Country Paper Phiippines

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Country PaperPhilippines

Asian Water Development Outlook 2007


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2007 Asian Development BankAll rights reserved. Published 2007.

The views expressed in this book are those of the authors and do notnecessarily refect the views and policies of the Asian Development Bank orits Board of Governors or the governments they represent.

The Asian Development Bank does not guarantee the accuracy of the dataincluded in this publication and accepts no responsibility for any conse-quence of their use.

Use of the term country does not imply any judgment by the authors ofthe Asian Development Bank as to the legal or other status of any territorialentity.


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Country Chapter Philippines1Geoff Bridges

Executive Summary

Some two billion Asians66% of the Asianpopulation (or nearly 75% of all those in the

world without such facilities)lack access toadequate sanitation. Many Asian countries facehuge financial costs to clean up the environmentbecause of a lack of investment in sanitation,leading to massive pollution of surface andgroundwater. The cost of cleaning a river alreadypolluted with industrial waste or sewage is farhigher than the cost of the infrastructure todispose of the pollutants properly. Water andsanitation must get top priority from politicalleadership everywhere; postponing action isnot an option because to delay will cost a greatdeal more. This key message was conveyed bythe Asian Development Bank (ADB) at theStockholm World Water Week, 1218 August2007.2

Sector Framework

The Department of Environment and Natural

Resources (DENR) is the line ministryresponsible for implementing water sectorlegislation, but administration is by the National

Water Resources Board (NWRB) of DENR.The 1976 National Water Code and the Clean

Water Act of May 2004, which consolidateddifferent fragmented laws on water resourcesmanagement and sanitation, define policies forpursuing economic growth within a framework

of sustainable development to manage andprotect water resources effectively. The Provincial

Water Utilities Act and Local Water District Lawauthorize the formation of local water districtsand local water utility authorities. NWRB is theeconomic and water resources regulator. Severalother government entities are in the water sector,fragmenting sector governance. While demand isincreasing rapidly, fragmented management and

weak enforcement and planning affect the watersector, with many small providers having neitherthe operational scale nor the autonomy to beefficient.

National Water Strategy and Policies

Strategy and policies are summed up in the 2004Clean Water Act and the Implementing Rulesand Regulations of April 2005, which covers theestablishment of a water quality management(WQM) system through the establishmentof WQM Areas supported by a WQM Fund,development of a National Sewerage and SeptageManagement Program, and establishment of

a wastewater permit and charging system. Aninnovative and emerging financing mechanism isthe Philippine Water Revolving Fund.

Water Resources Management

Overall, the country has abundant surface waterresources, although droughts and seasonal variationsmean some areas experience low per capita wateravailability. Upstream water quality of most rivers


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remains suitable for sustaining freshwater ecosys-tems and for domestic purposes, while downstream

water quality is generally poor and unsuitable fordomestic purposes. Water quality is poorest in urbanareas, the main sources of pollution being untreateddischarges of industrial and municipal wastewater.

Although groundwater resources are generallyabundant, over-abstraction and poor environmental

management of extractive resource industries haspolluted downstream water courses and aquifers,caused siltation, and lowered water tables. Onlyabout 33% of river systems are classified as suitablepublic water supply sources, and up to 58% ofgroundwater is contaminated. Projections of future

water requirement suggest water availability will beunsatisfactory in 8 of the 19 major river basins andin most major cities before 2025. Sixteen rivers areconsidered biologically dead during dry months.

Water resource management is now a top priority,and government efforts are focused on environ-mental issues and implementation of water sector

legislation to perform the integrated water resourcesmanagement strategy under the Medium-TermPhilippine Development Plan (MTPDP).

Water Supply

Characterized by widespread illegal connectionsand high level of nonrevenue water, the Manila

water supply system was owned and operatedby the state-owned Metropolitan Waterworksand Sewerage System (MWSS) until 1997 when

water services were privatized. Manila WaterCompany took over operation in Metro ManilasEast Zone and Maynilad Water Services in the

West Zone. Outside Metro Manila, urban watersupply is provided by about 500 water districts

and more than 1,000 local government-operatedwater utilities. Where no public sector serviceproviders exist, informal small-scale independentproviders (SSIPs) satisfy unmet demand. Thesize of the SSIP market is significantin MetroManila it was estimated that prior to privatiza-tion, some 30% of the population depended onSSIPs.

Sanitation

Less than 4% of Manilas population is connectedto the sewer network, with many high-incomehouseholds constructing their own facilities. Flushtoilets connected to septic tanks are widely used,and often serve large housing developments.However, sludge treatment and disposal facilitiesare rare, resulting in indiscriminate disposal ofuntreated or poorly treated effluent into the PasigRiver, one of the worlds most polluted rivers.

MDG Target Progress

World Health Organization/United NationsChildrens Fund (WHO/UNICEF) data for2004 indicate that overall water supply coverageachieved was 85% (87% urban and 82% rural),

with overall sanitation coverage 72% (80% urbanand 59% rural). Progress on meeting MillenniumDevelopment Goals (MDGs) by 2015 needs tobe improved, with urban water off-track andregressing (coverage decreased from 95% in 1990to 87% in 2004), rural water and rural sanitationoff-track but expected to hit the target after2015, and urban sanitation on-track for 2015.

Future PlansThe MTPDP 20042010 sets a target of 9296%for safe drinking water, and 8691% for accessto sanitary toilet facilities, goals that exceed the2015 MDG targets. The MTDPD includes astrong commitment to cost recovery, adoption ofcommercial principles (including private sectorinvolvement), and a strong commitment todecentralization of responsibilities to local govern-ments. Over the last two decades, annual capitalexpenditure in the water and sanitation sector hasfluctuated around P34 billion, and almost entirely

allocated to water, compared with the estimatedP67 billion needed to achieve the sector MDGs.

