The Effect of Privatization

News lately has been that Manila Water will soon charge more for water after they were slapped with a fine by the Supreme Court. News outlets either report this as a 780% price hike or a Php 26 price hike if the SC does not reverse its decision.

Now, a side note, most news outlets want to paint this in as bad a light as possible and so stress the 780% figure as opposed to the Php 26 figure. Math geeks will love cracking these numbers and since I'm one of them, it basically refuses to state that water is currently priced (apparently) at Php 3.33 per cubic meter which I think is crazy cheap and a price hike is warranted.

Many of my UP friends then cite this instance as one of the dangers of privatization. Since private companies will want to make money, utilities might wind up more expensive than before. This is a no-brainer. When the power industry was privatized during then President Ramos, electricity rates did indeed go up! The promise was that prices would go down but let's not kid ourselves, prices went up. Judging by this Php 26 price hike, yes, the promise of lower prices is not fulfilled.

Why then do some people (me included) push for privatization at all? It's the quality that we're after. If you're a 90's kid like me, you will no doubt remember how brown outs and black outs were regular occurrences. Right when the power plants, the grid and the distributors were privatized, Filipinos experienced less brownouts. As a child, I didn't appreciate it or hardly noticed it but we had electricity more reliably. Now, it's not perfect. We still do experience brownouts every so often but it's due to these private companies wanting to make money that these brownouts are fewer and further in between.

The logic is simple. In the past year, we received several notices of possible brownouts. Only a few ever materialized as VECO knows that the longer the power lines are down, the longer the time is that their power lines aren't making money for them. These private companies are also more vigilant in catching cheaters who try to steal electricity or water. Do some escape? Of course but I dare say, much less than before.

Now we can talk about the fine that the SC imposed on Manila Water and how I think it's excessive and unreasonable but to stay on point, the short of it is that privatization assures that we have these services at all. Electricity may be more expensive, but the fact is it's more reliable than ever. Water may be more expensive, but the fact is it's there (even with the water crisis earlier this year, mind you).

These companies want you to use water and electricity so in other words, they have every incentive to continue providing the people with water and electricity. That's the effect that privatization has on industries. Having certain things government owned usually sees a decline in its quality slowly through time. Notice things like public schools, public hospitals, public roads and bridges. I've said it before and I'll say it again, it's time we stop demanding a lot of things and start demanding nice things.