Page 1

Vol.

XII

No. 5

September-October

1994

ISSN 0115-9097

OUTLOOK OF SUPPLY AND DEMAND: METRO MANILA AND THE PHILIPPINES

W A T E R! by Maria Corazon M. Ebarvia*

T

he Philippines is endowed with abundant water resources. The mean annual rainfall in the country is 2360 millimeters which are collected as runoff due to a natural topography of 421 principal river basins, 59 natural lakes and numerous streams.

Total water supply consists of runoff or surface water which is the portion of rainfall that flows into the rivers and lakes, and groundwater or that portion of rainfall that seeps into the aquifer basins. Runoff may be expressed either as mean annual supply which has a 50 percent probability of occurring, or as dependable water supply which has an 80 percent probability. The country’s mean and dependable runoff amount

It is both ironic and surprising

to 1,314 million cubic meters (MCM) per day, and 833 MCM per day, respectively. The groundwater reservoirs are relatively extensive with an estimated aggregate area of 50,000 square kilometers. The available groundwater storage capacity is 557,992 MCM, with a safe yield of 141.8 MCM per day. Safe yield refers to the withdrawal rate corresponding to the groundwater recharge rate. Despite this abundance of water resources, however, distribution varies widely in time and place as a result of geographic and climatic conditions prevailing in the different parts of the country.

to

find that even though the country is blessed

Editor's Note

with hydrological resources and reserves, the metropolis is still beset with water problems. The crisis is not over yet as ecology experts predict an acute water shortage in the coming years should the rampant destruction of watersheds continue. President Ramos himself called for the re-emergence of a water patrol to monitor the widespread wasteful usage of water. Water is a necessity for man and his industrial management of this resource is badly needed.

efforts.

Thus,

an

intelligent

In this particular issue are two enlightening features on water. The cover story is an indepth discussion on the general outlook of water supply and demand in the whole country. Several issues on water management are also presented. The second story deals with the Metropolitan Waterworks and Sewerage System (MWSS) and how it responds to the requirements of a megacity. Here, we shall learn how it tries to cope with its mandate, given the many infrastructural, technological as well as financial problems that it faces (page 4).

Population explosion, and agricultural and industrial growth resulted not only in the reduction of available reservoir areas but also in varying degrees of contamination and pollution which further reduces the water available for human consumption. Water Resources in the MWSS Service Area Hydrologically, the MWSS service area is located within the PasigLaguna de Bay river basin. The Metropolitan Waterworks and Sewerage System’s (MWSS) water sources consist of surface water (97%) and groundwater (3%). Though it relies heavily on surface water for its source, Next page

What's Inside 4 MWSS: Responding to the Water Needs of a Mega City 6 Reassessing the e-VAT 8 Rx: Reforms for the Philippines 8 DIA Policy Recommendations 9 The Cutting Edge in the World Market


DEVELOPMENT RESEARCH NEWS

MWSS does not rely on any of the ten largest river basins of the Philippines for its supply. The main source is the Angat River whose catchment (Bulacan) does not form part of the MWSS service area. There are two new sources being developed: the Umiray River which drains part of Quezon province and the Laguna de Bay which drains the provinces of Laguna and Rizal, and parts of the NCR and Batangas.

Most of the surface water resources in Metro Manila are already contaminated...the unabated pollution of Metro Manila's four major rivers had made these rivers fit only for limited navigation. Historically, the water supply in Metro Manila as well as in most areas in the country has greatly depended on groundwater sources, and have therefore been the alternative source for areas unserved or inadequately served by MWSS as well as for areas around Laguna de Bay. Thus, aside from the MWSS deepwells, there are also more than 3,000 private wells which abstract approximately 310 MCM of groundwater. Shallow wells, 20,000 of which had a pumpage of around 14 MCM in 1990, are also used to a certain extent. The shallow and deepwells were drilled for domestic supply, industrial and commercial uses. Of the total withdrawal from groundwater, approximately 91 percent is drawn by private wells and 9 percent by the MWSS wells. ________________ * Miss Ebarvia is a research assistant in a PIDS-NEDA collaboration, the Development of Short-Term Forecasting Models for the Philippines Project. She has done a number of research studies related to the water resource issue.

2

Sources of Recharge As noted earlier, the water resources of the country consist mainly of rainfall, surface runoff and groundwater storage. In the Metro Manila area, the average annual rainfall ranges from 1,900 mm to 2,200 mm. About 90 percent occurs during the rainy season (May to October). In spite of this seemingly large excess supply of water, the dependable streamflow comes only from the La Mesa or Novaliches watershed due to the highly polluted state of Metro Manila's surface waters. Direct recharge to the groundwater was estimated based on the following equation ( JICA 1992 ): P - R - E = I where P is the mean annual rainfall, R is the runoff, E is the evapotranspiration, and I is the effective infiltration. The average net recharge to the aquifer was estimated at 5 percent only of the average rainfall because of hydrogeological limitations such as aquifer impermeabilities and lack of effective natural recharge areas. Groundwater maps prepared from three sets of simultaneous observations (carried out in November 1990, April-May 1991 and August 1991) of groundwater levels of 231 deepwells show that Manila Bay and Laguna de Bay are recharging the depression in their coastal areas ( Roca 1993 ). Results of water balance computations as well as of mapping work imply a large extent of drawdowns due to high withdrawal rates under conditions of low effective recharge. This means that groundwater is being mined from the Guadalupe Formation at rates which greatly exceed the low natural recharge rates. Water Quality Around 200 of the 421 main river systems in the country have been classified by the Department of Environment and Natural Resources (DENR) according to their designated beneficial uses. Based on available