Utility Performance

Levels of nonrevenue water are very high in mostutilities, typically in excess of 30%, and in thecase of Maynilad well over 60% and reflected inthe unit consumption rates. Hours of supply aregenerally in excess of 18 hours and some have

Workers of the Lupang Area Muslim-ChristianDevelopment Cooperative Workshop, responsiblefor manufacturing services for Manila Water, as wellas collecting fees from consumers for water suppliesin the area


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Country Chapter Philippines

24-hour supply. There are major differences inthe performance levels of large and small waterutilities. Most utilities cover operating andmaintenance costs, with Manila Water perform-ing well and a good surplus generated. Most

water utilities charge connection fees beyond thecapacity of poor consumers to pay for them.

Main Issues and Key ChallengesThe main issues and key challenges are:

Disparities in coverage across regions. Low tariffs and poor revenue generation lead

to under-investment; with many utilitiesrevenue not even covering recurrent costs,especially for sanitation.

Poor utility performance due to lack ofinstitutional capacity and investment.

Weak and fragmented institutional andregulatory framework, with regulatoryfunctions controlled by different entities and

making enforcement difficult. Increasing pollution and depletion of waterresources.

Need to increase sewerage interception andtreat all raw sewage.

Need to recognize the role and formalizethe status of SSIPs until such time when theformal utility can provide services to SSIPcustomers.

Connections for the urban poor (no connec-tion fee or subsidized fee).

Poor technical performance and service levelsin many utilities.

Future Vision

The Philippines needs to increase annual watersector investments about tenfold to some P40billion or at least to 1% of GDP to meet MDGand legislative commitments, and also must focuson tariff reform, increased wastewater treatmentcapacity, increased coverage of water sectorservices, greater water conservation, and effectiveimplementation of the Clean Water Act.

IntroductionThe purpose of the Asian Water DevelopmentOutlook (AWDO) is to enable leaders andpolicy-makers to understand their respectivenational situations, to appreciate their presentsector performance and the key issues in theircountry, and, by learning from the experiences ofother countries, to encourage them to take effec-

tive action to tackle those issues. Achievement ofthese goals has been constrained by the limitedavailability of data and published current statusinformation, as well as detailed future plans. Thecontents of this country chapter focus primarily onthe water supply and sanitation subsectors, cover-ing other subsectors, such as water resources, onlyin more general terms.

Despite difficult political circumstances,the Philippine economy has remained strongin recent years. Moderate economic growth

was achieved in 2006, gross domestic product(GDP) rising by 5.4%. GDP growth is expectedto remain at 5.4% in 2007 and then increaseslightly to 5.7% in 2008. Per capita grossnational product was US$1,300 in 2005, andper capita GDP growth was 3.2% in 2006, andis projected to increase by 3.2% in 2007 and to3.6% in 2008. Inflation was 6.2% in 2006, butis forecast to fall to 4.8% in 2007, rising againto 5.9% in 2008.3 The country had a Human

Development Index (HDI) value of 0.763 in2004 (0.722 in 1990), and was ranked 84th

worldwide in terms of HDI. The 2004 GDPper capita was US$4,614 PPP4 and its HumanPoverty Index was 15.3%.5 Urbanization is sig-nificant and increasing rapidly, with 62.6% of thepopulation living in urban areas in 2005 (48.8%in 1990), the annual 1990/95 urban growthrate being 4.30%.6 In terms of water resourceavailability, the per capita total actual renewable

water resources (TARWR) value reduced from6,332 cubic meters (m3)/year in 2000 to 5,880m3/year in 2005, with total water used being 6%of TARWR.7 Of the 28.52 billion m3 of water

withdrawn in 2000, the proportion of withdraw-als by agriculture, industry and domestic users

was 74%, 9% and 17%,8 respectively.

Water qualityis poorest in

urban areas, themain sourcesof pollutionbeing untreateddischarges ofindustrial andmunicipal waste-water

Informal settlements along the banks of the Pasig River, Manila


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Sector Status andPerformance Overview

Sector Framework

The Department of Environment and Natural

Resources (DENR) is the line ministry respon-sible for implementing water sector legislation.This function is effectively administered bythe National Water Resources Board (NWRB)of DENR, although NWRB has only a smallcadre of staff, limited financial resources and noregional presence. Relevant legislation fallingin the remit of NWRB is the 1976 National

Water Code (Presidential Decree 1067) andthe Implementing Rules and Regulations (lastamended and approved in April 2005) of theClean Water Act (Decree 1152) of May 2004,

which defines policies for pursuing economic

growth within a framework of sustainabledevelopment to manage water resource qualityeffectively, while protecting, preserving andimproving them. The Clean Water Act was thefirst attempt to consolidate different fragmentedlaws in the Philippines on water resourcesmanagement and sanitation. The Provincial

Water Utilities Act and Local Water District Lawauthorize the formation of Local Water Districtsand Local Water Utilities Administration(LWUA) to operate and manage water systemslocally. The provision of basic services, suchas water and sanitation, was devolved to localgovernment in 1991. However, there are severeinstitutional and technical capacity constraints

within many local government entities to under-

take such devolved functions. As well as being theregulatory body for all water resources, NWRBis also the economic regulator. Responsibilityfor LWUA, have recently come under NWRBs

jurisdiction, to remove the anomaly of thembeing both financier and regulator of their waterdistricts. To improve the economic regulationof private water utilities under its jurisdiction,

NWRB sets their tariffs using the 5-year Returnon Investment (ROI) method. There are severalother government entities involved in the watersector, as shown in Figure 1 below, illustratingthe considerable fragmentation that characterizessector governance.

