lc manila water

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IED

Learning Curves

ADBAssistancetoWaterSupply

ServicesinMetroManila

March2009

Thisreportpresentsthefindings,lessons,andrecommendationsofanindependentassessmentofmorethanthreedecadesofpartnershipexperiencebetweenADBandthedevelopmentofwatersupplyservicesin

MetropolitanManila.

Theevaluation1foundthatthevalueadditionofADBassistancetoManilawaterserviceswaslargelylimitedtoaugmentingrawwatersupplytotheMetropolitanWaterworksandSewerageSystemwatertreatmentand

supplysystem.

Background

MetroManilaswatersupplyisentirelydependent

uponasinglesourceofrawwater,theAngatReservoir,

locatedabout30kilometersnortheastofManila.It

providesabout98%ofthemetropolis watersupplyor

4millioncubicmetersperday.

FollowingtheWaterCrisisActof1995,theprocess

toallowforprivatesectorparticipationculminatedon

1August1997whentheoperationalandinvestment

functionsofMetropolitanWaterworksandSewerage

System(MWSS)inwaterandsewerageweretrans

ferredtoManilaWaterCompanyandMayniladWater

Services,Inc.undertwoseparateconcessionagreements.Theconcessionagreementstransferthetenancy

andoperationalfixedassetsandexclusiverightsto

produceandtreatrawwater;transport,distribute,and

marketpotablewater;andcollect,transport,treat,

dispose,andeventuallyreutilizewastewater,including

industrialeffluentdischargedintotheseweragesystem,

totheconcessionaires.

TheunderlyingobjectiveofADBassistancetothe

waterservicessectorinMetroManilahasbeenexpand

ingthewaterandseweragesystemsandincreasingthe

availabilityofwaterbyprovidingnewinfrastructureandrehabilitatingoutdatedunnecessaryinfrastructure.

Nineloans,includingonetechnicalassistanceloan,

havebeenapprovedsince1974.Theloanswereall

executedandimplementedbytheMWSSandguaran

teedbytheGovernmentofthePhilippines.

Theevaluationstudyassessestheperformanceof

ADBassistancetotheGovernmentforimprovingwater

supplyservicesinMetroManilaandtodrawlessons

forfuturepartnershipoperations.Threeprojectswere

casestudiesforthisevaluationreport:theAngatWaterSupplyOptimizationProject,theManilaSouthWaterDistributionProject,andtheUmirayAngatTransbasinProject.SummaryofFindings

Overall,ADBsassistancetoimprovingwatersupply

servicesinMetroManilaisassessedas partly

successful.

ADBfinancedprojectsforManilaswatersupply

havesuccessfullycontributedtotheconstructionof

majorinfrastructurecomponentsofthewater

conveyancesystemfromtheAngatReservoir,whichare

crucialforsecuringwatersupplyfortheMetroManila

area.However,MetroManilaisstilldependentona

singlesourceofrawwater.TheADBMWSSpartnership

haslimitedsuccessindevelopingalternativesourcesof

rawwater,althoughsupportfromADBandother

developmentpartnershaveofferedtodevelopnew

watersources.Thepartnershipinthepastalsodidnot

includethesanitationsubsector.Althoughseweragein

MetroManilahadalwaysbeenfinancedprimarilyby

theWorldBank,ADBfinancedasmallprojectforwater

sewerage($42.8million).

ADBsroleinassistingMWSSinthedesignandimplementationofwaterconcessions(alsocalled

privatization)waslimited.However,ADBassistanceto

MWSSforregulatorycapacitybuildingwasdeemed

useful.ADBfinancedprojectcomponentsaimedat

reducingnonrevenuewater(NRW),whichbecamethe

responsibilityoftheconcessionairesafterprivatesector

participation,weregenerallysuccessfulwithManila

WaterCompanyintheEastZoneandunsuccessfulwith

MayniladWaterServicesintheWestZone.

