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AN UPDATE

ON

WATER SUPPLY & SANITATION IN THE PHILIPPINES


A Technical Presentation as Resource Speaker
in the Philippines Society of Plumbing Engineers (PSPE), Inc.

2nd Luzon Regional Conference and Trade Exhibit held on October 17-18, 2008 at Hotel Supreme Convention Plaza. Magsaysay Avenue, Baguio City
Compiled by: Engr. Virgilio D. Simbulan
PSPE ID #0003, Fellow NAMPAP

OVERVIEW In the Philippines, coverage and quality of water supply and sanitation suffer from low investment rates, many small supply systems, a fragmented sector structure, and increasing pollution of water resources. Tariffs are mostly too low to recover costs, resulting in poor utility performance. Many supply systems are too small to work efficiently.

Overview

High connection fees hinder the water supply connection to urban poor. Only 4% are connected to a sewerage system. Together with the neglect of a comprehensive water resources policy until 2004, this led to a serious threat to our drinking water. The National Water Resources Board tried its best to improve the situation since 2003.

Overview

Metro Manila Data on Water Supply Service Providers: Metropolitan Waterworks & Sewerage System (MWSS) Concessionaires: 1) Manila Water Company East Zone 2) Maynilad Water Services, Inc.- West Zone

OVERVIEW

PROVINCE OF BULACAN

ZONES

PROVINCE OF RIZAL MANILA BAY

LAGUNA DE BAY PROVINCE OF CAVITE

Overview

Metro Manila Data on Water Supply 1. Continuity of Supply (2007)


East Zone West Zone Manila Water Maynilad

%
98% 42%

2. Average Residential Water Use - - 175 l/c/d


3. Average Urban Water Tariff
East Zone West Zone Manila Water Maynilad

(PhP/cu m)
PhP15.50 PhP21.60

ACCESS TO WATER AND SANITATION


The extension of coverage has not been kept pace with the growing population in the last few decades. According to the Joint Monitoring Program (JMP) for Water Supply and Sanitation of UNICEF & WHO, access to an improved source of water supply actually decreased from 87% in 1990 to 85% in 2004. Sanitation has long been regarded as a private responsibility, resulting in almost no connection to a sewerage system.

Access to Water and Sanitation

Our government intends to reach 92-96% of potable water coverage by 2010.

ACCESS

According to the United Nation Development Programme (UNDP), the aim of the Millenium Development Goals (MDGs) is for 86.6% of the population to have access to safe water supply and 83.8% to a sanitary toilet facility by 2015. The UNDP ascertained that the targets will likely be achieved, given the current trend. Independent surveys describe a much lower access rate. In 2000 only 63% of the population had access to water supply.

SERVICE QUALITY
Continuity of Water Supply In 2004, water supply was available on the average as shown:
Maynilad : West Zone of Metro Manila : 18 hrs/day Manila Water: East Zone of M Manila : 21 hrs/day

According to their respective websites, Manila Water increased 24-hour water service from 26% in 1997 to 98% in 2007, whereas Maynilad reported 42% of their customers had an uninterrupted water supply in 2007.

In 2004 sample of 45 service providers with different management models and sizes, the National Water Resources Board (NWRB) found an average availability of 21 hrs/day, 27 providers offered 24-hour service. Drinking Water Quality In 2005 World Bank reported that water quality does not meet standards set by the national government. As a result, waterborne diseases remain a severe public health concern in the country.

Wastewater Treatment Only 5% of the total population is connected to a sewer network. The vast majority uses flush toilets connected to septic tanks. Since sludge treatment and disposal facilities are rare, most effluents are discharged without treatment. According to the Asian Development Bank, the Pasig River is one of the worlds most polluted rivers. In March 2008, Manila Water announced that a WWTP will be constructed in Taguig.

Water Resources Although water resources becomes scarce in some regions and seasons, our country as a whole has more than enough surface and groundwater. However, the neglect of a coherent environmental policy led to the actual situation, in which 58% of groundwater is contaminated. The main source of pollution is untreated domestic and industrial wastewater. Only one-third of our rivers are suitable for public water supply.

Water Resources It is estimated that in 2025, water availability will be marginal in most major cities and in 8 of the 19 major river basins. Besides severe health concerns, water pollution also leads to problems in the fishing and tourism industries. The good news is our government recognized the problem and since 2004 has sought to introduce sustainable water resources development management.

