In July of 1992, when Fidel V. Ramos assumed the presidency, he was immediately confronted by two crises: the power crisis and the water crisis. The power crisis arose when the National Power Corp., a government-owned corporation mandated to be the sole owner and operator of power plants in the Philippines, experienced financial difficulties and so was not able to build the power plants sorely needed by the recovering Philippine economy. The approach of the Ramos administration was for the government to get out of the power generation business and open the business to the private sector. The water crisis was dealt with differently.
As recounted in Tap Secrets: The Manila Water Story by Virgilio C. Rivera, Jr., the crisis in water was not so much the lack of water distribution capacity but rather the high system leakages with Non-Revenue Water (NRW) reaching as high as 63%. This means that of the water that the Metropolitan Waterworks and Sewage System (MWSS) sourced from the Angat Dam, filtered, and distributed only 37% was actually billed with the 63% lost through leaks and pilferage. What was needed from the private sector was not financial resources but rather managerial expertise. Privation of the MWSS would require huge financial investment, take too long to implement, and posed legal issues as water distribution as compared to power generation is a natural monopoly.
The Ramos administration’s solution was not to privatize the MWSS but to bide out the management of the MWSS to the private sector. Moreover, instead of choosing one private company, the MWSS franchise area was divided into the West and East Zones so that the performance of the two chosen private companies could be compared. This arrangement also solved the conflict of interest inherent in the existing system where the MWSS, as the operator, proposes water rates and other water performance metrics which MWSS, as the regulator, approves. Under the new system, the private company operators propose the water rates while the MWSS approves the proposal.
By the way, the government policy of allowing its agency to be both the regulator and the operator has been one of the root causes of government inefficiency. For example, the Department of Education (DepEd) as a regulator reviews the performance of the private schools. How then does DepEd, the regulator, review the performance of the public schools of which it is the operator? In sharp contrast, when the Department of Health devolved 651 of its 721 public hospitals to the local government units (LGUs), it was placed in a better position to evaluate and regulate their performance.
Returning to the water issue, the winning bidders were chosen based on the water rates they proposed to charge. At that time the average water rate of MWSS was P8.78 per cubic meter. Manila Water won the East Zone by bidding P4.02 per cubic meter while Maynilad won the West Zone bidding at P7.21 per cubic meter. By 2022, the Non-Revenue Waters of both Maynilad and Manila Water have been reduced to 12% from the 63% under MWSS, thus making the Metro Manila System viable.
Interestingly this framework was adopted by the United States of America with respect to Charter Schools. In 1992, the first Charter School in the USA, City Academy in St. Paul, Minnesota, opened. The school was owned by the government but managed by a private company. The rise of charter schools changed the education marketplace in the United States and provided new options, even for parents without the means or desire to send their students to private schools.
Charter schools differ from traditional public schools in keyways. Charters have more flexibility. Rather than being part of a public school district, which dictates the curriculum and standards in all schools, charters operate autonomously through individual agreements, or charters, with state or local governments that dictate rules and performance standards.
Given the ability to operate through these agreements, individual charter schools can tailor their curriculum, academic focus, discipline policy, and other matters generally decided at the school district or state board level. In return for that flexibility, charter schools are supposed to be more accountable to parents and the state or local governments that authorize them.
In June of 2023, Stanford University, which has been evaluating the performance of charter since 2000, issued its third in a series of studies conducted by the Center for Research on Educational Outcomes (CREDO). The new study shows that charter school students are now outpacing their peers in traditional public schools in math and reading achievement, cementing a long-term trend of positive charter school outcomes.
As some may be aware, we have been advocating for the devolution of public elementary and high schools presently owned and operated by the Department of Education to the LGUs. There are several ways this devolution could be done. One is to devolve these schools to the pamantasans — colleges which are owned and operated by LGUs. There are about 100 pamantasans (local universities and colleges) operating presently.
For those LGUs without pamantansans, the public schools could be devolved to the local school boards. Fortuitously, Senator Sherwin Gatchalian has filed a bill entitled the “21st Century School Board Act” which seeks to strengthen the involvement of LGUs in education. A section could be added devolving the public elementary and high schools to these school boards.
Some LGUs may be unwilling or unable to manage these devolved public schools. However, if a Charter School Law were enacted then private companies, both profit and non-profit, could be engaged to run the public schools. Under this Public-Private Partnership arrangement, the MWSS model could be adopted. LGUs could assign several private companies to manage the many schools thus having a basis of comparison. Moreover, unlike in the previous MWSS and the present DepEd where they were both regulator and operator, raising conflict of interest issues, the LGUs become the owner and regulator while the private companies become the operators. As regulator, the LGUs would set the school fees to be paid to the private operators, define the deliverables, and conduct proficiency tests on students taught by the private operators.
We are hoping some members of Congress would file a Charter School Bill.
Dr. Victor S. Limlingan is a retired professor of AIM and a fellow of the Foundation for Economic Freedom. He is presently chairman of Cristina Research Foundation, a public policy adviser and Regina Capital Development Corp., a member of the Philippine Stock Exchange.
