Management Models for Smalltowns Philippines

Administrator

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About the cover:About the cover:About the cover:About the cover:About the cover:Nearly 60 per cent of Filipinos now live inurban areas, mostly in small towns with lessthan 100,000 people. A number of Philippinesmall towns have access to piped watersupply services, either connected to householdtaps or via a series of public standpipes.

Management Models forManagement Models forManagement Models forManagement Models forManagement Models for Small Towns Water Supply Small Towns Water Supply Small Towns Water Supply Small Towns Water Supply Small Towns Water Supply

Lessons learned from case studies in the Philippines

World Bank Water and Sanitation ProgramEast Asia and the Pacific

in partnership with The Government of the Philippinesand The Government of Australia

The World Bank does not guarantee the accuracy of the dataand images included in this publication. The views expressedherein are not necessarily those of the World Bank, AusAID orthe Australian Government or the Government of thePhilippines. The findings, interpretations and conclusions arethe result of research supported by these organizations. Theydo not accept responsibility for the views expressed herein, whichare those of the authors and should not be attributed to theWorld Bank, its affiliated organizations, to AusAID, the GOAor the GOP.

Published June 2003World Bank Water and Sanitation Program– East Asia and the Pacific.

This document is written by Andy Robinson based on his report,prepared with the Test Consultants, Inc., Management Modelsfor Small Towns Water Supply: Lessons Learned from CaseStudies in the Philippines, released in February 2003,http://www.wpep.org

Cover photo credits:Radoslaw Janicki; Andrew Whillas

LLLLLessons learned from case studies in the Philippinesessons learned from case studies in the Philippinesessons learned from case studies in the Philippinesessons learned from case studies in the Philippinesessons learned from case studies in the Philippines

Management Models forSmall Towns Water Supply

Contents

Summary.......................................................................................... 1

Background .................................................................................... 4

Case Studies of Small Towns Water Supply......................................... 7

Management Model Performance...................................................... 10

Factors of Success............................................................................. 18

When is a small town too big for community based management?...... 20

Conclusions..................................................................................... 21

Recommendations............................................................................ 23

MANAMANAMANAMANAMANAGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TOWNS WAOWNS WAOWNS WAOWNS WAOWNS WATER SUPPLTER SUPPLTER SUPPLTER SUPPLTER SUPPLYYYYY 1

Summary

Small towns water supply is a neglected‘market’ globally, and the Philippines is noexception. The key issue is that water supplysystems in small towns are typically too complexto be well managed by community groups, buttoo small to be financially viable for professionalwater utilities. Furthermore, most water supplyfunding and assistance goes to definitively ruralor urban cases, leaving small towns dependenton meager local government budgets.

There is some debate over what defines a‘small’ town, as there are marked differencesin the pattern of urban development fromcountry to country, and region to region. InMarch 2000, a global e-conference on smalltowns water supply agreed upon the followingdefinition:

“Small towns are settlements that aresufficiently large and dense to benefit fromthe economies of scale offered by piped watersupply systems, but too small and dispersedto be efficiently managed by a conventionalurban water utility. They require formalmanagement arrangements, a legal basis forownership and management, and the abilityto expand services to meet the growingdemand for water. Small towns usually have

populations between 5,000 and 50,000inhabitants, but can be larger or smaller”

In the Philippines today, nearly 60% of thepopulation live in urban areas, up from 40%only twenty years ago. Manila is a huge city,even in global terms, but much of this high andrising urban population is now found in smallertowns. According to the 2000 Census, there are1,600 cities and towns in the Philippines1, and95% of these have populations below 100,000.

These figures il lustrate the growingsignificance of the small towns sub-sector in thePhilippines. When considered in tandem withthe management challenges associated withsmall towns water supply, it becomes apparentthat this is an area of some importance to thewater supply and sanitation sector. Yet, little isknown about the performance or relativeadvantages of the diverse models that arecurrently being used to manage small townwater supply systems.

This field note presents the findings from arecent study by the Water Supply and SanitationPerformance Enhancement Project (see Box),which used case studies of fourteen small townwater supply systems in the Philippines to

1 Excluding the National Capital Region (Manila and the contiguous cities and towns around it)

examine ‘factors of success’ for differentmanagement models. The key lesson from thecase studies was that water supply systems usingcommunity-based management models (e.g.Water Cooperatives and RWSAs1) are the mostconsistently successful2 in small towns. WaterCooperatives and RWSAs are locally-embedded institutions that prosper in thehighly politicized small towns of the Philippines,while strong community involvement preservestheir autonomy (political and financial) andensures transparency and accountability.

The successful community-basedmanagement bodies are more sophisticatedthan typical community management models.A key factor is the professional support theyreceive, which allows them to provide cost-efficient and well-planned services, whileretaining their local advantages and demand-responsiveness. Nearby Water Districts3, whichmanage their own large urban water supplysystems, provide a ready source of technicalassistance, and have enabled community-basedmanagement bodies to introduce commercialaccounting systems, domestic water meters, andwell-organized billing and collection systems.

As small towns grow and their water supplysystems become more complex, professionalwater utility management skills become moreimportant. For this reason, it has been arguedthat community-based management models arenot suitable for small towns water supply.However, the lessons learned from this studysuggest that professional support helpscommunity-based management bodies toevolve with their systems, and allows anincremental transition from community-basedto commercial water supply management.Encouragement and assistance in contractingout commercially viable functions (e.g.operation and maintenance, billing andcollection, and financial audits) would assistcommunity-based management bodies tofurther improve performance whilst retaining theadvantages of user ownership and control.

1 Rural Water Supply Associations (RWSAs)2 “Successful performance” is defined as water supply

services that are sustainable (technically, socially,financially, institutionally, & environmentally) and areeffectively used by the community

3 Water Districts are semi-autonomous water utilities setup by local government (legally defined as governmentowned and controlled corporations)

2 MANA MANA MANA MANA MANAGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TGEMENT MODELS FOR SMALL TOWNS WAOWNS WAOWNS WAOWNS WAOWNS WATER SUPPLTER SUPPLTER SUPPLTER SUPPLTER SUPPLYYYYY

The Water Supply and SanitationThe Water Supply and SanitationThe Water Supply and SanitationThe Water Supply and SanitationThe Water Supply and SanitationPerformance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)

The Water Supply and SanitationThe Water Supply and SanitationThe Water Supply and SanitationThe Water Supply and SanitationThe Water Supply and SanitationPerformance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)Performance Enhancement Project (WPEP)

WPEP is an action research project in the Philippines, which is jointly funded by AusAID (the AustralianGovernment’s aid program), the Water and Sanitation Program of the World Bank and the Governmentof the Philippines (GOP). The executing agency for the GOP is the Water Supply and Sanitation ProgramManagement Office of the Department of Interior and Local Government (WSSPMO-DILG), with supportfrom the Water and Sanitation Program – East Asia & Pacific (WSP-EAP). The goal of the project is “toenhance the access of the under-served rural and urban poor to adequate water and sanitation serviceson a sustainable basis.”

