Press Release
July 17, 2009

SENATE INQUIRY ON LAIBAN DAM PROJECT SOUGHT

Senate Minority Leader Aquilino Q. Pimentel, Jr. (PDP-Laban) today asked the Senate to inquire into the proposed joint venture agreement between a state firm and the San Miguel Group to implement the Laiban Dam project in view of allegations that certain terms and conditions are grossly disadvantageous to the government which may ultimately prejudice consumers.

The Metropolitan Waterworks and Sewerage System (MWSS) has entered into an agreement with the San Miguel Bulk Water Company, Inc. (SMBWCI) to build the Laiban Dam in Tanay, Rizal which has the potential to provide long-term water supply - estimated at l,900 million liters a day - to Metro Manila.

"Notwithstanding the urgency of developing alternative sources of potable water for the expanding population of the metropolis, the government must ascertain that the joint venture agreement should fully conform with the build-operate-transfer (BOT) law and will be beneficial to consumers in terms of steady supply of water at reasonable cost," Pimentel said.

The inquiry should be undertaken by the Senate committee on government corporations and public enterprises and the committee on public services, he said.

Since more than 4,000 families are in danger of being displaced, Pimentel asked what measures have been drawn up to relocate them and compensate for the disruption of their lives in terms of loss of homes and means of livelihood.

The senior parliamentarian said the Arroyo government should explain why it opted to pursue the Laiban Dam Project through a joint venture agreement wherein the MWSS becomes a partner of the private contractor.

Pimentel said critics have a point with their observation that the deal will put the MWSS in a conflict of interest, which is prohibited by the Constitution -- because it primary functions as a regulatory body that approves water rates.

"Since the MWSS is the business partner of the SMBWCI in the joint venture, how would the agency effectively exercise its regulatory duties in this respect?" he said.

Pimentel questioned the lack of competitive public bidding for the waterworks project, which is required by the BOT law to allow the entry of the best qualified contractors and to secure the most advantageous terms for the government.

"Was the joint venture agreement adopted for the Laiban Dam Project to skirt legal procedures and to do away with public bidding?" the senator from Mindanao asked.

He said the issue of lack of public bidding cannot be cavalierly disregarded by the government specially because the cost of the project, originally estimated at $l billion, has reportedly ballooned to $2 billion. He warned that the inflated cost could translate into higher water rates, and therefore burdensome to consumers.

Pimentel said the inquiry will also zero in on a "take-or-pay" provision of the joint venture contract which will require the MWSS to pay for the full amount of 1,900 million liters of water supplied daily by the Laiban Dam even if less than this amount is actually consumed.

He said such lopsided arrangement should not be allowed because it may be construed as direct government guarantee the incremental cost of which will be passed on to the water consumers.

"This is reminiscent of the onerous contracts entered into by the government with several Independent Power Producers at the height of the power crisis in the early l990s that compelled residential and industrial consumers to shoulder the cost of the unused electricity generated by the IPPs," Pimentel said.

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