Philippines: Water Supply and Sanitation Sector Assessment, Strategy, and Road Map

8/14/2019 Philippines: Water Supply and Sanitation Sector Assessment, Strategy, and Road Map

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Water Supply and Sanitation Sector

Philippines


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Water Supply and Sanitation Sector

Assessment, Strategy, and Road Map

Philippines

January 2013


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Printed on recycled paper.

2013 Asian Development Bank

All rights reserved. Published 2013.Printed in the Philippines.

ISBN 978-92-9092-941-3 (Print), 978-92-9092-942-0 (PDF)Publication Stock. No. RPS125240

Cataloging-In-Publication Data

Asian Development Bank. Philippines: Water supply and sanitation sector assessment, strategy, and road map.Mandaluyong City, Philippines: Asian Development Bank, 2013.

1. Water supply and sanitation 2. Philippines. I. Asian Development Bank.

The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of theAsian Development Bank (ADB) or its Board of Governors or the governments they represent.

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iii

Contents

Currency Equivalents iv

Abbreviations iv

Acknowledgments vi

I. Sector Assessment: Context and Strategic Issues 1

A. Introduction 1

B. Sector Context 1C. Core Sector Issues, Causes, and Eects 6

II. Sector Strategy 20

A. Government Sector Strategy, Policy, and Plans 20

B. ADB Sector Support Program and Experience 26

C. Other Development Partners Support 28

D. ADBs Sector Forward Strategy 29

III. Sector Road Map and Results Framework 32

Appendixes

1 Problem ree Analysis: Water Supply Subsector 33

2 Problem ree Analysis: Sanitation Subsector 34

3 ADB Assistance to Water Supply and Sanitation Sector in the Philippines 35


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iv

Currency Equivalents(as of 11 September 2012)

Currency unit peso (P)

P1.00 = $0.024

$1.00 = P41.48

Abbreviations

ADB Asian Development BankASR assessment, strategy, and road mapBWSA barangay water and sanitation associationDENR Department o Environment and Natural ResourcesDILG Department o Interior and Local Government

DOH Department o HealthDPWH Department o Public Works and HighwaysGDP gross domestic productHUC highly urbanized cityIWRM integrated water resources managementJICA Japan International Cooperation AgencyJMP Joint Monitoring ProgrammeLGU local government unitLWUA Local Water Utilities Administrationm3 cubic meterMDG Millennium Development GoalMPDP Medium-erm Philippine Development PlanMWCI Manila Water Company, Inc.MWSI Maynilad Water Services, Inc.MWSS Metropolitan Waterworks and Sewerage SystemNCR National Capital RegionNSCB National Statistical Coordination BoardNEDA National Economic and Development AuthorityNSO National Statistics OfficeNSSMP National Sewerage and Septage Management Program


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Abbreviations v

NWRB National Water Resources BoardPPP publicprivate partnershipPSSP Philippine Sustainable Sanitation PlanPWRF Philippine Water Revolving Fund

PWSSR Philippine Water Supply Sector RoadmapRWSA rural waterworks and sanitation associationSWSSP Small owns Water Supply Sector ProjectUNICEF United Nations Childrens FundUSAID United States Agency or International DevelopmentWHO World Health OrganizationWSP water service provider


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Acknowledgments

Tis report was prepared by a team rom the Urban Development and Water Division (SEUW) o theSoutheast Asia Department (SERD) led by Stella ansengco-Schapero (senior finance specialist); withteam members Rudol Frauendorer (lead urban development specialist), Paul van Klaveren (senior urbandevelopment specialist, water supply and sanitation), and N. an (consultant). Guidance and support wasprovided by Richard Bolt (advisor, Office o the Director General, SERD). Te team wishes to thank theDepartment o External Relations and Mary France Creus (operations assistant, SEUW/SERD) or theirsupport in preparing and editing the report.


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1

I Sector Assessment:

Context and Strategic Issues

A. Introduction

1. Tis sector assessment, strategy, and road map (ASR) documents the current assessment oand strategic investment priorities or the Philippine water supply and sanitation sector o the AsianDevelopment Bank (ADB). It highlights the sector perormance, priority development constraints,

government plans and strategies, past ADB support and experience, other development partners support,and ADBs uture support strategy. Te ASR is linked to and inorms ADBs country partnership strategyor the Philippines, and will be updated as strategic developments and program changes arise. Tis ASRwill help provide sector background inormation or investment and technical assistance operations.

B. Sector Context

1. Overall Context

2. Rapid urbanization. Te Philippines is one o Asias astest urbanizing countries, with 138 cities,

1,496 municipalities, and 42,027 barangays.1

Since 2000, the countrys population has increased 1.9%annually on average, and reached a total population o 92.34 million in 2010 (as reported by the 2010census). Rapid urbanization is putting significant pressure on urban inrastructure, especially in secondarycities which are growing the astest. O the 17 regions in the Philippines, the corridor comprising the urbanareas o Cavite, Laguna, Batangas, Rizal, and Quezon (CALABARZON), which are adjacent to MetroManila, is now the most populated area in the country with 12.61 million inhabitants. Te population o theCALABARZON corridor now surpasses that o the National Capital Region ([NCR], which is comprisedo Metro Manila) (11.86 million), and Central Luzon (10.14 million). Further, 33 cities, including all 16cities in the NCR, are now classified as highly urbanized cities (HUCs), 4 o these being home to morethan 1 million inhabitants.2Tese latter our HUCs include three located in the NCR (Caloocan City [1.49million], the City o Manila [1.65 million], and Quezon City [2.76 million]), as well as Davao City (1.45million) on the southern island o Mindanao. Cities in the Philippines are contending with urban problemssuch as congestion, overcrowding, poor quality o lie, and rapidly growing poor urban communities. Te

government needs to address the current situation, and plan or and finance substantial urban developmentneeds. Tis is a particularly urgent concern in light o the act that the urban population is expected to grow

1 Te barangayis the Philippines lowest-level governmental administrative unit. Tis Filipino word is variously translated as

village, district, or ward. Municipalities and cities thus comprise numerous barangays. Data are rom Government o

the Philippines, National Statistics Office (NSO). 2012. Provincial Summary, Number of Provinces, Cities, Municipalities and

Barangays, by Region as of 31 March 2012. Manila.

2 Highly urbanized cities (HUCs) are cities with a minimum population o 200,000 inhabitants (as certified by the NSO), and with

an annual income o at least P50 million in 1991 constant prices, as certified by the city treasurer.


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2 Philippines: Water Supply and Sanitation Sector Assessment, Strategy, and Road Map

by as much as 67% by 2030, adding an additional 34.8 million inhabitants to the countrys urban areas.Tis rapid rate o urban growth is being driven by limited employment opportunities in rural areas, landshortages, natural disasters, and the negative impacts o climate change.3

3. Urban economies: Te main driver of economic growth in the Philippines. Te expansiono major cities and municipalities as centers o consumption, productivity, and employment has beeninstrumental in the general improvement in living standards o the countrys population. However, whilethe Philippine economy grew by 4.64% per annum on average rom 2007 to 2011 (a rate aster than theworld average), gross domestic product (GDP) per capita increased at a slower rate because o higherpopulation growth during the same period (2.66% per annum on average).4Te NCR accounted or32.5% o 2009 GDP. While still the largest regional share in GDP, this was slightly lower than its 33% sharein 2008. Te service sector accounted or the largest share o the NCRs economy (67.6% in 2009, up rom65.4% the previous year).

4. Widening urbanrural disparities. While International Monetary Fund figures show thepoverty incidence in the Philippines has allen in recent decades, this decline has occurred at a relativelyslow rate. Further, during the past decade, some o this progress has reversed.5Based on 2009 official

poverty statistics, the poverty incidence or the country overall increased slightly, reaching 26.5% othe population in 2009, up rom 26.4% in 2006 and 24.9% in 2000.6Importantly, the income disparitybetween the countrys urban and rural populations continued to widen over the period, as the urbanpoverty incidence declined at a aster rate than rural poverty, with the 2008 Annual Poverty IndicatorsSurvey reporting significantly lower poverty incidence in urban than in rural areas (19.7% comparedwith 42.5%).7As in other developing countries in the region, urban areas in the Philippines are seenas offering better employment opportunities and higher incomes than rural areas. Te NCR continuedto register the highest level o real per capita GDP in the country in 2009 (P40,838), which was nearly3 times that o national real per capita GDP (P15,528) in that year.8

5. Low marks for infrastructure, quality of public institutions, and corruption.Deficiencies inthe investment environment have resulted in slower growth in private sector investment, and relativelylow levels o oreign direct investment inflows. Te Philippines ranked 75 (o 142 countries) in the World

Economic Forums Global Competitiveness Report 20112012, 10 places higher than in the previousreport, mainly due to the countrys lower public deficit and debt, its improved credit ratings, and moderaterate o inflation. However, it lagged behind neighboring countries such as Indonesia (46) and Viet Nam(65) due to low marks or inrastructure, quality o public institutions, and corruption.9

6. Water resources and climate change. According to the searchable database o the World ResourcesInstitute, the Philippines has total annual renewable water resources o 479 billion cubic meters (m3) romits surace water and groundwater sources. Tis translates into an annual per capita availability o about6,100 m3,which is twice that o the rest o Asia, and 6 times the global scarcity threshold o 1,000 m3.10

3 ADB and the Government o Australian. 2011. Competitive Cities in the 21st Century: Cluster-Based Local Economic Development.

