Philippines: Water District Development Sector Project

The proposed Water District Development Sector Project (WDDSP), a US$50-million loan for approval
by Asian Development Bank (ADB) in November 2010, aims to assist the Philippine Government in its
effort to improve water supply and sanitation services for the urban population outside Metro Manila,
and to achieve the related Millennium Development Goal (MDG) targets. The project will support the
institutional development of Local Water Utilities Administration (LWUA) and contribute to water sector
reform. The project will also provide assistance to LWUA to implement pilot projects for sanitation and
support capacity-building for water districts. ADB approved a US$1.2 million project preparatory
technical assistance (PPTA) in September 2008; the PPTA report has yet to be posted on the ADB
website. Since 1975, ADB has supported the Philippine water sector by approving five loan projects for
LWUA for a total amount of US$178 million.

Background. Water districts are local government-
owned and -controlled corporate entities that
provide water supply and sanitation services within
their areas of responsibility, which may include one
or more cities and municipalities. The majority
(about 67%) of a total 500 water districts are
classified as small, while only about 3% are
categorized as large, and about 1% as very large. (v) Koronadal City Water District. Criteria for water
LWUA provides water districts with financial and
technical assistance, and serves as their regulator.
LWUA has established itself as the dominant lender
to the sector, focusing primarily on the larger and
more viable water districts. As a result, smaller water
districts serving poorer areas of the country have had
much less access to LWUA funding and have not
been able to enhance service coverage and quality. In
2004, Executive Order (EO) 279 was approved to
provide for comprehensive reform of the financing
policies of the water supply sector and to streamline
LWUAs organizational structure. EO 279 mandates
that LWUA focus its lending operations and
assistance on less creditworthy water districts, with
the aim of graduating them to creditworthy status.
Creditworthy water districts are expected to access
the commercial financial market for funding.
Main issues for water districts. Issues identified are:
(i) the high number of small utilities with low
efficiency, (ii) lack of capacity for project
development and implementation, (iii) low service
quality (e.g., interrupted supply, uncertain water
quality, high level of nonrevenue water, low pressure,
low coverage), (iv) need to enhance financial
performance, and (v) major investment needed for
infrastructure expansion and rehabilitation. While
water districts are also mandated to provide
sanitation in their service areas, there are only a few
examples where this is practiced; this is mainly due
to (i) lack of cost recovery for sanitation,
(ii) institutional fragmentation, and (iii) lack of public
awareness and willingness to pay for sanitation.
WDDSP pilot water districts. These include:
(i) Metro La Union Water District; (ii) Quezon
Metro Water District; (iii) Legazpi City Water
Districte; (iv) Leyte Metro Water District;
district selection was based on (i) demand for
improved water supply and sanitation; (ii) fiscal
capacity, financial management, commitment to
reform, and governance; (iii) focus on serving low-
income communities; (iv) well-defined investment
needs; and (v) project preparedness.
TOR of PPTA consultants. The objective of the
PPTA is to design the WDDSP following a
consultative process. The consultants are tasked with
the following:
Develop and recommend mechanisms for public
consultation and community participation in
project planning; operation and maintenance;
project implementation and management,
particularly in relation to levels of service
performance; tariffs; and environmental protection.
Assess whether there is a role for NGOs in project
activities.
Carry out public consultations that include NGOs.
Hold discussions with LWUA, water districts,
related government agencies, consumer groups,
and other stakeholders to identify key issues and
obtain their views on capacity building needs.
Develop a capacity building program, outline
training programs and recommended interventions,
and estimate related costs.

May 2010 Public Services International Asia-Pacific Regional Organisation (PSI-APRO)

Initial Poverty and Social Assessment (IPSA). An
IPSA, also prepared during project preparation,
contains the following:
The main stakeholders are the water users, water
districts, local governments and LWUA.
There will be several public consultation meetings
over the course of the project preparation (e.g.,
workshops, seminars).
A participation plan needs to be prepared.
Employment opportunities will result from
construction activities financed by the project and
from economic growth facilitated by improved
water supply.
Clauses on core labor standards will be included
into all the bidding documents.
Labor retrenchment was not flagged as an issue.
AGWWAS-ADB dialogue on WDDSP. PSI affiliate
AGWWAS (Alliance of Government Workers in the
Water Sector) initiated discussions on WDDSP with
Project Team Leader Rudolf Frauendorfer in
September 2009. Two of the pilot water districts (La
Union, Koronadal) have existing unions which are
affiliates of AGWWAS. Follow-up meetings were
held at ADB Headquarters in Manila in December
2009 and March 2010. AGWWAS plans to organize
a consultation forum on WDDSP in mid-2010, in
cooperation with ADB. In its dialogue with ADB,
AGWWAS presented their concerns on, among
others:
PSI/AGWWAS' program on building Quality
Water Services through Public-Public Partnership
(PUPs).
Privatization of water services does not ensure safe,
clean, reliable, affordable water-for-all nor achieve
MDG targets.
Need for more consultation with workers unions
on WDDSP, including on capacity-building
programs.
AGWWAS project on Capacity Building of
Water District Workers through Performance
Benchmarking.
PSI/AGWWAS engagement on ADBs water policy.
Aside from WDDSP, PSI/AGWWAS have engaged
ADB on several fronts on the Banks 2001 Water for
All policy:
Nov 2005: Submitted comments on ADBs Water
Policy Review and raised issues on the human right
to water, failure of private sector participation in
water service delivery, and the need to promote
PUPs to meet MDG targets in water and sanitation
services.
May 2007: Organized a forum on ADBs Water
Policy at ADB Annual Meeting in Kyoto (Japan),
and at a parallel Peoples Forum on ADB; in these
public forums, PSI/AGWWAS presented the role
of workers as major stakeholders in the water
sector and harmful impacts of water privatization
on workers.
Dec 2007: Organized a forum on "World Water
Challenges: Japanese Standpoints" at the 1st Asia-Pacific
Water Summit organized by ADB and Asia-Pacific
Water Forum in Oita (Japan) in which ongoing
campaigns on water privatization, strengthening
public water systems and PUPs were highlighted.
PSI water affiliates also contributed to an NGO
publication released in Oita by the Reclaiming Public
Water network on different public management
models in water in Asia-Pacific region.
FOR MORE INFORMATION:
http://www.adb.org/Projects/project.asp?id=41665
http://www.adb.org/water/policy/psi-comments.pdf
http://www.adb.org/Water/policy/AGWWAS-
comments.pdf
http://www.adb.org/AnnualMeeting/2007/ngoprogra
m-details.asp#cso-forum
http://www.apwf.org/project/openevents.html
http://www.apwf.org/archive/documents/openevent/
message/No.45.pdf
CONTACT PSI-APRO:
Level 4 Wisma AUPE,
295 Upper Paya Lebar Road,
Singapore 534929
Email: lakshmi.vaidhiyanathan@world-psi.org
Website: www.world-psi.org