September-October 1994

information, 65 percent of the 74 selected monitoring stations showed water quality that has deteriorated beyond the beneficial use of the water resource as classified in those stations. Most of the surface water resources in Metro Manila are already contaminated, thus, MWSS had to source the water from river basins which are outside its service areas. The unabated pollution of Metro Manila’s four major rivers (Pasig, San Juan, Tullajan-Tenejeros and Paraùaque-Zapote) had made these rivers fit only for limited navigation. Their biological oxygen demand (BOD) has become quite high while the dissolved oxygen (DO) levels are below the DENR criteria for Class C rivers. They are also contaminated with heavy metals and pesticides. The sources of pollution in these rivers could be attributed to the following: domestic sewage and garbage; municipal wastes from public markets and slaughterhouses; untreated or partially treated wastewater from

For lake water to be fit for drinking, tertiary water treatment will be required to eliminate the toxic heavy metals and organic compounds. industries along these rivers; and oil spills from gasoline stations, barges and boats. There are indications of increasing contamination of Laguna de Bay from human and industrial development, agriculture, and other non-point sources. There is a rise in phosphates, lowering of dissolved oxygen (DO), and increase in turbidity although coliform bacteria count has been erratic and pH and temperature levels have remained relatively constant (results of the Laguna Lake Development Authority monitoring from 1980 to 1988).


DEVELOPMENT RESEARCH NEWS

Non-point sources of pollution include surface run-off containing fertilizers and pesticides, urban road sediments, and airborne wherein gasoline laden with lead from vehicular emissions is adsorbed* on dust particles ( Peralta, Soriano and Dizon, 1993). For lake water to be fit for drinking, tertiary water treatment will be required to eliminate the toxic heavy metals and organic compounds. The surface water from Angat, Ipo and Novaliches catchment, meanwhile, are well protected and meet the requirements for Class A-A to A water. The raw water from the rivers and the catchments have good turbidity values, low mineral concentrations, sufficient natural alkalinity, and acceptable color values.

3

of March 1991. As a consequence, new wells have to be developed, searching for fresh water in deeper aquifers, thus repeating the cycle wherein more areas are subjected to salt water intrusion. Over-extraction can also lead to land subsidence although there is yet no clear physical evidence. Apart from salinization, groundwater may also be contaminated by point sources such as leachate from dumpsites, polluting industries, and underground storage tanks of gasoline stations and bus terminals.

One of the areas highly vulnerable to pollution contamination is Payatas, Quezon City which is in the vicinities of the La Mesa reservoir and an open dumpsite. The Environmental Management Bureau has already recommended Table 1: Sectoral Demand for Water, 1990 the decommissioning of this dumpsite. (MCM/day)* (in %)

Agriculture Industries Domestic & Municipal

249 23

Total

287

15

*million cu. m. Despite the high quality, MWSS nonetheless subjects this raw water to a series of treatments which include sedimentation, filtration and disinfection. The disinfection process or chlorination is meant to provide sufficient residual chlorine for protection against re-emergence of contamination along the distribution of the water. The uncontrolled development and excessive pumping of groundwater has caused a widespread decline of water levels in artesian aquifers. This has ensued in a considerable number of deepwells in the MWSS service area being affected by regional salinization, especially those in the coastal areas. Of the 258 MWSS deepwells, 52 were abandoned while 75 were inactive as

Other areas in the country where the quality of rivers and groundwater is of 5 special concern are Region VI (Iloilo) and 100 Region VII (Cebu). The “gold rush” areas in Mindanao where rivers have been reported to be contaminated with mercury and cyanide are also under notice. 87 8

National and Regional Water Demand The country’s total demand for water in 1990 was estimated at 287 MCM per day, and was projected to increase to 507 MCM per day in the year 2000. Table 1 shows the breakdown in sectoral uses. A comparison of the available water supply ( see page 1 ) and demand at the national level would show that there is no problem of physical scarcity. From a regional viewpoint, though, the water outlook is less optimistic. Metro Manila's problem is quite obvious with its large average daily water demand as seen in Table 2. Then,

September-October

1994

if dependable water supply values are used, Regions V, VI, VII, XI and XII may become borderline cases by the year 2000 while Region III will be a distressed area by that time. Table 2: Average Daily Water

Demand in M. Manila (MLD)* Year

Average Daily Water Demand

1990

1,628.63

1991 1992 1993

1,600.63 1,508.45 1,632.18

*milliliters per day

Agencies Involved in Water Resource Development The authority and responsibility for the development, control, protection and conservation of water resources in the country is vested in the State. This is accomplished through the various government offices which implement the water resources programs in the country. The National Water Resources Board (NWRB) was created to integrate all activities related to water resources. There are about 32 agencies involved in water-related activities in the country. The other agencies responsible for the coordination and supervision of the water supply subsector are the National Economic and Development Authority (NEDA), Department of Health (DOH) and Department of Public Works and Higways (DPWH). The Department of Interior and Local Government (DILG) provides assistance in the formation of Water Districts. The quality of water in Metro Manila is monitored through a tripartite body headed by the Environmental Management Bureau of the DENR and with MWSS and DOH as members. All water resources development projects are required to be undertaken on a multi-purpose basis using a single To page 7


DEVELOPMENT RESEARCH NEWS

B

y the year 2000, Metro Manila joins 23 other urban centers worldwide with forecast population of over 10 million. Dubbed as mega cities, these centers are a spectre of urban mess, resulting from population explosion and severe strain on available resources and on the environment.

