02
Message of the Chairman

FUELING GROWTH

My fellow shareholders,

The Philippine economy remained strong in 2017, with GDP growing 6.7 percent, making it the second fastest-growing economy in ASEAN. Marking six consecutive years in which our economy expanded more than six percent, this strong growth is particularly impressive as the previous year was one in which election-related spending fueled the growth. Inflation remained fairly moderate at 3.2 percent, keeping consumer confidence high. Consumption remains the major driver of the economy, accounting for about 70 percent of GDP. Overseas Filipino remittances remained strong, which have helped keep consumption healthy and interest rates relatively low.

In 2017, we saw progress in our government’s efforts in tax reform as the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) was signed into law. The passage of this law, along with the government’s plan to pass additional reforms, sends a strong signal that the current administration is committed in its efforts to simplify the tax system, encourage investments, and improve the country’s infrastructure.

We are particularly supportive of the government’s “Build, Build, Build” program as this will not only address transportation issues; it also has a number of specific projects that ensure long-term water security. While the program has yet to gain significant traction, we remain confident as many of the projects are in various stages of planning and development. All told, the country did well in 2017 and businesses remain optimistic even as they operate in a more competitive environment.

In Manila Water, our journey followed a similar path in 2017. While numerous challenges came our way, we did not lose sight of our trajectory towards long-term sustainable growth.

In Manila Water, our journey followed a similar path in 2017. While numerous challenges came our way, we did not lose sight of our trajectory towards long-term sustainable growth.

Our Manila Concession business has remained strong, posting positive gains while absorbing the final tranche of the negative tariff adjustment last year. In 2017, billed water volume for the Manila Concession grew two percent to 488.4 million cubic meters.

For Manila Water Philippine Ventures, the attractiveness of the water and used water space has given rise to tougher competition. New entrants have begun to make their presence felt in our target areas. We, nevertheless, won new concessions in Obando, Bulacan and Calasiao, Pangasinan that complement our existing operations in Laguna, Cebu, Boracay, Clark and many other areas in the country.

In addition, Manila Water Total Solutions launched Healthy Family Mini, a 500-ml variant of our original five-gallon Healthy Family Purified Water. In the field of environmental services, we have refocused our efforts towards more integrated offerings for our customers, which include used water, sanitation, and waste-to-energy solutions.

Finally, beyond our shores, Manila Water Asia-Pacific continued its regional expansion, notably with the recent acquisition of East Water, a water supply and distribution company in Thailand. This new platform opens new opportunities to showcase the technical capability and professionalism, which Manila Water has developed over the last 20 years. Thailand marks the fifth ASEAN country in addition to the Philippines, Vietnam, Myanmar, and Indonesia where we have operations. Furthermore, we deepened our presence in Indonesia with the acquisition of a stake in PT Sarana Tirta Ungaran, a bulk water supply company.

Looking ahead, we remain committed to our growth objectives. Spearheaded by Manila Water senior leadership, we have begun laying the groundwork for a new chapter in Manila Water’s growth story.

With our strong management team and your continued support, I am confident that Manila Water will reach new, unprecedented heights as it enters this new, exciting stage in its journey.

Aerial view of Angat Watershed