Water supply deal in Iloilo to almost double tariff rates
In the heart of the Philippines, the city of Iloilo is embroiled in a debate over its water supply future. The city government has endorsed Aboitiz InfraCapital's (AIC) bulk water supply proposal, despite a cheaper, publicly funded alternative backed by the National Irrigation Administration (NIA) and the Asian Development Bank (ADB).
The AIC project, which follows a Build-Own-Operate/Build-Lease model, carries a potential financial risk for local governments. Over a 33-year concession period, they could pay availability fees of up to P27 billion, even if actual water demand is lower than projected. This could lead to significantly higher water tariffs, potentially more than doubling the current rate of ₱18 per cubic meter, according to figures from the NIA.
The city government's rationale for favoring AIC’s more expensive proposal over the publicly supported plan has not been publicly clarified. Critics have labelled the AIC plan a "middleman scheme" that inflates water rates and adds costs, potentially making retail water prices as high as ₱80–₱86 per cubic meter after distribution costs.
The NIA, supported by the ADB, has an existing government-to-government project, the Jalaur River Multi-Purpose Project Stage II (JRMP II), designed to supply water at lower costs and ensure affordability without contingent liabilities. The intended water source for the AIC plan is the same as that for the JRMP II, according to NIA.
The city's endorsement of AIC's unsolicited proposal has raised concerns, particularly as the AIC plan competes directly with a government-to-government arrangement with the Metro Iloilo Water District (MIWD), designed to keep water affordable. In July, MIWD and NIA signed a memorandum to study the full 86 million liters per day allocation from JRMP II.
The AIC proposal was initially rejected by NIA in March. However, the city granted AIC Original Proponent Status, advancing the project to a Swiss Challenge, a process that allows other companies to submit competing proposals. The AIC plan, if successful, could potentially double water rates for consumers.
The NIA claims the AIC plan violates the Public-Private Partnership Code, which prohibits unsolicited proposals when a comparable government-backed project is underway. The AIC plan also has potential conflicts with ongoing projects backed by the ADB, according to NIA.
Despite financial concerns, AIC cites successful examples of its infrastructure projects elsewhere, advocating collaboration and innovation in infrastructure development. These factors may influence city officials, who are looking to modernise and improve their city's infrastructure.
As the debate continues, residents of Iloilo City are left wondering about the potential impact of higher water tariffs on their household expenses, particularly at a time when prices of other essential goods and services are also rising. The city government has yet to provide a clear explanation for its decision to pursue the AIC project.
- The government's endorsement of Aboitiz InfraCapital's (AIC) expensive water supply proposal, despite a cheaper, publicly funded alternative, has raised concerns among critics who label it a "middleman scheme" that could potentially double water rates for consumers in Iloilo City.
- In the face of financial risks and potential conflicts with ongoing projects, AIC defends its proposal by citing successful infrastructure projects elsewhere and advocating for collaboration and innovation in infrastructure development.
- With the AIC proposal set to compete with a government-to-government arrangement designed to keep water affordable, residents of Iloilo City are left wondering about the potential impact of higher water tariffs on their household expenses, particularly at a time when prices of other essential goods and services are rising.