To arrest the impending crisis, these cities should direct their efforts to design systems that will optimally and equitably manage their resources. One vital consideration in planning these cities would be the available water resource. Based on experience, water scarcity and the failure to provide the required water supply for the entire Metro Manila seems to hamper the realization of economic development targets for the region and the nation as well. Although the Philippines is well endowed with surface and ground water resources, reserves are unreliable since hydrological factors are oftentimes variable and unpredictable. On the other hand, aside from being finite, the quality of fresh water reserves is vulnerable to the changing environment and is directly affected by both natural processes and human activities. Issues and Concerns Past studies have identified various issues and concerns which need to be addressed to ensure Metro Manila with a sustained, reliable, and safe water supply at affordable prices. Some of these issues are: (a) the need to draw up an integrated water resource management where plans and programs are within the framework of sound economic and social policy; (b) a conscientious effort to fill in present/ unserved demands or water shortages within the present MWSS service area and to meet future requirements; (c) reduction of the present non-revenue _water; _ _ _ _ _(d) _ _ _ the _ _ _ _need _ _ _ _ to _ _ arrest the deple* Manager, Research and Development, Metropolitan Waterworks and S e w e r a g e System.

4

September-October 1994

tion of ground water resources; (e) prospects of privatization of some aspects and activities of water supply system operations; and (f) application of sound economic principles to the system of allocation and pricing of water. The MWSS The Metropolitan Waterworks and Sewerage System (MWSS), a water utility organization, has been in existence since 1878 but its present mandate has been established only by its charter in 1971. Despite various changes in the organization, the system has maintained its general corporate objectives, namely: (a) to provide an adequate supply of potable safe water at affordable rates, and (b) to provide satisfactory and reliable sanitary wastewater disposal facilities at affordable rates. MWSS operates the system through revenues, loans and government capital subsidy to meet these objectives. The political boundary of Metro Manila is 636 square kilometers but the MWSS, which was mandated to serve Metro Manila’s water needs, has a far bigger task that calls for the servicing of a jurisdiction that is beyond or almost thrice the size of Metro Manila. At present, MWSS serves six cities and 31 municipalities of the entire National Capital Region (or Metropolitan Ma-

nila), Rizal province and some parts of Cavite province (Cavite City, Noveleta, Kawit, Rosario, Bacoor and Imus). It has around 750,000 concessionaires in an aggregate service area of 1,800 sq. kms. Metro Manila’s main reliance on watersheds and aquifers outside of MWSS’ political jurisdiction and service area makes the problem of providing water to the city’s population complex, and politically and administratively intricate. Furthermore, the rapid growth of urban population and industrialization are also putting a severe strain on available water resources and supply and the environmental protection capabilities of MWSS. Supply and Demand Situations Statistics reveal that the annual water production of MWSS in 1992 totalled more than 850 MCM ( Fig. 1 ). However, only 384 MCM (or about 45 % of the produced water) was metered, recorded and billed as sold water to households, public faucets, and commercial and industrial establishments. The remaining 55 percent was represented as nonrevenue water (NRW) due to metering error, illegal use and leakages. This is, however, comparatively fair than a previous record of 65 percent. The

Metropolitan Waterworks and Sewerage System (MWSS):

Responding to the Water Needs of a Mega City by

FRANCISCO

ARELLANO*


DEVELOPMENT RESEARCH NEWS

available supply from the central distribution system (CDS) is currently below the total demand of the service area. This deficit is translated into irregular supply of water from the CDS. In the past, daily power outages cut the operation time of pumping stations and further aggravated the irregular supply. Fringe areas are particularly subjected to scheduled water rationing during summer months (March to June) when insufficient supply and corresponding low water pressures become more frequent. The CDS supplies water drawn from the Angat basin to the Metropolitan Manila area except some parts of Caloocan City, Quezon City, Marikina, Taguig, Para単aque, Valenzuela, Las Pi単as and Muntinlupa. Groundwater Resources: Going...Going... The extensive and previously unregulated groundwater abstraction mainly from coastal areas around Metro Manila have resulted in both the decline in well-yield and deterioration of groundwater quality. For instance, because of the prevailing negative hydraulic gradient, overpumping created a condition where the seawater has moved inland

5

and contaminated freshwater wells. It has also depleted the shallow aquifers. Shallow wells, scattered in thousands all over the national capital region, are likewise being used in an undetermined extent and are turning out low yields with doubtful quality. Groundwater production contributes only three percent to the actual water requirements of Metro Manila but negative indications of water mining in the main regional aquifer have attracted concern for the protection of groundwater resources. The present level of saline intrusion places the aquifer of the national capital region in alarming danger. Policies that will limit abstraction within its recharge potential should be adopted but the best engineering measure is the prevention of further groundwater mining. This can be done through reduced pumping by providing alternative water supply sources in areas where groundwater is the only source. MWSS should continue with its current plans of extending distribution networks to areas not reached by the current surface water source, including those which are threatened or already affected by increased groundwater salinity.

September-October

1994

The program on non-revenue water reduction will complement the extension works by increasing the available supply of water. Groundwater reserves in Metro Manila can be redirected to serve the population which have no access to surface water. Programs to Meet Projected Demands To meet the water requirement for year 2000 , MWSS has formulated a work program which involves new infrastructure and an expanded supply source base. Policies are geared towards reduced non-revenue water, enhanced revenue generation and financial operations, and organizational reforms. These are balanced by increasing the system capacity through conservation and optimization measures of present resources. Basically, the infrastructure component consists of projects designed to tap new sources of raw water, expand the distribution network, and rehabilitate or upgrade existing facilities such as reservoirs, treatment plants, pumping stations and transmission mains. The infrastructure project needs an estimated budget of P37 billion to increase the population coverage to 90 percent by year 2000. To page 14

Figure 1. MWSS Water Supply and Consumption Statistics (1992)


DEVELOPMENT RESEARCH NEWS

N

6

September-October 1994

Reassessing the

ever was there a tax law that was met with so much opposition as the expanded Value-Added Tax (eVAT) law. Several months after it was proposed for implementation, it is still the focus of complaints from certain groups appearing in various mass media stories. What makes this new tax law hated by certain quarters?

