Water Supply And Sanitation In The Philippines

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Public Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedPublic Disclosure AuthorizedService Delivery AssessmentFebruary 2015100894Water Supplyand Sanitationin the PhilippinesTurning Finance intoServices for the Future

This report is the product of extensive collaboration and information sharing between many government agencies, nongovernment organizations and private sector. The core team of the National Economic Development Agency (NEDA) hasbeen a key partner with the Water and Sanitation Program of the World Bank in facilitating the Service Delivery Assessment.The authors acknowledge the valuable contributions of all other agencies that participated, specifically the Departmentof Budget and Management, Department of Health, Department of Interior and Local Government, Department of PublicWorks and Highways, Department of Social Welfare and Development, Development Bank of the Philippines, Land Bank ofthe Philippines, Local Water Utilities Administration, Metropolitan Waterworks and Sewerage System, the National WaterResources Board as well as other government agencies, development partners and international and local NGOs active inthe sector.The Task Team Leader for the Service Delivery Assessment (SDA) in East Asia and the Pacific is Susanna Smets. Thefollowing World Bank staff and consultants have provided valuable contributions to the service delivery assessment processand report: Rosario Aurora L. Villaluna and U-Primo E. Rodriguez, Edkarl Galing, Aileen Castro, and Almud Weitz. Thanks goto World Bank staff Sudipto Sarkar, Sector Leader, and Ousmane Dione, Practice Manager, who peer reviewed the report.The SDA was carried out under the guidance of the World Bank’s Wa ter and Sanitation Program and local partners. Thisregional work, implemented through a country-led process, draws on the experience of water and sanitation SDAs conduct edin more than 40 countries in Africa, Latin America, and South Asia.An SDA analysis has three main components: a review of past water and sanitation access, a costing model to as sess theadequacy of future investments, and a scorecard that allows diagnosis of bottlenecks along the service de livery pathways.SDA’s contribution is to answer not only whether past trends and future finance are sufficient to meet sector targets forinfrastructure and hardware but also what specific issues need to be addressed to ensure that fi nance is effectively turned intoaccelerated and sustainable water supply and sanitation service delivery.The Water and Sanitation Program is a multi-donor partnership, part of the World Bank Group’s Water Global Practice,supporting poor people in obtaining affordable, safe, and sustainable access to water and sanitation services. WSP’sdonors include Australia, Austria, Denmark, Finland, France, the Bill & Melinda Gates Foundation, Luxembourg, Netherlands,Norway, Sweden, Switzerland, United Kingdom, United States, and the World Bank.WSP reports are published to communicate the results of WSP’s work to the development community. Some sources citedmay be informal documents that are not readily available.The findings, interpretations, and conclusions expressed herein are entirely those of the author and should not be attributedto the World Bank or its affiliated organizations, or to members of the Board of Executive Directors of the World Bank orthe governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Theboundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment onthe part of the World Bank Group concerning the legal status of any territory or the endorsement or acceptance of suchboundaries.The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent toworldbankwater@worldbank.org. WSP encourages the dissemination of its work and will normally grant permission promptly.For more information, please visit www.wsp.org. 2015 International Bank for Reconstruction and Development/The World Bank

Water Supply and Sanitationin the PhilippinesService Delivery AssessmentTurning Finance into Services for the Future

Strategic OverviewData from the UNICEF-WHO Joint Monitoring Programmeindicate that the Philippines is on track to meet itsMillennium Development Goal targets for water supplyand sanitation.1 However, with a population of more than94 million in 2011, there are still some 7.5 million Filipinoswithout access to improved water supply facilities and 24million without access to improved sanitation. Roughly 8.3million people still defecate in the open and just 3% areconnected to centralized sewerage systems.Sector stakeholders are looking beyond the MDG attainment,and sector roadmaps for water supply and sanitation setout a vision of universal coverage by 2025 for water supply2and 2028 for sanitation.3 Furthermore, the Department ofHealth National Sanitation Policy issued in 2009 calls for zeroopen defecation in all barangays4 by 2022. Without politicalcommitment, improved institutional arrangements, increasedfunding for the sector and the adoption of viable operationalstrategies that emphasize sustainable user outcomes andequity, it is unlikely that these ambitious targets will be met.To achieve the country’s vision of inclusive growth andpoverty reduction,5 improved water supply and sanitationservices are essential. In urban growth centers, reliableaccess to adequate water for domestic, commercial andother uses is vital to sustain economic activities. For thecountry as a whole, sustainable access to adequate waterand sanitation services is needed to protect health andreduce the costs associated with water- and sanitationrelated illness, malnutrition and losses in productivity.To achieve government targets for 2025 for water supply,the additional population requiring access is estimated at2.75 million per year with a total investment requirement ofUS 838 million per year. For sanitation to achieve universalcoverage by 2028, the additional population requiringaccess annually is estimated at 3.0 million with a totalinvestment requirement of US 619 million per year.The obstacles to achieving universal, sustainable accessto improved water supply and sanitation services areprimarily institutional and financial in nature. In particular,the sector has suffered from a lack of leadership and poorco-ordination among the many agencies involved in serviceprovision. Until recently there has been no designated leadagency for the sector, which complicates planning andoperations. Regulation remains fragmented and is generallyweak, except in the case of the large concessions in Manila,government-owned water utilities (districts) and for someprivate utilities/associations that have a license. In particular,local governments, who self-regulate their own watersystems, are not held accountable for meeting performancetargets either in terms of service quality or coverage. Thelimited capacity of many local service providers contributesto the problem to sustain and expand service beyond theurbanised center of municipalities and cities.Joint Monitoring Programme of the WHO-UNICEF, 2013Philippine Water Supply Sector Roadmap, 2nd Edition, 20103Philippine Sustainable Sanitation Roadmap, April 20104The barangay is the smallest unit of governance in the Philippines. The country has 41,994 barangays nationwide.5Societal goal of the Philippine Development Plan 2010 to 201612ivWater Supply and Sanitation in the Philippines

