AN UPDATE

ON

WATER SUPPLY & SANITATION

IN THE PHILIPPINES
A Technical Presentation as Resource Speaker

in the Philippines Society of Plumbing Engineers (PSPE), Inc.

2nd Luzon Regional Conference and Trade Exhibit

held on October 17-18, 2008 at Hotel Supreme Convention Plaza.
Magsaysay Avenue, Baguio City
Compiled by:
Engr. Virgilio D. Simbulan
PSPE ID #0003, Fellow NAMPAP

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

Overview

High connection fees hinder the water

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

Overview

Metro Manila Data on Water Supply

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

OVERVIEW

ZONES

PROVINCE OF
BULACAN

PROVINCE OF
RIZAL
MANILA
BAY

LAGUNA DE
BAY
PROVINCE OF
CAVITE

Overview

Metro Manila Data on Water Supply

1. Continuity of Supply (2007)

East Zone
West Zone

Manila Water
Maynilad

%
98%
42%

2. Average Residential Water Use - - 175

l/c/d
3. Average Urban Water Tariff
(PhP/cu
m)
East Zone

Manila Water

PhP15.50

West Zone

Maynilad

PhP21.60

ACCESS TO WATER AND

SANITATION

The extension of coverage has not been

kept pace with the growing population in
the last few decades.
According to the Joint Monitoring Program
(JMP) for Water Supply and Sanitation of
UNICEF & WHO, access to an improved
source of water supply actually decreased
from 87% in 1990 to 85% in 2004.
Sanitation has long been regarded as a
private responsibility, resulting in almost no
connection to a sewerage system.

Access to Water and Sanitation

Our government intends to reach 92-96%

of potable water coverage by 2010.

ACCESS

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

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

According to their respective websites,

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

In 2004 sample of 45 service providers with

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

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

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

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

 Water Use
In 2000, as a whole 28.52 billion m 3 of water
were withdrawn from various sources, of
which 74% were used for agricultural
purposes.
Industry used another 9%, leaving 17% or
4.8 billion m3 for domestic consumption,
resulting in an average water production of
175 liters per day per capita.
In 2004 sample of 45 water service
providers in the country, the NWRB found
an average consumption of 118 l/d/c

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

PASIG RIVER, ONE OF THE WORLDS MOST POLLUTED

 HISTORY OF WATER SUPPLY & SANITATION

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

 Marcos Administration (1965-1986)

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

 Marcos Administration (1965-86)

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

 Marcos Administration (1965-1986)

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

 Marcos Administration (1965-1986)

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

 Aquino Administration (1986-1992)

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

 Aquino Administration (1986-1992)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

 Ramos Administration (1992-1998)

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

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

 Arroyo Administration (2001-

PGMA continued to support private

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

 Arroyo Administration (2001 Clean Water Act

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

 Arroyo Administration (2001-

The MTPDP 2004-2010

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

 Responsibility for Water Supply & Sanitation

Administrative Divisions
The Local Government Code of 1991 divided the
Philippines into three administrative
provinces, municipalities, and barangays.

levels:

 Responsibility for Water Supply & Sanitation

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

 Responsibility for Water Supply & Sanitation

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

 Responsibility for Water Supply & Sanitation

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

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

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

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

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

 Financial Aspects
Tariffs
The fragmented sector led to different tariff
structures and levels according to the
respective management model.
The connection fees, which are charged in
most cases, are so high that they often
impede
new
connections
for
poor
consumers.
In 2004, the NWRB indicates an average
tariff of P13.65 /cu. m while the average
connection fee was P2,200.

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

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

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

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

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

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

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

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

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

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

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

 Manila Third Sewerage Project

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

 World Bank Project

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

 World Bank Project

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

 World Bank Project

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

 World Bank Project

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

 World Bank Project

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

END OF PRESENTATION

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

Thank You