Independent Evaluation Department

Asian Development Bank

6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines

Tel +63 2 632 4100; Fax +63 2 636 2161; [email protected]; www.adb.org/evaluation/
http://en.wikipedia.org/wiki/Metro_Manilahttp://en.wikipedia.org/wiki/Metro_Manilahttp://en.wikipedia.org/wiki/Metro_Manilahttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.mwss.gov.ph/http://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.adb.org/Documents/Periodicals/ADB_Review/2003/vol35_1/private_sector.asphttp://www.adb.org/Documents/Periodicals/ADB_Review/2003/vol35_1/private_sector.asphttp://www.adb.org/Documents/Periodicals/ADB_Review/2003/vol35_1/private_sector.asphttp://www.adb.org/Documents/Periodicals/ADB_Review/2003/vol35_1/private_sector.asphttp://www.adb.org/Documents/Periodicals/ADB_Review/2003/vol35_1/private_sector.asphttp://www.manilawater.com/http://www.manilawater.com/http://www.manilawater.com/http://www.manilawater.com/http://www.manilawater.com/http://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.gov.ph/http://www.gov.ph/http://www.gov.ph/http://www.gov.ph/http://www.gov.ph/http://www.gov.ph/http://www.gov.ph/http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=23170http://www.adb.org/projects/project.asp?id=23170http://www.adb.org/projects/project.asp?id=23170http://www.adb.org/projects/project.asp?id=23170http://www.adb.org/projects/project.asp?id=23170http://www.worldbank.org/http://www.worldbank.org/http://www.worldbank.org/http://www.adb.org/water/topics/non-revenue/default.asphttp://www.adb.org/water/topics/non-revenue/default.asphttp://www.adb.org/water/topics/non-revenue/default.asphttp://www.adb.org/water/topics/non-revenue/default.asphttp://www.adb.org/water/topics/non-revenue/default.asphttp://www.adb.org/water/topics/non-revenue/default.asphttp://www.worldbank.org/http://www.adb.org/projects/project.asp?id=23170http://www.adb.org/projects/project.asp?id=23170http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=24109http://www.adb.org/projects/project.asp?id=22229http://www.adb.org/projects/project.asp?id=22229http://www.gov.ph/http://www.adb.org/water/actions/country.asp?code=PHIhttp://www.adb.org/water/actions/country.asp?code=PHIhttp://www.mayniladwater.com.ph/index.asphttp://www.mayniladwater.com.ph/index.asphttp://www.manilawater.com/http://www.adb.org/Documents/Periodicals/ADB_Review/2003/vol35_1/private_sector.asphttp://www.geocities.com/green_juris/watercrisis.htmlhttp://www.mwss.gov.ph/http://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://en.wikipedia.org/wiki/Metro_Manila

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MWSSchronicallysufferedfromtwooperational

problems:highlevelsofNRWandaccountsreceivables.

Despitethisinstitutionalweakness,ADBfunded

projectscarriedextremelyoptimisticassumptions,

contributingtothepoorperformanceoftheManila

SouthProject.

AlthoughADBdidnotplayamajorroleinthe

strategydevelopmentallowingprivatesectorparticipation,theprojectsincludedinthisevaluation

studyalsobenefitedtheprivateconcessionaires

throughtheprovisionofinfrastructuresupportingthe

growthoftheirbusinessesandachievementofthe

performancetargetssetoutintheconcession

agreements.

Lessons

Somelessonsthatwereidentifiedinclude:

Projectdesignsneedtoconsiderbothsupplyanddemandissuesandtheroleofsmallscalewatersuppliers/vendors.Highwillingnesstopay

indicatesthattherearealternativewaysofmeeting

demand.Thesealternativeservicesshouldbe

consideredinfeasibilityassessments.

ProjectdesignsneedtoconsiderNRWlessonsfrompreviousprojects.