The water and sanitation sector is not given a high priority onthe national government agenda and annual allocations areinadequate to improve and expand access to services for theunderserved poor. Only the urban water supply sub-sectorenjoys a near-adequate level of funding, but the bulk of theresources are reserved for Metro Manila; funding for otherurban centers (both capital and operational) is inadequate,as it is for both water supply and sanitation in rural areas.The inequalities in access are starkest and most persistentfor rural areas: 93% of the richest rural households haveaccess to improved sanitation, as compared to only 27%among the poorest quintile; and for water supply, 69% ofthe richest quintile enjoys piped house connections, whileonly 4% of the poorest quintile does, for other improvedwater sources the richest have near universal access, andthe poorest quintile remains low at 66%.6Rural sanitation remains the subsector where accessremains lowest, progress is expected to rely heavily onhousehold self-investments, and government financing forcommunications campaigns, operational expenses andtargeted support for the poor require scale-up to reach theambitious goal of the elimination of open defecation in thenext decade. The urban sanitation sector, with a high levelof access to improved and shared on-site facilities, is ata critical junction where city-level investments in treatmentfacilities and septage management are to be prioritized,alongside adequate institutional and regulatory frameworks.6While the challenges are many, the prospects for progressare improving as government has signalled its high-levelcommitment to rationalize institutional arrangements for thesector. It intends to a) clarify leadership and coordinationthrough appointing a lead department for the water andsanitation sector, b) separating institutional responsibilitiesfor service provision through a utility approach, and c)consolidating regulation, presumably under a futureNational Water Resources Management Office, whileduring transition expanding the mandate of the NationalWater Resources Board. The ongoing institutional reviewis expected to help identify which organization would bemost suitable to host the “lead department”. The proposednew arrangements will help to establish a better enablingenvironment for operational improvements within each ofthe four sub-sectors. While Philippine government banksand the Philippines Local Water Utilities Administrationagencies already offer attractive products for water supplyfinancing, further innovations and leveraging commercialfinance, are expected to help reduce sector financing gapsin order to reach the universal access goals.This Service Delivery Assessment was a multi-stakeholderprocess in cooperation with government agencies inthe Philippines. Priority action points emerging from theanalysis are summarised on the next page.JMP/UNICEF Equity trees, special tabulation based on NDHS 2008.Service Delivery Assessmentv

Sector-Wide: Institutions, Financing and Monitoring Implement new institutional arrangements including an expanded role for the National Water Resources Board asthe sector regulator and its transition to a National Water Resources Management Office, and the establishment ofa dedicated Water and Sanitation Unit as a lead sector agency (hosting department/agency to be identified throughinstitutional review). Improve coordination mechanisms between actors at provincial and municipal levels Establish a national capacity building program, especially to address rural subsectors, by consolidating variousinitiatives already in place including the regional capacity building hubs established under DILG Harmonise data collection systems, standardise the definition of terms and develop a coherent sector monitoringframework Establish a collective platform for a multi-stakeholder review process to monitor subsector performance (forexample Joint Annual Sector Reviews) Increase sector investment, particularly in rural areas where large disparities exist between rich and poor, as wellas funding for “software”, specifically for rural sanitation programs Align budgeting to support the implementation of long-term strategies and investment plans by public serviceproviders, and translate these into annual work plans and budget Introduce key results areas for local water supply and sanitation services to increase local accountability for serviceimprovements and incentivize LGUs to access additional funding sources including matching grants from nationalgovernment and private sector sources Create a national account for water and sanitation, disaggregated between urban and rural to enable monitoring offinancial flows towards the subsectorsPriority Actions for Rural Water Supply Enable economies of scale and financial viability in service provision by encouraging the consolidation of smallservice providers Formalize the management of small piped schemes and introduce light-handed regulation including the use ofperformance contracts to drive service quality and reliability and incentivize service provision to the poor Expand the provision of technical support to small providers, combined with business planning services to facilitateaccess to finance for system expansion Operationalise policies for full cost recovery for rural scheme operation to reduce the investment gap and improvesustainability of services Enhance rural water supply improvements (piped schemes) via other poverty alleviation programs such as theBottom-Up Budgeting Process and the National Community Development Driven program Develop systems for management support to schemes operated by community-based organizations, throughpartnerships with private sector and water districtsviWater Supply and Sanitation in the Philippines

