Consumer issues, Oil deregulation

Amid Saudi attacks, no need for oil price hikes

Amid a looming oil crisis precipitated by the attacks on Saudi Arabian plants that effectively shut down 6% of global oil supply, oil companies in the Philippines can still afford not to raise prices. This is because they have overpriced domestic petroleum products to the tune of Php4.38 per liter for gasoline and Php1.80 for diesel from January 2018 up to the first week of September 2019.

This “overpricing” is the result of the oil firms implementing price adjustments that do not properly reflect movements in global price benchmarks, in particular the Mean of Platts Singapore (MOPS) for diesel and gasoline, as well as fluctuations in the US and peso foreign exchange (forex) rates. To illustrate, the net price adjustment for diesel in 2018 based on MOPS and forex was a rollback of Php2.08 per liter. But the actual price adjustment was a rollback of only Php0.60, or a difference (overpricing) of Php1.48 per liter. For 2019, up to the first week of September, the actual price hike for diesel was Php3.15 per liter when the adjustments should have only been Php2.83, or a difference of Php0.32 per liter.

Similarly, there should have been a net rollback of Php5.83 per liter for gasoline in 2018, but the actual reduction was only Php2.35 or a difference of Php3.48 per liter. For 2019, as of the first week of September, the total adjustment in gasoline prices should have only been Php3.25 per liter, but actual price hikes have reached Php4.15 per liter at that point, or a difference of Php0.90 per liter.

So-called global price benchmarks like MOPS, of course, do not show the actual price of oil, which tends to be artificially high because of global oil monopolies that dictate supply and prices. With or without an oil price hike, prices are bloated because of global monopoly control by the oil giants like Shell and Chevron. But on top of this monopoly price, oil firms even profit more by taking advantage of lack of government control on domestic prices and supply. Under oil deregulation, oil firms hike or roll back local pump prices by much higher (in case of price hikes) or lower (in case of rollbacks) than the movements in global benchmark prices and forex.

Can Duterte curb this abusive practice of the oil companies? Not under Oil Deregulation Law, which took away government’s capacity to regulate and ensure fair domestic prices and price adjustments. Will Duterte stop local oil overpricing? Not if his government is raking in about Php7.72 million every day in additional VAT (value added tax) revenues on overpriced diesel and gasoline.

2019 elections, Governance

22 dahilan bakit dapat iboto si Neri Colmenares sa Senado

Neri poster

22. Para sa mga manggagawa, gaya ng wage hike at pagwawakas sa endo

21. Para sa mga magsasaka, gaya ng tunay na reporma sa lupa

20. Para sa senior citizens, gaya ng pagtaas ng SSS pension

19. Para sa mga kabataan, gaya ng sapat na badyet para sa edukasyon

18. Para sa mga maralita, gaya ng sapat na serbisyong pabahay

17. Para sa sapat na serbisyong pangkalusugan, lalo na para sa mahihirap

16. Para sa mga katutubo at Moro, at karapatan nila sa sariling pagpapasya

15. Para sa maliliit na lokal na negosyante, laban sa labis na dayuhang produkto at kapital

14. Para sa abot-kayang presyo ng bigas at suporta sa mga magsasaka ng palay

13. Para sa murang singil sa kuryente, bantay sa pang-aabuso ng Meralco, atbp.

12. Para sa murang singil sa tubig, bantay sa pang-aabuso ng Manila Water, Maynilad, atbp.

11. Para sa mababang presyo ng langis at bantay sa pang-aabuso ng kartel ng langis

10. Laban sa mga pahirap na buwis gaya ng nasa TRAIN Law at VAT

9. Laban sa korupsyon sa gobyerno, gaya ng pork barrel

8. Laban sa patuloy na pamamayagpag ng mga political dynasty

7. Para sa kalayaan, laban sa diktadura at Martial Law

6. Para sa mga karapatang pantao at bantay sa mga paglabag dito

5. Laban sa panghihimasok ng sinumang dayuhan, US man o China

4. Mahusay na abogado, kongresista at aktibista

3. Hindi magnanakaw at walang bahid ng korupsyon

2. Hindi hawak sa leeg ng administrasyon, tunay na oposisyon

1. Subok na para sa bayan at tunay na pagbabago

22 Neri Colmenares For The Win


Economy continues slowdown under Duterte

The gross domestic product (GDP) grew by just 5.6% in the first quarter of 2019. That’s the slowest quarterly growth in four years.

Duterte’s economic managers are pinning the blame on the delayed passage of the 2019 national budget. What they do not say is that the slowdown this quarter is just a continuation of the overall trend of slowing economic growth since the Duterte administration took over in 2016. (See chart below)

Annual GDP growth rate averaged 6.9% in 2016, then slowed down to 6.7% in 2017, and further to 6.2% last year.

Not that the economy was in a better shape under Aquino and the previous regimes.

But the slowdown under Duterte shows that absent fundamental economic reforms to boost agricultural production and encourage manufacturing expansion that will create long-term, productive jobs; promote domestic consumption as growth driver (e.g., through substantial wage hikes and removal of onerous taxes); etc., the relatively rapid growth in the first half of 2010s is not sustainable.

What we have seen under Duterte so far is the further destruction of agriculture and rural livelihoods such as through the Rice Tariffication Law; continuation of the low wage policy to attract foreign investors; additional tax burden under the TRAIN Law, etc.

