How Protectionism and Oligarchic System Cause Artificial Water Crisis in the Philippines

What really causes water crisis in the Philippines? Photo credit: Gmanetwork.com

The mainstream media recently warned us about an imminent water crisis this country might face over the next ten years if we fail to develop sustainable water sources to address growing consumer demand.

The warning came from Asian Development Bank, a regional development bank engaged in extending loan assistance packages to debtor countries.

According to the ADB, more than 75 percent of Asia-Pacific countries, including the Philippines, are at risk of water shortages unless proper measures are made to develop resources.

Here’s a report from Yahoo.com:

A new ADB report released Wednesday said 37 developing countries in the region “are either suffering from low levels of water security or have barely begun to engage in the essential task of improving water security.”

Only 12 Asia-Pacific countries have meanwhile been found with necessary water security infrastructure and management systems in the report entitled Asian Water Development Outlook 2013.

Bindu Lohani, ADB Vice President for Knowledge Management and Sustainable Development, said that while many countries in the region have improved economically, “it is alarming that no developing country in the region can be considered ‘water-secure’.”

“Countries must urgently improve water governance through inspired leadership and creative policymaking,” he said.

The ADB report states that the Philippines and 48 other countries currently experience “water insecurity” due to lack of development and sustainable water sources. At least three out of four countries in the Asia-Pacific region confront serious water supply problem.

The Philippines, along with Vietnam, was rated poorly in the National Water Security Index, as it obtained the lowest score of one in urban water security among ASEAN countries. The five factors used to rank countries are as follows: household, economic, urban and environment water security, and resilience to water disasters.

ADB’s Wouter Lincklaen Arriens said in a press conference in March that “the Philippines comes out at level two out of 5 so that means there’s still quite some way to go.”

“The scores in the 5 key dimensions are two for household water security, 4 for economic water security, doing strongly there, one for urban water security, which means treatment of wastewater and management and reduction of floods and the damages from floods. That is an area of serious concern to increase water security for action, as mentioned, and of course the Philippines is engaged in that. Environment water security score is 2 and the resilience to water disasters is also 2.”

“That resilience incorporates some indicator for exposure and as we know, those of us who live here, the Philippines is very exposed to water-related disasters. We have many typhoons every year and the forecast and predictions are that such intense weather events will not decrease but increase. That’s why this is indeed an area for action,” he explained.

After warning the entire region about an impending water crisis, the ADB offered its solution: more public investments.

The regional bank urged the region to invest an additional US$59 billion to upgrade water supply and another US$71 billion to guarantee water sanitation in 2014.

But where will the money come from? Well, debtor countries, like the Philippines, only need to borrow money from the ADB.

According to ADB Vice President Bindu Lohani, these public investments would be used to meet the Millennium Development Goals on access to water and improved water sanitation by 2015 and beyond.

What the ADB is trying to say is this: to solve the impending water crisis in the region, Asia-Pacific governments only need to expand their debt, and the borrowed money will be used to improve water supply and for better sanitation.

Indeed, ADB has every reason to urge governments to borrow money and embark on a massive, unsustainable spending binge.

However, the ADB is not telling the public that debtor governments will have at least two basic options after getting the money:

  1. Use the borrowed money to finance government institutions or state owned corporations engaged in providing water services to the public.
  2. Forge partnerships with water cronies.

As opportunistic statists and cronies often say:  “don’t let a perfectly good crisis go to waste”. Isn’t this the same mentality that created our crony-infested power sector dominated by the so-called independent power producers during the post-Marcosian reign of President Noynoy Aquino’s mother, Corazon?

In the Philippines, public utility sectors (e.g., water sector, power sector, telecommunication sectors, among others) are semi-off-limits to foreign investors (except mass media wherein foreigners are totally not allowed to invest). The 1987 Constitution specifically mandates that the government and Filipinos should own at least 60 percent of a company or business).

This constitutional restriction on foreign participation led to Filipino cronies and oligarchs monopolizing nearly all public utility sectors and industries.

For example, the Lopez Group currently dominates several key sectors, namely, mass media (e.g., ABS-CBN Corporation and Sky Vision Corp.), telecommunications (e.g., Bayan Telecommunications Holdings Corporation), power sector (e.g., First Philippine Holding Corp., First Gen Corporation, First Gas Holdings Corporation, FGP Corp, FG Hydro Power Corporation, FG Bukidnon Power Corp., Meralco, PECO or Panay Electric Company, Energy Development Corporation), real estate sector (e.g, Rockwell Land Corporation, First Philippine Industrial Park, First Philippine Realty Corp., TerraPrime Inc.), infrastructure sector (e.g., First Balfour, Inc. and First Philippine Industrial Corp.), and manufacturing sector (e.g., First Philippine Electric Corp., Philippine Electric Corporation, First Electro Dynamics Corporation, among others).

