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Case 2 - Efficiency Gains - Manila Water PDF
Case 2 - Efficiency Gains - Manila Water PDF
Case Study #2
Efficiency Gains: the Case of Water Services in Manila
by Mathieu Verougstraete and Isabelle Enders (April 2014)
This case study considers the question of whether efficiency gains can be
achieved by introducing private operators in sectors traditionally managed by
public entities.
EFFICIENCY GAINS
To assess whether efficiency gains have been
realized by adopting a PPP model, there are
two key questions: has performance improved
and have tariffs declined following the entry
of a private operator? These two questions are
own revenues from water tariffs, but have to tackled in turn below.
75 per cent pay for operating costs, investments plus a
of homes in concession fee to the government (mainly to Performance Level
service the historical debt of MWSS).
the eastern
half of Manila As the main reason for privatizing the
At the same time, they were responsible for operation of water services was to improve
lacked 24-hour expanding the network to meet ambitious the quality of water services, it is worth
service and performance targets, including: considering whether performance has
only 8 per cent improved since the concessions were
• Elevating water pressure to 16 pounds per
had sewerage square inch
awarded. This can be measured via different
connection indicators.
• Uninterrupted 24-hour service within five
years Water service
• Immediately complying with Philippine The service coverage improved considerably
national drinking water safety and water as both concessionaires increased
effluent standards dramatically the number of water service
• Providing universal water coverage within connections (the number of connections
10 years and 83 percent sewerage and almost tripled between 1997 and 2013).4
sanitation coverage within 25 years.
Today, Manila Water provides 24-hour
To achieve these targets, it was estimated that service to 99 per cent of the population in
US$7 billion of investment would be needed its service area and approximately 97.8 per
over the contract period. cent of Maynilad customers enjoy 24-hour
uninterrupted water supply.5
Under the concession agreement, the
Figure 1 : Gains in service continuity in Manila6
ownership of the asset base was retained by
MWSS and all additional assets invested by
the concessionaires will be turned over to
MWSS at the end of the concession period
(a compensation mechanism was foreseen in
that regard).2
Tariff procedures
In the case of the Manila Water project, the Despite these issues, it is fair to say that
argument is that MWSS would most likely this case study confirms that efficiency gains
not have been able to achieve the level of can be triggered through the introduction
service provided by the two concessionaires of private operators. This conclusion is also
without at least increasing the tariff to the in line with empirical studies from other
same level (or receiving public subsidies). countries.
One of the reasons is that the productivity
level of MWSS was below the one reached
by the concessionaires. For example, before End Notes
the introduction of private operators, MWSS 1
Infrastructure Advisory Services (2010): Philippines: Manila
was overstaffed with 13 employees per 1,000 Water. Washington, DC: IFC.
connections, which was two to five times more 2,17
Rivera, V. C. Jr. (2011): The business of water: going the corporate
than similar water utilities in the region.16 way the case of Manila water. Water Practice & Technology Vol 6 No 4. IWA
The private concessionaires managed to Publishing.
12,14
Wu, X. and Malaluan, N. A. (2008) : A Tale of Two Conces-
sionaires: A Natural Experiment of Water Privatisation in Metro Manila. Urban
Studies. 45(1) pp. 207–229.
13
Guasch, J.L. (2004): Granting and Renegotiating
Infrastructure Concessions. Doing it right. Washington, DC: The World Bank.
14
Source: Maynilad website accessed on April 2014
18
For further information please see Kim, J.-H.and J. Kim
(2011): Case Studies from the Republic of Korea Attachment: Global
Country Comparison of Public–Private Partnership, KDI and ADB
Picture on page 2: Stefan Ray (from flickr website)
Please note that this case study has been issued without formal editing