Duterte’s economic managers think that infrastructure spending (i.e., “Build, Build, Build”) will impact GDP figures positively. But this may be true only in the short term. As the program relies heavily on public debt, not to mention that most of the infrastructure will be privatized anyway, it will actually create more problems for the economy and the people in the long term. ###

Labor & employment

Wage hikes, slowest under Duterte

May 1 wage hikes

(UPDATED May 1, 2019) Did you know that among all post-EDSA presidents, the minimum wage has increased at the slowest pace under Pres. Rodrigo Duterte?

In his first three years in office, the minimum wage in NCR (non-agricultural rates and including allowance) has only increased by an average of 9.8 percent. At the start of his term, the minimum wage in NCR was Php454 to Php491 and are today pegged at Php500 to Php537.

During similar periods in their respective terms, the minimum wage in NCR has increased by 32.6% under Corazon Aquino (from Php89 to Php118); 22.9% under Fidel Ramos (from Php118 to Php145); 17.0% under Joseph Estrada (from Php198 to Php213-250); 13.1% under Gloria Arroyo’s first term as Estrada’s replacement (from Php213-250 to Php243-280) and 26.9% in her “second” term (from Php243-280 to Php313-350); and 16.1% under Benigno Aquino III (from Php367-404 to Php429-466).

Wage rates compared above are since the passage of the Wage Rationalization Act of 1989 (Republic Act 6727) and exclude wage adjustments on or before May 1, as reported by the National Wages and Productivity Commission (NWPC). The wage rates under Corazon Aquino cover her three last years in office since RA 6727 was passed in June 1989, while the period under Joseph Estrada includes wage rates up until his ouster in January 2001.

PH labor condition, worst in Southeast Asia

Filipino workers are worse off than most of their counterparts in Southeast Asia. Consider these comparative data culled from various regional and global institutions:

Unemployment is worst in the Philippines:

  • The Philippines has the lowest labor force participation rate at 60.7%, compared to Cambodia (86.6%); Vietnam (76.3%); Lao (74.5%); Brunei (69.5%); Indonesia (69.0%); Thailand (68.1%); Malaysia (68.0%); Singapore (67.7%); and Myanmar (61.5%), ASEAN Secretariat in its ASEAN Key Figures 2018 report (comparing 2017 data)
  • The Philippines has the highest unemployment rate at 6.6%, compared to Thailand (1.2%); Cambodia (1.6%); Lao (1.8%); Vietnam (2.0%); Myanmar (2.1%); Singapore (3.1%); Malaysia (3.4%); Indonesia (5.3%); and Brunei (6.1%), according to the ASEAN report.

Wages in the Philippines are among the lowest:

  • According to a 2018 survey of JETRO (Japan External Trade Organization), the base salary of a Filipino manufacturing worker at US$220 a month is much smaller than Malaysia (US$413); Thailand (US$413); Indonesia (US$296); and Vietnam (US$227).
  • Year-on-year wage hike for manufacturing workers in the Philippines in 2017-2018 and 2018-2019 averaged 4.8%, much slower than Indonesia (8.1%) and Vietnam (7.1%) that are already providing higher base wages to their manufacturing workers; and while faster than Malaysia (4.2%) and Thailand (4.2%), wages there are already almost twice compared to the Philippines, based on the JETRO survey.

Official poverty in the Philippines is among the highest:

  • Based on World Bank data from its Poverty and Shared Prosperity 2018 report, the mean consumption or income per capita in the Philippines is growing every year at just 1.4% (2009 to 2015), way behind Malaysia (5.9%, 2011 to 2015); Indonesia (4.8%, 2015 to 2017); Vietnam (3.7%, 2010 to 2016); and Thailand (3.0%, 2010 to 2015).
  • Comparing 2015/2016 national poverty incidence, the Philippines recorded the highest rate at 21.6%, according to the ASEAN Key Figures 2018 report. This was way higher than the poverty rates in Malaysia (0.4%); Vietnam (7.0%); Thailand (8.6%); and Indonesia (10.9%). ###

Counting the poor, measuring poverty

SWS poverty

Just before the Holy Week break, the Philippine Statistics Authority (PSA) reported that the country’s poverty incidence dropped to 16.1% of families in the first half of 2018 from 22.2% during the same period in 2015. Among individuals, the poverty incidence fell to 21% from 27.6 percent. This supposedly means that the Duterte administration is on track to meet its target of lifting one million Filipinos from poverty every year.

Absurdly low threshold

Expectedly, government’s claim of improved poverty situation has been met with strong criticisms, not to mention ridicule, from various sectors. The biggest flak remains the absurdly low threshold that the PSA continues to use to count the number of poor Filipinos. For the first half of 2018, the poverty threshold was pegged at Php10,481 per month, which for government represents the minimum amount that a family of five needs to be considered not poor.

That threshold translates to a measly sum of Php69.87 per person per day. As state statisticians try in vain to defend the methodology that produced their preposterous poverty threshold, the simple challenge from the incredulous public is for government officials to live off Php70 a day.