Priority Actions for Urban Water Supply Establish a comprehensive regulatory framework covering all types of service providers, including local governmentrun schemes, water districts plus private and independent operators, both large and small, and consolidate theseroles gradually within a national regulator Develop a financing policy and strategy, linked with a graduation policy for utilities based on creditworthiness, inorder to attract commercial finance, and accelerate access to concessional finance to support the expansion ofservices Strengthen the capacity of local government to contract, manage and oversee private sector participationmodalities, in order to leverage private sector investment, use professional capabilities of the private sector andencourage the consolidation of small-scale service providers Introduce multi-stakeholder, performance-based planning and monitoring including a system of annual subsectorreviews Build capacity and increase the accountability of LGUs for improving the quality and sustainability of serviceprovision, using performance benchmarks and an incentive and/or penalty systemPriority Actions for Rural Sanitation and Hygiene Operationalize the Zero Open Defecation program, within the framework of an equitable rural sanitation and hygienepromotion policy, a capacity building plan, an implementation plan and a monitoring system Develop a financing strategy for the program that includes public investments to generate household demand forsanitation, output-based subsidies to the very poor and collective incentives for barangays and LGUs in achievingZero Open Defecation Strengthen rural sanitation promotion via other poverty alleviation programmes, such as the Bottom-Up BudgetingProcess, the National Community Development Driven programme and target poor households through theNational Cash Transfer Program (4Ps)Priority Actions for Urban Sanitation and Hygiene Establish institutional arrangements to facilitate implementation of the National Sewerage and Septage ManagementProgram (NSSMP) and increase Local Government and Water District accountability for the coverage and quality ofurban sanitation services Develop a sanitation investment framework and mandate local governments to adopt City Sanitation Plansincorporating measures to improve cost recovery and extend affordable services to the poor Adopt a cost-effective approach to investment whereby the gradual expansion of sewerage is complemented bymeasures to maximize connections and to improve fecal sludge management, since most households will continueusing septic tanks for the foreseeable future Build local capacity to enable successful planning and implementation of the NSSMPService Delivery Assessmentvii

ContentsStrategic Overview .ivContents . viiiAbbreviations and Acronyms.ix1.2.3.4.5.6.7.8.9.10.11.Introduction. 1Sector Overview: Coverage, Trends and National Goals. 3Reform Context. 8Institutional Framework. 11Financing and its Implementation. 14Sector Monitoring and Evaluation. 16Subsector: Rural Water Supply. 18Subsector: Urban Water Supply. 22Subsector: Rural Sanitation and Hygiene. 26Subsector: Urban Sanitation and Hygiene. 29Conclusion. 33Annex 1: Scorecard and Explanation . 38Annex 2: Key Assumption and Inputs for Costing Analysis . 67Annex 3: Comparative Explanation of SDA costing . 74viiiWater Supply and Sanitation in the Philippines

Abbreviations and SINAPCNAWASANCDDPNCRNDHSNEDANHTS-PRNSOAnnual Poverty Indicators SurveyBuild Operate TransferCo-operative Development AuthorityDepartment of Agrarian ReformDepartment of Budget and ManagementDepartment of Interior and Local GovernmentDepartment of FinanceDepartment of HealthDepartment of Public Works and HighwaysDepartment of Social Welfare and DevelopmentExecutive OrderGovernment-owned and Controlled CorporationInfrastructure CommitteeUNICEF-WHO Joint Monitoring ProgrammeKapit-Bisig Laban sa Kahirapan (Comprehensive, Integrated Delivery of Social Services)Land Bank of the PhilippinesLocal Government CodeLocal Government UnitLocal Water Utilities AdministrationMunicipal Development FundMillennium Development GoalMetropolitan Waterworks and Sewerage SystemManila Water Company Incorpo

accelerated and sustainable water supply and sanitation service delivery. The Water and Sanitation Program is a multi-donor partnership, part of the World Bank Group’s Water Global Practice, supporting poor people in obtaining affordable, safe, and sustainable access to water and sanitation services.

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