The Philippine stock market is facing a great risk this year. This is primarily because of the tirades of President Rodrigo Duterte against the water dealers in the Philippines.
As of now, the country’s water concessionaires are facing their most difficult threat – the regulatory uncertainty.
Why Regulatory Uncertainty Is a Big Risk?
What is scarier about these regulatory risks is that it does not just threaten the water sector.
Research head Justino Calaycay of Philstocks Financials said that this risk is a threat to other regulated utilities, including the power utility.
Calaycay noted yesterday in the press briefing that the regulatory risk is leading sentiments. Investors are now in fear. Like a contagious disease, the regulatory uncertainty could easily spread over the entire utility sector.
Right now, he believes it is the biggest risk for the market.
Onerous Contracts With MWSS and Water Dealers
It has only been recently that the water sector has been one of the primary targets of the government.
In 2019, it can be remembered that President Duterte has started throwing tirades against Pangilinan-led Maynilad Water Servies, Inc. and Ayala-led Manila Water.
The President has been criticizing them for the purported provisions in their contracts with the country’s Metropolitan Waterworks and Sewerage System or MWSS.
On the 30th of December 2019, President Duterte attacked the two water establishments and their heads once again. This was during his speech in front of the victims of Digos City’s earthquake.
He said that they breached the Philippine anti-corruption law with their questionable contracts.
MWSS put an end to the 1997 water privatization contract.
It was during former President Fidel Ramos’ reign that it was approved while the extension was agreed during former President Gloria Macapagal’s term.
Other Sectors Suffer the Same Risk
According to Calaycay, the situation right now is very similar to the case of Philweb in 2016.
During that year, President Duterte declined to renew its license.
Later, Ongpin just decided to sell the listed gaming establishment to the son-in-law of the former President Ferdinand Marcos, Gregorio Araneta III.
Calaycay also talked about ABS-CBN‘s future license renewal. This entertainment establishment could suffer the same fate as PhilWeb.
The issue between the broadcast giant and President Duterte is not a secret to the public. The President has warned that he would not grant the company’s renewal of franchise to operate.
Calaycay brought up that it is true that every administration has the power to check and review all the contracts approved by the previous administrations. However, he also stated that due diligence should be made.
Romeo Bernardo, a former finance undersecretary, answered his statement.
He answered that the government is reviewing the 1997 water privatization contract between MWSS and water dealers, and its extension thoroughly.
Despite the regulatory uncertainty being a great threat, PhilStocks still expects good flow. They predict that the Philippine Stock Exchange Index will hit 8,800.
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