The WPEP action research agenda is demand driven through consultation with a broad range ofwater supply and sanitation sector practitioners in the Philippines. At the outset, WPEP funded sixbackground studies, which provided the basis for the learning agenda. Following consultation onthese studies, WPEP commissioned local consultants to undertake four field-based studies on the followingtopics:

• Small Towns Water and Supply Management Models (STWSMM);• Urban Sewerage and Sanitation: What has worked and what has not (USS);• Small Scale Independent Providers (SSIP);• Rural Water: Models for Sustainable Development and Sector Financing (RWSFin)

This field note is one of a series of field notes summarizing the results of this research program.

The Philippine small towns are unusually dynamic in nature – population grows rapidly and economic activities areever increasing. Water supply systems in small towns need to be able to cope with this changing environment.



Comparative regional dataComparative regional dataComparative regional dataComparative regional dataComparative regional data

Background

Comparative regional dataComparative regional dataComparative regional dataComparative regional dataComparative regional data

CountryCountryCountryCountryCountry PPPPPopulationopulationopulationopulationopulation UrbanUrbanUrbanUrbanUrban PPPPPop. densityop. densityop. densityop. densityop. density GNP perGNP perGNP perGNP perGNP per FFFFFemaleemaleemaleemaleemale Access toAccess toAccess toAccess toAccess to(millions)(millions)(millions)(millions)(millions) populationpopulationpopulationpopulationpopulation (per sq.km)(per sq.km)(per sq.km)(per sq.km)(per sq.km) capita (US$)capita (US$)capita (US$)capita (US$)capita (US$) literacyliteracyliteracyliteracyliteracy11111 WSWSWSWSWS22222

The PhilippinesThe PhilippinesThe PhilippinesThe PhilippinesThe Philippines 7676767676 59%59%59%59%59% 253253253253253 $ 1,040$ 1,040$ 1,040$ 1,040$ 1,040 95%95%95%95%95% 91%91%91%91%91%Thailand 61 22% 119 $ 2,000 93% 94%Malaysia 23 57% 71 $ 3,380 82% 100%East Asia & Pacific1,855 35% 116 $ 1,060 78% 89%

Source: World Development Report 2001/02

The Philippines consists of a chain of over7,000 islands, dominated by the largeis land of Luzon in the nor th, and byMindanao in the south. The islands aresurprisingly densely populated, with themajority of the 76 million inhabitants nowliving in urban areas. However, economicdevelopment has not kept pace with therising urbanization, and per capita incomeslag behind those of i ts neighbors (seecomparative data in table). Developmentpotential in the Philippines rests largely onthe abundant natural resources and well-educated workforce, with major economicchallenges coming from rapid populationgrowth , h igh leve l s o f pover t y andinequality, low productivity and intensifiedglobal competition.

The Asian financial crisis, triggered in mid-1997, has further hindered the Philippineeconomy, leading to a loss of foreign exchangereserves, a higher debt burden and falling shareprices. There have been signs of recovery, withGDP growth increasing from 0.1% in 1998 to3.0% in 2000, but the Philippine Peso continuesto lose value1, and both oil prices and interestrates have risen sharply. These economicchallenges have been heightened by seriouspolitical and security problems. Charges ofcorruption and inefficiency have affected manyagencies, delaying project implementation anddiscouraging investment. However, a newadministration took office in January 2001, andit has initiated a gradual economic recovery,leading to improved stability and confidence2.

1 Percent of women aged 15 and above2 Percent of urban population with access to improved water sources (1996)

1 The official exchange rate has fallen from P40 = US$1 in early 2000, to P53 = US$1 in early 20032 ADB, 2001

Urban water supply in the PhilippinesUrban water supply in the PhilippinesUrban water supply in the PhilippinesUrban water supply in the PhilippinesUrban water supply in the Philippines

After independence was won from theUnited States in 1946, most provincial andmunicipal water supply systems in thePhilippines were government-owned, andwere operated by local authorities withtechnical assistance from the Bureau of PublicWorks (BPW). Control of urban water supplyreverted to the central government between1955 - 71, under the auspices of the NationalWaterworks and Sewerage Authori ty(NAWASA), but this centralized system favoredMetro Manila and was not responsive to theneeds of more distant municipalities.

Consequently, the provision of urban watersupply services was divided in the early 1970s.The newly-created Metropolitan Waterworksand Sewerage System (MWSS) was givenresponsibility for the services in Metro Manilaand its contiguous urban areas, whilstmanagement of all other provincial andmunicipal water supply systems was passedback to local government. Most of these watersupply systems were in poor condition, andLocal Government Units1 (LGUs) rarely had thecapacity, experience or funds needed tomanage or improve the systems.

In the 70s MWSS become responsible for Metro Manila and contiguous areas, whilst all other systems werehanded over to local governments that rarely had adequate capacity and funds to manage them.

Recognition of the seriousness of theseproblems led to the 1973 Provincial WaterUtil i t ies Act, which introduced a newmanagement model for urban water supply:the Water District. Under the new act, LGUshad the option to form ‘Water Districts’ to runtheir urban water supply and sewerage systems.Water Districts were to be ‘quasi-publiccorporations2’ that operate independently of theLGU, with promotion, support and financingfrom the specially created Local Water UtilitiesAdministration (LWUA).

In 1980, the urban water supply sector wasfurther sub-divided by the creation of the RuralWaterworks Development Corporation(RWDC). Larger towns (populations greaterthan 20,000) were to be served by WaterDistricts, assisted by LWUA. The RWDC was tocater for water supply in rural centers and smalltowns (populations less than 20,000), and wasauthorized to form Rural WaterworksAssociations (later renamed Rural Water SupplyAssociations) to manage these water supplysystems. However, this arrangement was short-lived. The RWDC was abolished in 1987, andall its functions and responsibilities have sincebeen transferred to LWUA.