Water Use In 2000, as a whole 28.52 billion m3 of water were withdrawn from various sources, of which 74% were used for agricultural purposes. Industry used another 9%, leaving 17% or 4.8 billion m3 for domestic consumption, resulting in an average water production of 175 liters per day per capita. In 2004 sample of 45 water service providers in the country, the NWRB found an average consumption of 118 l/d/c

Water Use The highest consumption was recorded in the East Zone of Metro Manila with 232 liter per day per capita. (61 g/d/c)

PASIG RIVER, ONE OF THE WORLDS MOST POLLUTED RIVERS

HISTORY OF WATER SUPPLY & SANITATION


From our independence in 1946 to 1955 most water supply systems were operated by local authorities. From 1955 to 1971, control of urban water supply was passed to the national government. In order to improve service delivery, the sector has been repeatedly subjected to extensive reforms which created numerous institutions and responsibilities. However, comprehensive water resources management was only introduced in 2004.

Marcos Administration (1965-1986) In 1971, Manila Waterworks Authority which was founded in 1878, was transformed into the Metropolitan Waterworks and Sewerage System (MWSS). MWSS was made responsible for service provision in Metro Manila. Municipal and provincial water and sewerage system in about 1,500 cities and towns were transferred back to local governments. Most systems were in poor condition, and most LGUs failed to maintain & improve them.

Marcos Administration (1965-86) In 1973 a new water management model for urban water supply was introduced. LGUs were encouraged to form utilities called Water Districts which would operate with certain degree of autonomy from LGUs. Local Water Utilities Administration (LWUA) was created to give technical assistance and financial support to Water Districts. In 1976, the National Water Resource Board (NWRB) was created through the National Water Code of the Philippines.

Marcos Administration (1965-1986) In 1980, Rural Waterworks Development Corporation (RWDC) was founded to be responsible for water supply in areas where neither MWSS nor LWUA carries out the service or assists the LGUs, respectively in communities with fewer than 20,000 inhabitants. At the beginning of the United Nations International Drinking Water Supply and Sanitation Decade (1980-1989), the Integrated Water Supply Program 19802000 was initiated by the government.

Marcos Administration (1965-1986) The objective of the Integrated Water Supply Program 1980-2000 was to increase water coverage to 70% of the population by 1987 and 90% by 1992. Between 1978 and 1990, more than US$120 million were invested in 11 rural water supply projects. After 10 years, only 4,400 functioning water systems, about 5% of the 96,200 potential systems, existed. Many of the recently constructed systems failed shortly after completion due to poor construction and service.

Aquino Administration (1986-1992) When the Aquino administration came to power in 1986, it sought to abolish overlapping responsibilities. In 1987 LWUA took over the work of RWDC which had been created only seven years. The Rural Water Supply and Sanitation Master Plan of 1988 provided for the installation of 81,900 rural water supply systems by 1991. Every barangay should receive at least one additional potable water source.

Aquino Administration (1986-1992) Responsibilities became more decentralized under the framework of the Local Government Code of 1991. Barangays, municipalities, provinces, and cities were authorized to finance, operate, and maintain their own water supply system.

Ramos Administration (1992-1998) The government sought to encourage local government participation and institutional strengthening. The efficient use of water resources was addressed. It was the Ramos administration that planned, prepared, and implemented the privatization of MWSS.

Ramos Administration (1992-1998) The Privatization of MWSS The plan to privatize MWSS emerged from the inability of the public utility to expand coverage to the growing population. By 1996, MWSS only provided water supply for an average of 16 hours each day to two-thirds of its coverage population. According to ADB, the share of nonrevenue water (NRW), water which is not billed, e.g. due to leakage and illegal connections, was over 60%.

Ramos Administration (1992-1998) The Privatization of MWSS The 60% NRW was extremely high percentage even compared to developing countries and much higher than in Seoul (35%), Kuala Lumpur (36%), Bangkok (38%). Furthermore, MWSS depended on government subsidies due to poor cost recovery. In 1995, the Water Crisis Act was passed, providing the legal framework for the privatization of MWSS.

Ramos Administration (1992-1998) The Privatization of MWSS Private participation was implemented through a concession contract, in which the concessionaires were assigned the task of operating and managing the facilities, whereas MWSS preserved the ownership of the infrastructure. In order to facilitate benchmark comparisons, the service area were divided into two zones : East Zone and West Zone.

