownership as key to one’s freedom, resulting in societal development in the long run. Libertarians assert that govern- ment control over resources or goods must be divided or limited, as in the case of free market and privatization, to allow for economic devel- opment and growth (Boaz, 2020). Smith (as cit- ed in Curtis, 2008, p.117) postulated that private individuals, with freedom of action, work toward the advancement of society in general and pre- vent “faulty distribution” of profits:

“Without any intervention of law, there- fore, the private interests and passions of men naturally lead them to divide and distribute the stock of every soci- ety, among all the different employments carried on it, as nearly as possible in the proportion which is the most agreeable to the interest of the whole society.”

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In the Philippines, nationalist and protectionist policies largely dominated during the Cold War, especially during the presidency of Diosdado Macapagal, when Hilarion Henares, Jr. was at the helm of development policy planning and making in the country (Tadem, 2019).

Toward the end of the Cold War and at the onset of post-Cold War Philippines, neoliberal policies and approaches started to gain footing with the introduction of industrial capitalization, privat- ization, and participation in free trade agree- ments. This required “modernizing elites” or

“technocrats”—those who have been educated and trained in Western theories, models, and strategies—to contribute to the industrialization and modernization of developing countries.

Tadem (2019) provided a significant account of the role of technocrats in the emergence of current development models in the country. Ac- cording to her, these technocrats occupied key positions in government, big private corpora- tions, and premiere academic institutions upon their return to the country. Technocrats occupy- ing government positions (such as Mapa, Virata, and Sicat) had the luxury and political backing to facilitate the shift to liberalization policies and export-oriented industrialization development approaches, particularly during the Marcos re- gime (Tadem, 2019).

The presence of political dynasties, however, prevented economic liberalization from taking off, resulting in compromised policies and pa- tronage politics favoring the interests of free marketeers and the ruling elites. Compromises were made in the form of privatization and in- dustrial incentives policies (Tadem, 2019).

These technocrats were confronted later by an- ti-Marcos movements both from the business community and the masses that successfully overthrew the dictator. Tadem (2019) argued that this helped end the dominance of Cold War technocrats in the country.

Nevertheless, trade liberalization continued

during the administration of Corazon Aquino, with the Philippines signing into the ASEAN Free Trade Agreement (AFTA) toward the end of her term (Laluna, Paras, and Soliva, 2006).

Non-performing public assets and poor pub- lic sector service that continued until the next administration, however, compelled the suc- ceeding administration of Fidel Ramos to divest and sell properties through the creation of the Philippine Privatization Program (Proclamation 50) (Dolan et al., 1993; Private Investment and Trade Opportunities [PITO], 1993).

Liberalization policies and strategies, such as privatization and redistributive reforms, were heightened during the Ramos administration, when several public utilities, including water services, were privatized (Laluna, Paras, and Soliva, 2006; Bernardo and Tang, 2008).

Privatization, as Bakker (2010) described, re- sults in a new state-economy relation that is characterized by the management of public re- sources by private entities and commodification of public goods.

Utilitarianism and the East Asian Miracle Utilitarianism is said to be more influential in the development of NICs in East Asia and Lat- in America, where redistribution of wealth and power both followed an egalitarian approach but with different results (Gereffi, 1989). Simply put, utilitarianism is the advancement of the great- er good or pleasure based on morality and/or ethics. However, what is morally good is subjec- tive; hence, utilitarianism is seen to be partial or preferential.

Kay (2002) highlighted the importance of state capacity, policy reforms, and agricultural and industrial co-development in East Asia that took place differently in Latin America. She dis- cussed how the combination of authoritarianism and egalitarianism made it possible to imple- ment agrarian reform, leading to agricultural and industrial development in South Korea. She underscored the importance of state control

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and “welfare-oriented and distributive policies”

in altering state-economy relations leading to a promising climate for industrialization.

Meanwhile, Gereffi (1989) offered an alternative view to understanding the East Asian experi- ence. He debunked the usual development the- ories that have been deduced from East Asian and Latin American experience. While he also underscored the importance of “egalitarian in- come distribution” in the East Asian Miracle, he disregarded the contribution of agrarian reform, which is typical of many Western scholars when referring to East Asian development.