Malacañang officials did not accept the challenge, and instead argued that poverty is a matter of lifestyle. Depende sa lifestyle nung kumakain. Kasi kapag tanungin mo iyon mahirap, sabihin niya, asin lang. Magdidildil kami ng asin, nakakakain na kami,” presidential spokesperson Salvador Panelo was quoted as saying when asked if a family can survive on the PSA threshold.

And there’s the rub. For government, poverty is an issue of lifestyle, not based on any reasonable or acceptable standard of income and consumption, and of access to adequate social services such as health, education and shelter. If a household can survive on salt, then Php70 for each of the family members must be enough.

But the idea of measuring poverty is not simply to count how many are poor. Ultimately, it is about ensuring, as a matter of policy, that people achieve a decent living to become not poor. Decent living thus is not an issue of lifestyle but creating, among other things, enough economic opportunities and a conducive social environment for people to afford life’s basic necessities and achieve a certain level of comfort in a sustainable way. Any poverty threshold should be set based on such standard and principle.

Need for higher standards

At the global level, there are already many studies that attempt to define the quality and quantity of decent living. These efforts are in response to the deemed inadequacy of existing global standards in measuring poverty such as World Bank’s US$1.90 per capita poverty threshold (the International Poverty Line or IPL) based on 2011 Purchasing Power Parity (PPP). In macroeconomic theory, PPP compares different countries’ currencies through a “basket of goods” approach.

In Philippine peso, a US$1.90 PPP poverty line translates to an even lower threshold of Php40.20 in 2015, according to World Bank calculations. The PSA’s annual per capita poverty threshold in 2015 (full-year) was Php21,753 or Php59.60 per day.

Much like the PSA, World Bank is widely criticized for systematically understating the extent of global poverty by using a low poverty line. Partially acknowledging the criticisms, World Bank for the first time presented alternative and higher poverty lines (i.e., at US$3.20 per day for lower-middle income countries such as the Philippines and at US$5.50 per day for upper-middle income countries) in its latest (2018) annual global poverty report.

But the adjustments still fall way short in depicting a more realistic picture of poverty. For instance, World Bank standard of US$3.20 PPP poverty line for the Philippines as a lower-middle income country translates to just about Php67.80 in 2015.

Nonetheless, the magnitude of poverty among the population increases significantly even with insignificant increases in the poverty line. To illustrate, 21.93 million Filipinos fell below the PSA poverty threshold of Php59.60 in 2015. With an additional eight pesos to match World Bank’s new poverty line for countries like the Philippines (i.e., Php67.80 in 2015), the number of poor swells by almost six million to 27.5 million Filipinos.

Imagine then the impact of a truly meaningful upward adjustment in poverty lines in terms of measuring the real magnitude of poverty. Just by way of illustrating this point, look at the number of poor people worldwide using World Bank’s poverty lines for low-income countries (i.e., US$1.90) and upper-middle income countries (i.e., US$5.50). At US$1.90, the number of poor people in 2015 by World Bank calculations was only 10% of global population (736 million people); but at US$5.50, poverty incidence rises to 46% of global population (almost 3.4 billion people).

Cost of decent living

So, what should be the higher standard with which to measure if Filipinos are poor or not? Concretely, how much is the cost decent living? Duterte’s economic managers apparently know that current official poverty threshold does not allow a family to afford a life out of poverty, much less a decent living.

Remember when the National Economic and Development Authority (NEDA) came under fire last year for reportedly claiming that Php10,000 is enough budget for a family of five to survive? The ruckus forced Duterte’s socioeconomic planning secretary Ernesto Pernia to give an estimate on how much a family would actually need to live decently – i.e., Php42,000 a month.

Pernia, of course, would later clarify that the Php42,000 is “not official NEDA figures” and was just “top of mind”, aware of the implications on government’s wage policy. But that amount was not pulled out of thin air. The NEDA chief said he came up with the figure based on the assumption that there are two people working in the family and each earns at least Php21,000 a month. It approximates the average family monthly income of about Php23,000, based on the latest (2017) Annual Poverty Indicators Survey (APIS) of the PSA.

Using Php21,000 to Php23,000 as proxy for the cost of decent living, how do Filipino families measure up in terms of income? Based on the 2017 APIS, 70% of Filipino families are earning below Php22,500 a month. Put another way, seven out of every 10 Filipino families fail to meet the “cost of decent living”. This is a far cry from the two out of every 10 families that the PSA counts as poor.

Other ways of measuring poverty

Family income is actually just one aspect of measuring poverty. Decent living is only completely achieved if a family has sufficient access to basic services such as education, housing, health, utilities, transportation, etc. as well as provision for rest and recreation and savings for emergency expenses. While a substantial income will allow a family to meet most of these basic needs, availability of infrastructure and provision of state support is also equally crucial.

As a consequence of lack of sufficient income and of an even greater lack of public investments, a significant portion of Filipino families are deprived of these basic services. According to the 2017 APIS, 33% of those in school age (i.e., 3 to 24 years old) from all families are not attending school; 39.8% of them cited high cost of education or financial concern and need to look for work as reasons for not attending school. Also, only 10.9% of all family members finished college while only 19.5% finished high school. For the poorest 30% of families, only 1.9% finished college and 15.4% finished high school.