so well

VAT opponents claim that the tax is “anti-poor” and “pro-rich” and that it caused prices to increase. On the other hand, the Bureau of Internal Revenue claims that the VAT itself is not responsible for price increases. Rather, prices increased because of misconceptions on the VAT. Individual fiscal experts show that the expanded VAT is a more progressive tax than the current VAT and that, contrary to popular thought, the implementation of the expanded VAT will have the richest 10 percent of the population bear more of the tax burden. In a media forum titled “VAT in the Light of Proposed Tax Reforms” sponsored by the Philippine Institute for Development Studies and The Asia Foundation and held on the day (August 25) the Supreme Court ruling in favor of the constitutionality of the expanded VAT came out, fiscal experts presented findings that put the VAT in a new perspective. Dr. Benjamin Diokno of the University of the Philippines School of Economics states that the VAT system per se is undeniably a good concept. The problem is not in the VAT system itself but in Republic Act 7716 or the Expanded Value-Added Tax Law. Diokno enumerated the defects of RA 7716 which are: 1) in the coverage of banks which increases intermediation costs and interest rates

e-VAT

contrary to the existing economic plan; 2) in the uniform registration fee of P1,000 which is regressive; 3) in the percentage tax of of non-VAT firms which should be increased by 50 percent rather than 100 percent; and 4) in the preparatory period prior to implementation which should be longer. In the same forum, Dr. Rosario Manasan, a research fellow at the PIDS, also presented a set of findings on the impact of the implementation of the expanded VAT on the incomes of Filipinos across different income groups. Her set of results were based on two scenarios, i.e., whether the

expanded VAT is (a) revenue-neutral or (b) revenue-enhancing. Revenue neutral means that the expected tax to be collected by the government remains the same as before while revenueenhancing means that there is an increase in the expected amount to be collected. Manasan made simulations which assumed that indirect taxes including the VAT are shifted on to the price of goods on which they are levied, thereby passing on the tax burden to the household. She ranked Filipino households by income decile, with the poorest 10 percent of households categorized under income decile one and the richest 10 percent under income decile 10. With the expanded VAT, Manasan's results show that only 2.35 percent of the tax to be collected will be borne by income decile one while the richest decile will bear 32.72 percent of the tax burden. The shares of the tax burden of all deciles (1-9), except decile 10, will in fact decrease as a result of the expanded VAT. To page 11

Table 1: After-Tax Income (in Pesos) Decile

1 2 3 4 5 6 7 8 9 10

VAT88

15,687 25,285 32,599 40,211 49,163 60,547 75,529 98,359 139,366 328,762 1 = REVENUE 2 = REVENUE

Expanded VAT (1) (2) 15,689 25,290 32,607 40,219 49,172 60,559 75,542 98,365 139,367 328,700

15,501 25,009 32,254 39,792 48,656 59,939 74,775 97,410 138,090 326,082

NEUTRAL ENHANCING

S o u r c e : Manasan,R. "Expanded Value-Added Tax: Dissecting the Myth," (forthcoming).


DEVELOPMENT RESEARCH NEWS

Water Outlook...(from p. 3) river basin or an integrated basin approach ( Sly 1993 ). The country is divided into 12 water resources regions --which generally correspond to the existing political regions in the country, except in Ilocos, Cagayan Valley Central Luzon and Northern Mindanao-based on defined physiographic features, hydrologic boundaries and homogeneity of climate. Present System of Allocation and Water Supply Services The water service is classified into three levels: (I) point source system, (II) communal faucet system, and (III) waterworks system. About 31 percent of the country’s population is served through wells and developed springs (Level I) while 32 percent is served through the piped system (Levels II and III). The remainder of about 37 percent of the country’s population, however, is underserved/unserved. Moreover, the country has no sewerage system to speak of except in Metro Manila.

7

which is only about 60 percent of the population in the MWSS Service Area. MWSS, however, estimated that the illegal usage of its water served about 2.65 million people in 1990. Water-use regulation is achieved through administrative concession or “water permit” system. The present Water Code requires groundwater users to secure water permits from NWRB, except users of shallow wells for domestic purposes. However, measurement and reporting of groundwater levels, quality and pumping rate are rarely being done by the users. The Central Sewerage System, the Ayala Sewerage System and Wastewater Treatment Plant, and the community tanks in certain areas serve approximately 15 percent of Metro

1994

domestic wastewater is being discharged directly into the water bodies of Metro Manila. Although many pollutive firms in Metro Manila have some level of wastewater treatment, most of the facilities have been neglected, in a state of disrepair, or not used regularly. Current Fee Structure The NWRB is likewise tasked to review and approve water rates to be charged by waterworks operators. Waterworks system operators are required to submit to NWRB an annual report of finances and operations, and these reports form the basis for the determination of a tariff rate base in which the operators will be allowed a rate of return of not more than 12 percent. The current annual charges range from P0.55 to P1.10 per liter per second for the following uses: domestic,

Table 3: Surface and Groundwater Consumption in Metro Manila, 1990 (in million cubic meters per year) Type of water user Domestic

The MWSS accounted for 750,000 households or concessionaires in 1990. And although it served almost 90 percent of such population --directly and indirectly-- only 60 percent of the households had access to piped water supply system or Level III services.

September-October

Type of water connection

Surface Water

MWSS house service connection & public faucet Private deepwells Private shallow wells

Groundwater

264.0

22.5 138.3 14.0

Commercial

MWSS Private

Meter Connections deepwells

125.6

8.1 39.0

Industrial

MWSS Private

Meter Connections deepwells

30.8

2.2 129.5

All Users

MWSS Private

Meter Connections Deepwells

442.9

32.8 320.8

In Metro Manila, water supply consists of individual house connections (599,754 in 1990), private wells, dug wells, peddlers, around 1,490 public/MWSS standpipes in blighted areas, and 66,574 commercial/industrial and other connections. In terms of water consumption (both surface and groundwater), meanwhile, Table 3 details the level of usage by type of user and type of water connection in Metro Manila in 1990.