Powell (2004) described the Asian Miracle or the success of the (East) Asian Model as a combination of “heavy state control” coupled with market forces. Wade (2000) explained that the Asian Financial Crisis of the late 1990s was due to the reversal of this model, allowing for rapid integration to the global free market and infusion of significant private capital inflows through crony capitalism and foreign debts, among others. He also attributed this to the weak domestic economic structures that are re- lationship-based, lack transparency, and unable to regulate appropriately.

Wade (2000) advocated for rules-based state intervention. In contrast, Powell (2004) argued that in many developed countries, such as in East Asia, development is attributed to free markets and that state intervention, if there’s any, usually focused on industrialization efforts rather than welfare and environmental protec- tion-oriented suggested by Wade (2000).

‘Governance Failure’ in Water Supply Man- agement in the Philippines

Metro Manila’s water distribution systems orig- inated in the 1800s during the Spanish coloni- zation era and is said to be among the oldest in Asia. In 1878, the Carriedo Waterworks was founded, sourcing its water from Marikina Riv- er. It was later renamed as Metropolitan Water District in 1919, with Angat River and Ipo Dam

as its new water sources. As part of the coun- try’s move to centralize management of water utilities in the country, it was integrated into the National Waterworks and Sewerage Administra- tor or NAWASA in 1955, although problems with centralized management led to the dissolution of NAWASA (JICA, 2003).

Nevertheless, this paved the way for the en- actment of Republic Act (RA) 6234 or “An Act Creating the Metropolitan Waterworks and Sewerage System (MWSS) and Dissolving the National Waterworks and Sewerage Authority”

in 1971. The MWSS is a government-owned and controlled corporation mandated to pro- vide water utility services in Metro Manila and its neighboring provinces, such as Rizal, Cavite, and Bulacan. It sources its water supply from Angat River, Ipo Dam, and La Mesa Watershed (Rivera, 2014).

According to Rivera (2014), however, the MWSS was “caught in [a] vicious cycle” of high debts, high losses, under-investments, and underper- formance. Metro Manila’s water services were tailing behind its neighboring capital cities in Southeast Asia in terms of water availability (17 hours/day compared with 24 hours/day in other capital cities), coverage (only 67% of popula- tion), and non-compliant water quality, to name a few (Chia et al., 2007). This was exacerbated by the El Niño phenomenon in the early 1990s.

The water crisis in the early 1990s and the poor services of MWSS pushed the government to enact RA 8041 or the National Water Crisis Act of 1995, which allowed for the privatization of water services. The privatization of MWSS in 1997 was implemented by awarding split con- cession agreements (CAs) to Maynilad Water Services, Inc. for the West Zone (Maynilad) and to Manila Water Company, Inc. (MWCI) for the East Zone to prevent monopolies. This followed the Paris model of privatization that was also adopted in Jakarta, Indonesia at around the same time (Esguerra, 2003; Rivera, 2014).

The CAs provided Maynilad and the MWCI with

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25-year exclusive rights for arrangements in regulation of rates, payment of MWSS debts, and use and management of water services facilities. The government, through the MWSS, would still own the water utility facilities and assets. All facilities and assets, including im- provements made, would be turned over to the MWSS upon expiration of the CAs. The MWSS,

through its Regulatory Office, also serves as the regulatory and arbitration body of the conces- sion agreement.

After five years, the concession has generated improvements in water utility management in Metro Manila, as shown in Table 1.

Table 1. Selected water service performance indicators of concessionaires in 2002

Service Indica-

tors Prior to

Privatization Actual Accomplishments in 2002

Total (2002) Gains Manila Water Maynilad

Population served 7.3 M 3.4 M 5.2 M 8.6 M +18%

Water Coverage (Based on Official No. of Connec- tions)

67% 62% 78% 79% +18%

Water Availability 17 hours 21 hrs. 21 hrs. 21 hrs. +24%

No. of Leaks

repaired 20,585 37,461 92,189 129,650 -

Staff per 1,000

connections 9.8 4.1 4.1 4.1 -58%

(Source: MWSS, 2002 as cited in Chia et al., 2007)

Privatization of water supply outside Metro Ma- nila followed and expanded under the Arroyo Administration with Executive Order 279 of 2004 (WPN, 2017). Bernardo and Tang (2008) have initially seen this privatization project as a success owing to:

“(a) expanded service delivery...; (b) increased operational efficiencies...; (c) less politicized rate setting; and (d) reduced reliance on government to fund MWSS budget shortfalls and needed capital expenditures.” (p.22)

Several case studies on the impact of water pri- vatization in Metro Manila and other provinces in the country, however, have shown otherwise.