While demand is increasing rapidly,fragmented management and weak enforcementand planning continue to affect supply. In 1995,a national water crisis was declared, whichprompted the passage of special legislation, thePhilippine Water Crisis Act. One of the moreimportant features of the Act was the provision

for stronger private sector participation in thefinancing and operation of water supply services,in particular in Metro Manila. This eventually ledto the privatization of water supply in Manila.10

In 2004, President Gloria Macapagal-Arroyoformulated and announced her Ten-Point Agenda

which includes the provision of power and watersupply to all barangays. The President appointedthe National Anti-Poverty Commission (NAPC)to oversee the Governments commitment toprovide safe water supply and sanitation servicesto the entire country, through the PresidentsPriority Program on Water (P3W). The programaims to: (1) increased access to water supply andsanitation services coverage by 50%; (2) reducedincidence of diarrhea by 20%; (3) improvedaccess of the poor to water supply and sanitationservices by at least 20%; and (4) 100% sustain-able operation of all water supply and sanitationprojects constructed, organized and supportedby the program. Funding for the P3W is cominglargely from the public funds of the Departmentof Public Works and Highways (DPWH). NAPCestimated that P5.6 billion11 would be needed toachieve these targets, of which P2 billion would

be required in Metro Manila alone. The NationalEconomic and Development Authority (NEDA)reported in its Comprehensive and IntegratedInfrastructure Program that the water resourcessector would require 15% of the P1.7 trillioninvestment12 required during 20062010.13

The water supply and sanitation sector isfragmented, with numerous small providers

Tony Aquino, President of Manila Water, points tothe 98% piped-water coverage served by the utility


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that have neither the operational scale nor thenecessary autonomy from political interferenceto be efficient. This is demonstrated in Table 1below.14 The situation is compounded by the factthat many operate under different regulatory andfinancing regimes. On average, two out of threepeople in the rural areas lack access to potable

water, significantly higher than the Asian average

of one in three people. The provision of watersupply and sanitation facilities in rural areas is,therefore, a priority for the Government.

The Department of Health plays animportant role in setting water quality standards,and in the monitoring and control of drinking

water quality in urban and rural areas.

National Water Strategy andPoliciesStrategy and policies are summed up in the 2004

Clean Water Act and the Implementing Rulesand Regulations of April 2005, which covers theestablishment of a water quality management(WQM) system through the establishmentof WQM Areas supported by a WQM Fund,development of a National Sewerage and SeptageManagement Program through the Departmentof Public Works and Highways, and establish-ment of a wastewater permit and chargingsystem. DENR is nominated as the lead agencyfor implementation of the legislation, the mainaspects of which are to:15

streamline procedures to prevent and controlwater resource pollution,

promote environmental strategies andcontrol mechanisms,

formulate a holistic national WQM pro-gram,

formulate an integrated WQM framework, promote environmentally friendly commer-

cial and industrial processes and products, encourage self-regulation of private

industrial enterprises through incentives andmarket-based instruments,

provide comprehensive management

program to prevent pollution, promote public education and information

to encourage active participation, formulate and enforce accountability for

adverse environmental impacts, and motivate civil society to address environmen-

tal issues at the local and national level.

Key:NEDA NationalEconomicandDevelopmentAuthorityDPWH DepartmentofPublicWorksandHighwaysNWRB NationalWaterResourcesBoardNIA NationalIrrigationAdministrationDENR DepartmentofEnvironmentandNaturalResourcesPNOC PhilippineNationalOilCompanyNPC NationalPowerCorporationDOH DepartmentofHealthDILG DepartmentoftheInteriorandLocalGovernmentLWUA LocalWaterUtilitiesAdministrationLGUs LocalGovernmentUnitsMWSS MetropolitanWaterworksandSewerageSystem

Figure 1: Major Institutions involved in the Water Sector9

Table 1: Market Shares of Urban and Rural Populations byPrimary Water Source (%)

Type of Provider Urban Rural

LGUs/CBOs 40 65

WaterDistricts 30 10PrivateOperators 10

SSIPs 15 10

Self-supply 5 15

CBO = community-based organization, LGU = local government unit,SSIP = small-scale independent provider)

An innovative and emerging financingmechanism is the institutionalization of thePhilippine Water Revolving Fund (PWRF). TheClean Water Act encouraged the establishmentof the PWRF as an alternative financing mecha-nism.16


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scale hazardous waste treatment facilities.Approximately 50,000 tons of hazardous wasteare stored on or off-site due to lack of propertreatment and landfill facilities.19

Water pollution, wasteful and inefficient useof water, saltwater intrusion, high nonrevenue

water levels due to leaks and illegal connections,and denudation of forest cover, are placing major

strains on water resources. Combined with grow-ing population pressures, it is becoming moredifficult to provide basic water services. The 1998

Japan International Cooperation Agencys waterresources study projected that in the absence ofan effective water resources management programbeing put in place, the countrys water resources

would be at a critical stage by 2025.20

The Government now recognizes that waterresource management needs to be a top prior-ity,21 and is focusing its efforts through DENR(and NWRB) as the line ministry with centralresponsibility for environmental issues and imple-

mentation of water sector legislation. The generalintegrated water resources management (IWRM)strategy22 to be adopted under the Medium-TermPhilippine Development Plan (MTPDP) is basedon the following actions:

Devolve decision-making to new orstrengthened river basin organizations and

Water Resources Regional Councils. Pursue raw water pricing to effect efficient

allocation and conservation. Maintain and sustain data collection and a

water resources database.

Conduct water assessments in terms ofavailability and demand for prioritized waterconstraint areas.