Ramos Administration (1992-1998) The Privatization of MWSS In 1997, the Maynilad Water Services, Inc., a joint venture by the French Suez and the Benpres Holding was awarded the concession contract for the West Zone. Whereas the Manila Water Company, Inc., consisting of Ayala Corp. as well as the British United Utilities and the US company Bechtel, was awarded the East Zone. The concession contract were expected to last for 25 years.

Ramos Administration (1992-1998) The Privatization of MWSS Included in the contracts were targets concerning coverage, service quality, and economic efficiency. An objective was to increase water coverage in Metro Manila to 96% by 2006. The companies were expected to be regulated by the newly created MWSS Regulatory Office, financed by the concessionaires.

Ramos Administration (1992-1998) The Privatization of MWSS After the concession came into force, public opposition soon emerged due to repeated tariff increase. It is worth mentioning that tariffs at first decreased after privatization in 1997 and did not reach the pre-privatization level until 2002. Then, the concessionaires suffered from a severe drought and the Asian financial crisis. Due to rapid currency devaluation, MWSS dollar-dominated debt service doubled.

Ramos Administration (1992-1998) The Privatization of MWSS Maynilad went bankrupt in 2003 and was turned over to MWSS in 2005. On the other hand, Manila Water had begun to make profits by 1999 and performed well financially and in reducing NRW. In December 2006 a 84%-stake in Maynilad was competitively awarded by MWSS to all-Filipino partnership of DM Consunji Holdings, Inc. and Metro Pacific Investments Corporation for a sale of US$503.9 million.

Estrada Administration According to the Medium-Term Philippine Development Plan (MTPDP) 1998-2004, the Estrada administration had these main objectives concerning water: create and independent regulatory agency, develop a pricing mechanism that considers cost recovery, strengthen the implementation of watershed rules, encourage private participation in water resources administration.

Arroyo Administration (2001-

PGMA continued to support private participation schemes and began to pursue economies of scale in the sector. PGMAs MTPDP (2001-2004) calls for the creation of a single regulatory agency for all water supply and sanitation systems. However, this attempt failed, so that economic regulation for LGUs and water districts was assigned to NWRB.

Arroyo Administration (2001 Clean Water Act In 2004, the Philippines Clean Water Act was passed to improve water quality and prevent pollution through comprehensive and integrated water management. The act was the first attempt by our government to consolidate different laws concerning water resources management as well as water supply and sanitation. The main objective of the act is to improve sanitation and wastewater treatment in the country.

Arroyo Administration (2001-

The MTPDP 2004-2010 The plan aims at extending coverage of potable water to 92-96% by 2010 through public and private investment, with priority given to 400 barangays with poor water supply coverage.

Responsibility for Water Supply & Sanitation Administrative Divisions The Local Government Code of 1991 divided the
Philippines into three administrative provinces, municipalities, and barangays. levels:

Responsibility for Water Supply & Sanitation Policy General policies concerning the water and sanitation sector are formulated by NEDA in its MTPDP. Responsibility The responsibilities are defined by the 1976 National Water Code and the 2004 Clean Water Act, which consolidated different laws on water supply and sanitation and water resources management.

Responsibility for Water Supply & Sanitation Responsibility DENR is the lead ministry for implementation water sector legislation. Dept. of Finance takes the lead in financing water policies at the national level. National Water Resources Board (NWRB)under DENR is responsible for water resources management. DPWH provides technical assistance within rural water supply systems. National standards for drinking water quality as well as standards concerning sanitation and sewerage collection is set by the Department of Health.

Responsibility for Water Supply & Sanitation Service Provision According to 2005 World Bank study, approximately 5,000 service providers exist in our country. Most of them only provide water. While sanitation is still expected to be a private responsibility. Within the entire country, septic tanks are the most common method of sewage treatment. In Metro Manila alone, about 75 local companies provide tank-desludging services.

Service Provision LGU-operated systems Most households in our country are served by their LGUs, either directly through a provincial, city, or municipal engineering department or through community based organizations (CBOs), (cooperatives, Barangay Water & Sanitation Associations (BWSAs), or Rural Water & Sanitation Associations (RWSAs). CBOs usually operate Level I and Level II water supply systems with support from the national government or NGOs. Out of 4,800 LGU-operated systems, 3,100 are estimated to be at the barangay level.

