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 PROVINCE OF BULACAN

• ZONES

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 Manila Water 98%
West Zone Maynilad 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 world’s 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 m3 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 WORLD’S MOST POLLUTED RIVERS

■ 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 Nation’s
International Drinking Water Supply and
Sanitation Decade (1980-1989), the
Integrated Water Supply Program 1980-
2000 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 non-
revenue 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.
• PGMA’s 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 levels:
provinces, municipalities, and barangays.
■ 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 small-
scale 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 sector’s 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