Water Supply

Prior to 1997, the Manila water supply systemwas owned and operated by the government-runMetropolitan Waterworks and Sewerage System(MWSS), and was characterized by a badly dete-riorated network, widespread illegal connections,

and 63% nonrevenue water. On 1 August 1997,two private concessionaires took over operationof the water and sewerage system, namely, Manila

Water Company, Inc. (MWCI) in the East Zoneand Maynilad Water Services, Inc. (MWSI) in the

West Zone. Both concessionaires struggled at thestart of the concessions due to the Asian financialcrisis, during which the peso was devalued byabout 50%, and also as a result of the effects of a

severe El Nio. Considerable political and publiccriticism compounded the tackling of technicalissues by both concessionaires. Manila Wateris now modestly profitable, but Maynilad hasstruggled to make a profit and its future has beenthe subject of intense speculative activity as it seeksto restructure. Technical achievements of Manila

Water include reduction of nonrevenue water from63% to 25%, 24-hour water availability increasedfrom 26% to 98% of the population in the centraldistribution system, replacement or rehabilitationof 2,000 kilometers of pipelines, expansion ofcustomer base from 3 million to 5 million, half of

which belong to low-income groups, and expan-sion of sewage treatment capacity from 44 to 85million liters per day.

MWSI, which was formerly a partnershipbetween Benpres Holdings Corporation andOndeo Water Services, Inc. (formerly SuezLyonnaise de Eaux), went through a change ofownership towards its 10th year, with the consor-

tium of D.M. Consunji, Inc. and Metro PacificInvestments Corp. acquiring 83.97% of stakespreviously held by the Metropolitan Waterworksand Sewerage System due to a debt-capital conver-sion. Lyonnaise Asia Water Limited (LAWL) gotthe 16% share. DMCI-Metro Pacific Consortium,

won the right to continue operating the WestZone concession in December 2006 after it put ina whopping $447 million bid for the 84% stake

Addressing the challenge of providing piped waterto crowded slum communities

Widespread il-legal connectionsand high levelof nonrevenuewater


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of the Metropolitan Waterworks and SewerageSystem in Maynilad. The consortium formallytook control of Maynilad in 24 January 2007.

Near Manila, the former Subic Bay navalbase and the neighboring city of Olongapo arecovered by a 25-year lease contract awardedin 1997 after the completion of a build-oper-ate-transfer (BOT) scheme to improve the

dilapidated water facilities and to make betteruse of limited water supplies. The leaseholder(Subicwater) is a joint venture agreementbetween two private companies and two localgovernment entities. Through the agreement,the two government agencies retain ownershipof the system assets, and earn lease payments onthe infrastructure and profit dividends of 20%and 10%, respectively from Subicwater. Initiallyunregulated, the Subic Bay Water RegulatoryBoard was created in January 2001.

Outside Metro Manila, urban water supplyis mainly provided either by about 500 water

districts, under the authority of the Local WaterUtilities Administration (LWUA), or by morethan 1,000 local government-operated waterutilities. Many of the small water districts andlocal government-operated water utilities lackstaff and skills to prepare new projects.

Where there are no public sector serviceproviders, the informal sector has stepped in tomeet unmet demand. Small-scale independentproviders (SSIPs) cover a diverse range of wateroperators that serve different groups of custom-ers. The size of the SSIP market is difficult toestimate but is significant as a substantial propor-

tion of the population does not have access toformal piped service provision. In Metro Manilaalone it was estimated that prior to privatization,some 30% of the population depended on SSIPs,

with a similar proportion catered for in this wayin Cebu, the second largest city in the country.However, SSIPs are not subject to any regulatoryperformance checks, do not have to comply

with quality standards, and they miss out on thebenefits of economies of scale on tariff levels.

Potable water quality is governed by theNational Standards for Drinking Water. However,many water distribution networks operateintermittently and do not provide a service toeveryone in the area of jurisdiction of the waterutility. Under such circumstances, the quality ofdelivered water at the customer tap can fall wellbelow the necessary standards. Furthermore, whereconsumers rely on service provision from SSIPs,there is no regulatory control over water quality.Many people resort to in-house treatment of their

water supply, although this coping mechanismshould never be considered as equivalent to animproved drinking water supply.

Sanitation

In the sanitation sector, less than 4% of Manilaspopulation is connected to the sewer network,

with high-income households responding byconstructing their own facilities. Flush toiletsconnected to septic tanks are widely used, andoften serve large housing developments. Around40% of households now have on-site latrines. Itis estimated that there are more than 1 millionseptic tanks in Manila. However, sludge treat-ment and disposal facilities are rare, resulting inindiscriminate disposal of untreated or poorlytreated effluent into the Pasig River. Some 10million people discharge untreated waste into thePasig, which, combined with the 35 tons of solid

waste also deposited in it annually by squattersliving in makeshift shelters on the river bank,makes it one of the worlds most polluted rivers,

with human waste accounting for 70% of the

pollution load.23

In rural areas, heavy reliance isplaced on latrines for sanitation.As well as forcing people to adopt expensive

and inconvenient coping mechanisms to meettheir basic water and sanitation needs, poor waterand sanitation services inevitably increase diseaseand illness. Diarrhea and cholera outbreaks arenot uncommon in the Philippines as a result oflack of access to basic water services.Manado harbor