Manila’s population at present. The Central Sewerage System does not provide any form of treatment and it only collects effluents and discharges them directly into the deep waters of Manila Bay through an ocean outfall.

Using the MWSS standards of 8.1 persons served per house connection and 486 persons served per public faucet, the estimated population served by the system, therefore, is 5,582,000,

Around 600,000 had individual septic tanks in Metro Manila in 1990 while others relied on pit privies whose point of disposal are the creeks and rivers. Thus, almost 85 percent of the

Source: JICA (1992). Study for groundwater development in Metro Manila

irrigation, livestock, commercial, industrial, and power, plus administrative charges. The MWSS charges different sets of water tariff schedule by the following customer types: residential (A and B), commercial and industrial sectors, and by consumption volume. Through this tariff structure, MWSS aims to provide cross-subsidy to low income To page 12


DEVELOPMENT RESEARCH NEWS

Rx:

Reforms for the D

P hilippines

uring the recent Development Incentives Assessment (DIA) Project Policy Symposium wherein the key results of the project were presented, Socioeconomic Planning Secretary Cielito Habito stressed the need to “make the greater majority understand the benefits that can be reaped from an economic restructuring.” That is why he said that the private sector and the policy makers have to be made aware of the results of the DIA project which analyzed the impact of trade and policy reforms on the whole economy, in general, and on eight manufacturing industries --textiles and garments, agricultural machinery, appliance, ship and boat building and repair, packaging, motorcycle and parts, synthetic resins and plastics, and meat and dairy processing -specifically. Habito emphasized President Fidel Ramos’ call for the transformation of the “slow-growing, inwardlooking and import-subsituting economy” of the Philippines into one that is export-oriented and globallycompetitive. It should not be any cause for alarm if the Philippines ranks 33rd among countries in terms of competitiveness if one is to consider the number of industrialized and newlyindustrialized countries in Europe, America and Asia. Habito stressed that this should rather be seen as a reason to further intensify efforts that will bring the country up the ladder of global competitiveness. He added that the results of the DIA project will only affirm the economic managers’ belief

8

September-October 1994

that reform is necessary and desirable, and will ultimately lead to a better life for Filipinos in the future. Deputy Director Gordon West of the United States Agency for International Development (USAID), meanwhile, said that based on the findings of the study, he saw no reason why the hopes and dreams of the present administration cannot be achieved by the Philippines by the end of the century. Dr. Romeo M. Bautista, Research Fellow at the International Food Policy Research Institute (IFPRI) and DIA Project Consultant, presented a summary of the first three chapters of

DIA Policy Recommendations AFTER three years of research on the effects of the Philippine trade policy reform which began in the early 1980s, the Development Incentives Assessment (DIA) Project came up with its findings based on plant-level data from industrial censuses. According to Dr. Erlinda Medalla, DIA Project Director, the most telling result of the study is "a more competitive manufacturing industry which has been forced to adapt in reaction to the global market exposure that it experienced." "There is reason to be hopeful with respect to the prospects for the Philippine industrial sector," Medalla said. The study recommends the following: * A continued policy thrust toward greater trade liberalization remains the most important element of industrial policy.

The ultimate goal is one where quantitative restrictions are limited to reasons of security, health and sanitary regulations, and where tariffs are near uniform.

"I think we're beginning to see the positive impact of these reforms." -- NEDA Director-General

and

* The key and major target sector for selective intervention should be the export sector.

Socio-Economic

the project’s main report. He touched on the desirability of non-intervention from the government in the issue of promoting industrial development; the appropriateness of trade policy as an instrument for industrial promotion; and the influence of exchange rate on development incentives.

Continued thrust toward greater trade liberalization constitutes the major policy reform toward export orientation. Tariff policy could be rationalized to answer some of the needs of the growing export sector. Very much relevant to trade liberalization is the plan to shift away from HCV to transaction value as the basis for customs valuation.

Dr. Erlinda Medalla, PIDS Fellow and DIA Project Director, emphasized the project’s conclusion that a more liberal trade policy is “necessary to propel industrial and economic development.” Dr. Gwendolyn Tecson To page 16

Other export promotion measures should be continually improved to reach a wider coverage of new exports, and increase the automaticity of the dutydrawback system. Efforts to streamline export procedures should be given top To page 16 priority.

Planning

Secretary

Cielito

Habito.


DEVELOPMENT RESEARCH NEWS

The following are excerpts from the presentations made during the DIA Policy Symposium held at the Manila Diamond Hotel last September 24, 1994. Dr. Erlinda Medalla is the Project Director, Dr. Romeo Bautista is the Project Consultant, and Dr. Gwendolyn Tecson, a member of the project team..

DR. ERLINDA MEDALLA on investment policy and other instruments for industrialization

The objective of the investment incentive system is not to induce additional investment by itself --this is the responsibility of the fiscal and monetary policy-- but to channel investments to the desired sectors within the industry to maximize their potential in the development process.

9

The

Cutting Edge in the World Market

Three general cases for possible intervention from the investment incentive system include a promising “infant industry�, interdependent investment decisions, and new exports.

Politically, it is difficult to justify why foreigners should get more incentives than domestic investors. However, this isn’t really much of a problem because there are other more efficient means to compete for foreign capital. For example, a good overall climate for investments created by stability and consistency of economic policy regime, rules and regulations regarding repatriation of earnings and capital would do better to attract foreign investments.

1994

DR. ROMEO BAUTISTA on the promotion of industrialization

Political leaders and economic planners have commonly viewed industrialization as almost equivalent to economic development. Industrialization is expected to absorb excess labor from the agricultural sector, increase labor productivity throughout the economy and raise living standards of the population. Such expectations seem reasonable on the basis of economic records of developed countries: each had to go through a process of structural transformation that made their domestic industries the dominant producing sector of the economy. The substantial disparity between developed countries and developing countries in the contribution of manufacturing to national output is often seen as the principal manifestation of economic backwardness in the latter.