Almost half (49.4%) of Filipino families do not have access to individual or household taps (i.e., piped into dwelling) and get their water from unsafe sources including public taps, wells, springs, etc. About 78% of the poorest 30% of families get their water from sources other than individual or household taps. Meanwhile, 95.4% of all families do not have access to pipe/sewer system; for the poorest 30%, 97.8% do not have access to such sanitation facility. Some 35.8% of all families have houses (i.e., walls) built from light and salvaged materials; for the poorest 30%, it is at 61.1 percent.

Aside from these indicators of access to and deprivation of basic needs, another way of measuring poverty is to ask the people if they feel they are poor such as the regular self-rated poverty survey of the Social Weather Stations (SWS). In its latest quarterly survey (Dec 16-19, 2018), SWS reported that 50% of Filipino families consider themselves poor. That’s equivalent to an estimated 11.6 million poor families.

The SWS itself pointed out that the results of its self-rated poverty surveys are consistent with the easing trend in poverty (but obviously not in terms of scale) indicated in the official PSA survey (i.e. comparing the first half of 2015 to the first half of 2018). But looking at the trend between the two periods actually shows a deteriorating poverty situation that could only be explained by the policies Duterte implemented which directly impacted people’s income such as the TRAIN Law and the high inflation it triggered.

Using SWS self-rated poverty surveys, poverty appears to be worsening under President Duterte. In the first half of 2016 (or the immediate period before Duterte assumed power), there was an estimated average of 10.4 million families that count themselves as poor. The number declined to 9.7 million families in the second half of 2016 but climbed to 10.6 million families in full year 2017 (or average of the four SWS quarterly surveys) and further to 11.2 million in full year 2018.

Thus, based on these estimates, the number of poor families that consider themselves poor increased by an estimated 800,000 under the Duterte administration – from 10.4 million in first half 2016 to 11.2 million in 2018.

That’s equivalent to about four million additional poor people. Instead of lifting one million people out of poverty annually based on its target, the Duterte administration apparently is pushing almost two million people to poverty every year. ###

Agrarian reform, Human rights

Landlessness, poverty and war in Negros

“Kaya dun po sa amin
Di biro ang magtanim
Magpunla ka ng binhi
Punglo ang aanihin.”

(Magtanim ay di biro)

On Mar 30, 2019, the police and military killed 14 farmers in separate operations in the city of Canlaon and in the towns of Manjuyod and Sta. Catalina – all in Negros Oriental province. Twelve more were arrested. Police and military officials justified the killings and insisted that the victims were armed communist rebels. They claimed that state forces were just implementing search warrants for loose firearms when the victims opened fire at them.

But several witnesses, including relatives of the victims who survived the gruesome killings, have come forward to dispute the account of the police and military. The harrowing details of the massacre as told by the survivors and kin are being documented by human rights advocates and peasant groups as calls for justice and to end impunity mount.

War against peasants

The summary execution of 14 farmers in Negros Oriental came five months after unknown assailants massacred nine farmworkers in Sagay City in Negros Occidental on Oct 20, 2018. They were participating in a land occupation and cultivation campaign led by the National Federation of Sugar Workers (NFSW) at the disputed Hacienda Nene when they were killed. Weeks later, on Nov 7, 2018, their lawyer – a long-time peasant rights advocate in Negros – was also assassinated. For the military, the NFSW is a communist front.

It came three months after six people were killed and 15 arrested in similar joint police and military operations in search of supposed loose firearms in hinterland barangays in Negros Oriental on Dec 27, 2018. Again, the authorities insisted that the victims, including village officials, “turned out” to be armed communist rebels and fought back.

All in all under the Duterte administration, at least 55 farmers, farmworkers and land rights advocates have been felled by apparent extrajudicial killings in Negros island so far. These killings appear to be systemically being carried out as part of President Duterte’s anti-insurgency campaign, made even more reprehensible by his virulent rhetoric against assertive peasants (My orders to the police and soldiers, shoot them… If they die, I do not care.” – Duterte on landless farmers involved in land occupation campaigns)

Negros island provinces are among those covered by Memorandum Order (MO) 32. It called for increased deployment of police and military forces purportedly to “suppress lawless violence and acts of terror”. The others are provinces in Samar island and Bicol region.

Implementation of the Malacañang directive in Negros island has taken the form of the Synchronized Enhanced Managing of Police Operations (SEMPO). More notoriously, it is also known as Oplan Sauron in Negros Oriental under whose name the recent mass killings and arrests of mostly Negrense peasants are being carried out.

Twenty of the reported 55 extrajudicial killings in Negros island were on account of Oplan Sauron in Negros Oriental. Oplan Sauron is sinister by design. Disguising as law enforcement, it uses search warrants for loose firearms to legitimize police and military attacks in rural communities and households suspected as bases of support of the New People’s Army (NPA).

But instead of weakening the NPA, such brutal modus operandi could be fueling even deeper collective resentment in the rural areas against the police and military. In the end, Oplan Sauron could only further boost the legitimacy of the people’s war and agrarian revolution that the NPA wages.

This is especially so because of the structural issues underlying the social unrest and conflict in Negros.

Landless, hungry, poor

Negros is an island mired in grinding poverty and hunger, mainly spawned by decades of chronic landlessness among its farmers and farmworkers.