Less than 4% ofManilas popula-tion is connected

to the sewernetwork


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MDG Target Progress

World Health Organization/United NationsChildrens Fund (WHO/UNICEF) data for2004 indicate that overall water supply coverageachieved was 85% (87% urban and 82% rural),

with overall sanitation coverage 72% (80% urbanand 59% rural).24 Of the 87% urban water supply

coverage, 58% was through house connections,the equivalent figure for rural water supply being23%. Coverage by public standpipes was 11.1%urban and 15.2% rural (2003 data). For the 80%urban sanitation coverage, 7% was due to sewerageconnections, while for rural sanitation sewerageconnections only accounted for 2% of the total.25Progress on meeting the Millennium DevelopmentGoals (MDGs) for water by 2015 needs to beimproved, with urban water off-track and regress-ing (coverage decreased from 95% in 1990 to87% in 200426), rural water and rural sanitationoff-track but expected to hit the target after 2015,and urban sanitation on-track to meet its target by2015. The improvement in urban sanitation cover-age is very good, increasing from 66% in 1990 to80% in 2004, and in the rural sector from 48% in1990 to 59% in 2004. However, coverage by itselfas a monitoring indicator without an assurancethat existing facilities continue to give appropriateservice, in particular the quality of water deliveredat the customers premises or the need to effectivelytreat sewage, becomes less meaningful. Coveragefigures are therefore likely to overestimate the trueprovision of acceptable improved facilities for both

water and sanitation.

Future Plans

The MTPDP 2004201027 sets a target of9296% for safe drinking water, and 8691%for access to sanitary toilet facilities, goals thatexceed the 2015 MDG targets.28 The generalstrategy of the MTPDP, which has not changedsignificantly over the years, includes a strongcommitment to cost recovery in the sector, theadoption of commercial principles (including

private sector involvement in the managementand financing of services), and a strong commit-ment to decentralization of responsibilities tolocal governments. Over the last 2 decades annualcapital expenditures in the water and sanitationsectors have fluctuated around P34 billion, andalmost entirely allocated to water, compared withthe estimated P67 billion needed to achieve thesector MDGs. Implementing the provisions of

the 2004 Clean Water Act will require additionalannual expenditures of P35 billion.29

Governance

Governance can be considered in several ways,ranging from the transparency of government

and business dealings, the efficiency of thebusiness process (delays in project implementa-tion), to the implementation of regulations andsector performance, e.g., nonrevenue water.Such assessments are necessarily fairly subjectiveand so to provide an overall indication thecorruption perceptions index (CPI) producedby Transparency International will be used as aproxy indicator. In 2006, the CPI score for thePhilippines was 2.5, making it 121st in the overallranking and 18th in the regional ranking.30 Only

Australia, Peoples Republic of China, Indonesia,Mongolia, and Sri Lanka in the Asia and Pacificregion had ratified the UN Convention againstCorruption, suggesting a lack of governmentdetermination in the region to tackle corruption.

The need for reform for good governancehas been recognized at various levels and sectors,and numerous efforts at the policy level arebeing pursued. A recent initiative established the

Manila Waters Mother meters provide bulk bill-ing to poorer communities


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Presidential Commission on Effective Governance(PCEG), which was given responsibility fordeveloping an integrated reform action plan. PCEGadvocated the passage of the Re-engineering theBureaucracy Bill and supported the proposed CivilService Code. However, although the country is notlacking in policy or policy reform initiatives, thereare significant problems in their implementation.31

Utility Performance

Levels of nonrevenue water remain very highin most utilities, typically being in excess of30% and in the case of Maynilad, still well over60%. Hours of supply are generally in excessof 18 hours and some have 24-hour continuity.However, there are major differences in the per-formance levels of large and small water utilities,for instance staffing-connections ratios are goodin Manila at around 3.2 to 3.5 but are higher in

smaller systems. The overall performance of theManila system has undoubtedly improved, butwith each concessionaire attaining different levelsof achievement (see Table 2). Tariffs charged bythe two private sector concessionaires in Manilaare considerably higher than those charged by theother utilities in the table but this may simply bea reflection of the investment made to remedy thesituation and clear the backlog of remedial workrequired on deteriorating assets to reduce leakage.High leakage levels are also reflected in the unitconsumption rates associated with the Manilaconcessions. Most utilities cover operation andmaintenance costs, with Manila Water perform-ing well with a good margin of revenue collectedover costs incurred. Most water utilities appear tobe charging connection fees that are beyond thecapacity to pay, for poor consumers who wouldlike to have a piped water system.

Table 2 summarizes recent utilityperformance data.32

Selected national indicators are summarizedbelow:

Wateravailability(percapita) 5,880m3/year

Waterquality fairImprovedwatersupply

coverage

85%

Improvedsanitationcoverage 72%

Wastewatertreatment poor

GovernanceTransparency

Index(CPI)

2.5

Main Issues and KeyChallengesHigh connection fees are unaffordable for low-income households, even when options to payby installments are available. However, by actingtogether as a community, the cost of water can bereduced dramatically, for instance by improving

access for water vendors to reduce transportationcosts or negotiating a community supply with thewater utility, etc. What is needed is a championto support the community through such initia-tives. Mr Macabebe, President of LUPON,Manila, Philippines, is a good example of whatcan be achieved (Box 1).

The main issues and key challenges are asfollows:

Disparities in coverage across regions. Low tariffs and poor cost recovery may

indicate a low willingness to pay. Poor revenue

generation is a core constraint, leading to under-investment and undermining development ofthe whole sector. For many service providers,revenue does not even cover recurrent costs letalone contribute to the accumulation of suf-ficient reserves to fund new capital investment.The situation is even worse in the sanitationsector, particularly as local governments attacha higher priority to water supply investmentsin order to bridge the significant gap betweendemand and supply capacity.

Poor utility performance due to lack ofinstitutional capacity and investment.

Weak and fragmented institutional andregulatory framework, with regulatory func-tions controlled by different entities, makingit difficult to develop technical capacity andleading to variance in implementation ofregulatory rules and enforcement.

Increasing pollution and depletion of waterresources.