Projecteconomicandfinancialanalysesneedtobebasedonrealisticassumptions,especially

concerningtariffs,NRW,operationandmaintenance

expenditures,andsupply.

Long

term

sustainability

of

water

supply

services

depends,toalargeextent,onthesuccessofan

appropriatetariffpolicyandtariffrevenuecollection

tocoveroperationandmaintenancecosts,debt

service,andnewdevelopmentstomeetrising

demand.

Foreignexchangerisksneedtobefactoredintothefinancialanalysisandmanagementofwater

companies,particularlythosehavingforeigndebt

serviceobligations.

TheregulatoryarrangementsandtheconcessioncontractsinMetroManilaneededabetterdesign

andmorerealisticassumptions.

Theexpectedregulatoryresponseandmanagementcontributionofforeignpartnersneedtobeclearat

theoutset.

PrivatesectorparticipationinMWSSoperationshasbroughtbenefitswhereconnectionswereputin

placeandwatersupplied,butseveralareasfor

improvementremain.

Recommendations

Thisspecialevaluationstudyrecommendsthe

followinginfutureoperations:

GiventhelongpartnershipwithMWSSandtherisingdemandandwideningdemandsupplygap

forwaterinMetroManila,ADBshouldprovide

furtherlendingassistancetoimproveMetroManilasrawwatersupplybydrawingfrom

knownbutuntappedsourcesandsurveyingother

possiblesources. Additionalrawwateronalarge

scaletomeetthepressuresofthegrowing

metropoliswillrequiresignificantinvestmentto

developasignificantalternativetotheAngat

Reservoir.

ThereiscontinuedpotentialforanADBroleindevelopingwaterdistributionservicesinMetro

Manila,particularlyintheWestZone.However,

giventhepossibilityofalternative,sometimes

lowercostbilateralandmultilateralfinancing

sources,ADBwillneedtopackageanddeliverits

assistancemoreefficientlythanbefore.

AssistindevelopingnewmechanismsforaddressingNRWreductionissues.Toaddressthe

NRWissue,projectdesignshouldtakeintoaccount

bothdemand andsupplyrelatedfactorsthat

contributetoNRW.

Considerprovidinglendingassistanceforgroundwaterrelatedenvironmentalprotectionandwastewatermanagement. Thesectorcontinuesto

befacedwithproblemsofindiscriminateextraction

ofgroundwater,andpollutionfrommunicipaland

industrialwastewater.Furthersupportforthese

areasshouldbeassessed.

Feedback

ADBManagementsresponseandtheChairs

SummaryoftheDevelopmentEffectiveness

CommitteeDiscussionswerenotrequiredforthis

specialevaluationstudybecauseitservedasaninputtotheCountryAssistanceProgramEvaluationforthe

Philippines.ThestudywascompletedinSeptember

2008.

1 ADB.2008.ADBAssistancetoWaterSupplyServicesinMetroManila.SpecialEvaluationStudy.Manila.Available:

http://www.adb.org/Documents/SES/PHI/SST PHI2008

31/SSTPHI200831.pdf

Learning Curves available @ www.adb.org/evaluation/ Team Leader: Barbara Palacios, Tel +63 2 632 4114, [email protected]
http://www.adb.org/Evaluation/list-management-response.asp?year=2008http://www.adb.org/Evaluation/list-management-response.asp?year=2008http://www.adb.org/Evaluation/list-management-response.asp?year=2008http://www.adb.org/Evaluation/list-management-response.asp?year=2008http://www.adb.org/Evaluation/list-management-response.asp?year=2008http://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/evaluation/http://www.adb.org/evaluation/http://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/SES/PHI/SST-PHI-2008-31/SST-PHI-2008-31.pdfhttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/Documents/CAPES/PHI/CAP-PHI-2008-20/CAP-PHI-2008-20.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/BOD/dec/chair-summaries.asphttp://www.adb.org/Evaluation/list-management-response.asp?year=2008