Service Provision Water Districts In urban areas outside of Metro Manila, water districts served 15.3 million people in nearly 700 cities and municipalities in 2003. To form a water district, a local government needs a confirmation by the LWUA, from which it receives technical assistance and financial support. Although there is a certain autonomy from the local government, it appoints the board members, which is why water districts are often exposed to political interference. The model was introduced in 1973 however since 1990 its formation has decreased significantly.

Service Provision Large private operators In Metro Manila, the service has been carried out by two concessionaires since 1997: The Manila Water Co. in the East Zone and Maynilad Water Services, Inc. in the West Zone. Although the national government supported Private Sector Participation (PSP) since 1990, there are few arrangements outside Metro Manila. Only joint ventures in Tagbilaran City and in Subic Bay exist. This lack of success may partly result from the problems of the Metro Manila concession.

Service Provision Small-scale independent providers A significant share of the population in urban areas receives services from smallscale independent providers. Before privatization30% of the population of Metro Manila depended on small-scale independent providers. In August 2007, 250 small-scale providers formed the National Water and Sanitation Association of the Philippines as a venue for small-scale private water providers (SSPWPs) to share experiences and learn from each other.

Financial Aspects Tariffs The fragmented sector led to different tariff structures and levels according to the respective management model. The connection fees, which are charged in most cases, are so high that they often impede new connections for poor consumers.

In 2004, the NWRB indicates an average tariff of P13.65 /cu. m while the average connection fee was P2,200.

Financial Aspects Tariffs in LGU-operated Systems Tariff levels and structures vary widely. Most connections are not metered so that it is impossible to charge tariffs depending on consumption. Although connection fees are common, LGU usually charge no or very low tariffs. The costs of providing service are usually met by local governments. Per NWRB records, an average tariff of P8.00/cu. m for systems directly operated by LGUs and P8.50/cu. m for cooperatives, about half of the average tariff charged by private operators and water districts.

Financial Aspects Tariffs in LGU-operated systems The fee for a new connection was P1,128.00 and P2,300.00 for LGU-operated systems and cooperatives, respectively. Tariffs in Water districts Tariffs increased notably in 1996. Tariff structure is similar to the model used in Metro Manila, with an average tariff for the first 10 cu. m and increasing tariffs for additional consumption. At the end of 2006, the national average tariff for 30 cu. m was P17.00, more than double that of 1996 (P6.15/cu. m).

Financial Aspects Tariffs in Water districts The average fee for a new connection was P2,585.00, somewhat lower than among private operators. Tariffs in Metro Manila An initial tariff is to be paid for the first 10 cu. m consumed, with increasing blocks for additional consumption. Furthermore, consumers connected to sewerage pay an additional charge of 50% and all users must pay 10% environmental surcharge. For new consumers, a connection fee is charged, which was P6,300.00 in April 2007 in the East Zone.

Financial Aspects Tariffs in Metro Manila Just before privatization the average tariff per cu m was P12.20. After the concession contracts came into force in 1997, tariffs dropped to P2.35 in the East Zone and P5.65 in the West Zone. In 2006 the average tariff rose to P14.60 in the East Zone and P20.20 in the West Zone (all figures converted into real 2006 prices). The NWRB found an average tariff of P16.45 per cu. m and an average connection fee of P2,960.00 in 2004. While tariff is highest among private operators, the connection fee was higher within water districts.

Financial Aspects Cost Recovery Poor cost recovery remains one of the key challenges in the sector. Although the problem has been recognized by the national government and authorities include targets to increase cost recovery, the implementation of this objective remains unsatisfactory. The LGU-operated systems are not even able to recover operation and maintenance cost and they depend on local government. Water districts mostly recover recurrent costs, but most of them do not generate enough financial resources to improve their services.

Financial Aspects Cost Recovery In Metro Manila, the fact that one of the two concessionaires has gone bankrupt reveals the sectors financial problems, even though it was also caused by the Asian financial crisis. On the other hand, Manila Water makes a modest income and coverage targets have been partly achieved. All of the loss-making providers were operated directly by LGUs, and were mostly characterized by a high share of NRW, poor service continuity, low tariffs and low coverage within their respective service area.