Need to increase sewerage interception andtreat all raw sewage.

Many are now provided with water sectorservices by SSIPs so there needs to be agreater recognition of their role, with their

status formalized, until such time as theformal utility is able to provide services toSSIP customers.

The relative success of Manila Water andSSIPs supports an increasing role for theprivate sector to meet unsatisfied demand.

Connect the urban poor (no connection feeor subsidized fee).

Levels of non-revenue water

are very high inmost utilities,

typically inexcess of 30%


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1


Table 2: Utility performance

Indicator Maynilad Manila Water Dagupan Water

District33Orani Water

District

Magdalena (LGU

Managed Utility)34

Public/privatesector private private public public public

Mainwatersource surface surface groundwater spring+ground-

water

groundwater

Populationinareaofresponsibility

7,900,000 5,300,000 16,220

Coverage:

water(%) 71.2 58.8 54.83 19.02 66.3

sewerageseptictanks(%) (21.65) (17.86) 84.0 95.0

No.ofconnections 607,729 425,802 16,349 5,752 2,152

(676,974) (562,499)

No.ofpublictaps 0

SupplyContinuity(hoursof

supply)

18 21 24(95%)

Volume(m3/month):

Produced 69,410,000 46,161,000 596,070 199,143 418,745

(63,570,000) (40,367,400)

Consumed 21,915,402 24,173,000 417,249 161,305

Percapitaconsumption

(liters/day)

458 646 149 129 68

Overallnonrevenuewater

(%)

68.4 47.6 30 19 36

(66.39) (31.74)

Staffingratio/thousand

connections

3.9 3.6 6.5 4.35 1.9

(3.5) (3.2)Revenuecollected(US$

million/month)

9.17 7.10 0.15 0.04 0.009

Collectionefficiency(%) 104 87 95 95 91

Operationand

maintenancecosts(US$

million/month)

11.14 5.83 0.10 0.03 0.011

Connectionfee(US$) 95.35 135.80 78.40 63.15

Typicaldomestictariff

basedon10m3/month

(US$)

8.03 5.87 2.37 2.61 4.77(basedon

10.4m3/month)

Annualcapex(US$million) 9.02 77.12 0Sectorregulator MWSS MWSS NWRB NWRB

Note: Exchange rate used, US$1 = P.92.


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Katipunan Road, Balara Quezon City 1105,PhilippinesT: (632) 4358900; 4358902; 4358903;4358901; 4358904E: [email protected]: http://www.mwssro.org.ph/

Maynilad Water Services, Inc. (MWSI)MWSS Compound, Katipunan Road, Old

Balara, Quezon City, 1105 PhilippinesT: +63-2-435-3583 F:+63-2-922-3759E: [email protected]: http://www.mayniladwater.com.ph

Manila Water Company, Inc. (MWCI)Administration Building, MWSSCompound, Katipunan Road, Old Balara,Quezon City, 1105 PhilippinesT: +63-2-926-7999 F: +63-2-922-3761E: [email protected]

Local Water Utilities Administration (LWUA)

MWSS-LWUA Complex, Katipunan Road,Balara, Quezon City, PhilippinesT: (632) 9205581 to 89 F: (632) 9223434W: http://www.lwua.gov.ph/

National Anti-Poverty Commission3rd Floor, Agricultural Training InstituteBuilding,Elliptical Road, Diliman, Quezon City,

PhilippinesT: (063) 426-5028; 426-5019; 426-4956;426-4965E: [email protected]: http://www.napc.gov.ph

Department of Public Works and HighwaysBonifacio Drive, Prot Area, Manila,PhilippinesT: +632-304-3221; +632-304-3301E: [email protected]: http://www.dpwh.gov.ph

Table 3: Donors Active in the Philippines Water SectorDonor Sector/Area of Support Sample ADB Projects Status

AsianDevelopmentBank

(ADB)

Urban,Rural,andBasinWater MWSSNewWaterSources

DevelopmentProject

Loanapprovedin2003.Loan

closingdaterevisedto2008.

IrrigationSystemsOperation

EfficiencyImprovement

Project

Technicalassistanceproposed

in2007.

SouthernPhilippines

IrrigationSectorProject

Loanapprovedin1998.

Revisedclosingdatein2008.

IntegratedCoastal

ResourcesManagement

Loanandgrantapprovedin

2007.

WorldBank Waterresourcesmanagement,watersupply,irrigation

Active/ongoingwaterresourcesmanagement,

irrigation,watersupplyand

sewerage/sanitationprojects.

JapanBankfor

InternationalCooperation

Floodmanagement

JapanInternational

CooperationAgency

Improvementofbasicliving

conditionswhichinvolves

improvingwatersupplyservices

AustralianAgencyfor

InternationalDevelopment

Ruraldevelopment

UnitedStatesAgencyforInternationalDevelopment

Environment(includingwatersupplyandsanitation)

UnitedNations

DevelopmentProgramme

Environment

GermanAgencyfor

TechnicalCooperation

(GTZ)

Drinkingwater,watermanage-

ment,sewage/wastedisposal


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Donors active in the sector are summarizedin Table 3, which also provides an indication ofthe current status of key projects funded by the

Asian Development Bank.ADB is evaluating the proposed US$13 mil-

lion Rural Water Supply and Sanitation in Visayasand Mindanao Project which will provide 800

water supply facilities to deliver safe and reliable

water supplies to 850,000 people, together with150,000 latrines providing improved sanitation.Outputs will be demand-led. Training and capacitybuilding of local government units and user groups

will form a major component of the project.