Official poverty and hunger incidence in the island, especially Negros Oriental, is among the worst in the country. Negros Oriental has a poverty incidence of 45% (of population) compared to the national average of 21.6 percent. Its subsistence incidence is 24.2% while the national average is 8.1 percent. Negros Occidental has “better” poverty and hunger figures (29% and 9.4%, respectively) but these are still worse than the national averages. The numbers are as of 2015.

There are about 1.56 million poor people in the two Negros provinces. To give perspective, note that the country’s poorest region, the Autonomous Region in Muslim Mindanao (ARMM), has 1.99 million poor people spread in its five provinces.

To be sure, the actual levels of poverty and hunger in the Negros island are much higher than what official data indicate considering the absurdly low thresholds government uses to measure them. Based on the 2015 official poverty survey, for instance, a Negrense only needs Php39 to Php44 to meet daily food needs; and a total of Php56 to Php63 to meet daily food and non-food needs.

Nonetheless, such low standards still paint a picture of widespread destitution, one that is even worsening. Poverty in both Negros Oriental and Negros Occidental deteriorated from a decade ago (i.e. 2006 data). Hunger also worsened in Negros Oriental during the same period. (See Table 1)

Screen Shot 2019-04-07 at 4.10.42 PM

Many see government’s three-decade Comprehensive Agrarian Reform Program (CARP) as a failure; and it can’t be more conspicuous anywhere else than in Negros island. CARP is supposed to distribute 427,656 hectares (has.) of land in the Negros region. But as of end-2016, the program has distributed just 302,377 has. for a balance of 125,279 has. in land acquisition and distribution (LAD).

Negros island accounts for 21% of the national LAD balance of 602,306 has. – the largest among all regions. It has the second lowest LAD accomplishment rate at 71% , just behind the 67% of another restive and impoverished region, the ARMM. (See Table 2)

Screen Shot 2019-04-07 at 4.12.52 PM

Meanwhile, a sizable portion of CARP lands in the region, particularly in Negros Occidental, is under the notorious stock distribution option (SDO) that allows landlords to retain effective control. SDO schemes cover more than 3,200 hectares of CARP lands in Negros Occidental as of June 2015 and practically all are planted to sugarcane, accounting for almost 90% of all SDO lands nationwide.

Indeed, most of the undistributed lands in Negros are vast sugarcane plantations concentrated in the hands of landlords that include political clans. After rice lands (about 23% of LAD balance), sugarcane lands (around 19%) comprise the largest portion of undistributed lands in the country, with an overwhelming concentration in Negros Occidental.

Thus, many of the landless in Negros end up as sugarcane farmworkers in these massive haciendas, trying to eke out a living under slave-like conditions. It is estimated that Negros island has about 335,000 sugarcane farmworkers, almost 43% of the national total.

Latest farm wages survey of government pegged the average nominal wage of sugarcane farmworkers at Php253.69 per day – the second lowest among major crops, just a bit better than corn farmworkers’ Php246.05.

But the actual take home pay of the sugarcane farmworkers is much lower as they are tied to the vicious cycle of landlessness, starvation wages and debt. Paying off loans used to buy rice and other basic daily necessities in between pay days leaves sugarcane farmworkers and their families with practically nothing. In reality, a sugarcane farmworker typically earns just around Php50 to 67 a day, forcing them to work in several haciendas to augment their income.

Their dire situation is only made worse by the dreaded tiempo muerto or the period between the planting and harvesting seasons of sugarcane where no work is available in the haciendas for three months. With no established mechanism of government support, sugarcane farmworkers are left to fend for themselves, usually by taking on odd jobs in the cities.

But others take organized action such as the bungkalan campaign (land occupation and collective cultivation) on still undistributed CARP lands. However, landlords and even state forces respond to this legitimate form of assertion of people’s rights to land and livelihood with systematic violence like what happened in the “Sagay 9” massacre.

When government’s apparent plan to end landlessness is to eliminate the landless, what are the farmers and farmworkers of Negros island supposed to do? ###


Privatization, Water crisis

Questions on Manila Water’s compensation


Still reeling from public backlash, Manila Water will now “voluntarily” compensate consumers affected by the water supply interruptions. The estimate is that the initial compensation will cost the Ayala firm Php150 million. That obviously is merely a drop in the ocean of Manila Water profits, so to speak. In 2018, it reported a net income of Php6.5 billion.

Everyone – including the senators, congressmen and even the MWSS chief regulator – is saying that Manila Water’s offer is not enough. There should be a rebate, per the concession agreement. Manila Water claims it will cooperate with regulators.

While efforts to make Manila Water to account are commendable, and recent developments on demands for compensation are welcome as immediate relief especially for poor consumers, important questions remain:

(1) How about Manila Water customers, or even Maynilad’s for that matter, who have been without 24/7 water supply even BEFORE the artificial water shortage happened? They number about 300,000, based on the private concessionaires’ own reports. Aren’t they entitled to compensation and rebate, too?

(2) If the basis of the compensation is the failure of Manila Water to fulfill its contractual obligations, who is accounting for more than 20 years of failure and neglect of BOTH Manila Water and Maynilad under MWSS privatization?