While water utility has been more accessible, especially to poor households, privatization has proven unsustainable in the long run due to ir- regularities in the management and delivery of water services and advancement of corporate or private interests to the detriment of the public.

Privatization of public utilities aims at provid- ing incentives to the private sector to maximize profits and minimize losses, thereby providing

efficient services and infrastructures. In Privat- ization and the Urban Water Crisis, however, Bakker (2010) argued that public utilities serv- ing multiple functions such as water should not be privatized. Access to water, especially pota- ble water, is a basic right that the state should control and regulate and should not remain cap- tured by a few elites (Bakker, 2010; WPN, n.d.).

A WPN documentation on MWSS privatization showed that privatization of water utilities, as exemplified by Maynilad’s water rationing in Caloocan City and management of Leyte Met- ropolitan Water District, proved disadvanta- geous to consumers, with water cut-offs due to high rates and/or supply shortages undermining the country’s sovereignty and the people’s right to water. Water concessionaires were also re- ported to have committed graft, corruption, and labor malpractices and have contributed in the exacerbation of environmental issues, such as freshwater resource depletion and contamina- tion (WPN, n.d.).

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The concession agreements required Manila Water and Maynilad to install public faucets in depressed areas that are unable to secure in- dividual access to water. In this regard, Manila Water implemented its Tubig para sa Bayan community-based program for urban poor ar- eas. Manila Water installed shared water me- ters for clusters of two to five households and installed water supply meters in areas where individual clustering is not viable. With the sup- port of local government units and commis- sioned non-government organizations (NGOs), infrastructures or arrangements for individual household tapping were established, co-man- agement structures were defined, and payment schemes were operationalized (JICA, 2003).

In the accounts of Chng (2008) on communi- ty-based water management in Taguig City, the bulk-water supply agreement between Manila Water and a community association has con- tributed to the empowerment and emancipation of the urban poor. This success was threatened, however, by the local political dynamics that hampered improvements and expansion plans and by Manila Water’s expansion of direct water services to households, which undermined their bulk-water supply agreement.

Maynilad, meanwhile, implemented the Bayan Tubig program, which installed Level 1 (from direct source) public faucets, Level 2 water fa- cilities (from main pipes), or direct household connection in depressed areas. This program was co-implemented with NGOs and communi- ty associations, the latter providing counterparts such as labor and materials for installation and serving as its managing structure (JICA, 2003).

However, the program was compromised by mismanagement of facilities and service deliv- ery, local political dynamics, and conflicts aris- ing from water billing and collection, among others, while Maynilad continued to expand installation of direct household connections (JICA, 2003; WPN, n.d.). Although both pro- grams significantly contributed to bringing water to more households, they failed to institutional- ize co-management structures in many urban areas, thus necessitating higher capitalization

or investment costs from the concessionaires’

part, which translated to higher tariffs for house- holds later on.

In another case documentation by WPN in Magdalena, Laguna, privatization has also re- sulted in higher rates yet poorer service quality.

The initiative, started in 1999 and completed in 2001, was funded by the World Bank through a loan to the municipal government granted by the Development Bank of the Philippines (DBP) for the construction of water system facilities. The management of the water system was privat- ized through a 15-year agreement with Bayan Water Service, Inc. owned by Benpres Holdings and Montgomery-Watson New Zealand. Water supply from the project, however, was certified non-potable and the agreement with Bayan Water Services prematurely terminated due to unfinished construction of facilities by the local government. This resulted in inaccessible and unaffordable potable water (IBON, 2003 as cit- ed in WPN, n.d.)