The powerful Lopez family, which is notorious for supporting and campaigning protectionism and Filipino First policies in the past, also previously owned Maynilad Water Services through Benpres Holdings Corporation. Benpres left its joint-venture with Ondeo Water Services, Inc. in 2006 in order to settle a debt of US$150 million.

Among the oligarchs who benefited and still benefit from the country’s protectionism and Filipino First policies include the Ayalas, Henry Sy, Lucio Tan, the Cojuangcos, among many others.

There are only two possible reasons why this country is at risk of imminent water crisis– 1) our protectionism that bars foreign participation and protects Filipino cronies and politically connected Filipino corporatists, and 2) Big Government regulatory system that discourages businesses, causes red tape, breeds corruption, and stunts economic growth.

Basic economics tells us that protectionism limits competition and breeds corporatism or corporate favoritism. Also, limited or less competition in the marketplace has the following unintended consequences: less jobs, poor product or service quality, higher prices, less consumer choices, and less opportunities.

Currently, our protectionism and Filipino First policies create artificial scarcity and crises that benefit only the oligarchs and politically connected cronies and punish the country’s middle class, especially the poor.

By limiting foreign participation in the water sector, the entire country will definitely face artificial water crises or shortages in the near future. The Maynilad and Manila Water Company are the best example of government-created duopoly in the country’s water sector. Manila Water is majority-owned by the Ayala group.

Monopoly, or even duopoly (a form of oligopoly wherein two protected companies or providers exist in a single market), is prone to corporatist abuses (e.g., passing all kinds of expenses on to consumers, charging unreasonable prices, poor quality of services, corruption, unwillingness to improve or innovate, etc.)

For instance, both Manila Water and Maynilad currently face public criticisms and a possible Senate inquiry for allegedly passing on charges of  billions of pesos in income tax payments  to their consumers. They are also being accused of passing on a long list of expenses, including those for recreation, foreign trips and entertainment as well as those for flowers, gifts, ads and other tokens for all kinds of activities, to end-users.

But instead of blaming massive government intervention and protectionism, many politically naive Filipinos choose to blame non-existent capitalism or capitalistic greed for the abuses of Maynilad and Manila Water. The country’s water cartel does not, in any way or form, represent capitalism or free market system. What we have is a Corporatist system that calls for public-private partnership, or collusion between the government and some politically connected cronies or corporations.

Capitalism is about free market competition; it does not limit competition and protect Filipino-owned companies against foreign competition. If we were a capitalist economy, both Maynilad and Manila Water would have long been destroyed by better and more innovative competitors that offer lower prices and better quality services to consumers.

Now scientists and innovative private companies abroad do not merely focus on improving water sources and water sanitation issues; they have also been trying to discover new processes or methods of producing freshwater from unlikely sources, such as seawater, poolwater, filthy water, among others.

What some newly discovered and revolutionary water technologies show us is that the possibility of human innovation and ingenuity to create freshwater from various sources is limitless.

For instance, here’s a revolutionary method of converting seawater into fresh, drinkable water using nothing more than a small electrical field. This new water technology, which uses a very small amount of energy, was developed by researchers at the University of Texas at Austin and the University of Marburg in Germany.

Here’s a report from EcoWatch.com:

The new method—electrochemically mediated seawater desalination—uses no membranes, is considerably simpler than conventional methods, and is so low-energy that it can be performed with the energy provided by store-bought batteries. Those are big improvements on all fronts—if the process can be adequately scaled up, it’s a potentially revolutionary development. Freshwater scarcity is expected to become a significant problem in many regions of the world in the coming decades, but as it stands now, saltwater desalination isn’t particularly economical … A cheaper, simpler method than those currently available would be of great use—one which could be used on larger scales than simple solar stills are.

The new method/technology is patent-pending and is currently in commercial development by startup company Okeanos Technologies.

According to Richard Crooks of the University of Texas, seawater desalination is one effective way to provide freshwater to humans and to improve human health. Most current methods, Crooks said, use expensive and easily contaminated membranes.

“The membrane-free method we’ve developed still needs to be refined and scaled up, but if we can succeed at that, then one day it might be possible to provide fresh water on a massive scale using a simple, even portable, system,” he said.

In other words, this new method does not only seek to tap into the world’s largest water source– seawater; it was also designed to produce abundant freshwater cheaply and free from contamination.

However, according to our laws and current politico-economic system, these innovative and life-saving water technologies are totally not welcome– or will never be used– here in the Philippines unless their inventors or investors partner with the government or with some politically connected cronies who are automatically guaranteed by law to own at least 60 percent of the business/venture.

2 thoughts on “How Protectionism and Oligarchic System Cause Artificial Water Crisis in the Philippines

  1. Pingback: Filipinos' Fallacy of Politico-Economic Equivalence - VINCENTON BLOG

  2. Pingback: $30 Million MRT Extort Reveals the Evils of RP’s Protectionism and Corporatism | vincenton

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