Manila.

4 ADB. 2012.Asian Development Outlook 2012.Manila.

5 IMF. 2012. Positive Signs for the Philippines Amid Global Gloom. Washington, DC.

6 Government o the Philippines, National Statistical Coordination Board. 2012. http://www.nscb.gov.ph/pressreleases/2012/PR-

201206-SS2-01_pov2009.asp

7 Government o the Philippines, NSO. 2006. Family Income and Expenditures Survey (FIES, 2006). Manila;Government o the

Philippines, NSO. 2008.Annual Poverty Indicators Survey. Manila.

8 Government o the Philippines, National Statistical Coordination Board. 2010. 2009 Gross Regional Domestic Product. Manila.

9 http://reports.wcorum.org/global-competitiveness-2011-2012/#=

10 Government o the Philippines. 2007.Philippine Water Supply Sector Roadmap. Manila.


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Sector Assessment: Context and Strategic Issues 3

Te National Water Resources Board (NWRB) estimates total available groundwater supply to be 20,200million m3/year. Based on an 80% probability or surace water, the total dependable surace water supplyis 206,230 million m3/year, implying a total mean supply o 226,430 million m3/year. Agricultural useaccounts or 83% to 85% o this amount, the remainder being shared by the industrial, commercial,

and domestic sectors. Growing population especially in the urban areas together with water pollution,wasteul and inefficient use, continued denudation o orest cover (particularly in watersheds), andsaltwater intrusion caused by excessive withdrawal o groundwater (particularly in the metropolitan areao Cebu, Davao City, and certain areas o Metro Manila), are the major challenges acing the countryswater resources.

7. In the Philippines, climate change is also a concern or planners, particularly with regard to itsimpact on mean and extreme precipitation rates. Modeling 50 years into the uture, a time-series-basedanalytic model ormulated by the United Kingdom-based Climate Research Unit showed two key resultsor the Philippines: an increase in JuneAugust precipitation under all scenarios, but a decrease inDecemberFebruary precipitation under the high carbon dioxide emission scenario. How these changesmight affect the wet and dry seasons in the country is still to be studied. In any case, there seems to bea general consensus among climatologists that over time, climate change will heighten the severity o

droughts and deluges.11

A challenge will be downscaling relevant global data on climate change to thecity and municipality level, and translating this data to the sector level. A urther challenge is compilinga comprehensive and meaningul inormation database. A report such as the Philippine EnvironmentMonitor,12or example, could be a good tool or monitoring and reporting this comprehensively, includingdata related to the health o the environment and water supply and quality degradation.

8. Summary of sector performance: Limited by inadequate data.In the Philippines, water systemsare classified into one o three levels: Level I, stand-alone water points (e.g., hand pumps, shallow wells,rainwater collectors); Level II, piped water with a communal water point (e.g., bore wells, spring systems);and Level III, piped water supply with a private water point (e.g., a household service connection). TeWorld Health Organization (WHO)United Nations Childrens Fund (UNICEF) Joint MonitoringProgramme (JMP) reported in March 2012 (the JMP March 2012 Report) that the MillenniumDevelopment Goal (MDG) o 92% coverage has been met or drinking water. 13Te JMP estimated that

national coverage in the Philippines was 92% in 2010, with 93% coverage in urban areas and 92% in ruralareas. Te National Statistics Office (NSO) reported a lower figure o 84.8% o the population nationallyhaving access to potable water (Levels I, II, and III) in 2011, noting a slight increase rom 82.9% in 2007.14

9. Te JMP March 2012 Report stated that 43% o the countrys population had access to water pipedinto private premises (Level III) in 2010. However, the report highlighted a wide disparity in accessbetween urban and rural areas: 61% in urban areas compared to only 25% in rural areas. Tere are no

validated numbers or Level III water service providers (WSPs), and there is no harmonized nationaldatabase or water supply coverage. In several sector reports, the number o Level III water systems inthe country is estimated to range rom 3,000 to 6,000, reflecting the broad array o WSPs, includingmany small-scale WSPs in smaller cities and municipalities, especially in rural areas. Tere are numerouscommunity-based small-scale WSPs such as cooperatives, rural waterworks and sanitation associations

11 Manila Observatory or the Congressional Commission on Science & echnology and Engineering. 2010. echnical Primer on

Climate Change. 1516 March. Manila.

12 Te Philippine Environment Monitor Series is a World Bank initiative that seeks to present a snapshot o key environmental

trends in the country. It was last published in 2007.

13 Te WHOUNICEF JMP or Water Supply and Sanitation is the official United Nations mechanism tasked with monitoring

progress toward achieving Millenium Development Goal (MDG-7), or halving the proportion o the population without access

to water and basic sanitation. http://www.wssino.org/ (accessed July 2012).

14 Government o the Philippines, National Statistical Coordination Board. 2011. Summary of StatDev 2011 Indicators by Sector and

by Pace of Performance. http://www.nscb.gov.ph/stats/statdev/2011/Accelerating_inra/Chapter_accelerating_inra.asp


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(RWSAs), barangaywater and sanitation associations (BWSAs), homeowners associations, and propertydevelopers that supply water. Te vast majority o these are not registered with the NWRB, nor are theyattached to a national agency. Tere are also no comprehensive sector statistics on water distributionservice levels and quality among WSPs (i.e., continuity o water supply [e.g., 24 hours per day, 7 days per

week], quality o water supplied, or supply o water on a per capita basis).

10. Te Philippine Sustainable Sanitation Roadmap (PSSR) orecast that the 2015 MDG sanitationtarget can be achieved.15Te JMP March 2012 Report noted 74% national sanitation coverage in 2010,with 79% in urban areas and 69% in rural areas. However, according to NSO figures cited by the NationalStatistical Coordination Board (NSCB) in July 2012, 92.5% o households had access to basic sanitation(i.e., sanitary toilets) in 2011, up rom 76.0% in 2008, though the figure is projected to decrease to 83.8%by 2016.

11. While statistics rom various sources differ, consistent observations are that inadequate watersupply, sewerage, and septage management investments have kept sector coverage low, and thatinrastructure spending has been biased toward Metro Manila (including investments by the twoprivate concessionaires in Metro Manila) and other urban areas. Overall, lack o up-to-date, integrated,

harmonized, and comprehensive data on the sector continues to handicap both planning o developedwater and sanitation inrastructure, and assessment o development gaps.

2. Strategic Issues

12. Te countrys water resources are under mounting stress because o rapid population growth,increasing demand or ood production, urbanization, pollution, excessive and inefficient use o water,and climate change. Ensuring adequate availability o water in the uture will require protecting thecountrys water sources through improvement o catchment areas and watershed protection, regularassessment and monitoring o consumption patterns and trends, and efficient allocation o existing watersupplies. All o the latter need to be taken into account in the institutional decision-making ramework.Te challenge is to assess and manage water resources comprehensively, covering urban and rural areas

in a holistic manner.

13. Water supply coverage has not kept pace with the growing population in the last ew decades.Many water utilities ace financial difficulties because tariffs are too low to recover costs and systems aretoo small to work efficiently. Persistent problems in water supply include (i) institutional ragmentation,(ii) weak sector planning and monitoring due to lack o sector inormation, (iii) poor perormance omany water utilities, (iv) low public and private sector investment and limited access to financing orservice expansion, and (v) inadequate support or poor urban communities and rural water utilities.

14. Te challenges posed by sanitation are even greater. Few households are connected to a seweragenetwork (less than 5% by most estimates). Te majority o households with toilets are connected to septictanks that are poorly designed or maintained, thereore, most effluent is likely to be discharged withouttreatment. Weak management o solid waste and sanitation is a large challenge, since this contributes tocontamination and pollution o surace and ground water sources. Problems include (i) lack o policiesand effective governance and regulation, (ii) low levels o awareness and political will or improvingsanitation; (iii) inadequate unds or financing inrastructure; and (iv) lack o sanitation capacity.16

15 Government o the Philippines. 2007. Philippine Sustainable Sanitation Roadmap. Manila, and Government o the Philippines,

National Economic Development Authority and Department o Health. 2010. Philippine Sustainable Sanitation Plan. Manila.

