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COMPLETION OF MANILA WATER PRIVATIZATION

WASHINGTON, D.C., Aug. 1—Privatization of the Metropolitan Waterworks and Sewerage System (MWSS) was completed August 1 in Manila, Philippines. MWSS is the government-owned water supply, treatment and distribution utility serving the metro Manila area of over 11 million people and 37 municipalities. The closing was followed by a formal handover ceremony at the Malacañang Presidential Palace hosted by President Fidel Ramos.
Based on the privatization plan prepared by the International Finance Corporation (IFC) -- which was retained by the Philippine government as principal adviser to the project in 1995 -- MWSS awarded 25-year concessions to two consortia to assume full operational and investment responsibility for the city's water and sewerage system. The two consortia, the Manila Water Company, Inc. (MWC) and Maynilad Water Services, Inc. (MWS) are expected to spend up to US$7 billion during the contract period to improve and expand the system.
MWC is a joint venture of Ayala Corp. of the Philippines, United Utilities of the U.K. and the U.S.-based Bechtel Corp. MWS is a consortium composed of the Philippine industrial group, Benpres Holdings Corp. and the French company, Lyonnaise des Eaux. MWC and MWS were the winning bidders during the auction arranged by MWSS on January 27, 1997.
Under the arrangements, MWC will be responsible for management and development of the water system in the eastern part of the city and MWS in the western part of the city. MWSS will be transformed into the regulator with responsibility to monitor and enforce the two concession agreements.
At present, only two-thirds of the population of Manila has access to a piped water supply and only 11% are connected to the sewerage network. Over 55% of the water produced is estimated to be lost through leakages or theft. In addition, leaking water and sewage pipes create a health hazard.
All this will dramatically change as a result of privatization. Under the terms of the agreements, average water tariffs will decrease by more than 50% from present levels, water pressure and availability will meet international standards within three years, universal water coverage will be assured within ten years and more than 80% of the population will have sewerage and sanitation services within the concession period.
Mr. Jannik Lindbaek, IFC Executive Vice President said, "I am delighted that IFC could play such an important role in this landmark water privatization, the first in Asia. I am confident that it will make a significant improvement in the quality and availability of water and sewerage services to Manila's residents. I congratulate the government of President Fidel Ramos, especially, Gregorio Vigilar, Secretary of the Department of Public Works and Highways, for this accomplishment."
The government of the Philippines issued the Water Crisis Act in 1995 laying down the legal foundation for the privatization of MWSS and mandated IFC to help prepare and implement the transaction. IFC worked to ensure that the privatization satisfied key objectives by carefully structuring the transaction; marketing it to prospective investors and giving them the opportunity to prepare fully responsive bids; preparing and overseeing a competitive bidding process; negotiating the transaction on terms and conditions most favorable to the government; and guaranteeing fairness and transparency throughout the process.
IFC is the largest multilateral source of equity and loan financing for private sector projects in developing countries. The Corporation has worldwide experience in the privatization of state- owned utilities and plays a crucial role in providing needed comfort to prospective private investors while ensuring protection of the host country's interests.
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