The privatization of water utilities in the country has not been spared from the influence of global players or capitalists. Private companies, such as Maynilad, Manila Water, and Bayan Water, were backed up by international operators, such as Suez (French), Montgomery-Watson New Zealand, International Water Limited (USA), United Utilities (UK), and Mitsubishi Corpora- tion (Japan) (Chia et al., 2007). The MWSS also received overseas direct assistance and loans from international finance institutions for organi- zational development, rehabilitation of facilities, capacity building on regulation, and establish- ment of new water sources, among others.

Aside from the failed, if not negative, experi- ences discussed above, the concession agree- ments, including their amendments, between and among MWSS, Maynilad, and Manila Wa- ter also contain onerous provisions favoring private interests over public welfare. These in- clude provisions allowing for extraordinary price adjustments (EPA); rate rebasing or recovery of historical and future capital and investment ex-

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penditures; foreign currency differential adjust- ments (FCDA), which allowed for quarterly rate adjustments; accelerated extraordinary price adjustments (AEPA); and currency exchange rate adjustments (CERA) that offset foreign ex- change losses. All these rates or tariff-setting schemes passed the repayment burden to con- sumers (WPN, n.d.). Esguerra (2003) inferred that the concession agreements with Manila Water and Maynilad are but “corporate mud- dles” that allowed them to enjoy profits, ironical- ly under the watch of government and interna- tional finance community.

Recent controversies concerning CAs have called for the current administration’s premature revocation of existing agreements, which some fear would result in even higher water rates in Metro Manila.

Bakker (2010) called this phenomenon “gover- nance failure” or “mismatch in decision- making between citizenship and associated political rights, on the one hand, and institutional and cultural practices on the other” (p.45). When controls and regulations are overpowered with protection of private interests and control of public goods are put in the hands of the elite, public welfare is compromised, resulting in neg- ative impacts.

Free marketeers maintain that the pursuit of rational self-interests would lead to efficient resource use, management, and allocation, hence economic development. The preceding discussions, however, showed that the pursuit of individual happiness—by politicians and pri- vate entities—does not always translate to pub- lic welfare (Curtis, 2008).

Smith (1776) emphasized that an individual, without state intervention, naturally direct favor toward personal interests, causing ‘faulty’ re- source distribution. Mill (1937 as cited in Curtis, 2008) has already forewarned that representa- tives would naturally use their power at the ex- pense of the people, and he suggested having short term of office as possible counter- solu-

tion to power abuse. WPN has been strongly campaigning for the scrapping of privatization agreements on water services. Bakker (2010), however, cautioned that total abolition of pri- vate-sector management would also be prob- lematic.

So, what then would be the most appropriate state intervention?

Re-thinking Development in the Country: Al- ternative Models and New Breed of Leaders Recent controversies on the premature re- vocation of CAs were followed by a series of water service interruptions in Metro Manila.

This stimulated discussions on the need for new water sources and new players in the wa- ter utility service sector. Instead of investing in extractive industries or facilities (e.g., Centen- nial Dam Project), some groups recommended the “restoration and conservation” of existing watersheds and reservoirs as a sustainable means of increasing water supply; reforms in the governance of water services, including the review and amendment of existing CAs; and investments in alternative water sources, such as rainwater harvesting and desalination of La- guna de Bay (PAKISAMA, 2017; IBON, 2018;

HARIBON Foundation, 2018).

Tadem and Tadem (2019) and WPN (n.d.) ar- gued that two decades after water privatization, the water crisis persists as an issue that, in fact, continues to worsen. Sundaram (2018 as cited in Tadem and Tadem, 2019) claimed that pri- vatization failed to deliver on its promises of re- duced monopolies and efficient services. This is consistent with Bakker’s (2010) arguments that the persistent water crisis is due to market fail- ure (capitalism), state failure (vested interest of government), and governance failure (systemic and structural power issues).

