| The poor
pay more for their water
By Arthur C. McIntosh
Winnie Flores lives on the Mangahan
Floodway in Metro Manila. She is one
of about 3 million people who, almost
five years after the privatisation of
Manila water supply, still have no access
to piped water. They pay almost as much
for water as for rent. Winnie could
greatly improve the quality of her accommodation
and her dignity in the neighbourhood
if she could get connected to piped
water. She sighs, "It's coming
next year they say."
But she has heard
that story for the past five years.
Recently, when her husband lost his
job, they and her four children had
to move to cheaper accommodation at
1,000 pesos (US$ 18) a month. Yet Winnie
pays 900 pesos a month for 10 cubic
meters of water, while households connected
to the water mains pay about 100 pesos
a month for 20 cubic meters. She gets
her water from two sources. One is from
an entrepreneur who drilled a well and
pipes it to a small number of families
in the neighbourhood. The water costs
44 pesos per cubic meter but is of poor
quality. Twice a day, a water vendor
delivers 20-liter jerry cans of drinking
water from a water main about 2 km away.
She buys 4 containers a day at 5 pesos
a container.
Why are Winnie and so many others in
this deplorable situation? It is not
a question of land tenure - the neighbourhood
has concrete streets and many homes
built in permanent materials. It's all
about where the funds are. When privatisation
was introduced, the advantages, much
heralded, were that the private sector
would invest funds in water supply and
improve efficiency, by for example reducing
non-revenue water. In reality, after
almost five years, non-revenue water
has not reduced greatly and new funding
has been much less than expected. What
happened?
The "water crisis"
in Manila in 1996 was the rationale
for privatisation that was completed
in just 18 months. Unfortunately two
mistakes were made.
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| An elderly man warily negotiates
a muck-laden stream in Mathare,
Nairobi. Photo © Justo Casal/UN-HABITAT
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First, the contracts
with two different concessionaires were
not made on the basis of a formal and
publicised government policy. There
was no independent regulator to monitor
the implementation of that policy and
see that the contract conformed to the
policy. Instead the former Metropolitan
Waterworks and Sewerage System was appointed
as a regulator but ended up as a contract
administrator. The second mistake was
to have concessionaires compete to provide
water at a low tariff. The winning bids
were 57 per cent and 26 per cent of
the pre-bid MWSS tariff. What signal
did that send to consumers? Use more
of our very plentiful water. It lulled
consumers into a false sense of security.
So along came El Nino,
then the Asian currency crisis, and
soon one of the concessionaires started
screaming for a major tariff adjustment.
When would they get the money to get
on with the efficiency measures and
connect the millions without access
to piped water? The answer was, "
Sorry, it is not in your contract."
Of course, had the contract been based
on a policy of connecting the poor,
it would have been easy for the two
parties to get together and amend the
contract so as to align it with policy
and agree on a tariff hike. After all,
both concessionaires are guaranteed
a certain rate of return based on the
whole contract. But there was no policy,
only a constricting, restrictive contract.
So for a couple of years, the government
(not the regulator!), fought to resist
the tariff increase. Who was this hurting?
Without a doubt, the still unconnected
poor, like Winnie.
One of the mysteries is why the NGOs
did not come to the help of the poor
and demand a tariff increase. In the
end, the poor people asked for the tariff
increase themselves. The logic was simple.
If the tariff for those people connected,
was raised from an average of 5 pesos
per cubic meter to 10 pesos per cubic
meter and that allowed the concessionaires
to connect the poor, then the poor would
go from paying 90 pesos per cubic meter
to 10 pesos per cubic meter and be much
better off. Is it not too much to ask
those connected to water to help pay
for those not connected to get the same
access? In the end, the government capitulated
and gave the tariff adjustment to both
concessionaires.
What are the lessons
to be learned? First, policy is everything,
but it must be in front of the public
at all times. Second, counter-intuitively,
hiking the tariffs does help the poor
who are not yet connected to piped water.
Third, in the future, investments in
large city water supply should be financed
directly from tariffs.
Arthur C. McIntosh
was until recently the Principal Water
Supply Specialist, Asian Development
Bank, Manila, Philippines. The views
expressed are those of the author and
do not necessarily represent the views
of the ADB.
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