1 The term Local Government Unit refers to any level of local government, from Provincial Government down to Barangay2 Amended to ‘government-owned & controlled corporations ’ by a 1992 Supreme Court decision


Decentralization followed. The implementation

of the 1991 Local Government Code (LGC)

triggered a process of political and administrative

devolution that brought major changes to the

governance structure of the Philippines. The

LGC transferred powers and responsibilities

from the central government to Local

Government Units (LGUs), including primary

responsibility for the development of urban

water supply and sanitation services. This

process was accompanied by large increases

in LGU incomes, but there has been little

impact on the water sector to date.

The government has also been promoting

private sector participation in the water sector,

in order to provide additional finance and to

enhance service delivery. Metro Manila

undertook a high profile privatization of its

water supply in 1997, and there are four other

examples of privately managed urban water

supply systems in the Philippines1. However,

these examples are all in major cities and

towns. Recent projects encouraging private

sector participation, such as the World Bank-

funded LGU-UWSP2, have struggled to attract

private service providers to small towns water

supply, and have found it difficult to persuade

LGUs to relinquish control of their water

services.

To d a y, Wa t e r D i s t r i c t a n d L G U-managed systems provide piped watersupply services to about 60% of the townsin the Philippines, including many of thelarger towns. Most of the remaining smalltowns, and the urban areas excluded fromWater District or LGU systems, are eithersupp l i ed b y sma l l commun i t y -basedorganizations, such as Rural Water SupplyA s s o c i a t i o n s ( R W S A s ) a n d Wa t e rCooperatives, or rely on isolated waterpoints (e.g. wells and handpumps).

I n s ummary, t he r e a r e f i v e ma inmanagement models for small towns watersupply in the Philippines:

• LGU = Local Government Unit (500urban systems)

• WD = Water District (430 urbansystems)

• RWSA = Rural Water SupplyAssociations (500 systems)

• COOP = Water Cooperative (200+urban systems)

• PS = Private Sector (4 urbansystems)

There is also a hybrid management model:the ‘cluster model’, which refers to an LGU orWater District that provides water supply servicesto groups, or clusters, of small towns (throughone or more water supply systems).

1 Three fully private systems (General Trias, Balibago and Calapan) and one joint venture system (Subic Water & SewerageCompany - a joint venture between the Subic Bay Metropolitan Authority, Olongapo Water District, and a private company)

2 Local Government Unit – Urban Water Supply & Sanitation Project (LGU-UWSP) aims to promote demand-responsive approachesto the provision of urban water supply and sanitation services and to cost recovery, and utility operation following commercialprinciples.


Case Studies ofSmall Towns Water Supply

12

In 2003, Phase II of the Water Supply &Sanitation Performance Enhancement Project(WPEP) completed a study of managementmodels for small towns water supply in thePhi l ippines1. This s tudy combinedparticipatory community assessments (madeusing the MPA2) with specialist assessments(technical, institutional, environmental,financial and social) to create case studies ofwater supply systems in fourteen small towns.The main objectives of the WPEP study wereto:

• assess the performance of the differentmanagement models

• analyze the parameters that underliesuccessful or unsuccessfulperformance, and

• provide recommendationsregarding the continued use ofthe management models in theprovision of sustainablewater supply services in thePhilippines.

The Methodology of Participatory Assessmenttakes into account the views of women and menabout the sustainability and use of water servicesin their communities.

1 Robinson et al (2003) ‘Management Models for SmallTowns Water Supply: Lessons Learned from Case Studies in thePhilippines ’, Manila: WPEP Final Report

2 The Methodology for Participatory Assessments (MPA) provides indicators and tools that allow the assessors (including thecommunity themselves) to measure the sustainability and use ofcommunity water services, and the process whereby theywere established

Case study detailsCase study detailsCase study detailsCase study detailsCase study detailsCase study detailsCase study detailsCase study detailsCase study detailsCase study details

Name Mgmt. Urban Population Staff/ Min. Profitmodel population served conn tariff/mo. margin

P/m3 (2001)Systems in towns with population < 50,000Systems in towns with population < 50,000Systems in towns with population < 50,000Systems in towns with population < 50,000Systems in towns with population < 50,000

Aglipay LGU 21,800 250 (1%) 40 1.5 -194%

Hagonoy WD 43,900 910 (2%) 21 11.4 -2%

Numancia CLUS-WD 59,800* 13,500 (22%) 12 18.0 -10%

Barcelona COOP 19,000 6,800 (36%) 8 3.0 -1%

Guimbal RWSA 27,700 4,300 (16%) 10 6.0 +13%

Systems in towns with population 50,000 – 100,000Systems in towns with population 50,000 – 100,000Systems in towns with population 50,000 – 100,000Systems in towns with population 50,000 – 100,000Systems in towns with population 50,000 – 100,000

Barili LGU 57,700 3,200 (6%) 27 3.5 -16%

Nueva Vizcaya CLUS-LGU 100,600* 10,300 (10%) 10 2.3 -38%

Manolo Fortich LGU 74,300 24,400 (33%) 8 6.5 +18%

Ubay COOP 59,800 6,800 (11%) 14 5.0 +6%

Subic WD 63,000 29,400 (47%) 6 8.6 +18%

Systems in towns with population > 100,000Systems in towns with population > 100,000Systems in towns with population > 100,000Systems in towns with population > 100,000Systems in towns with population > 100,000

Darasa

(Tanauan City) RWSA 117,500 7,030 (6%) 7 8.2 -3%

Balibago

(Angeles City) PS 264,000 48,600 (18%) 8 13.8 -4%

M Kidapawan CLUS-WD 263,300* 60,600 (23%) 7 15.7 +18%

General Trias PS 107,700 51,000 (47%) 3 10.0 +25%

Key:* = combined population of more than one townStaff/conn = average number of staff per 1,000 house connectionsHouse connections = total number of house water connections supplied by systemMin. tariff = minimum tariff (Pesos per month)



The case studies were carefully selected toensure that well-established examples of the sixdifferent management models were included.Given the relatively small sample size, the studyfocused on overtly successful or unsuccessfulcases, in order to search out and highlightfactors of success or key constraints.

The coverage provided by the case studywater supply systems is generally low, with mostof them providing services in only certain partsof their host town. In the towns with smallerpopulations, the presence of low-cost alternatewater supplies (e.g. shallow wells andhandpumps) appears to have lowered demandfor house connections and prevented expansion,whereas the systems in larger towns are often

competing against other water supply systems.For instance, both the Darasa and the Balibagosystems supply relatively small sections ofsizeable cities, whose main service providers arelarge Water Districts.