16 Footnote 15, p. 4.


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15. Significant need for water and sanitation infrastructure, but low investmentrelative to overallpublic spending. Te bulk o expenditure in the sector is undertaken through (i) the Department oPublic Works and Highways (DPWH), (ii) two government-owned and controlled corporations (i.e., theMetropolitan Waterworks and Sewerage System [MWSS] and the Local Water Utilities Administration

[LWUA], both o which are agencies attached to DPWH), and (iii) the two private concessionaires inMetro Manila (Manila Water Company, Inc. [MWCI] and Maynilad Water Services, Inc. [MWSI]).Significantly, afer 2007 water and sanitation investments unded by national government agencies declineddramatically in Metro Manila, as the private concessionaires began to und significant investments.However, beginning in 2007, the national government once again began increasing investments in thesector outside Metro Manila, although its overall level o spending remained low. Most DPWH waterprojects are flood-control related; its other projects relate to roads, highways, and bridges.

16. Environmental degradation and poor health conditions. In 2007, the Philippines EnvironmentMonitor reported that much o the surace water in most large urban centers comprises rivers that pose apublic health risk (Class C standard or below).17Levels o coliorm bacteria in all rivers in Manila, includingthe tributaries o Laguna de Bay, exceed Department o Environment and Natural Resources (DENR)standards, in some cases by several orders o magnitude. Many beaches in Manila Bay, especially those

along the eastern side, also have levels o bacteria that present a significant health risk to those using the bayor transport, fishing, or bathing. Te report estimated that 95% o the wastewater rom urban householdsflows into groundwater, public canals, drainage systems, rivers, and other water bodies, either directly,or afer only receiving minor treatment in poorly designed or maintained septic tanks. Tis leaves urbandrainage systems and groundwater contaminated with human waste. Urban communities living close toopen drainage systems and those that rely on groundwater, wells, and leaky water distribution systems ortheir water supply are thus at risk. Contaminated surace water rom open deecation and sewage in ruralareas is also common, which threatens biodiversity and reduces overall quality o lie.18

17. Waterborne diseases are clinically maniested in diarrhea, typhoid, cholera, and helminthiasis.Acute watery diarrhea remains one o the top five causes o morbidity in the Philippines. Te NationalObjectives or Health or 20062010 o the Department o Health (DOH) set a target o diarrheamorbidity levels o not more than 750 per 100,000 population, and a target o mortality levels o less than

one death per 100,000 population.19Based on 2009 DOH Philippine Health Statistics, the morbidity targetwas met or Acute Watery Diarrhea (322,799 cases; 355 per 100,000). Notably, the 2009 figure is almosthal the 20042008 average (545,362 cases; 653 per 100,000). Tis decline in morbidity was largely due toan increase in access to sae water and sanitation services, and the promotion o hygienic practices such ashand washing. Te incidence o other water- and sanitation-related diseases such as typhoid and cholerahave shown similar declines. Soil-transmitted helminthiasis (e.g., ascariasis, trichuriasis, and hookworminection) exists in areas where personal and environmental sanitation practices are poor. However, withreported deaths rom diarrhea remaining flat (5,540 cases; 6 per 100,000), the diarrhea mortality target in2009 was still well above the DOH target.20

18. In spite o the general reduction in the incidence o most waterborne diseases, access to saewater and sanitation services remains a critical actor, considering its effect on the overall economyand the environment. In 2008, a joint study o the United States Agency or International Development(USAID) and the World Bank reported, that based on 2005 data, sanitation-related economic losses in

17 Water Usage and Classification or Fresh Water Systems used by the Department o Environment and Natural Resources. Class

C Category means a good fishery and industrial water supply.

18 World Bank. 2007. Philippines Environment Monitor. Manila.

19 Government o the Philippines, Department o Health. National Objectives for Health 20052010.http://www2.doh.gov.ph/

noh2007/NohMain.htm

20 Government o the Philippines, Department o Health. 2009. Philippine Health Statistics 2009. http://www.doh.gov.ph/serial


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the Philippines amount to P78 billion annually, o which premature death costs account or P51 billion.21An inordinate share o this health-related financial burden alls on the poor, as it is maniested in losttime or productive work and thereore lost income. Te study also showed that improvements in hygienepractices, particularly hand washing, can reduce annual health costs by up to P25 billion; improved

physical access to sanitary toilets, by about P2 billion; and improved physical access to improved toiletsystems, by P18 billion. Improvement in the treatment or disposal o waste also has a large impact onwater resources and tourism, and can reduce costs by P20 billion. On the other hand, gains to sanitationmarkets were estimated to be about P83 billion, which is a one-time benefit arising rom the constructiono toilets or people who currently practice open deecation or use unimproved pit latrines.

C. Core Sector Issues, Causes, and Effects

19. Tis assessment covers the Philippine water and sanitation sector disaggregated into its urban andrural components (as defined by the government), and as stated in the JMP March 2012 Report.22

1. Water Supply

20. Institutional Responsibilities.National planning in the Philippines is perormed by an integratedplanning structure, the unction o which is coordinated by the countrys independent economicdevelopment and planning agency, the National Economic and Development Authority (NEDA).NEDA is the key agency or policy ormulation and planning in the water supply sector, specificallywith regard to preparing national development plans and investment programs; ormulating sectorpolicies and strategies; and monitoring the implementation o policies, programs, and projects.NEDA is headed by the President o the Philippines as chair o the NEDA Board, with the Secretaryo Socio-Economic Planning, concurrently NEDAs director-general, as vice-chair.23 Te Committeeon Inrastructure (InraCom) is an interagency committee under the NEDA Board that is mandated tooversee the ormulation and monitoring o the annual inrastructure program, 24and to ensure that the

program relates to, and supports, the development goals and objectives in the Medium-erm PhilippineDevelopment Plan (MPDP)the blueprint o the countrys development strategy or the next 6 years.It also advises the President and the NEDA Board on matters concerning inrastructure developmentand coordinates the activities o agencies, including government-owned and controlled corporations,involved in inrastructure development. InraCom is chaired by NEDAs director-general, while the

21 Te United States Agency or International Development (USAID) and the Water and Sanitation ProgramEast Asia and the

Pacific unded a five-country study that included the Philippines, which analyzed the economic impacts o sanitation. Using

2005 data, the study estimated the economic losses due to (i) health impacts, (ii) water resource impacts, (iii) other welare

impacts, and (iv) tourism impacts.

22 Based on the governments nomenclature, urban classes are defined as municipal jurisdictions or divisions with a population

density o at least 1,000 persons per square kilometer, regardless o whether these are designated as chartered cities, provincial

capitals, or not. Te same is true o poblacions(central districts o municipalities) or cities with a population density o at least

500 persons per square kilometer. Conversely, rural areas are all central districts and barrios(areas or districts) that do not meetthe above criteria.

23 Te ollowing are members o the NEDA Board: secretaries o Agriculture, Budget and Management, Energy, Environment and

Natural Resources, Finance, Public Works and Highways, Science and echnology, ourism, rade and Industry, ransportation

and Communications; the executive secretary ; the presidential advisers or New Government Centers and Job Creation; chairs o

Housing and Urban Development Coordinating Council, Metro Manila Development Authority, Commission on Inormation

and Communication echnology, Subic-Clark Area Development Council; the President o the Union o Local Authorities o

the Philippines, the governor o the Autonomous Region in Muslim Mindanao, and the deputy governor o Bangko Sentral ng

Pilipinas (Central Bank o the Philippines).

24 Te NEDA Board approves the countrys annual inrastructure program in early November, afer which the Department o Budget

and Management immediately issues Advices o Allotment or the projects in the program on a comprehensive basis.


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DPWH secretary serves as its co-chair.25Other agencies involved in sector planning include the DOH,through its Environmental and Occupational Health Office, the Environmental Management Bureau othe DENR, the National Solid Waste Management Commission, the Housing and Land Use RegulatoryBoard, the National Housing Authority, and the Metro Manila Development Authority.

21. Consistent with the objective o decentralized development, NEDAs regional development officesormulate regional development plans and policies or regional and local development, and link withprovinces, cities, and municipalities in the preparation o the regional development plans or theselower-level administrative units, as well as their investment programs and annual budgets. However,planning and monitoring o sector activities are hampered by a lack o reliable data and the absence osystematic and regular monitoring o sector activities. Te NWRB has the legal mandate or overseeingwater governance, but has a structure and budget that are inadequate to allow proper exercise o thisadministrative unction. o address this existing leadership gap, InraComs Subcommittee on WaterResources, which was initially created to ensure implementation o the Philippine Water Supply SectorRoadmap (PWSSR), was given the expanded mandate as the key policy coordination body or the watersector.26However, sector regulation and allocation o water resources remains weak. Te governmentsneed to create a lead agency to coordinate development in the water sector is well-recognized.

