Saturday, December 14, 2019

Duterte threatens military takeover of water firms

In an interview, Dominguez said concession agreements with Maynilad and Manila Water should not have fixed return on rates, to allow flexibility amid the changing interest rate environment.

The President raised the warning even as Finance Secretary Carlos Dominguez III said the government is open to adjustments in its contracts with water concessionaires Maynilad Water Services Inc. and Manila Water Co. Inc. that would reflect changes in interest rates and ultimately redound to the benefit of the public.

President Duterte has threatened to send the military to take over the operations of the country’s water firms if they fail to shape up.

Economic plunder there is no bail,” he said.
“At that time, the Philippines was paying 700 basis points over the benchmark of six percent.

It should be referenced to what the interest rates are at that particular time,” Dominguez pointed out.

Dominguez noted that the contracts with the two water firms were signed in 1997 when interest rates were much higher.

Our best spread is now 32 (basis points) over benchmark of 1.7 percent to 1.8 percent.

The contracts should recognize that times change and you cannot fix the return on a fixed basis.

So we were paying 13 percent interest rate when we borrow, so 12 percent looked OK,” Dominguez said.

In contrast to Dominguez’s appeasing tone, President Duterte on Thursday said he would order a military takeover of the water firms if he saw no sincerity in their commitment to shape up.
“This is my personal opinion.