(3) If public pressure succeeds in seeking reasonable and just compensation – if there is ever such a thing for depriving people something as very basic as water in the name of profits – from Manila Water, does it mean water privatization actually works and all it takes is a vigilant public and effective regulator? ###

Privatization, Water crisis

Privatization is creating an artificial water shortage


First published by Bulatlat

Metro Manila’s supposed water crisis is one that is not caused by lack of supply and new water sources, or as some would argue, by lack of foresight and preparations by regulators and Manila Water. Rather, it is caused by lack of effective state control over water resources after government allowed the privatization of Metro Manila’s water system 22 years ago.

There lies the artificial water shortage.

By official accounts, the available supply for Metro Manila’s water needs is still enough. But instead of taking on the role of ensuring that this water reaches the people for their basic domestic use, government has deferred to two separate private companies (Manila Water and Maynilad), each with their own profit motives and considerations, in determining how water reaches the end-consumers through their separate distribution networks.

Worse, these private concessionaires have not improved the infrastructure enough to maximize existing water supply despite massive increases in their rates (and profits) for the past two decades. Imagine this – every day, about 1,177 million liters of water are lost due mainly to defective infrastructure. That’s equivalent to almost eight times of the supposed deficit in water supply that Manila Water is grappling with.

As it is, according to the concessionaires’ own performance reports, almost 300,000 people in their service areas are already without 24-hour water supply even before the current supply issues began early this month. That is the “normal” situation for these people under the regime of privatized water. The actual figures could be higher, as government regulators do not seem to verify – or do not have the capacity to check – the performance of the concessionaires.

Both Manila Water and Maynilad source the water they distribute from Angat dam that based on official pronouncements still holds enough water to supply the needs of the capital region and nearby areas. Angat dam supplies 4,000 million liters per day (MLD) or 96% of Metro Manila’s water (the rest come from Laguna Lake, 3% and deep wells, 1%).

But while Manila Water has a deficit, Maynilad has surplus supply. How did that happen? When the Ramos government privatized the Metropolitan Waterworks and Sewerage System (MWSS) in 1997, its service area was divided into two and then bid out to private companies. The east zone was won by Manila Water and the west zone, by Maynilad.

As part of the concession agreement, Maynilad will get 60% of Angat’s raw water and Manila Water the remaining 40 percent. That translates to 2,400 MLD for Maynilad and 1,600 MLD for Manila Water. The said sharing arrangement was based on the population size of the concession areas awarded to them by government. At present, Maynilad services around 9.5 million people in the west zone and Manila Water, 6.8 million in the east zone.

The 150-MLD challenge

Manila Water claims that its 1,600 MLD from Angat is no longer enough as its requirements already rose to as high as 1,750 MLD. The 150-MLD deficit is being blamed for the water supply interruptions that have been affecting some half a million people in the east zone.

This reported increased demand from Manila Water’s customers could have been easily met if the government were in charge of water management and distribution. Under the present privatized setup, water that flows to Metro Manila is divided to the concession areas of Manila Water and Maynilad, and this creates unnecessary challenges for an effective and responsive mechanism in water allocation and distribution.

The water flows between the concessionaires are connected through cross-border pipes. As one of the stop gap measures to help address the supposed 150-MLD shortage in the east zone, Maynilad agreed to open some of these cross-border pipes so that 50 MLD of water allocated for the west zone could be directed to Manila Water’s concession areas.

If the MWSS were in charge of water distribution from the start, such option could have been resorted to much earlier and in a manner that is less complicated and bureaucratic (e.g., asking Maynilad’s permission first); more effective (e.g., redirecting more than 50 MLD, if needed); and much faster (e.g., under privatization, most of the cross-border pipes have been already cut and will need time to restore) to avoid the supply woes that tens of thousands of households are being forced to bear today.

Aside from the cross-border pipe arrangement with Maynilad, Manila Water is also expecting to have another 50 MLD from its new treatment plant in Cardona, Rizal (with a maximum capacity of 100 MLD when completed) and a further 100 MLD from existing deep wells.

Missing water

What is not highlighted amid all the frenzy in securing additional supply is the more than a billion liters of water wasted daily, mostly from leakages in the existing distribution infrastructure of Maynilad and Manila Water, or what the water industry calls non-revenue water (NRW).

At present, by MWSS’s own account, the NRW of Manila Water is at 11% while that of Maynilad is at 39 percent. Looking at the volume of water that flows through their respective systems, water losses in Manila Water’s concession area is around 176 MLD and about 1,001 MLD in Maynilad’s for a total of 1,177 MLD.

On its website, Maynilad claims that as of 2018, its NRW is 27.1 percent. On the other hand, Manila Water’s own website claims they deliver 1.3 billion liters out of their 1.6 billion Angat dam allocation, or an NRW of 12 percent. Using these figures, the total volume of water losses from both concessionaires is still huge at 888 MLD.

Based on the original targets when MWSS was privatized, the volume of water losses should have already been reduced to less than a billion liters a day (around 732 to 976 MLD) as early as 2001 or 18 years ago. Instead of the promised reduction, the volume of water losses has increased (per MWSS’s NRW estimates) amid a growing service area that has expanded by about five million people in the past two decades. This even as present all-in rates (i.e., basic charge plus other charges, supposedly to recover investments used to improve water supply) have grown about 3-4 times of their 1997 level in real terms.

Note that Maynilad still has a surplus supply despite wasting more than a billion liters of water per day, while Manila Water, which has a much lower reported NRW than its west zone counterpart suffers a deficit. This further underscores the inefficiency and wastefulness of water resource management and the artificiality of water shortage under MWSS privatization.