Exports are penalized by the protection structure and also involve externalities. Export orientation keeps industries abreast in the adoption of best-practice technologies which result in faster productivity increases. Foreign investment, which represents additional savings, has the advantages of providing more output, higher employment level, easier transfer of technology and greater market accessibility.

September-October

"We recognize that a stable macroeconomic policy environment which promotes savings and investments is the basic ingredient in the success of our Asian neighbors." --Dr. Erlinda Medalla

A study on foreign direct investment by Rafaelita Aldaba, research associate at the Philippine Institute for Development Studies, shows that the fiscal incentives system was an insignificant explanatory variable. The most significant explanatory variables for direct foreign investment are political stability and the Effective Protection Rate (EPR). To page 11

It can be argued, however, that neither the historical association between industrialization and economic development nor the results of intercountry comparisons on the relative importance of the domestic industry implies a necessity to promote industrialization. It may be that industrial policies are unnecessary and that industrial growth and structural transformation will occur over time even when government policies are neutral between industry and other production sectors. But in the Philippines, import protection policy to promote industrialization held sway for a protracted period. There is abundant evidence that the protective import-substitution policies from the early 1950s to the late 1970s effectively held back the expansion of manufactured exports and impeded output growth and labor absorption not only in the industrial sector but in the entire economy as well. DRN


DEVELOPMENT RESEARCH NEWS

DR. GWENDOLYN TECSON on the impact of the 80's reform on Philippine manufacturing industries

The Philippines has been recorded as one of two Asian countries, India being the other, among sixteen developing countries which registered a negative total factor productivity growth during its entire postwar economic history. The negative total factor productivity (TFP) of the manufacturing sector had cancelled most of the positive growth in productivity that has been achieved by the agricultural sector. Our industrial growth has been the lowest among ASEAN member countries during the past two decades or so. There had been very little structural changes and diversification that have taken place in the manufacturing sector. Employment created by the manufacturing sector not only stagnated but also declined in relative

"We, in the government and among us, economic managers, are bent on opening up the economy in order to truly allow market forces to mold it to worldclass form." -NEDA Director-General Cielito Habito terms. As a consequence of this mediocre performance, the country’s competitiveness in world markets was lost. What has hindered the manufacturing sector from unleashing its tremendous potentials for growth and competitiveness? Our working hypothesis is that this has been mainly due to the weakness of the competitive forces to which our domestic industries have traditionally been subjected to. The Philippines had opted for a protracted application of its protection policy. As a

10

result, it has shielded domestic industries from at least three possible sources of competitive discipline, namely: among domestic firms, with imports, and within the export market.

"Trade liberalization, after all, is as important to make sure that Filipino consumers get goods that are of good quality and at proper prices as it is to make sure that our exports are competitive abroad." - Wilhelm G. Ortaliz Prohibitive tariffs, especially the quantitative restrictions, create the possibility for monopolists to exercise market power, something that they cannot do under competitive tariffs. Special programs of the government provided for quantitative restrictions that, therefore, intensified entry barriers through privileges and incentives granted to certain industries and firms. For the first source of competitive discipline --the protective system is biased against the existence and the growth of small and medium enterprises (SMEs). Before the reforms in the 80s, industries where SMEs dominate had been receiving less than the average protection. The large enterprises (LEs) were getting a lot more protection than the SMEs which were always at a disadvantage in terms of financial, administrative ability and political clout. Second --the protective system has also weakened competition from the entry of imports. The concentrated industrial structure would not have been as injurious to efficiency and competitiveness had a second source of competitive discipline been resorted to --the import market. The import discipline would have provided the

September-October 1994

challenge for effective competition to large oligopolistic firms. Domestic firms would have been more exposed to international best-practice measures, a necessary ingredient to achieving world class competition. The third source of competitive discipline affected by the protective system is the export market. Exporters have to pay a higher price for their imported inputs as the effect of protection on the exchange rate, thus, making them less competitive in world markets. The tendency of protection to lead to currency overvaluation affects exports on two counts. First, it discourages export activity as against selling in domestic markets. Second, it makes our exports less attractive to foreign buyers. Therefore, the application of protracted protection in the country has blunted the edge that cuts in world markets.

"May I suggest that we streamline both export and import procedures because even our importers face a very tedious system of import requirements..." - Chulia J. Azarcon Realizing this, the government decided to reform the protective system in the early 80s. As a result, the manufacturing sector’s Effective Protection Rate (EPR) went down from 42.8 to 28.3. The differences in EPR across industries were reduced, implying that there is movement towards a more neutral protective regime. The important component of the trade policy reform is the dismantling of quantitative restrictions. About one-third of the total imports in 1983 was covered by non-tariff measures; this went down to 10 percent in 1988. To

page 13


DEVELOPMENT RESEARCH NEWS

Medalla...(from p. 9)

There are basic obstacles to small enterprises which could possibly justify fiscal incentives. Simply providing tax incentives would not solve the problem. More effective would be providing some technical assistance centers, extension service and links with larger firms. Small manufacturing establishments (SMEs) should have complete access to fiscal incentives and there should be efforts to make the Board of Investments (BOI) registration more accessible to them. In regional investments, the basis for intervention stems from the fact that there are private advantages from clustering which give rise to social disadvantages. Our evaluation is that the present fiscal incentives seem to be inappropriate in general like the tax incentive for infrastructure in the form of tax credit. It is probably better to simply rule out incentives for investments within Manila. There are two general

Reassessing...(from p. 6) This therefore implies that the expanded VAT is a more progressive tax than the existing VAT since it shifts the burden of tax from the lower income deciles to the richest one. In analyzing the effective tax rate of the expanded VAT per income decile (or the ratio of the tax to the income) Manasan's results, however, showed differentiated effects on the basis of whether the tax is revenueneutral or revenue-enhancing. If the VAT is revenueneutral, income deciles one through nine pay less taxes relative to their income and again,

11

September-October

areas for reforms in the chanelling of investments to the desired areas: the type of incentives granted and the selection of activities to be listed in the Investment Priorities Plan (IPP).