Financial Aspects Cost Recovery The five best-performing service providers consisted of 4 water districts and one private operator. Investment and Financing It is estimated that between 1983 and 2003. approximately P3 - 4 billion were invested in the sector per year, the bulk of which was conducted to Metro Manila, although compared to other Asian capital regions, investment per connection of Manila is low. The majority of public investment is channeled through LWUA and MWSS, which accounted for more than half of the total investment.

Financial Aspect Investment and Financing Private investment outside the capital region remains limited. External Cooperation Asian Development Bank (ADB) This year, ADB will decide on the proposed Water District Development Project to continue its long term cooperation with LWUA. ADB contributes through MWSS New Water Source Development Project, which was approved in 2003 and will end in October 2008.

External Cooperation Asian Development Bank (ADB) ADB contributes US$3.26 million, whereas MWSS provides US$1.71 million in order to develop up to 3 water source projects for Metro Manila and to improve financial management as well as the accounting and fiscal control systems of MWSS. This year, studies for 2 water source projects were already completed. The project places emphasis on environmental and social impacts.

External Cooperation GTZ The German development agency GTZ supports the sector through the rural water supply and sanitation program, designed to improve the living conditions of the poor in selected rural areas of the country. The program supported the decentralization plan of the NWRB and runs from 2006 to 2009. The main program partner is the Department of Interior and Local Government (DILG)

External Cooperation GTZ The program has already achieved a successful introduction of low-cost options for sanitation, the construction of dehydration toilets, and the first Filipino constructed wetland, treating wastewater from about 700 households. World Bank The Work Bank supports the Filipino Water supply and sanitation sector through the following projects: Manila Third Sewerage Project

Manila Third Sewerage Project Last year, the World Bank approved an investment loan of US$5 million. The objectives are to assist our government in reforming institutions in order to attract private investment in wastewater sector, to improve the coordination of institutions responsible for preventing water pollution, and to promote innovative wastewater treatment techniques. The project follows the Manila Second Sewerage Project, which was carried out from 1996 to 2005 and increased the number of people with sewer connection from 721,000 to 1, 101,000. Cost is US$48.06 million.

World Bank Project National Program support for Environment and Natural Resources Management Project The project aims to assist DENR to improve its service delivery through better allocation of its limited financial resources. The components of the project include integrated ecosystem management and environmental and natural resources management. The World Bank approved a US$50 million loan in 2007 for the project which runs from 2007 to 2011.

World Bank Project LGU Urban Water and Sanitation Project APL2 The second LGU urban water project aims to reach approximately 40 LGU-operated water systems, which are given technical assistance and financial support. The four components of the projects are to: i) Finance civil works, equipment, and supervision for improved water supply systems in LGUs; ii) Finance improved sanitation infrastructure; iii) Provide investment and assistance to microdrainage infrastructure;

World Bank Project LGU Urban Water and Sanitation Project iv) Provide funds for the hiring of a construction supervision consultant and specialized consultants. The World Bank contributed through a US$30 million loan to the project, while the remaining US$5.2 million are financed by local institutions. The project began in 2001 and will end in 2008. The World Bank supports private sector participation through Design-Build-Lease contracts and Long-term Operation and Maintenance contracts between LGUs and private operators.

World Bank Project Design-Build-Lease Contracts Under Design-Build-Lease contracts, valid for 15 years and renewable for an additional 15 years, a local private operator prepares, builds, and operates a new water supply system. A World Bank loan channeled through the DBP finances 90% of the construction cost, and the remainder is contributed through LGU. The water tariff must cover expenses for operation and maintenance, as well as a lease fee and a return for the private operator.

World Bank Project Long-Term Operation and Maintenance Long-Term Operation and Maintenance contracts are used in LGUs which recruit a private company to construct a new water supply system and later engage water associations or user cooperatives to operate the system under contracts, which are awarded for 15 years with the possibility of renewal for another 15 years. Similar to D-B-L contracts, 90% of the construction cost of the water system is financed with a WB loan channeled through the LBP. The water user groups are required to work under commercial rules.

END OF PRESENTATION

Acknowledgement
The source of the article presented is taken from en.wikipedia.org/water supply and sanitation in the Philippines. The US Dollar-Peso rate conversion used in the presentation is 1 US$ = P47.00 The resource person is open to any inquiry, correction or modification that may be deemed necessary to rectify errors or omissions in part or in whole that the article may falsely claim.

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