The combined water losses of both Manila Water and Maynilad is more than 28% of the estimated current water supply of 4,167 MLD from the Angat dam, Laguna Lake and active deep wells. The MWSS is saying that the international standard is 20% while other studies suggest that the apparent economically reasonable NRW is between 10 and 12 percent.

In any case, halving the current total NRW (as estimated by MWSS) could produce an additional 588 MLD in water supply. It is interesting to note that the controversial Php12.2-billion Chinese-funded Kaliwa dam (which government, using the metro water shortage as pretext, wants rushed amid unmet environmental compliance) has a projected capacity of 600 MLD. In other words, addressing the issue of water losses substantially lessens the pressure of building new dams and avoiding the unnecessary environmental, social and economic costs they entail.

Finding accountability

To be sure, urgent demands to make Manila Water and their operator led by the Ayala group and their foreign partners accountable for the current water woes in Metro Manila are justified and legitimate. But they should be made to account outside the narrow framework of their commitments under the concession agreement (or privatization contract), and instead be held liable in the context of the assertion of people’s rights to water and reversing MWSS privatization.

The privatization contract, by design, heavily favors the private concessionaires. When the World Bank (through the International Finance Corp. or IFC) crafted the concession agreement in 1997, it ensured that the private concessionaires will be able to operate profitably in order to pay back the World Bank and other foreign creditors the hundreds of millions of dollars in debts that MWSS owes them. The IFC itself, as the World Bank’s private investment arm, is an investor in the MWSS privatization through Manila Water. Thus, from the onset, MWSS privatization was never about the provision of water services but the collection of private profits for foreign investors and creditors and their local partners.

The MWSS itself, for instance, is saying that it appears there is nothing in the concession agreement that they can use to penalize Manila Water for causing the current water supply problems in its service area. Regulators claim that they can use the concession agreement’s rate rebasing exercise (when concessionaires ask for higher basic charges) but that will not happen until 2022. There is also no assurance of accountability as Manila Water (as well as Maynilad) could always question and reverse the decision of regulators through an international arbitration mechanism provided under the privatization contract.

Focusing on just Manila Water absolves Maynilad and its operators led by Manny Pangilinan’s group and its Indonesian backers (Salim group) and Japanese investors (Marubeni) of accountability, and reinforces the wrong notion that the issue is simply mismanagement on the part of Manila Water. The prevailing impression today is that Maynilad customers are “fortunate” when in reality, Maynilad’s very high NRW deprives all consumers in Metro Manila and nearby areas of valuable water supply.

Most importantly, it diverts the issue away from privatization as the central issue in, and underlying reason behind, the artificial shortage. As such, it also has the effect of absolving government of responsibility when in fact, the biggest accountability in all this lies with government for abandoning its duty to ensure water for the people.

As long as water remains in the hands of unaccountable, profit-oriented private and foreign interests, the people of Metro Manila and adjacent provinces will continue to face insecurity in supply amid ever skyrocketing rates. This is the real water crisis that we face, and one that is permanent – El Niño or not – as long as there is no policy shift in the way that water resources are managed. ###

Human rights

Who is afraid of IBON?

(Photo: Politiko)

The only reason that Malacañang is going after groups like IBON Foundation is that because they have been very effective in exposing the lies of the Duterte government.

IBON has been effective in refuting the false claims of Duterte’s economic managers about the TRAIN Law, inflation, improving employment situation, benefits of Chinese loans, etc.

Instead of squarely and convincingly proving as false the fact-based criticisms of IBON or look at its concrete proposals to address the country’s economic woes, the Duterte administration resorts to malicious accusations.

For the past 40 years, IBON has established itself as a reliable source of progressive research and analysis on national socioeconomic issues. From Marcos to Duterte – IBON has been consistent in its position that economics should be about the people, their rights and interests.

But the Duterte administration obviously has zero tolerance for views and alternatives that contradict its policies and programs, including on the economy. Thus, it uses public resources not only to question the legitimacy of IBON but to apparently try to shut it down.

What Malacañang is doing is blatant repression. And while it targets the sources of funding support of IBON, the irresponsible act of the Duterte government also puts the officials and staff of IBON at risk of physical harm.

That is criminal and reprehensible. ###

Consumer issues, Oil deregulation

Oil firms overpriced gasoline by Php3.48 per liter in 2018; diesel by Php1.48


After a series of oil price cuts that started from mid-October 2018 up to the first week of the new year, domestic pump prices have begun to climb up again. The recent increases are due to the combined impact of rising global oil prices and of the second tranche of additional excise tax on oil products under the Tax Reform for Acceleration and Inclusion (TRAIN) Law.

For consumers, it is bad enough that they are made to shoulder a heavier tax burden from a commodity as vital as oil. It is even greater injustice that they are forced to pay for overpriced oil and for even bigger fuel taxes due to such overpricing.

As oil firms are wont to do in a deregulated regime, they implemented price adjustments in 2018 that were higher than what were justified (at least based on Department of Energy or DOE standards) by the weekly changes in global benchmark prices as well as foreign exchange rates.