"...A move toward a more open and liberal trade policy is necessary to propel industrial and economic development." - Dr. Erlinda Medalla Regarding monetary policy, we recognize that a stable macroeconomic policy environment which promotes savings and investments is the basic ingredient in the success of our Asian neighbors. The study states, therefore, that the overall macroeconomic policy should maximize the supply of investment funds and determine interest rates

income decile 10 pays more. other hand, if the expanded revenue-enhancing, every decile will then pay more taxes to its income.

On the VAT is income relative

The more meaningful question, though, is the after-tax income situation. What happens if the expanded VAT is imposed? If, according to Manasan, the eVAT is assumed to be revenue-neutral, then income deciles one through nine experience higher incomes after tax but income decile 10 experiences a drop in income after tax. The picture changes, though, if the eVAT is assumed to be revenueenhancing. All income deciles experience a drop in income after tax.

1994

that are reflective of the real scarcity of capital. Monetary policy could also be used as a special instrument for selective promotion. The main concern of our project is how it could be used as a tool for selective promotion, specifically in selective credit allocation. Indeed, the program granting automatic credit access for exporters seems to have been a key element for almost all the successful Asian economies. A large part of the explanation for the Philippine industries' low level of technology would lie on the protracted protection, inward-looking policy of the Philippines which bred a sense of lack of competition, limitation within the domestic market and penalty on exports, thus preventing investment into new technologies and into more productive industrial activities. This highlights our conclusion that a move towards a more open and liberal trade policy is necessary to propel industrial and economic development. DRN

At the lowest decile, an average of P186 is lost from their income. This is considerably lower than the drop in income that the richest income decile will experience (approximated at P2,680) but for people at a level where survival means more than comparing their losses with that of other income deciles, P186 already means a lot (see Table 1 on p. 6 ). It is therefore important that the implementation of the expanded VAT be done in conjunction with the proposed reforms in individual income taxation which seek to reduce the burden of income tax on the poor segment of the population. LBPonce


DEVELOPMENT RESEARCH NEWS

Water Outlook...(from p. 7) consumers, and to promote conservation by charging higher prices per cubic meter on higher volume of consumption. Added to the basic water tariff is the exchange rate adjustment (CERA) which takes into account projected exchange rates and debt servicing. There is also an environmental charge amounting to 10 percent of the water charge. The sewer tariff is 50 percent of the water tariff for those who are connected to the sewerage system.

Before launching any leakage control program, there must be an assessment of the magnitude of total water losses... In some areas being serviced by MWSS with groundwater but with no metering, rationing is being done by supplying water at certain hours of the day. The water users are charged a flat rate. Some residential subdivisions have their own deepwells, and the consumers are charged a higher tariff rate than that of MWSS. Further studies are needed to investigate the current pricing systems of both the MWSS and the private operators in terms of economic efficiency --that is, if they reflect the full economic value of using the resource, including environmental effects, as well as equity and intersectoral allocation aspects. The latter consideration would involve looking at the ability to pay and income class of the water consumers. Although priority of use is given to the MWSS, the water from Angat Dam is also being used by two other goverment agencies: the National Power Corporation (NAPOCOR) and the National Irrigation Authority (NIA). The NIA charges irrigation

12

September-October 1994

fees from the beneficiaries of the national and communal irrigation systems. Other Management Issues The key issues in the water resources sector are the following: the insufficient coordination of more than 32 agencies; the issue of situations of excess demand or water supply shortage due to increasing population and agricultural and industrial development; and the issue of pollution which aggravates water availability. The provision of sanitary sewerage systems should be given as much importance as that of increasing water supply. The low priority given by the MWSS management to sewage collection and disposal has resulted in the increasing amount of untreated wastewater in the waterways. The lack of water supply, in terms of both quantity and quality, as well as water pollution have adverse effects on health.

of over-extraction is, therefore, 370,000 CMD. The total annual cost of over-extraction is estimated to be P282.7 million ( James M. Montgomery 1992). Table 4 summarizes the supply and demand situation for water in 1995 and shows a shortage of more than half a million CMD. Shallow well users are exempted from securing permits from NWRB, thus, there is no inventory of the actual number of these users and their pumpage production. In effect, therefore, after their initial investment in the water pumps, these users use the water resource for free. For MWSS, there is a need to reduce the number of illegal users, leakages, and non-revenue water (NRW). The MWSS total water bill

Table 4 * Estimated Water Resources in M. Manila Groundwater safe yield Dependable streamflow (La Mesa) * Surface Water Sources Outside of M. Manila * Water Demand Requirement ( 1 9 9 5 ) * Deficiency in Water Supply * Rate of Overpumping of Groundwater

The cost of damages to health due to water pollution is estimated to be P8 4 million in 1988 ( Ebarvia 1994 ). Groundwater mining is being allowed to happen as a temporary measure to solve the current availability limitations from surface water, even if there is a critical threat from salt water intrusion and land subsidence wherein the detrimental effects could be irreversible. The combined total withdrawal from groundwater by MWSS and the private sector in 1990 was estimated at 339.6 MCM or about 930,000 cu. m./day (CMD). Based on the safe yield of this resource, the rate

560,000 100,000 2,300,000 3,519,000 559,000 370,000

cu. m./day cu. m./day cu. cu. cu. cu.