While others would push for total state control on water supply, other scholars, including Ta- dem and Tadem (2019), provided alternative models to water privatization based on expe-

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riences in neighboring Asian countries. These alternatives include:

“1. Reforms to water privatization – devolving management and regulation to local governments and communities;

2. Public/non-profit partnerships of co-privatiza- tion – co-management by private and non-gov- ernment entities such as community associations;

3. Public-private partnerships – collective man- agement; and,

4. Single non-profit agencies – management by non-government organizations.”

Bakker (2010) contended that there is no sin- gle or universal approach in water supply gov- ernance and management, and a “pluralistic approach” is rather needed. Community gov- ernance, through cooperativism, would be best in rural areas where collective private rights is predominant. In urban areas where property rights and water systems are much more com- plicated, co-management or governance mech- anisms where communities would have greater participation and influence would be preferable (Bakker, 2010). The challenge remains in en- suring utilitarian goal in managing public goods.

Tadem and Tadem (2019) maintained that a tri- partite approach, with strong civic participation, is critical to this end.

The cases discussed above have indicated that institutionalized tripartite management could be the best approach. Management by private sector alone is not as efficient and effective as targeted, while regulation by the public sector is not as accountable and transparent as it should have been. Moreover, co-management is only as potent as the political will of authorities and capacity of civil society to engage. Tripartite management of water utilities requires sus- tained state intervention (regulation of national agencies and cooperation of local government units) and co-sharing of resources among pub- lic-private-people stakeholders.

For this to be practicable in the country, struc- tures and institutions governing public utility management must first be reformed. This author believes that, privatized or not, there is a need for a new breed of neo-utilitarian statesmen and

community, political, and industry leaders. At the truest sense of utilitarianism as defined by Mill (1861 as cited in Curtis, 2008), there is a need for utilitarians of noble character who favor personal pleasure that would lead to society’s happiness and/or promotion of public welfare.

The Philippines has been saturated with too much laissez faire development approaches that are not working at all. Most of them have caused misdevelopment, e.g., the development of a few billionaires rather than of billions of peo- ple. Among the 2019 Forbes List of Billionaires in the country are individuals and siblings from conglomerates managing public utilities and services, such as power, energy, water, and telecommunications.

The Philippines had targeted to become an NIC by 2000 with the aid of privatization of public utilities to hasten the industrialization process.

Experiences from the East Asian Model or the Asian Miracles, however, proved that protection should come prior to trade liberalization. Rapid liberalization through huge private and foreign capital inflows increases the country’s risks to socio-economic and political crises as seen in the Asian Crisis in the late 1990s and mid 2000s.

CONCLUSION AND RECOMMENDATIONS

While the first few years of privatization of wa- ter utilities in Metro Manila had seen significant improvements, current controversies surround- ing private investments in the country’s water supply prove that current models and policies are not working. Free market logic argues that private entities could better provide efficient and effective services to public, resulting in growth and development of society. Discussions set out in this paper, however, suggest that the mod- el does not work in the management of public goods, such as water. Moreover, rapid and huge infusion of private capital inflows without ready domestic economic system and political struc- tures would only result in crises and governance failures. Learning from the experience of NICs,

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state intervention should first and foremost fol- low an egalitarian or utilitarian approach that upholds basic human rights prior to economic liberalization.

The governance failures and undelivered prom- ises of privatization call for a reframing of so- cio-political structures and institutions through:

Reform of economic policies to strengthen state interventions through control, regulation, and co-management (tripartite) of public goods; this includes reviewing and restructuring privatiza- tion arrangements and related enabling policies;

• Rationalization of various government wa- ter agencies and their competing functions in controlling, managing, and regulating wa- ter sources, supply, and use;

• Pluralistic approaches to public goods management in urban and rural areas that seek not only to service basic human needs but also to keep environmental dignity and human rights intact;

• Elimination of systemic barriers (e.g., bu- reaucratic procedures and policies) to ac- cessing public goods to ensure peoples’

participation in different aspects of water services; and

• Priority investments and public expendi- tures in sustainable restoration and conser- vation of watersheds and other natural water sources, instead of extractive and destruc- tive facilities such as dams.

These measures must be coupled with the de- velopment of a new breed of leaders to enact and implement these policies and models. This author also suggests further studies on compre- hensive socioeconomic impact assessment of the concession agreements with Maynilad and Manila Water in the last 20 years. Available lit- erature regarding this is limited to several case documentations and few impact evaluation studies done between five to 17 years after pri-

vatization.

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