For 2018, oil companies overpriced gasoline by an estimated Php3.48 per liter and diesel by about Php1.48 per liter. (See Table 1)

tab 1 summary of overpricing 2018

The figures were based on the estimated impact on local pump prices of the weekly adjustments in the Mean of Platts Singapore (MOPS) prices of gasoline and diesel, as well as of the peso-US dollar exchange rates. The results were then compared to the actual price adjustments implemented by the oil companies. According to the DOE, the Philippines uses the MOPS prices as benchmark for pricing finished petroleum products that are retailed in the country.

Put another way, oil firms were implementing higher price hikes when global prices were rising and lower price rollbacks when global prices were falling. This means that consumers were still being abused by the oil companies even as they were rolling back prices in the last three months of 2018. In fact, looking at Table 1, the oil firms overpriced more during the successive weeks of price rollbacks in October to December.

The Oil Deregulation Law (Republic Act 8479 or the “Downstream Oil Industry Deregulation Act of 1998”) and its regime of price adjustments without public consultations created the environment for such abuse to be committed with impunity.

These allowed the oil firms to rake in around Php33.93 billion in extra profits last year on top of their regular income, and the Duterte administration to collect some Php4.63 billion in additional revenues from the 12% value added tax (VAT). Apparently, it is not in the interest of the government to regulate oil price adjustments because of the tax windfall that high and overpriced oil generates. (See Table 2)

tab 2 summary extra profits & vat 2018

It is important to stress that the “overpricing” based on the MOPS and forex movements does not in any way represent the true extent of how much prices are artificially bloated due to the monopoly control of big oil companies in the global and local markets. It just illustrates how deregulation can be easily abused by the oil firms operating in the country through implementing adjustments that are beyond the supposedly “justified” amounts by so-called international benchmarks such as the MOPS.

Oil price unbundling

During the height of unabated oil price hikes at the start of 2018, the DOE initiated its proposal to unbundle the prices of petroleum products. The latest is that the DOE is already finalizing a circular to implement the proposed unbundling meant to put more teeth in monitoring oil prices and protect the consumers. Industry players and energy officials have already agreed on seven out of the eight major components of the unbundled price.

Understandably, the remaining contentious item in the planned unbundling is the “industry take”, which indicates the profit margin and operation cost of the oil companies. Nonetheless, the DOE expects to finally issue the circular by the first quarter.

While unbundling could make the cost breakdown per liter of fuel products seem more transparent, it will still not guarantee fair price setting. Adjustments in prices will remain deregulated and oil firms, especially the largest ones, can continue to abuse the weekly price adjustments and overprice their products. This is similar to the unbundling of electricity rates in the privatized and deregulated power industry, which did not stop the abusive pricing practices of the big power monopolies.

Besides, real transparency in prices requires that all oil companies disclose their term contracts with their suppliers, detailing key information such as the specific source/supplier of imported oil, the actual negotiated import price, volume of oil imports, etc.

Impact of the TRAIN Law on oil prices

Compounding the overpricing by the oil companies is the additional fuel tax imposed by the Duterte administration. The TRAIN Law (or Republic Act 10963) will add another Php2 per liter in excise tax to the pump prices of gasoline and diesel; Php1 per liter for kerosene; and Php1 per kilogram (kg) for liquefied petroleum gas (LPG). Including the 12% value added tax (VAT), the second round of tax hike under the TRAIN Law will increase the price of gasoline and diesel by Php2.24 per liter; kerosene by Php1.12 per liter; and LPG by Php1.12 per kg.

In 2018, the controversial tax scheme of the Duterte administration already added Php2.80 to the price of diesel; Php2.97 for gasoline; Php3.36 for kerosene; and Php1.12 per kg for LPG, representing the additional excise tax and the corresponding VAT. Adding to this year’s adjustments, the TRAIN Law’s total price impact as of 2019 would be an increase in the pump price per liter of diesel by Php4.80; gasoline by Php5.21; and kerosene by Php4.42. For LPG, the total price hike is Php2.24 per kg or a total of Php24.64 for the usual 11-kg cylinder tank that households use.

The bad news is that there remains still another tranche of excise tax increases next year under the TRAIN Law. The scheduled increases for 2020, including the VAT, are: diesel, Php1.68 per liter; gasoline and kerosene, Php1.12 per liter; and LPG, Php1.12 per kg. Table 3 summarizes the impact of the TRAIN Law on oil prices.

tab 3 train impact on oil prices

As of the latest price adjustments (i.e., Jan 15, 2019) and including the second tranche of fuel excise tax under the TRAIN Law, the pump price of diesel is more than Php12 per liter higher than its level before the Duterte administration took over; gasoline is almost Php9 higher. Of the said price increases, the additional tax burden (i.e., excise and VAT) imposed by the TRAIN Law accounted for Php5.04 per liter for diesel (41% of the total price increase in diesel under Duterte) and Php5.21 per liter for gasoline (59% of the total increase in the price of gasoline). (See Table 4)

tab 4 oil price before & under duterte jan 2019

If policy makers were to truly address the problem of high oil prices, they should look at both the TRAIN Law and the Oil Deregulation Law. Removing the unnecessary fuel tax burden and making oil taxation more progressive will immediately bring down the price of oil for sure. But oil prices will remain exorbitant and price adjustments will remain unjustified as long as the oil industry is deregulated. ###