This low coverage greatly limits the potentialfor economies of scale, particularly within smallsystems. Despite involving four differentmanagement models, each of the five case studysystems that serves more than 20,000 peopleutilizes less than ten staff/1,000 connections. Incontrast, only two of the nine smaller systemsare as efficient. This illustrates the difficultiesinherent in managing small town water supplysystems, whatever the management model.

Case studies by management modelCase studies by management modelCase studies by management modelCase studies by management modelCase studies by management model

Management ModelPerformance

The following sections outline the keyfeatures of the six management models forsmall towns water supply, and summarize theperformance assessments resulting from thecase studies. However, as the case studiesinclude both successful and unsuccessful cases,average management model performance (as

1. Local Government Unit1. Local Government Unit1. Local Government Unit1. Local Government Unit1. Local Government Unit

The LGU model defined in the WPEP studyinvolves direct management of an urban watersupply system by any level of local government.Therefore, this model covers a wide range ofinstitutional arrangements, from managementof a complex multi-town system by the ProvincialGovernment, to small simple systems run bythe Barangay Council1.

shown in the table below) is not representativeof typical management model performance.Therefore, the management modelassessments focus primarily on features thatare common, or replicable, or capable ofreform, and attempt to identify where unusualconditions may have influenced performance.

The 1991 Local Government Codetransferred financial resources, responsibilities,personnel and assets from the nationalgovernment to local governments. This led to asignificant increase in LGU incomes, with theInternal Revenue Allotment (IRA) provided by

1 Barangay is the smallest administrative unit in thePhilippines (the smallest case study town, population19,000, comprised 25 barangays)


Case studies by management modelCase studies by management modelCase studies by management modelCase studies by management modelCase studies by management model

ManagementManagementManagementManagementManagement Average nr.Average nr.Average nr.Average nr.Average nr. AverageAverageAverageAverageAverage MinimumMinimumMinimumMinimumMinimum AverageAverageAverageAverageAverage AverageAverageAverageAverageAveragemodelmodelmodelmodelmodel connectionconnectionconnectionconnectionconnection nr. staff pernr. staff pernr. staff pernr. staff pernr. staff per tariff tariff tariff tariff tariff salary salary salary salary salary profit profit profit profit profit

served served served served served 1,000 conn.1,000 conn.1,000 conn.1,000 conn.1,000 conn. (P/m (P/m (P/m (P/m (P/m33333))))) (P/mth) (P/mth) (P/mth) (P/mth) (P/mth) margin margin margin margin margin

Private sector (2) 9,270 5.5 8.2–10.0 15,180 +10% Cluster WD (2) 6,900 9.5 15.7–18.0 9,940 + 4% Water District (2) 3,360 13.5 8.6–11.4 8,180 + 8% Cooperative (2) 1,290 10.5 3.0–5.0 6,730 + 3% RWSA (2) 950 7.9 6.0–8.2 9,130 + 5% LGU + Cluster LGU (4) 1,720 21.3 1.5–6.5 5,880 - 57%

Key:staff per 1,000 conn.= average number of staff per 1,000 house connections

Typical LGU ManagementTypical LGU ManagementTypical LGU ManagementTypical LGU ManagementTypical LGU Management

The towns of Surigao del Norte Province (Mindanao) are typical of the LGU management model:the Municipal Planning and Development Coordinator (MPDC) handles operations; the MunicipalEngineer’s Office (MEO) manage construction & repairs; and the Municipal Treasurer’s Office assistswith billing & collection. Some towns hire meter readers, plumbers and laborers on a regular basis,while other towns hire personnel only when needed, or when they have funds.

Hinigaran Water System (Negros Occidental, Visayas) is owned and managed by the municipality,but was formerly a Water District. The water system was returned to the LGU because the system wasnot successful (its water source was too distant). The LGU has since programmed P3.5 million (US$70,000) for expansion and rehabilitation of the system, and the Provincial Government is assisting withdevelopment by paying for new distribution pipes. The barangay is assisting by providing labor. Thesystem is operated by the Mayor through a City Public Utility Officer, assisted by 12 staff and an InternalAuditor.

Adapted from Lazaro, 2000

Typical LGU ManagementTypical LGU ManagementTypical LGU ManagementTypical LGU ManagementTypical LGU Management

central government rising from P10 billionin 1991 to more than P90 billion (US$ 2.25billion) in 1999. LGUs were also grantedincreased powers to raise local revenues fromproperty and business taxes.

Most LGUs (both provincial and municipal)have been slow to adjust to this new order. Afew progressive LGUs are beginning to planand implement their own developmentprograms, enabling them to attract funds fromboth private investors and external fundingagencies, but decentralization remainsconstrained by inadequate local fundingcapacity, by shortages of technical andmanagerial expertise, and by the highlypoliticized environment at the local level.

Direct management of small town watersupply systems by LGUs does not appear towork well. The central problem is that thebudget of an LGU-managed water supplysystem bears no relation to its water revenues.LGUs are provided with central funding throughtheir internal revenue allocation (IRA), but theLGU has little control over the size of its annualbudget, and has to allocate the funds betweenthe competing needs and priorities of thelocality. In theory, the funds spent on providingwater supply services should be recouped fromthe water tariffs, but these revenues disappearinto the central accounts of the LGU treasurer,

so have little impact on the operation andmaintenance of the water supply. Furthermore,most LGU leaders are elected officials (e.g.Mayors) and prefer to subsidize the operationof the water supply system rather than lose votesby raising water tariffs. As a result, LGU watersystems tend to have very low tariffs, and areconstantly short of funds.

Within the LGUs, salaries are low and mostpersonnel have duties in addition to their watersupply roles, hence there is little incentive orcapacity for efficient performance. LGUs alsolack technical expertise. Private contractors needto be employed for all but the simplest operationand maintenance (O&M) tasks, and LGUs canrarely afford to maintain, rehabilitate or expandtheir water supply systems. Consequently,systems deteriorate quickly, reliability is low, andusers are reluctant to pay for their water services.

In small towns, LGUs are often both the‘water supply provider of last resort’ and thelocal regulator. There is a strong case forstrengthening the water supply capacity ofLGUs, but the findings of the WPEP studyindicate that there are few benefits to directLGU management, and suggest instead thatthe LGU role should be confined to creatingan enabling environment for other serviceproviders to operate within.


