million
Challenge
Over the past 15 years, Manila’s growing urban population has demanded a significant increase in water supply and sanitation services and facilities. Before the 1997 Manila water concession, only 6.3 million of the city’s 11.8 million residents had water service connections. Only 67% of households had water available for 24 hours per day, and only 13% had adequate sewer and sanitation coverage.
More investment was needed to provide affordable and efficient water service. The local concessionaires – the Manila Water Co. Inc. (MWCI) and Maynilad Water Services Inc. (MWSI) – needed to upgrade their piped water supply and sanitation coverage due to expanding franchise areas. The proliferation of informal households and lack of institutional preparedness in implementing new and complex water projects exacerbated the problem.
To address the challenge, the IBRD set out to promote greater private sector participation to improve the sector.
Approach
IBRD’s involvement in water concessions was based on the rationale that the private sector can play an important role in delivering services. Private utilities in the Philippines remain a major provider of formal water/sanitation services in urban areas, particularly in metro Manila.
MWCI and IBRD implemented the $57 million Manila Second Sewerage Project to improve the quality of wastewater and septage management service in Manila (from 2001 to 2005) and expand MWCI’s sewerage and septage management program.
The Manila Third Sewerage Project (MTSP) is a public-private partnership (PPP)-led wastewater project to extend improvements in sewerage and sanitation across the East Zone concession area, for the period 2005-2010. Assisted by a $64 million loan from the IBRD, the MTSP has enhanced septage management, piloted a combined sewer-drainage system approach and promoted advocacy campaigns on the negative environmental impacts of wastewater.
The Bank also supported development of a transparent regulatory framework for the Metropolitan Waterworks and Sewerage System (MWSS) Regulatory Office to achieve a balance between investor concerns and consumer welfare.
The IBRD-assisted Water Districts Development Project (WDDP) extended a US$2.5 million loan for technical assistance designed to pilot and field-test a public performance audit system in the MWSS in the post-privatization phase. To improve the regulation of water supply, the project provided statistical information to local politicians, consumers and potential private sector partners on the relative performance of WSS utilities.
An International Finance Corporation (IFC)-backed $218 million investment with the MWCI for the period 2002–2005 focused on the concessionaire’s supply expansion and water sources development. Similarly, another loan under IFC (MWC II) helped MWCI provide lower-income households with access to piped water at a rate sensitive to their capacities to pay.
The Global Environment Facility (GEF) extended $5 million, under the GEF Third Manila Sewerage Project, to assist the government in streamlining administrative practices and legislation to generate private investment in the wastewater sector.
Results
Through capital infusion, debt restructuring and infrastructure rehabilitation, both concessionaires managed to accelerate and enhance supply across their franchise areas.
MWCI posted a dramatic increase in 24-hour water supply, to 99 percent in 2009 from 26 percent in 1997. Its aggressive civil works and pipe-laying endeavors almost doubled the number of people served with potable water, to 6.1 million in 2009 from 3.1 million in 1997. Water previously lost to leaks and pilferage was used to supply MWCI’s expanding coverage area.
By expanding the provision of reliable and affordable services, the project has benefited some 107,000 poor households since its inception in 1997. Furthermore, it established customer facilities to encourage communities to discuss and participate in the process of expanding services, and to resolve their concerns.
MWCI’s investment program reduced the risk of sicknesses from exposure to sewage contamination, which is estimated to have reduced mortality by 20 percent. The project’s focus on expanding coverage through alternative arrangements for connection and payment (such as deferred payment schemes and early payment discounts) also amplified its positive impact in poor urban communities.
The second supplier, MWSI, encountered financial difficulties in 2000-2001 that affected its operations. It was unable to increase its sewerage coverage due to the deferment of targets in line with its rehabilitation plan. Nevertheless, it developed capacity in managing and maintaining septage collection and treatment projects.
Toward the Future
In line with a Philippines Supreme Court ruling in December 2008, which ordered the clean-up of Manila Bay, both Manila concessionaires are obliged to accelerate implementation of proposed sewerage projects and wastewater treatment initiatives. Accordingly, MWCI and MWSI have sought extensions of their concession periods to meet sewerage and wastewater treatment targets.
Because of the huge capital investment requirement under the program, the MWSS granted MWCI a 15-year extension of its contract to 2037. Similarly, MWSI has requested the extension of its contract. Both MWCI and MWSI requested that IBRD extend a new financing window to expand their respective initiatives. In response, IBRD is preparing a programmatic lending facility centered on sewerage and wastewater treatment.
The IBRD, through the IFC, is expanding its advisory services in light of the MWSS’ successful privatization with the MWCI.
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