22. able 1 summarizes inormation rom various sources regarding Level III coverage. Coverage inurban areas is much higher than in rural areas. Tus on average, only an estimated 42%48% o thepopulation has piped water into private homes.

Table 1 Estimated Level III Coverage, Philippines

Population (2010

Census) (millions)

Est. %

of Total

Population

Est. Level III

CoverageWater Supply Provider(s)

Urban - NCR 11.9 13% 88% (1) Manila Water, Maynilad

Urban - outside NCR 33.0 36% 50%65% Water Districts

LGUs

Private operators

Rural 47.4 51% 25% (2) Coops, BWSAs, RWSAs

Total 92.3 100% 42%48%

BWSA = barangay water and sanitation association, est = estimated, LGU = local government unit, NCR = National Capital Region, RWSA = rural

waterworks and sanitation association.

Sources: (1) MWSS; (2) JMP March 2012 Report.

25 Other members o the InraCom include the executive secretary, and the secretaries o the Department o ransport and

Communications, the Department o Finance, and Department o Budget and Management.

26 Te Subcommittee on Water Resources is an interagency committee or the water sector established through the NEDA Boards

InraCom (Board Resolution No. 2, Series o 2008). It is composed o representatives o key national agencies, leagues o cities

and municipalities, academe, and civil society. Its key unction is to advise the NEDA Board and InraCom on policies and issues

relating to the water sector.


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Table 3 Estimated Number of LGUs with Level III Service

Total Number

of LGUs (1) Est. LGUs with Level III Service

Est. LGUs without or with limited

Level III Service

LGUs served by Metro Manila concessionaires 17

LGUs served by water districts (2) 642

LGUs served by LGU-run water utilities (3) 350

1,617 1,009 608

Est = estimated, LGU = local government unit.

Sources: (1) Department of Finance Order No. 23-08, as of 30 June 2010; (2) Local Water Utilities Administration as of 31 December 2011; (3)

Department of Interior and Local Government estimate.

28. During the past 2 decades, there has been increased private sector participation and investment inurban water supply outside Metro Manila, as private companies have secured congressional ranchises,entered into concessions with LGUs or special economic zones, or built systems located in new propertydevelopments. Medium- to large-scale private WSPs include Manila Waters new subsidiaries operating

outside Metro Manila including Boracay Island Water, Laguna Water, and Clark Water, the latter beingthe concessionaire at Clark Freeport Economic Zone; SubicWater and Sewerage Company Inc., whichis the concessionaire at Subic Bay Freeport Zone; Balibago Waterworks System; Mactan Rock Industries;PrimeWater Inrastructure Corporation, which is affiliated with a major property development company;and Calapan Waterworks. Tere are also many small and medium-sized publicprivate partnerships(PPPs) operating in the sector, ofen as bulk water suppliers to water districts.

29. Tere are several institutions with economic regulatory responsibilities in the sector. Tese includethe primary regulatory agencies, the NWRB, LWUA and the various LGUs, and special regulatory unitssuch as the MWSS Regulatory Office and the Subic Bay Water Regulatory Board which were created undercharters and operate under contract-based regulation. Regulation o drinking water alls under LWUAand the DOH through the city and municipal health offices o the LGUs, while the DENR regulateseffluent standards or wastewater quality.

Rural Areas

30. In rural areas, water is generally supplied by LGUs and small-scale community-based organizations,including cooperatives (around 180 water cooperatives are registered with the Cooperative DevelopmentAuthority), BWSAs, and RWSAs.27 Some households have their own shallow or deep wells. Withintheir respective areas o responsibility, some o these WSPs (i) have been granted certificates o publicconveyance by the NWRB (such as RWSAs, BWSAs, cooperatives, and other community-basedutilities); (ii) have entered into a management contracts with LGUs; (iii) have been granted authorityby LWUA in the case o some RWSAs; or (iv) are operating without any permit at all. Sustainabilityis ofen a challenge or these mainly small-scale systems, especially those run by LGUs, because capacityis weak and water tariffs are ofen too low to recover costs or are not collected at all, resulting in poorutility perormance.

31. Tere have been relatively ew projects or improving access to water supply services in ruralareas, mainly because investment costs are difficult to recover and the government has not been ableto provide the required grants on a sufficient scale. Initiated during the late 1990s, the Rural WaterSupply and Sanitation Sector Project constructed new water supply and sanitation acilities in selectedmunicipalities in the Mindanao and Visayas. Although this project was well received and was regarded

27 About 180 water cooperatives are registered with the Cooperative Development Authority. Tere are an estimated 3,000 BWSAs

and about 500 RWSAs.


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as highly beneficial to customers as per its benefit monitoring evaluation report, sustainability was anissue. More than hal o the registered BWSAs had deficient revenue streams and were not consistentlycollecting the revenues due them as stipulated in their water tariffs. Further, standard technical designswere not applied.

32. Current performance.In March 2012, the JMP reported that the MDG target o 92% coverage hadbeen met or drinking water (ootnote 13). Estimated national coverage in the Philippines in 2010 wasreported to be 92%, with 93% coverage in urban areas and 92% in rural areas. Further, the JMP noted alarge difference in the sources o drinking water used in urban and rural areas. In urban areas, 61% waspiped onto premises, and 32% came rom other improved sources; or rural areas, only 25% was pipedand 67% came rom other improved sources. Te NSO reported a slight increase in the percentage o thepopulation with access to potable water (Levels I, II and III), this rising rom 82.9% in 2007 to 84.8% in2011 (ootnote 14).28

33. As a result o committed efforts by the Metro Manila concessionaires to improve their operations,water service in Metro Manila has substantially improved in all respects, particularly in terms ocoverage, non-revenue water, and hours o service. As o the end o 2011, MWCI served 857,981 water

connections and more than 99,300 sewer connections, with an estimated non-revenue water level o11.2% in its service area (Manilas east concession).29Similarly, as o August 2011, MWSI served 963,740water connections and 55,900 sewer connections, with non-revenue water levels estimated at 47% in itsservice area (the west concession).30

34. Te MWSS, the water utility regulator or Metro Manila, reports Level III service coverage o 88%or Metro Manila households, and 11% or all households in the country. At the end o 2011, LWUAreported that the 502 operational water districts serviced about 3.5 million households. Tis is roughly53% o urban households outside the NCR, or 19% o total households nationally. Assuming 350 LGU-run water utilities with approximately 900 service connections on average, these utilities supply Level IIIwater to about 5% o the countrys total number o households. Looking specifically at urban areas outsidethe NCR, water districts are estimated to account or about 80% o Level III connections, compared withabout 7% or LGU-run water utilities.

35. Tis inormation indicates that 60%71% is a rough estimate or Level III water service coveragein all urban areas in the country (broadly in line with the JMPs March 2012 estimate o 61% in 2010).Te estimated 50%65% Level III coverage in urban areas outside the NCR is much lower than the88% already achieved in Metro Manila. While coverage appears to be increasing, a report prepared orthe World Bank in November 2009, which evaluated the perormance o water utilities outside MetroManila, ound that many o the perormance targets or water service (including access to sae water,hours o service, compliance with national drinking water standards, and cost recovery) are not beingmet, particularly in the case o LGU-run utilities.31Other sector studies have ound that water districtsprovide better water service, citing the corporatized nature o water districts and the benefits o LWUAscredit and institutional development support.

28 Government o the Philippines, National Statistical Coordination Board. 2012. Summary o StatDev 2011 Indicators by

Sector and by Pace o Perormance. http://www.nscb.gov.ph/stats/statdev/2011/Accelerating_inra/Chapter_accelerating_inra.

asp (accessed July 2012).

29 Manila Water. http://manilawater.com/downloads/sec.FORM.17A.verApril13-2012.pd

30 Maynilad Water Services, Inc. 2011.Report Card on Key Performance Indicators and Business Efficiency Measures Report. Manila.

31 World Bank. 2009. Diagnostic Study of the Philippine Water Sector. Manila.


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2. Water Supply Constraints

36. Te lack o water supply acilities results rom institutional ragmentation, weak planning andmonitoring, poor water utility perormance, low levels o investment, and inadequate support or peri-

urban and rural areas. Appendix 1 shows the problem tree relating to water supply.