Typical Water District ManagementTypical Water District ManagementTypical Water District ManagementTypical Water District ManagementTypical Water District Management

The General Manager of a Water District is appointed by the Board, and is given full control ofoperations, including the authority to appoint all Water District personnel. The General Managerof Subic Water District (Zambales Province, Luzon) has been in position for its entire 22-year life,as has one of the female directors. Water District Boards comprise five directors, who serve six-year terms with staggered starts. This ensures the capability to implement long-range policies,and prevents the LGU leader (usually a Mayor or Governor) from appointing more than 2- 3directors during their three-year term.

Water Districts have common procedures and commercial systems for billing & collection oftariffs, accounts, budgeting, preparation of financial statement, tariff setting, and all houseconnections have water meters. Water District tariffs must cover O&M costs, debt servicingrequirements, and an additional allowance for capital expenditures and reserves. Tariffs are setfollowing public hearings, approval by the Board, and LWUA review and confirmation.

Adapted from TEST, 2002

Typical Water District ManagementTypical Water District ManagementTypical Water District ManagementTypical Water District ManagementTypical Water District Management

2. Water District2. Water District2. Water District2. Water District2. Water District

The Water District model was designed tooperate on commercial lines, with many of thesame powers, rights and privileges given toprivate corporations. This changed in 1992,when the Supreme Court ruled that WaterDistricts were Government Owned andControlled Corporations (GOCCs) and,therefore, subject to government regulations onemployment, budget, management and audits.

Government control and regulation hasreduced autonomy (political and financial),and has limited the scope for innovation, butWater Districts still perform well in the areaswhere the LGU model is weak. Most WaterDistricts have strong financial management,and significant technical capacity. However,tariffs are generally high, and water servicesto the poor are restr icted by rules on‘financial viability’.

Water districts secure capital financing from LWUA, but these loans are expensive and conditions to pass all costsonto users have driven up water tariffs. Here, residents are having a swim at the water district reservoir –perhaps one of the few free ‘benefits’ for users?


High Tariffs in Water DistrictsHigh Tariffs in Water DistrictsHigh Tariffs in Water DistrictsHigh Tariffs in Water DistrictsHigh Tariffs in Water Districts

LWUA Loans to Water DistrictsLWUA Loans to Water DistrictsLWUA Loans to Water DistrictsLWUA Loans to Water DistrictsLWUA Loans to Water Districts

LWUA was the main source of capital forWater Districts (see Box on LWUA loans), but itsfunding has dried up and it is being reformed.LWUA loans have proved expensive, and thecondition that all financing costs are passed onto water users appears to have reducedincentives for efficient design or for cost-effectiveimplementation. When loans are badly spent,Water Districts are still forced to raise their tariffs,leading to a vicious circle: inadequate servicesand high tariffs result in lower consumption,which reduces revenues, making cost recoverydifficult and, in many cases, requiring furthertariff increases (see Box on high tariffs).

The Local Water Utilities Administration (LWUA) provides loans to Water Districts for ‘financiallyviable’ projects. LWUA is able to secure loans at concessionary rates (3-4%), which it then offersto Water Districts at higher interest rates (8-12.5%). In addition, LWUA charges 9% of the grossloan amount for carrying out feasibility and detailed design studies, plus another 4% for constructionsupervision. LWUA also passes on any currency adjustments due to fluctuation of the dollar-pesorate.

LWUA used to be allowed to extend assistance to Water Districts that were not commerciallyviable by supplying 50% of the funds required as a grant. However, this practice was stopped in1998, when the National Economic & Development Authority (NEDA) ordered that LWUA supportonly projects deemed financially viable (i.e. able to recover all costs and pay back their loans).


LWUA Loans to Water DistrictsLWUA Loans to Water DistrictsLWUA Loans to Water DistrictsLWUA Loans to Water DistrictsLWUA Loans to Water Districts

In 1987, Numancia Water District (Visayas) received approval for a LWUA loan to improveservices. The water users were highly supportive of the project, and agreed to an initial tariff ofP3.5/m3, rising to P5/m3 following project completion in 1993. Debt repayments required furthertariff increases, and by 1997 the tariff had nearly doubled to P9/m3.

Unfortunately, Numancia Water District was unable to service its debt repayments, and in1998 LWUA took over management of the water supply. Another public hearing was held todiscuss further tariff hikes to raise funds for the payment of arrears and to enable the developmentof additional water sources. An immediate 36% tariff increase was approved, as were laterincreases of 20% in 2000 and 12% in early 2002. The tariff stood at P18/m3 by the end of 2001,but the management decided to defer the planned Jan 2002 increase (to P20/m3 = US$ 0.40/m3) because this was likely to lead to more disconnections, thus further diminishing their revenueand cash flow1.

Adapted from TEST, 20021 The basic water tariff in the fourteen case studies averages P8.1/m3

High Tariffs in Water DistrictsHigh Tariffs in Water DistrictsHigh Tariffs in Water DistrictsHigh Tariffs in Water DistrictsHigh Tariffs in Water Districts

LWUA’s ‘financial viability ’ requirementwas meant to improve cost recovery. Inpractice, this approach has made it hard forWater Districts to provide services to thepoor. Water Districts, especially those withsubstantial debt and already high tariffs,tend to confine their service coverage to theweal th ie r ‘u rban barangays ’ 1. Moreborrowing wou ld be needed to fundexpansion beyond this service area, andWater D is t r i c t s fear tha t low- incomehouseholds will not be able to afford (or bewilling to pay) their high tariffs.

1 The barangays making up small towns in the Philippines are classified as either ‘urban ’ or ‘rural’


equity. The board of directors is elected by thegeneral assembly (comprising all of theassociation’s members), and no electedgovernment official (with the exception ofBarangay officials) can be a director.

RWSAs were originally set up, supported andfinanced by a government body, the RuralWaterworks Development Corporation (RWDC).In 1987, the RWDC was dissolved and itsfunctions and responsibilities were transferredto LWUA. Despite having inherited loanrepayments from more than 450 RWSAs, thesums involved were small, and LWUA has shownlittle interest in either RWSA performance, or inthe collection of its debts.

RWSAs retain many of their originalgovernment-established features andregulations, but are no longer monitored, andhave few channels through which to obtainfinance. Today, some 50% of the RWSAsregistered with LWUA are no longer operational.The reasons for this high failure rate are notknown, but probably relate to the government’ssupply-driven approach in establishing RWSAs,and the current lack of financial or institutionalsupport.

