MANILA - The National Economic Development Authority (NEDA) remained unconvinced that the government will not eventually pay for supplied water from Laiban dam that would exceed actual demand--despite a recent assurance from government counsels.

In a July 20 letter, Alberto L. Agra of the Office of the Government Corporate Counsel (OGCC) told NEDA director general Ralph Recto that "the take-or-pay scheme under the draft Contract Documents for the Laiban Dam Project is not, strictly speaking, a 'direct government guarantee,' as defined by law."

Recto had earlier questioned not just the secrecy that clouded the process in forming the $1 billion joint venture deal between state agency Metropolitan Waterworks and Sewerage System (MWSS) and a unit of local conglomerate San Miguel Corporation, but also the take or pay provisions in the proposed joint venture contract.

Semantics

OGCC's reply was essentially saying that the direct government guarantee in a "take or pay" provision as defined in a Build-Operate-Transfer (BOT) contract does not apply in the proposed MWSS-SMC contract.

OGCC's Agra stressed that the operating entity behind the Laiban dam contract is not a BOT but a joint venture.

For NEDA Assistant Director for Infrastructure Ruben Reinoso, however, the issue at stake is whether the government will eventually shoulder the costs should supply from the dam exceed customer demand.

He said this is what makes the take or pay provision in the proposed JV contract essentially the same thing as a direct government guarantee.

"We have received the OGCC's letter. We will review it further and determine whether we still need to reply," said Reinoso, adding that there was basically nothing new with the OGCC's reply.

Precedent

Reinoso stressed, the government should tread carefully and responsibly on this issue, as it could set a precedent for future projects.

"It's unfair to the private sector. We do not want to discourage the private sector from participating. That's why if they say they are on solid legal ground, we will not stop them from doing that," he said.

Meanwhile, San Miguel Corporation said it has not received any feedback from the MWSS on the project.

"We have been following up, but we have not received any feedback," San Miguel president Ramon Ang said at the sidelines of the annual stockholders unit of a San Miguel unit.

The Laiban Dam project entails a total project cost of about $1.2-billion for the construction of a dam and water treatment facility in Tanay, Rizal, aiming to address a projected water shortage in Metro Manila by 2015.

The OGCC said the contracts needed for the project to materialize have yet to be finalized.