37. Institutional Fragmentation.More than 30 different agencies in the Philippines have some rolein water resources and water supply and sanitation, but there is currently no single department or bodywith overall responsibility or sector policy and coordination, or or overseeing implementation o sectorreorms, especially outside Metro Manila. For example, the DILG, the DOH, the DPWH, and the LWUAhave all at one time or another started to pursue rural water supply improvement programs based on

various parameters. More effective interagency coordination or sector planning and monitoring isthus imperative or sustainable development to become a reality. In October 2011, Executive Order 62created an interagency committee that was to draf a master plan addressing all water sector issues.Tis task was to be led by the secretary o the DPWH, whom the President appointed water czar in2010. Tat said, the government is expected to announce the creation o the National Water ResourcesManagement Office, a superbody under the Office o the President, which will absorb all economic

regulation unctions o agencies in the water supply sector. Te new body is expected to be mainlyresponsible or management and protection o the countrys water resources or domestic water supply;sanitation; irrigation; hydropower; fisheries; aquaculture; flood control; navigation and recreation,including enhancement and maintenance o water quality; conservation o watersheds; and controlo water pollution and environmental restoration; without compromising the natural ecosystemsunctions and services. Similarly, in October 2011, a bill (commonly reerred to as the Angara bill aferits proponent) was filed with Congress, that sought to adopt the integrated water resources management(IWRM) approach to water supply management by dividing the country into provincial water resourcezones, within which all water utilities would be synergized and integrated. Tis bill also proposedstrengthening the NWRB, renamed the Water and Sanitation Regulatory Authority, which would serveas the lead agency.

38. Weak sector planning and monitoring due to lack of sector information. Sector planning is

severely constrained by the lack o updated local master plans, as well as by the lack o, or conflicting,sector inormation. Different methodologies used in monitoring and limitations regarding the accuracyo data make quantiying actual improvements in water supply access and coverage difficult. Te vastmajority o water utilities are neither registered with the NWRB nor attached to a national agency, as thereare no penal provisions or noncompliance in this regard. Tere is also no clear flow o inormation romthe utilities to the development planners. Importantly, there is no common methodology or tariff review,and no economic regulatory body prescribing perormance standards or monitoring and benchmarkingperormance. National agencies have inadequate financial and technical capacity or their oversightroles: LWUA monitors more than 500 water districts, at least hal o which have less than 3,000 serviceconnections. Te NWRB has to oversee several thousand domestic WSPs such as the private developers,homeowners associations, water cooperatives, and other small water utilities, and the DILG overseesabout 1,000 LGU-run water utilities. Updating, harmonizing, and consolidating sector inormation romall the various agencies with an oversight role in the water and sanitation sector is important or purposeso planning and monitoring. It is equally as important to have adequate technical capacity and financialresources or enorcing policies and environmental regulations.

39. Poor performance of many water utilities. Water districts are financially independent, and donot receive subsidies rom LGUs. Tereore, they are compelled to generate enough income to coveroperating and maintenance costs, debt service, and essential capital expenditure. Water districts aregenerally viewed as being better run than other public sector water utilities. Among the utilities sampledor the DILGs benchmarking exercises or the Philippines Small owns Water Utilities Data Book, waterdistricts were reported to have higher coverage rates on average (69%) compared to other water operators


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(62%).32Most water districts provided water 24 hours a day, while many LGU-run systems, cooperatives/rural water utilities, and private systems ell short o this standard. However, the water districts autonomyin planning and managing their operations has limitations that may negatively affect their efficiency andsustainability. Increasing water tariffs to cost-recovery levels is ofen politically unpopular. Several central

government agencies set the conditions or institutional arrangements, labor conditions, procurementprocedures, and accounting practices. For many water districts, limited access to affordable long-datedinvestment capital impedes their ability to expand and improve services, which would allow them toachieve operational and technical efficiencies. Scale is also an issue or many water districts. LWUAreports that more than hal o the 502 operational water districts at end o 2011 had less than 3,000 serviceconnections.

40. Most LGU-run water utilities are characterized by an absence o commercial practices, such asring-encing o accounts, and a general lack o ability to service loans. Many LGUs have also shownlittle interest in pursuing water supply projects due to local leadership uncertainties brought about by3-year electoral terms. A 2005 World Bank study reported that in general, water utilities under directLGU management are poorly operated because o the lack o technical, financial, and managementcapabilities at the local level.33 High non-revenue water also characterizes many LGU-run WSPs.

Another study on Management Models or Small owns Water Supply (Water Supply and SanitationPerormance Enhancement Project, 2003) ound that direct management by LGUs was the leastsuccessul management model or small towns water supply.34Te DILG, which has oversight unctionover LGUs, does not have enough capacity and resources to be able to provide capacity-building supportto the LGUs. Te DILG Water Supply and Sanitation Program Management Office, which is assignedthis particular unction, primarily manages oreign-assisted water supply and sanitation projects. TePWSSR offers an explanation or this situation by saying that even afer almost 20 years o issuance o theLocal Government Code, the major sector agencies have not changed their paradigm o direct planningand implementation o projects to that o providing support to and developing the capacity o LGUs toplan and implement water supply projects. Te PWSSR urther reports that the situation is made moredifficult by the absence o a national government department or an apex body that can resolve conflictsand translate government policies, strategies, and goals into a comprehensive water supply program at theappropriate level.

41. Perormance o community-managed systems has also been constrained by a lack o technicaland management capabilities, although this is less pronounced than in LGU-run utilities. In the 2005benchmarking study unded by the World Banks Water and Sanitation Program, RWSAs, cooperatives,and private operators were ound to generally perorm better than LGU-run water utilities.35

42. Low levels of public and private sector investment for service expansion due to regulatoryrisk and limited access to financing.Te absence o a common methodology or tariff review, as wellas political pressure to keep tariffs lowofen below cost-recovery levelshas ofen been cited as areason why water utilities are reluctant to borrow to finance urban inrastructure projects. For the samereasons, many o those who seek financing are aced with scarcity o affordable medium- to long-termunding, since many lenders, such as commercial banks, and government financial institutions remain

uncomortable with the current regulatory ramework or the sector. Investments have likewise beenconstrained because government unding or water supply has declined.

32 World Bank, Water and Sanitation Program, Government o Australia, and Government o the Philippines. 2006. Philippines

Small owns Water Utilities Data Book 2005. Manila.

33 World Bank. 2005. Philippines: Meeting Infrastructure Challenges. Sectoral Chapter: Water Supply and Sanitation Sector. Manila.

34 World Bank Water and Sanitation Program. 2003. Water Supply and Sanitation Performance Enhancement Project Management

Models for Small owns Water Supply: Lessons Learned from Case Studies in the Philippines. Manila.

35 Footnote 34, p. 12.


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o water, and has invested in a treatment acility in nearby Muntinlupa. Attention has now reocused onMetro Manilas long-term water security, since 97%98% o the water used in Metro Manila comes romAngat Dam, a multipurpose dam completed in 1967 that is located about 40 km northeast o Manilathat also provides water or irrigation and hydropower generation. Since the mid-1990s, the MWSS has

considered the construction o a new water source, but construction o a dam or this purpose has beenrepeatedly delayed. o meet projected uture water demand increases in the NCR, the MWSS is planningto upgrade the older aqueducts that carry water rom Angat Dam to Manila, the MWSS having completedone new aqueduct in July 2012.

47. Te governments PublicPrivate Partnership Center (PPP Center)40 seeks to scale up privateinvestor interest in priority inrastructure and development projects that have traditionally beenundertaken by the government, including water projects. Te PPP Center provides technical assistanceto national government agencies, government-owned and controlled corporations and LGUs, as wellas to the private sector to help develop and implement critical inrastructure and other high-prioritydevelopment projects. Specifically, in December 2011 the MWSS secured a unding commitmentrom the PPP Center or pre-investment studies, including one or its new water source. However,other private sector participation and PPP initiatives have been largely confined to bulk water supply,

dam development, pipeline extensions, and rehabilitation o provincial waterworks. Tis can be seenin the water and sanitation projects listed under a proposed PPP program in the NEDAs 20092013Comprehensive Inrastructure Investment Program (CIIP) that amounts to P100.80 million. Privatesector attempts at working with LGUs have not been so successul, as noted by the Local GovernmentUnit Urban Water Supply and Sanitation Project o the World Bank. Aside rom election-related issues,this relative lack o success can be attributed to the complexities o working at the LGU level.

48. Another government strategy or attracting private capital is to offer incentives through the Boardo Investment, such as income tax holidays or reduced income tax or priority initiatives. 41Te 2011Investments Priorities Plan included water supply and/or distribution inrastructure in the countrys30 poorest provinces and less-developed areas, and in the Autonomous Region in Muslim Mindanao.For example, the Balibago Waterworks system secured such tax incentives in 2011 when it won the bid tosupply water on behal o the LGU o Passi City, Iloilo. One o the PWRFs components seeks to help putin place incentives or investments in the water sector by private financial institutions. Such incentiveswould include getting approval than the Central Bank o the Philippines or allowing the requirementsor compliance with the Agri-Agra Reorm Credit Act o 2009 to be ulfilled by bank lending to watersupply and sanitation projects. Tis Act requires banks to set aside at least 25% o their total loanableunds or credit to agriculture and agrarian reorm in general.42

49 Inadequate support for peri-urban and rural areas.Te delineation o responsibilities amongnational agencies such as water districts and LGUs is unclear. Under Presidential Decree 198, waterdistricts are responsible or providing potable water to the population within their service areas, includingrural areas. In reality, water districts efforts gravitate toward the town center (ofen reerred to as the

poblacion) due to economic considerations. Only very ew water districts serve the ringe areas. Tis isbecause LWUA, the regulatory body or water districts, does not monitor service area coverage. In other

40 Te Government o the Philippines allocated P300 million (about $7 million), and the Government o Australia contributed $6

million as counterpart financing (administered by ADB) to the PPP Centers Project Development and Monitoring Facility.