The difficulties in expanding services intolow-income urban areas has led some WaterDistricts to relinquish their exclusive right toprovide water supply services in their franchisearea1. In several of the case studies, the WaterDistrict has retained control of its existing servicearea while encouraging another serviceprovider (RWSA, Water Cooperative or PrivateSector) to develop separate water supplysystems in the low-income areas. However,some Water Districts are strongly opposed tohaving other service providers within theirdomain, thus further restricting options forprovision of services to the poor.

3. Rural Water Supply Association3. Rural Water Supply Association3. Rural Water Supply Association3. Rural Water Supply Association3. Rural Water Supply Association (RWSA) (RWSA) (RWSA) (RWSA) (RWSA)

Despite the title, RWSAs manage watersupply systems in both rural and urban contexts.Outside the rural areas, RWSA systems aregenerally found in small towns, or serving well-defined areas within larger towns (e.g. those notserved by Water Districts or LGUs). However,even large RWSAs provide water services to amaximum of about 2,500 households.

RWSAs are non-profit water userassociations, in which the members hold no

The high involvement of community members is a positiveThe high involvement of community members is a positiveThe high involvement of community members is a positiveThe high involvement of community members is a positiveThe high involvement of community members is a positiveinfluence on the performance of rural water associations andinfluence on the performance of rural water associations andinfluence on the performance of rural water associations andinfluence on the performance of rural water associations andinfluence on the performance of rural water associations andwater cooperatives. Here, users are assessing the technicalwater cooperatives. Here, users are assessing the technicalwater cooperatives. Here, users are assessing the technicalwater cooperatives. Here, users are assessing the technicalwater cooperatives. Here, users are assessing the technicaladequacy of their system.adequacy of their system.adequacy of their system.adequacy of their system.adequacy of their system.

1 Water Districts usuallyhave a Certificateof Public Convenience(or Certificate ofConformance) whichgrants them exclusiveright of water serviceto a town (orcluster of towns)

Typical RWSA ManagementTypical RWSA ManagementTypical RWSA ManagementTypical RWSA ManagementTypical RWSA Management

The two RWSA case studies perform well,showing political and financial autonomy, aswell as good relations with local government.High levels of community involvementpromote transparency and accountability.Technical and financial performances aregenerally good, assisted by professionalsupport from local Water Districts. Thiscombination of local knowledge and externalsupport (from LGUs and Water Districts) makeRWSAs effective in small towns.

Both salaries and tariffs are higher than inthe Water Cooperative case studies, perhapsas a legacy of their government influencedrules and regulations, and the close

Mabuhay Water Supply Association (MWSA) manages the water supply system of BarangayMabuhay within the town of Sison (Pangasinan Province, Luzon). Five staff operate and maintainthe system, and the MWSA treasurer collects the water charges (P10 per month for house connectionsand P5 per month for users of public standposts). Water is currently rationed, but the association istrying to raise funds to construct a reservoir that will increase supply.

The members of Darasa RWSA in Tanauan City (Batangas Province, Luzon) have a strong senseof ownership:

• one (non-official) member records the time in and out of the RWSA employees• neighbors report cases of illegal connections• General Assembly voted against handing over management to Tanauan Water District• members have donated assets (wells and storage tanks) worth P3 million (US$ 60,000)

Adapted from Lazaro, 2000 and TEST, 2002

relationship with local Water Districts. This makesRWSAs less cost-efficient, but has not diminisheduser satisfaction.

4. Water Cooperative4. Water Cooperative4. Water Cooperative4. Water Cooperative4. Water Cooperative

Water Cooperatives are community-basedassociations, governed by a board of directorselected by the general assembly. However, theydiffer from RWSAs in that members contributeequity and thus have a financial stake in thesuccess of the Cooperative. Like RWSAs, WaterCooperatives tend to manage small, relativelysimple water systems - the largest knownexample serves 2,500 households1. Support andoversight are provided by the Cooperative

Typical RWSA ManagementTypical RWSA ManagementTypical RWSA ManagementTypical RWSA ManagementTypical RWSA Management

1 Argao Cooperative, Visayas


Typical Water Cooperative ManagementTypical Water Cooperative ManagementTypical Water Cooperative ManagementTypical Water Cooperative ManagementTypical Water Cooperative Management

Development Authority (CDA), but it has notechnical or financing capacity, so limits itselfto more administrative roles (registration,training, monitoring and mediation).

Water Cooperatives are the most demand-responsive of the management models, inthat they are difficult to form if the prospectivemembers are not convinced that the watersupply system will meet their needs. WaterCooperatives are autonomous, but often havegood relations with LGUs and Water Districts,thereby improving their access to funding andto technical support. Enthusiastic communityinvolvement, genuine interest in financialperformance, and Water District assistancein financial management combine to helpsuccessful Water Cooperatives to keep costsdown and tariffs low, making services moreequitable (better provision of water supply tothe poor) and resul t ing in high usersatisfaction ratings.

5. Private Sector5. Private Sector5. Private Sector5. Private Sector5. Private Sector

In the private sector model, the small townwater supply system is run as a business, withprofit as the primary consideration. In thePhilippines, there are numerous examples ofsmall enterprises providing water supplyservices to residents of private housingdevelopments, and of smal l- scale

independent providers selling water to localhouseholds, but there are very few cases ofprivate sector management of the primary watersupply system in a small town.

Small towns tend to have low populationdensities and high per capita investmentcosts, and the high risks and low profitsassociated with these systems appear to havediscouraged most private service providers1.The few private companies providing urbanwater supply in the Philippines are found intowns with populations above 100,000, andtheir service coverage centers on affluent,highly urban areas. Under these conditions,the private water companies perform well,using a professional management style tocapture economies of scale and makesignificant gains in operational efficiency.

Unfortunately, the private sector modelcurrently lacks accountability or transparency.Private water companies have to submit theirfinancial records to the Securities and ExchangeCommission (SEC), and water tariff increaseshave to be approved by the NWRB, but theyare otherwise unregulated. Little informationabout the private water companies is in thepublic domain, and the WPEP study found thatthey were often reluctant to reveal their financialresults, or to discuss tariff increases with theircustomers.

The San Pedro Multi-Purpose Cooperative in Santo Tomas (Batangas Province, Luzon) has six staff,headed by a woman. The Cooperative supplies water to 450 households, and holds regular meetingsin which women actively participate. The basic tariff is P6/m3 (US$0.12/m3) and collection efficiency is70-80%. The water users know each other and feel a sense of ownership for the system, which helpsget bills paid and makes disconnections rare. External financing is needed for major works as 88% ofthe revenue is spent on routine operation and maintenance. Private contractors are hired when repairsare needed, and spare parts and equipment are readily available.