Future Vision

Progress toward achieving the MDG targetsin the Asia-Pacific Region has been less rapidthan anticipated such that, at current rates ofprogress, the sanitation MDGs will not be metin many Asian countries. As a result, the Vision2020 document on Delivery of the MDGsfor water and sanitation in the Asia-PacificRegion was prepared to point the way forward,and was unanimously endorsed by Ministersfrom 38 countries at the Asia Pacific MinisterialConference in December 2006 held in NewDelhi. The overarching framework is principledgovernance, together with a move from policyas intention to policy as practice. To achieve theobjectives, partnerships will be essential. The2020 vision can be achieved by:

a concerted campaign over the next five yearsto raise awareness and generate momentumto change polices and governance practicesand build sector capacity,

multistakeholder approach in each countryto achieve synergies and a united effort, and

active sharing of information and experienceacross the region as part of a region wideinitiative.

The future vision for the water sector in thePhilippines should include the following:

Prioritize the water and sanitation sector interms of investment and human resourcedevelopment.

Recognize the important role of SSIPs andformalize their status and contractual status

with formal utilities. Strengthen environmental legislation en-

forcement to halt and reverse the decline inthe quality and quantity of water resources.

Treat all wastewater discharges to at leastprimary level within 5 to 10 years.

Set sustainable and affordable tariffs toprogressively move toward full cost recoveryand progressively improve service standards(nonrevenue water, hours of supply, etc.)

The cost of achieving the water sectorMDGs worldwide has been estimated at US$10billion/year, a seemingly large sum but one thatonly equates to 5 days worth of global militaryspending or less than half of what rich countriesspend on mineral water.35 In reality, it is a smallprice to pay for improved quality of life, millionsof young lives saved, increased productivity, andfor generating an economic return to boost pros-perity. Governments should aim for a minimumof 1% GDP spending on the water sector.

The Philippines needs to increase annual watersector investments about ten-fold to some P40billion to meet MDG and legislative commitments,and at the very least to 1% of GDP, and also mustfocus on tariff reform, increased wastewater treat-ment capacity, increased coverage of water sectorservices, greater water conservation, and effectiveimplementation of the Clean Water Act.

The Index of Drinking Water Adequacy

(IDWA) value for the Philippines (see Table 4)is 80, ranked third amongst the 23 countriesevaluated in the IDWA background paper for

AWDO.36 Use has the top rating of 100, andquality (84), access (81), and resource(73) values are all good, with rankings all in thesecond quartile of the cohort evaluated. Althoughthe capacity (59) value is reasonable, it providesthe best opportunity to increase the overallIDWA value and ranking.

The capacity component is a measureof the populations capacity to purchase waterbased on per capita GDP in purchasing power

parity US$. Its value is obviously linked to thegeneral economic situation in the country and is,therefore, much harder to influence. However, ifconnection fees are made affordably small or freeand the excess funded through the tariff, together

with the development of a sustainable tariffstructure and unit charges, the cost of water as aproportion of household income would reduceand more people would connect and increase

Table 4: Index of Drinking Water Adequacy (IDWA)

Resource Access Capacity Use Quality IDWA

73 81 59 100 84 80


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water consumption. It is anticipated, therefore,that increasing sector investments, improvingurban and rural water coverage, modifyingconnection fees and tariffs, as well as increasing

wastewater treatment to reduce pollution, willhelp raise the IDWA value to about 90 by 2015,maintaining its ranking in the top quartile ofcurrent IDWA value estimates.

This AWDO country chapter is a dynamicdocument that should be updated and expandedperiodically to reflect changes, issues andproposed remedial strategies in the national

water sector. It is recommended that in the nextupdate there should be a specific focus on (i)

water resources and environmental management,(ii) wastewater treatment, and (iii) water utilityperformance and benchmarking.

Endnotes1 The contribution of Paul van Klaveren of the ADB who

reviewed the draft document is gratefully acknowledged.Comments have also been included from Mr Tony

Aquino, President of Manila Water.2 Asia Faces Huge Environmental Clean-Up Due to

Inadequate Sanitation, ADB News Release, 7 August2007.

3 Asian Development Outlook 2007, p. 222 and TablesA1, A2 and A8, ADB, 2007.

4 Purchasing Power Parity5 Tables 1 to 3, Human Development Report 2006,

United Nations Development Programme (UNDP).6 Tables A4 and A6, More Urban, Less Pooran Intro-

duction to Urban Development and ManagementGoran Tannerfeldt and Per Ljung, SIDA Earthscan,2006.

7 Total Actual Renewable Water Resources (TARWR)from Table 4.3, Water a Shared Responsibility: UN

World Water Development Report No. 2, 2006. UNI-CEF

8 Earth Trends Data Tables: Freshwater Resources 2005,FAO/AQUASTAT 2005. Available at www.fao.org/wa-icent/faoinfo/agricult/agl/aglw/aquastat/water_res/in-dex.htm

9 Section 2.3.1, p. 18, the Philippine Water SituationReport 2006, League of Cities of the Philippines inpartnership with WEDC, UK.

10 Executive Summary, p. v, the Philippine Water SituationReport 2006, League of Cities of the Philippines inpartnership with WEDC, UK.

11 About US$0.1 billion in 2004.12 About US$0.034 trillion in 2006.13 Executive Summary, p. v, the Philippine Water Situation

Report 2006, League of Cities of the Philippines inpartnership with WEDC, UK.

14 Chapter 7 and Table 7.1, Philippines; Meeting Infra-structure Challenges, PPIAF, World Bank, December2005.

15 From DENR Administrative Order 2005--10, Imple-menting Rules and Regulations of the Philippine Clean

Water Act of 2004 (Republic Act No. 9275).16 Section 5.2.1, p. 43, the Philippine Water Situation

Report 2006, League of Cities of the Philippines inpartnership with WEDC, UK.