41 Te priorities or 2012 as well as development initiatives consistent with existing laws such as Republic Act No. 9275 (the

Philippine Clean Water Act o 2004, which covers establishment o wastewater treatment acilities; sewage collection integrated

with treatment acilities; and adoption o water pollution control technology, cleaner production and waste minimization),

and Republic Act 9003 (the Ecological Solid Waste Management Act o 2001, which covers establishment o waste recycling

acilities).

42 Banks that ail to comply with the mandatory credit allocation ace monetary fines amounting to an annual penalty o hal o 1%

o the amount o noncompliance or under-compliance.


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major urban areas that have not ormed water districts, utilities are either run by LGUs or operated byprivate companies under management contracts with the LGUs. LGU-run utilities generally also mainlyserve thepoblacion. Tus communities in peri-urban and ringe areas are ofen lef to organize themselves(e.g., as RWSAs, BWSAs, or other small-scale WSPs), or remain unattended to, and thus deprived o basic

water supply and sanitation services.

50. It is worth noting that nearly 2 million people rom the marginalized communities in Metro Manilanow have access to sae water, in part because concession agreements included several pro-poor elementssuch as universal access. Recognizing also that illegal connections contributed to high system losses inMetro Manila, technical, engineering, and social interventions were developed by the concessionaires toaddress water thef. MWCI launched ubig Para Sa Barangay(Water or the Poor) in 1998, a programdesigned to make piped water available to low-income communities and inormal settlements where illegalconnections were then rampant. MWSI launched Bayan ubig(Nation Water) and Bayanihan Bayanubig(National Water Hero), and more recently in May 2009, Samahang ubig(Water Association) toaddress the problems o water inaccessibility and irresponsible use in its concession area. Te advantageso having regular and legal connections were highlighted to the consumers, oremost being the ensuredquality o water. MWCIs project is supported by the Global Partnership on Output-Based Aid.43Te

$2.8 million grant is expected to benefit 20,000 poor households through connection ee subsidies. TeMetro Manila experience confirms that highly efficient water supply operations can sustainably servemarginalized communities with limited subsidies.

3. Sanitation

51. Institutional responsibilities. NEDA, the key agency or policy ormulation and planning onsanitation, works with other government agencies including DENR, the National Housing Authority,and the Metro Manila Development Authority.

52. Institutions mandated to construct, operate, and maintain sanitation and sewerage systems includethe MWSS or Metro Manila (Republic Act 6234 o 1971), and the water districts (Presidential Decree 198o 1973), and LGUs or areas outside Metro Manila (Republic Act 7160 o 1991). MWSS concessionaires,which include MWCI and MWSI, are the largest providers o sewerage and sanitation services in thecountry. Te Clean Water Act o 2004 requires LGUs and water districts to create septage managementprograms in areas without sewerage systems. However, most LGUs and water districts have lacked thecapacity, technical knowledge, or unds to take much action since the passage o the act. Tere are privatecompanies in major cities providing septic tank desludging services, but in many cases, treatment anddisposal o sludge are likely to not be noncompliant with environmental regulations, and little enorcementor rom non-industrial sources o waste remains the rule. 44Te same financing agencies that providecapital unds or the water sector outside Metro Manila also und sanitation and sewerage projects. Teseinclude the national government, LWUA, the Development Bank o the Philippines, the Land Bank o thePhilippines, the Municipal Development Fund Office, and the PWRF.

53. At the local level, LGUs monitor sanitation programs that are implemented through provincial,city, or municipal health offices, as well as barangayhealth offices. About 40% o the countrys 41,840barangays have barangay health stations, each with an average staff strength o five health workers(ootnote 15).

43 Te Global Partnership on Output-Based Aid, a multi-donor trust und administered by the World Bank, provides a one-time

ull subsidy or the connection ee or eligible households.

44 German echnical Cooperation AgencyWorld Health Organization. 2010. Sector Assessment Report. Manila.


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Current Performance

54. Access to sanitary facilities.Despite several national sewerage and sanitation policies such asthe Sanitation Code o 1975 and the Clean Water Act, investment in sanitation, sewerage, and septageacilities has remained low. Improper handwashing or none at all is still common. Open deecation is stillpracticed in many areas, especially is highly populated ones, as toilets are not available in the majority opoor households. Tis results in polluted waterways and the spread o atal and inectious diseases. TePSSR predicts that the 2015 MDG sanitation target can be achieved (ootnote 15). Te March 2012 JMPReport estimated national coverage or sanitation acilities in the Philippines to be 74% in 2010, with 79%coverage in urban areas and 69% in rural areas. According to NSO figures cited by NSCB in July 2012,92.5% o households had access to basic sanitation (i.e., sanitary toilets) in 2011, up rom 76.0% in 2008,with a decrease to 83.8% by 2016 projected. Te Annual Poverty Indicator Survey reports that the regionswith the lowest percentage o households with sanitary toilets are the Autonomous Region in MuslimMindanao (50.0%), Region VIII (77.7%), Region IX (78.6%), and Regions VII and IVB (79.9%).

55. Wastewater treatment acilities are increasing, but many more are needed. Afer the SupremeCourt ordered 10 government agencies including the MWSS and, by extension, the two Metro Manila

concessionaires, to clean up Manila Bay in December 2008, the concessionaires established ambitiousinvestment plans or sewerage and wastewater treatment. As o 2011, the concessionaires had a totalo 43 wastewater acilities.45Te effort to clean up Manila Bay has widened to include the Laguna deBayPasig RiverManila Bay watershed, and the seven major rivers that drain into Manila Bay. ManyLGUs in the area are investing in wastewater and solid waste management acilities, ecotourism, and localdrainage and flood control acilities along the river systems that lead to Laguna de Bay, in an effort toreduce pollution in the lake and prevent degradation o its watershed. Te Supreme Court decision alsoordered LWUA, through the local water districts and in coordination with the DENR, to provide, install,operate, and maintain sewerage and sanitation acilities, and to institute efficient and sae collection,treatment, and disposal o sewage in the provinces o Bataan, Bulacan, Cavite, Laguna, and Pampanga,where needed at the earliest possible time.46

56. Outside Metro Manila, only a ew cities (including Baguio, Vigan, and Zamboanga) have sewerage

systems, that serve less than 3%5% o the service area population. 47Tereore, domestic wastewaterlargely goes untreated into groundwater or public canals and drainage systems, and eventually intorivers and other water bodies, thus exposing the majority o the population to raw sewage. A ew LGUshave adopted ordinances regarding septage management and have constructed treatment acilities.Tese include Baguio, Dumaguete (jointly with the water district), and Sarangani. Other cities have alsoinitiated septage or sewage outall treatment programs, such as Calbayog, Cebu, Davao, Iloilo, Laguna,San Fernando (La Union), and Zamboanga. Several water districts have septage management initiatives.Tese include Baliwag, Cabanatuan City, Calamba, Davao City, Laguna, Metro Cebu, Metro Naga,San Pablo City, and Zamboanga City. Te PWRF has conducted workshops or disseminating septagemanagement business models, and has even set up a help desk or water districts preparing septagemanagement plans. Still, there has been limited tangible progress in this subsector outside the NCR.

45 Figure is taken rom company reports as o 31 December 2011.

46 In 1999, 14 concerned residents filed a case against 10 executive departments and agencies alleging neglect o duties, which

contributed to the degradation o Manila Bay, and the resulting threat to public health, the maritime economy, and marine lie.

Te 10 agencies were the Metropolitan Manila Development Authority, the DENR, the Department o Education, the DOH,

the Department o Agriculture, the Department o Public Works and Highways (DPWH), the Department o Budget and

Management, the Philippine Coast Guard, the Philippine National Police Maritime Group, and the Department o the Interior

and Local Government (DILG).

47 Te systems or Vigan and Zamboanga were built by the Americans in the late 1920s or early 1930s.


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2.2 Sanitation Constraints

57. Te core problem o the subsector is the lack o sanitation acilities, particularly in rural townsand low-income provinces. Te capacity o LGUs and water districts must be strengthened, and the

private sector needs to be engaged i effective and sustainable sanitation programs are to be developed.Te problem tree in Appendix 1 summarizes the main reasons why subsector goals have not been ullymet, policies have not been implemented, and rules have not been ully enorced, despite the numerouslegislative actions and policies addressing sanitation (ootnote 10).