Typical Water Cooperative ManagementTypical Water Cooperative ManagementTypical Water Cooperative ManagementTypical Water Cooperative ManagementTypical Water Cooperative Management


1 This is supported by the recent difficulties that LGU-UWSP has experienced in contracting private operators to managesmall town water supply systems (as yet none of the nine pilot towns are under private management)

Cost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSA

There is little doubt that involving the privatesector in urban water supply management willallow efficiency gains. However, the problemsassociated with making small towns watersupply attractive to private water providers,and in holding these private providersaccountable, suggest that their ini t ialinvolvement should be limited to specificfunctions in which private provision has acomparative advantage (e.g. O&M, billingand collection, financial audits).

This model is of particular interest because ithas the potential to capture economies of scale,and thus to make the provision of small townswater supply services more attractive to theprivate sector.

In practice, there is little evidence of anyadvantage in the management of clusters ofsmall town water supply systems in thePhilippines. The three case studies of clustersystems did not perform well, with the fewpositive findings being related to attributes ofthe particular management body (LGU or WaterDistrict) rather than to cluster effects. Thissuggests that, in practice, the diseconomies ofdispersion and complexity associated withclusters of small town water supply systemsoutweigh any theoretical economies of scale.

Cost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSACost-efficient Management by Guimbal RWSA

Guimbal is a small town in Iloilo Province with a population of 27,700. Guimbal RWSA hasbeen operating for 15 years and now supplies water to one third of the urban barangays. Ithas a very progressive LGU, which assisted the RWSA in attracting professional support from alocal Water District, and in sourcing grant funding for construction of its water supply facilities.

The water supply system has only average operational efficiency (7 staff for 714 houseconnections), but is well managed and the RWSA makes a reasonable profit (15% profitmargin in 2000). In 2001, the RWSA took the unusual step of reducing the minimumtariff from P70 to P60 (for 10m3). Interestingly, this 17% tariff reduction led to a 50%increase in annual water consumption, creating higher overall revenues and enablingthe RWSA to maintain a profit margin of 12%. Guimbal RWSA is fortunate to have awater supply system capable of meeting this increased demand, but it is making the mostof its assets, and the water users are clearly benefiting from the RWSA’s cost-efficientmanagement.

6. Cluster6. Cluster6. Cluster6. Cluster6. Cluster

The cluster model refers to the case wherethe management body (typically an LGU orWater District) provides water supply services tomore than one town.


Despite the performance assessments beingbased on only two or three case studies of eachmanagement model, some common factors ofsuccess emerged from the analysis. Thesuccessful management models for small townswater supply exhibited all, or most, of thefollowing:

• cost-efficient management (low costs,low tariffs and minimal profit)

• active planning and expansion(significant expenditure on repairs andrehabilitation)

• good relations with local government(ability to attract funding and technicalsupport)

• professional support (assistance withtechnical and financial management)

• community involvement (creatingtransparency and accountability)

Small towns water supply systems are rarelylarge enough to capture economies of scale,and instead rely on the effective use of localresources to minimize their costs (e.g. by payinglower salaries than those found in large towns).The introduction of increasingly professionalaccounting and financial management practiceshas assisted successful managers to monitortheir expenditures, and to recover these costswhilst keeping tariffs low (see Box on GuimbalRWSA).

Factors of Success

Small towns are unusually dynamic innature. Their populations tend to grow rapidly,and their economic basis and developmentpriorities can change as the towns expand. Inthe Philippines, efforts to maximize the benefitsof water supply investments are leading to shorterdesign lives and more incremental developmentof systems. As a result, strategic planning andexpansion are critical elements of the successfulmanagement of small town water supply systems.

Strategic planning and expansion involve:setting tariffs that cover the costs of repairs andrehabilitation; extending the distribution systeminto new areas; expanding the revenue base byencouraging new connections; chasing funds fornew facilities; and, overseeing the design andimplementation of these projects. In small towns,these activities often require both good relationswith local government and professional supportfrom external agencies.

The highly politicized environment and thelimited funding opportunities found in most smalltowns in the Philippines mean that LGUs remaincentral to the success of local water supply services.

Direct LGU water supply management hasproven ineffective, due to the constraintsimposed by government financial and


Continuing access to professional support is key to the success of community-managed water supply as smalltowns grow and more complex systems evolve.


management systems. However, watersupply providers that maintain good relationswith local government improve their access tofinance and to external support. In large towns,the substantial revenue from water supplyservices increases the risk of political captureand rent-seeking by local elites, but in smalltowns, strong community involvement canassist the water supply management to securepoli t ical support whilst retaining theirtransparency and accountability.

The importance of professional support isseen throughout the small towns water supplysub-sector. Inexperienced and under-staffedsmall town water supply providers struggle

to organize operation and maintenanceteams, to supply themselves with spareparts and consumables, or to keep accurateand up - to -date accounts . Inadequatetechnical capacity often results in poorplanning, design and construction of thewater supply facilities, thus reducing thesus ta inab i l i t y o f even we l l -managedsystems. Advice and assistance in theseareas help small management bodies todeliver more reliable services, to set cost-reflective tariffs, to introduce efficient billingand collection systems and, ultimately, toensure that water users are willing to payfor the services.

One of the key messages of this fieldnote isthat management of a water supply system ina small town is very different to that in a largerurban center. In a small town, pipe networksserve fewer people and use simplercomponents, but are often more spread outbecause of lower population densities. Thecontext is also different, with lower local incomesand skill levels. Under these conditions, the casestudies suggest that community-basedmanagement models are surprisingly effectivein providing sustainable water services.However, this neglects the fact that community-based management models are rarely foundin larger water supply systems. Both RWSAs andWater Cooperatives were originally intended to

When is a small town too big forcommunity-based management ?

R. Janicki, 20

03.

manage water supplysystems in towns withless than 20,000inhabitants. Whathappens when thesesmall towns grow, andassociations become toolarge to be easilymanaged?

Both RWSAs andWater Cooperatives areaccountable to theirmembers through ageneral assembly, but this

process is likely to become cumbersome andineffective when too many people are involved. Thenormal solution to this scale problem is to introducea new management model when the systembecomes too large (e.g. by contracting a privatewater company to take over the management) butthere are several other options to consider.Community-based management models can bedecentralized by encouraging new associations toform as the population grows. Each new associationcovers a neighborhood, and reports to a moreprofessional ‘apex organization’ that manages thewater supply system. In Bulacan Province (Luzon),a federation of RWSAs has already formed – it meetsonce a month to share information and discussproblems, and enables member RWSAs to makemajor repairs and procurements at lower costs.