17 Chapter 3, p. 46, Medium-Term Philippine Develop-ment Plan (MTPDP) 2004--2010.

18 Executive Summary, Country Environmental Analysisfor the Philippines, ADB, September 2004.

19 Chapter 3, pp. 46 and 47, Medium-Term PhilippineDevelopment Plan (MTPDP) 2004--2010.

20 Executive Summary, v, the Philippine Water SituationReport 2006, League of Cities of the Philippines inpartnership with WEDC, UK.

21 Philippines Country Water Resources Assistance Strat-egy 2003, p. 6, ADB.

22 Chapter 3, Thrust No 4 , sub-section 2 on water re-sources, p. 53, Medium-Term Philippine DevelopmentPlan (MTPDP) 2004--2010.

23 Box 1.4, Human Development Report 2006, UNDP.24 Country, regional and global tables in Meeting the

MDG Drinking Water and Sanitation TargettheUrban and Rural Challenge of the Decade, WHO/UNICEF Joint Monitoring Programme Report 2006.

25 Joint Monitoring Programme for Water Supply & Sani-tation; Coverage Estimates: Improved Sanitation Phil-ippines and Improved Drinking Water---Philippines,

WHO/UNICEF, June 2006.

26 Meeting the MDG Drinking Water and SanitationTargetthe Urban and Rural Challenge of the Decade,

WHO/UNICEF, 2006.27 For further details see MTPDP, chapter 3, Thrust No 4,

sub-section 2 on water resources.28 Second Philippines Progress Report on the Millennium

Development Goals, July 2005.29 Chapter 7, Philippines: Meeting Infrastructure Chal-

lenges, PPIAF, World Bank, December 2005.30 Corruption Index CPI 2006 Regional Results: Asia

Pacific. Transparency International, 2006.31 Executive Summary, Country Governance Assessment:

Philippines, ADB, 2005.32 Data for Maynilad and Manila Water based on 2004

data provided by WSS, World Bank. Comparative datafrom the Regulator for 2006 is shown in parentheses ( )for the most recent but not complete data set.

33 2005 data for Dagupan and Orani abstracted from Pro-vincial Towns Water Supply Program Phase III (ProjectProposal by the Local Water Utilities Administration forKfW Financing).

34 Source of data for 2005: Department of the Interiorand Local Government---Water Supply and SanitationProgram Management Office.

35 Human Development Report 2006, UNDP, p. 8.36 Access to Drinking Water and Sanitation in Asia:

Indicators and Implications, by Prof Bhanoji Rao,Background Paper for AWDO, July 2007.

Angat Dam and Reservoir


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Asian Water Development Outlook (AWDO) 2007AWDO is a new publication commissioned by the Asian Development Bank (ADB) in view ofthe increasing importance of water in the future development scenarios of the Asia and Pacificregion. In recent years, water has steadily gravitated toward the top of the national agendasof ADBs developing member countries. This is a desirable development because water isan essential requirement for human and ecosystems survival. In addition, water is a criticalcomponent for most development needs. Without adequate quantity and quality of water, it

will not be possible to ensure food, energy, or environmental security of nations.AWDO is aimed at Asian and Pacific leaders and policy makers and those interestedin understanding the complexities and dimensions of the current and the future waterproblems, and how these can be addressed successfully in policy terms. Its main objective isto raise awareness of water-related issues and to stimulate an informed debate on how bestto manage Asias water future. These are important and complex issues, and their timelymanagement can contribute to the achievement of all the water-associated MillenniumDevelopment Goals and beyond.

AWDO 2007is ADBs first attempt to make a forward-looking assessment of the possiblewater future for the most populous region of the world. It is now increasingly beingrecognized that water is likely to be a major critical resource issue of the world, and that thesocial, economic, and environmental future of Asia is likely to depend on how efficiently andequitably this resource will be managed in the coming years.

About the Asian Development BankADB aims to improve the welfare of the people in the Asia and Pacific region, particularlythe nearly 1.9 billion who live on less than $2 a day. Despite many success stories, the regionremains home to two thirds of the worlds poor. ADB is a multilateral development financeinstitution owned by 67 members, 48 from the region and 19 from other parts of the globe.ADBs vision is a region free of poverty. Its mission is to help its developing member countriesreduce poverty and improve their quality of life.

ADBs main instruments for helping its developing member countries are policy dialogue,loans, equity investments, guarantees, grants, and technical assistance. ADBs annual lendingvolume is typically about $6 billion, with technical assistance usually totaling about $180million a year.

ADBs headquarters is in Manila. It has 26 offices around the world and more than 2,000

employees from over 50 countries.

About the Asia-Pacific Water ForumThe Asia-Pacific Water Forum (APWF) provides countries and organisations in the regionwith a common platform and voice to accelerate the process of effective integration of waterresource management into the socioeconomic development process of Asia and the Pacific.The APWF is an independent, not-for-profit, non-partisan, non-political network.

The APWFs goal is to contribute to sustainable water management in order to achievethe targets of the MDGs in Asia and the Pacific by capitalizing on the regions diversity andrich history of experience in dealing with water as a fundamental part of human existence.Specifically, the APWF seeks to champion efforts aimed at boosting investments, buildingcapacity, and enhancing cooperation in the water sector at the regional level and beyond.

Asian Development Bank6 ADB Avenue, Mandaluyong City1550 Metro Manila, Philippineswww.adb.org/water

Asia-Pacific Water ForumSecretariat: Japan Water Forum (JWF)6th FI,1-8-1 Kojima Chiyoda-kuTokyo, Japan APAN 102-0083Tel +81 3 5212 1645Fax +81 3 5212 [email protected]/

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