58. Lack of policies, effective governance, and regulation. Te PWSSR identifies the lack o aneffective national sanitation policy, including the lack o a clear policy on sanitation regulation, as oneo the critical gaps in the sector (ootnote 10). Policies on sanitation regulation should include nationaltargets, a strategy or eliminating open deecation, and a strategy or acilitating localized sanitationimprovement plans and budgets, and national investment priorities and plans or sanitation. Based onthe concession agreements, the regulatory arrangement o the MWSS has effectively dened standards,targets, and tariffs or the sanitation and sewerage programs o the two private concessionaires in MetroManila. Tis could be used as a model, as no similar arrangements exist elsewhere. Te standards and

targets are being closely monitored by the MWSS Regulatory Oce. However, to achieve comprehensivewastewater treatment, there is a need to align the two concessionaires institutionally in terms o targets,action plans, and community awareness campaigns.

59. Water districts, on the other hand, are not obligated by LWUA to plan or implement sanitationand sewerage projects, despite the mandate they have under Presidential Decree 198. Water districts thatinitiated sewerage projects increased their water tariffs, causing water bills to rise by 8%50%. Lack oenorcement o existing laws and regulations is also a critical gap in the sector.

60. Similar to water supply, the governments efforts in addressing the inadequacy o sanitationinrastructure are also constrained by a weak and ragmented regulatory ramework, and inadequatemonitoring mechanisms and financial resources. Tere are many institutions with sanitation-relatedmandates, but the responsibilities under these mandates are unclear. Te leadership required to push

efficient, effective, and sustainable sanitation programs is also lacking. While the DOH plays a key role inthe sector due to the health impacts o poor sanitation, the only unit at the DOH addressing sanitationissues is the Environmental and Occupational Health Office o the National Disease Control andPrevention Center, the mandate o which in sanitation is limited to policy ormulation and monitoring olaws and policies.

61. Many laws and standards relating to sanitation and wastewater management need to be integratedand updated. Mandates regarding the implementation and monitoring o existing laws, policies, andstandards remain vague. LGUsvery much in the oreront o implementing, monitoring, and, to someextent, regulating sanitation programs and projectsare generally not adequately inormed about thesestandards (ootnote 10).

62. Te continual degradation o water resources is a maniestation o the poor enorcement o existinglaws and policies. Te complaint filed in 1999 by concerned residents who lived along the shore o ManilaBay against specific government agencies with mandates or controlling pollution is an illustration o thepublics dismay regarding poor enorcement o national policies relating to pollution control. Te SupremeCourts 2008 landmark decision ordering 10 government agencies and by extension, the two MetroManila concessionaires, to coordinate the clean-up, restoration, and preservation o Manila Bay, took9 years to achieve.

63. Low awareness and political will for improving sanitation. LGUs are responsible or datageneration, specically that relating to water supply and sanitation coverage, as well as investment and


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nancing, but most do not, or are unable to regularly provide updated inormation or monitoringpurposes. o date, very ew LGUs have initiated sanitation plans and programs. Possible reasons or thisoutcome are low awareness about the costs and benefits o sanitation as evidenced by the small budgetor their local sanitation programs and projects, an overall lack o easible project packages, and poor

advocacy campaigns regarding the importance o sanitation. Moreover, there is a need to demonstratesustainable models rom successul sanitation projects to show how such programs should be implemented.A champion or sanitation is thus required to get LGUs to recognize the importance o sanitation andto take action.

64. While some LGUs recognize sanitation problems, they are also constrained by the high investmentand operating costs o sewerage systems, limited willingness-to-pay, and space restrictions in low-incomeurban areas where sewage is disposed o indiscriminately (ootnote 10). Septage management systemsare currently being promoted as a cheaper alternative to sewer systems, but consumers already burdenedby the cost o getting adequate and potable water supply are hesitant to spend additional money onimproving sanitation acilities. Water districts also have similar concerns. As a result, only 12 easibilitystudies were done by the LWUA over the last 2 decades that related to sewerage, 48 and only one (inBaguio) was implemented.

65. Inadequate funds to finance sanitation infrastructure; uncertainties about willingness to pay.Tere have been ew investments in proper sewage collection and treatment, especially outside MetroManila. Te benefits o sanitation projects are still not broadly appreciated, as the effect o improvedsanitation is ofen not immediately elt. More advocacy and awareness-raising programs are necessary.Beneficiary willingness to pay also depends on the cost recovery and tariff strategies adopted. Te tariffcollection and cost recovery or Dumaguete Citys septage treatment acility could be one examplepromoted or replication elsewhere. Under a memorandum o agreement between the LGU andthe water district in Dumaguete, the LGU enacted the required legislation to obligate households todesludge septic tanks regularly. Te water district manages the acility and collects user ees rom serviceconnections that are included in monthly water bills, thus raising sufficient revenue to cover operationand maintenance expenses, and to recover capital investments over a reasonable timerame. Fees arecollected rom unconnected households directly. According to both LGU and water district officials in

Dumaguete, households now spend less on desludging compared to the ees charged by private operators,and have the added comort o knowing that such waste is treated in a manner consistent withenvironmental regulations.49

66. Lack of sanitation capacity. Effective service delivery is hampered by lack o capacity. Sincethere isnt a separate sanitation agency, personnel rom various agencies usually handle both water andsanitation. People working in the sanitation sector come rom varying backgrounds, a situation that hasboth its advantages (being multidisciplinary) and disadvantages (lack o required skills and expertise).Tere do not appear to be enough sanitation specialists. Very ew universities offer sanitary engineeringcourses. Educators report continually declining enrollment in such courses. Many reasons are cited orthis, including the act that LGUs at the city and municipal levels do not require sanitary inspectors tohold degree in sanitary engineering (ootnote 15).

67. Sanitation crisis in emergency situations.During typhoons Ondoy, Pepeng, Santi and Sendong,and intense monsoon rains that caused massive flooding, one o the more problematic issues thatconronted the government was that o sanitation during emergency situations. Both sanitation and

48 In the 1980s, the LWUA unded easibility studies or Baguio City, Butuan City, Daet, Ozamis City, and Zamboanga. In the 1990s,

USAID unded easibility studies or the cities o Cagayan de Oro and General Santos. Te World Bank also unded easibility

studies or Calamba, Cotabato, Dagupan, Davao, and Roxas in 1996.

49 United Nations Environment Programme. Local Initiatives for Affordable Wastewater reatment (LINAW Project), Case of

Dumaguete City (Public Market and Septage reatment Plant) .


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hygiene promotion were identied as highly critical during the relie and rehabilitation phases due toincreasing cases o waterborne disease, health risks due to open deecation, groundwater contamination,and the generally unsanitary condition in evacuation centers and resettlement areas. In some evacuationcenters, the toilet to population ratio was 1:116 against an ideal ratio o 1:20 (ootnote 10). Low-cost

portable sanitation solutions such as the EcoSan or waterless toilets were deployed to evacuation centersand scattered communities in Iligan and Cagayan de Oro afer yphoon Sendong. Tese could beconsidered a orm o scalable disaster preparedness, especially as over time, extreme storms and floodsare expected to increasingly occur as a result o climate change.50Research on innovative technologies orproviding economic, ecological, and efficient sanitation, sewerage, and septage acilities is lacking.

3. Key Constraints, Strategic Development Needs, and Solutions

68. Te main constraints or development o the urban water and sanitation sector are (i) institutionalragmentation and weak sector planning and monitoring, (ii) low public and private sector investment,and (iii) weak perormance o utilities. Te constraints are more severe in the rural water supply andsanitation sectors due to unclear delineation o responsibilities and very limited access to financing,which has resulted rom a decline in available government unds.

50 Sustainable Sanitation in Emergency and Reconstruction. http://susanawg8.wordpress.com/2012/01/02/urine-diversion-

dehydration-toilets-afer-typhoon-sendong-in-the-philippines/


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20

II Sector Strategy

A. Government Sector Strategy, Policy, and Plans

1. Medium-Term Philippine Development Plan, Medium-Term Public Investment Plan, andComprehensive and Integrated Infrastructure Program

69. In collaboration with other related government agencies, NEDA prepared the Philippine

Development Plan results matrix or the 20112016 Mid-erm Philippine Development Plan (MPDP)and the Medium-erm Public Investment Plan (MPIP). Te results matrix integrates the resultsenvisioned under the various strategies, programs, and projects outlined in the MPDP. It thus acilitatestracking o gains achieved, and serves as a tool or monitoring and evaluating the progress in implementingthe MPDP to ensure that the goals o all strategies are met in the medium term. For water supply,the MPDP ocuses exclusively on the goals and programs adopted under the PWSSR. Te MPDPreaffirms the goal to eliminate waterless areas by 2016, by ensuring that all barangaysand municipalitiesthat will be provided with water supply will have corresponding sanitation acilities or proper disposalo wastewater, and by continuing to provide capacity-building programs and technical assistance relatingto water supply and sanitation planning, management, and project implementation, or all WSPs needingassistance.