Conclusions

Case studies of fourteen small townwater supply systems in the Philippinessuggest that water supply systems usingcommunity-based management models(e.g. Water Cooperatives and RWSAs) arethe most consistently successful in smalltowns. However, a wider perspective revealsthat some 50% of RWSAs registered withLWUA are no longer operational, and thatmos t communi t y-based managementmodels report diff icult ies in obtainingfinance for service improvements or systemexpansion. Clearly, these successes areunusual in several respects.

The key difference is that the successfulcommunity-based management bodies are farmore sophisticated than typical communitymanagement models. Whilst they began assimple water user associations, they nowoperate like small businesses. Water suppliesare metered; billing and collection systems arewell-organized; commercial accountingtechniques are prevalent; and, political supportis carefully cultivated. Management has beenprofessionalized through gradual training andimprovement, but local personnel are stillemployed, and the community remains wellinformed and involved in proceedings. Thiscombination of local knowledge andprofessional approaches is essential tosuccessful small towns water supply.

The professional support received bythese communi t y-based managementmodels is a key factor in their success. Assmall towns grow and their water supplysystems become more complex, professionalwater util i ty management skills becomemore important. The lessons learned fromthis study suggest that professional supporthelps water supply management bodies toevolve with their systems, and allows anincremental transition from community-based to commerc ia l water supp lymanagement. Professional support allowsthem to provide cost-efficient and well-planned services, while retaining their localadvantages and demand-responsiveness.Nearby Water Districts, which often managetheir own large urban water supply systems,prov ide a ready source o f techn ica lassistance, and have enabled community-based management bodies to introducemanagement systems more typically foundin large urban utilities.

Water Dis t r ic ts of fer an al ternat ivemanagement model with strong financialand institutional performance, as well asgood technical capacity. In small towns,however, Water District services are rarelydemand-responsive, and the constraints ofgovernment control often result in hightariffs, high debts and limited services for the


poor. Water Districts appear more successfulin larger towns where they can utilize theirprofessional skills to capture economies of scale.

To date, the provision of small towns watersupply in the Philippines has not attracted muchinterest from the private sector. Small townscombine low population densities with low-income consumers, thus require a relativelyhigh per capita investment for little return.There is little scope for efficiency gains, andlocal politicians often have an undue influenceon the performance of the water services.Unsurprisingly, this blend of high risk and lowyield has discouraged private service providers

from all but the most prosperous andwelcoming of locations.

In general, the successful examples of smalltowns water supply management are those thathave taken advantage of their position astridethe rural-urban divide. Local knowledge andcommunity involvement reduce costs andimprove transparency, while the availability ofskilled staff and external support allow moreadvanced technical and financial management.The community-based management modelsexamined may not make much profit, but whenrun professionally, they offer low tariffs, effectiveoperation and maintenance, and good costrecovery.

Small towns do not interest private water companies because of the low population densities and presence ofgenerally low-income level of consumers in these areas. Community-managed systems often employ a breakevenstrategy, but when run professionally, they can be very effective in supplying small towns.


Recommendations

The lessons learned from the case studiessuggest the following recommendations for thesustainable provision of small town water supplyservices in the Philippines:

AAAAA Greater involvement of LGUsGreater involvement of LGUsGreater involvement of LGUsGreater involvement of LGUsGreater involvement of LGUs

There is a strong case for improving thesupport provided by LGUs to water supplymanagers. This will require a strengtheningof the water supply and sanitation capacitywithin LGUs, in l ine with the ongoingdecentralization process, as well as theintroduction of new forms of local regulationand contract management. Water supply unitswithin LGUs should promote commercialpractices, provide polit ical support fortransparency in transactions, offer grants forcapital works, and carry out performanceaudits with citizens’ participation.

BBBBB Incentives to provide professionalIncentives to provide professionalIncentives to provide professionalIncentives to provide professionalIncentives to provide professional support support support support support

The successful case studies were oftendependent on professional support from aWater District. This support cannot beguaranteed. Suitable Water Districts are notavailable in all areas, and some may not wishto offer their services. Therefore, it isrecommended that institutions capable ofproviding professional support (be they WaterDistricts, or other independent providers) shouldbe offered incentives to assist managers of smalltowns water supply systems.


An approach that has proved successful in WestAfrica is the creation of Water Management Units(WMU), which provide financial, management,training and performance benchmarking servicesto groups of small towns (or federations of RWSAsand Water Cooperatives). These support servicesare funded through production charges paid bythe water supply provider (a nominal payment perunit of water produced), thus encouraging theWMU (or Water District) to assist the water supplyproviders to expand their services and increasewater production.

CCCCC Contract out commercially viableContract out commercially viableContract out commercially viableContract out commercially viableContract out commercially viable functions functions functions functions functions

There are about 500 community-managedwater supply systems operating in small townsin the Philippines, and several hundred othersthat have failed. There are also some 500 LGU-managed systems. The WPEP study suggests thatan incremental transition to commercialmanagement is vital for the sustainability of smalltown water supply systems under community-based or local government management,particularly in those towns where population isgrowing rapidly. This transition will allow theadvantages of locally embedded managementto be gradually enhanced by the introduction ofmore efficient operational, financial anddecision-making processes. Professional supportwill be important, but these management bodiesshould also look to contract out commerciallyviable functions (e.g. O&M, billing andcollection, auditing) to local enterprises, thusimproving efficiency while retaining overallownership and control of their systems.

ReferencesReferencesReferencesReferencesReferences

ADB (2001) ‘Water supply & sanitation sector profile: Philippines’, Manila: Asian Development BankAngel Lazaro & Associates (2000) ‘Small Towns Water Supply Management Models - Final Report’, Manila: WPEP website http://www.wpep.org/Robinson, A and TEST Consultants Inc. (2003) ‘Management models for small towns water supply: lessons learned from case studies in the Philippines’, Manila: WPEP Final Report http://www.wpep.org/World Bank (2001) ‘World Development Report 2000/01: Attacking poverty’, Washington DC: The World Bank

AcknowledgementsAcknowledgementsAcknowledgementsAcknowledgementsAcknowledgements

The inputs of Philippine and international peer reviewers, members of WPEP Project SteeringCommittee and Technical Working Group and World Bank staff have been helpful in ensuring thequality of this document.

Management Models for Smalltowns Philippines

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