70. Several government reorm initiatives are designed to help ensure that the MPDP objectives and

MDGs are met. In 2007, the government prepared the PWSSR with the participation o stakeholdersrom both government and civil society. About the same time, World Banks Water and SanitationProgram launched the Sustainable Sanitation for East Asia Project (SuSEA), SuSEA-Philippines being thecomponent under which the project was to be implemented in the Philippines. Tis project assisted theDOH in preparing the National Sustainable Sanitation Plan, 20102016. Tis was ollowed 2 years laterby the preparation o the National Sewerage and Septage Management Program (NSSMP), ormulated inconsultation with multi-stakeholder technical working groups.

71. Te 20112016 MPIP earmarked nearly P2 trillion or inrastructure development, including significantinvestment in the water and sanitation sector through the DPWH, LWUA, and the MWSS. Te MPDP andthe MPIP are concretized in the 3-year rolling Comprehensive Inrastructure Investment Program. Teprogram lists the projects that the government would like to prioritize, and specifies priority projects to beimplemented by the government using purely public resources either through the PPP ramework or official

development assistance.

2. Water Supply

Philippine Water Supply Sector Roadmap

72. Te overall goal o the PWSSR is access to sae, adequate, and sustainable water or all. Te visiono the road map is that all waterless municipalities will have achieved a coverage rate o more than 50%,that utility operations will have become sustainable, and that existing ormal (i.e., legal) utilities will have


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Sector Strategy 21

expanded coverage to the unserved. It also envisions that by 2015, the water supply sector willhave achieved the MDG target o halving the percentage o the population that lacks sustainableaccess to sae drinking water and basic sanitation, and that 60% o WSPs will be regulated. Importantly,its vision is that by 2025, all o the ollowing will have been achieved: (i) universal access coverage and

sustained utility operations, (ii) continued coverage expansion o existing ormal utilities on a par withpopulation growth, and (iii) regulation o all WSPs.

73. Te PWSSR adopted the IWRMramework in sector management, and is guided by thePhilippine IWRM Plan Framework. It outlines medium- and long-term sector developmentgoals and outcomes, and supports operationalization o the MPDP strategies by ocusing developmentinterventions on three major sector outcomes: (i) institutional strengthening, (ii) capacitydevelopment, and (iii) strategic alliance building. Te purpose o these 3 core outcomes is toimprove the operating environment o the water supply sector, and to complement a ourthoutcomeadequate inrastructure provision. Tese our sector outcomes are inter-linked,and support the national development goals as embodied in the governments commitmentsto achieve the targets o the 20112016 MPDP and the United Nations MDGs. Outcomesare disaggregated into outputs and activities or easy monitoring through the use o verifiable

indicators. Implementation o the PWSSR will be monitored and evaluated using results-basedmonitoring and evaluation.51

Other Programs

74. Economic Regulation. An equally important concern is the outcome o ExecutiveOrder 62. While independent economic regulation is desired, legislation must addressenorcement by creating a mechanism or this purpose. A centralized body responsible ormore than 6,000 utilities may be too daunting a prospect or implementation, thus renderingthe body with that responsibility ineffective. In addition, in the light o the Clean Water Act o2004, regulating wastewater tariffs could also all under the purview o this agency. Further,the outcome o the Angara Bill, which proposes merging water utilities into provincial waterutility management agencies, remains to be seen.

75. Government Funding for Waterless Communities.Under the 20042010 MPDP, 432 waterlessmunicipalities52were targeted or water service coverage, which was to reach more than 50% by 2010aninitiative which that to be unded through a P3 billion allocation rom the national government. Tistarget was not met or a number o reasons. LWUA received about P2.25 billion in 20092010, o whichabout P325 million was released to 37 water districts in the 432 waterless municipalities identified. Underthe 20102016 MPDP, the list o waterless municipalities was updated, and the government launchedthe Sagana at Ligtas na ubig sa Lahat(or Salintubig) (Abundant and Sae Water to All) PresidentsPriority Program on Water that was to increase water access by at least 50% by 2015. Te National Anti-Poverty Commission was designated the lead coordinating agency or ensuring that the goals o theprograms were met. In 2011, the program targeted 115 waterless municipalities, 58 waterless barangays,55 waterless health centers, and 24 waterless resettlement sites, using the P1.5 billion unds released to theDOH. In 2012, program leadership remained with the Natonal Anti-Poverty Commission, which worked

in close cooperation with the DILG or capacity development activities, the DOH or sanitation, andLWUA or areas with water districts. Te program was allocated P1.5 billion in 2012 (DILG, P800 million;LWUA, P700 million). Te 2012 program targeted 110 waterless municipalities (DILG, 80; LWUA, 30),62 waterless barangays, 25 waterless health centers, and 8 waterless resettlement sites. Te remainingwaterless municipalities, and a number o waterless barangays, health centers, and resettlements siteswere to be covered rom 2013 to 2016 through the DILG.

51 Government o the Philippines. 2010. Philippine Water Supply Sector Roadmap. 2nd Ed. Manila.

52 Waterless municipalities are defined as municipalities with less than 50% service coverage.


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76. Eco-efficient Water Infrastructure Roadmap.NEDA is also currently drafing the Eco-EfficientWater Inrastructure Roadmap, a tool that will help address water supply problems in the country throughshort-, medium-, and long-term strategies. Tis road map aims to provide guidance and direction ormainstreaming and decentralizing implementation o its initiatives, guided by the IWRM principle. It

envisions attaining efficient and sustainable water resources management in the Philippines within thenext 25 years.

77. Te MDGF-1919 and other capacity-building initiatives for local government units andsmall water utilities.Utility reorm measures such as ring-encing, benchmarking, business planning,and perormance contracting have been introduced as part o a capacity-building and perormanceimprovement path or water utilities.53Commenced in May 2009, the MDGF-1919 is a program jointlyimplemented by the government and the United Nations to enhance provision o, and access to waterservices with the participation o the poor, by filling in the sof component gaps o existing nationalgovernment programs that ocus only on provision o inrastructure or hard components. NEDA, theDILG, the NWRB, the United Nations Development Programme, and the UNICEF have partnered overa 3-year period. Te program aims to contribute to partially addressing issues o low investment and lowcapacity by establishing investment support mechanisms or improving efficiency, access, affordability,

and quality o water and enhancing capacities at the local level in developing, operating, and managingwater utilities in order to benefit 122,000 households in 36 municipalities in Regions II, V, IX, X, and XIII.Previous similar initiatives include ADBs Regional echnical Assistance or Implementing Pilot Projectsor Small Piped Water Networks (20052008) which developed the small piped water networks toolkitand implemented two pilot projects in the Philippines.54Te toolkit eatured five modules: project study,business models and instruments, financing, sustainability and acceptability measures, and regulatorymeasures.

78. Corporatizing water utilities run by local government units. Most LGU-run water utilities arecharacterized by their absence o commercial practices, and thus could benefit rom ring-encing o theirwater utility operations. Ring-encing leads to more accurate inormation that can be used or makingdecisions about resource allocation, management, operational changes and improvements, and watertariffs. Better decision making is expected to lead to better water supply services or the community.

In July 2009, staff rom the DILG, the Municipal, the Cooperative Development Authority, and theLocal Government Academy, in association with mentors, deployed by the PWRF Support Program,pilot-tested the ring-encing approach or water utilities with eight LGUs and three cooperatives. O the11 pilot utilities, 6 went on to develop their own ring-encing guidelines, while the LGUs o Lasam andLumban committed to ring-ence once they ormally begin operating their water utilities. Te WorldBankWater and Sanitation Program also financed a program or accrediting consultants or assistingwater utilities to improve their operations and/or to refine their technical and financial proposals to theNWRB, and to offer small loans to water utilities to pay or these services. According to the Water andSanitation Program, 19 water utilities were assisted in 20112012, and the program was extended tobenefit up to 30 more through 2015. In addition to this, it could be worth evaluating what would motivateLGUs to expand their water supply operations. An LGU could be reluctant to orm a water district orgrant a concession to a private operator i it is planning to upgrade its status (e.g., rom a municipalityto a city) in order to get a larger internal revenue allotment rom the national government (the internalrevenue allotment is equal to 40% o all revenues collected by the Bureau o Internal Revenue), and to

53 Ring-encing o regulatory accounts is needed when a regulated public utility (e.g., water supply) financially separates itsel rom

a parent entity that engages in non-regulated business. Tis is done mainly to protect consumers o essential services such as

power, water, and b

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