m./day m./day m./day m./day

for 1992 was P3,186.8 million, but the total water revenue or the amount actually collected was only P2,981.72 million. In 1990, the total volume sold was 384.67 MCM, representing only 42 percent of total production. Thus, 58 percent is unaccounted-for water. Before launching any leakage control program, there must be an assessment of the magnitude of total water losses, identification of the causes, and determination of leaks. Measures for the control of illegal


DEVELOPMENT RESEARCH NEWS

use must be made and implemented. Significant reductions in NRW to acceptable levels could result in the avoidance of constructing new facilities. For the period 1980 to 1990, MWSS was able to raise water rates by 4 percent annually in real terms. Based on the economic and financial feasibility analyses for the Umiray-Angat Transbasin Project, the economic value of water is assumed to be 20 percent higher than the water rates assumed by MWSS. It was therefore recommended that MWSS seriously consider executing real increases in the price of water to properly reflect its scarcity value ( Sinotech Engineering, Inc., et al. 1992 ). The increase in water tariffs must be accompanied, however, by improvements in service performance as well as revenue collection policies. Another problem is concerned with those families who have no access to MWSS water supply, and buy at higher prices from peddlers their water supply which may be of doubtful quality. The higher prices may reflect the scarcity of water, but usually, the families affected belong to the low-

13

income groups. Likewise, the water problem affects the small and mediumscale industries. Another management issue is the current transbasin transfer from Angat River in Bulacan to the MWSS service area. Many towns in Bulacan are now complaining of water shortage and want the distribution service extended to them since the water originally came from their province. In 1990, under a Memorandum of Agreement with MWSS, LWUA and the province of Bulacan, MWSS agreed to provide bulk water supply to the towns of Obando and Meycauayan in 1991. There will also be direct service connections to the towns of San Jose, Norzagaray and Angat in 1993 ( Asuncion, n.d.). This increase in coverage would bring about additional pressures on MWSS' capacity to meet increasing demand. Another issue concerns the water supply of towns under CALABARZON as future demand is expected to increase due to population growth and industrial development. There can

Tecson. ..(from p. 10) What were the effects of the trade policy reform (TPR) on the manufacturing sector? We think that in 1988, the market environment was more conducive to competition than before the trade policy reform. In other words, in the interim period of 1988, we have competition strengthened in the import market, in the domestic firms, and in the export market. The TPR heightened import competition: the share of real imports to real gross domestic product (GDP) increased between 1983 to 1988 and manufactured imports, a share of total imports, went up from 61 to 76 percent due to the tariff restructuring and the dismantling of the quantitative restrictions. The demise of inefficient large and small enterprises during a severe economic crisis led to the net entry of plants and the doubling in number of manufacturing establishments between 1983 and 1988. DRN

September-October

1994

arise competition between Metro Manila and the CALABARZON towns over the Laguna Lake water. Finally, all efforts must be exerted on all fronts to address the abovementioned issues so that a crisis in water availability may be abated. DRN

*Adsorption molecules of a

refers to the deposit of gas, liquid or solute on the

surface of a solid or liquid.

References: Asuncion, Teofilo T. (1993). "Surface Water: Its Utilization for Metro Manila and MWSS Service Areas." Speech presented at the annual convention of the Philippine Association of Water Districts. Ebarvia, Ma. Corazon M. (1994). "Valuation of Environmental Damages." Technical Report, Environmental and Natural Resource Accounting Project-Phase II. Unpublished report. Japan International Cooperation Agency (1992). "Study for the Groundwater Development in Metro Manila." Unpublished report. Peralta, G. L., R. S. Soriano and C. Q. Dizon (1993). "Pollution Sources and Water Quality Assessment in Metro Manila and Laguna Lake Basins." Paper presented at the Regional Workshop on Management Modelling for Conjunctive Water Use. James M. Montgomery Consulting Engineers, Unc. (1992). "Industrial Efficiency and Pollution Control report.

Program." Unpublished

Roca, Rolando Jr. E. (1993). "Current Conditions and Development Plan of the Groundwater System in Metro Manila." Paper presented at the Regional Workshop on Management Water Use.

the

Modelling

for

Conjunctive

Shin, Eulsoon, et al., (n.d.). "Valuing Economic Impacts of Environmental

Problems: Asian Cities." Working Draft. Sinotech Consultants, Inc., et al. (1992). "Umiray-Angat Transbasin Study: Feasibility Study." Draft report. Sly, Peter G., ed. (1993). Laguna Lake Basin, Philippines: Problems Opportunities. Los Ba単os: Environment Resource

Management

project

(ERMP).

and and


DEVELOPMENT RESEARCH NEWS

14

Metropolitan...(from p. 5) The non-revenue water (NRW) reduction program aims to drastically trim the volume of NRW to 15 from the present 55 percent to further increase revenue and widen the supply coverage. A program on enhanced revenue and financial operations, on the other hand, concentrates on improved revenue generation, adjustments in tariff, administrative cost-saving measures, and prudent investment and sound asset management practices. These programs will be accompanied by improvements in several management areas designed to: (a) restructure the organizational set-up, (b) realign functions, (c) streamline practices and procedures, (d) implement a computerized information system, (e) enhance the staff compensation incentive scheme, and (f) institute training and reorient behavioral practices. The full program is expected to be funded thru equity infusions from the government; loans and grants from multilateral and bilateral agencies (such as the World Bank, Asian Development Bank, Overseas Economic Cooperation Fund, and Japan International Cooperation Agency) and donor

Existing

governments; syndicated financing arrangements or bond floatations; and internal cash generation. The build-operate-transfer (BOT) scheme will also be considered an alternative option to the work program together with the possible privatization of certain activities and operations in the system. Options for Privatization Privatization of MWSS shows possibilities that could utilize the resources of the private sector and offer them incentives while improving the performance of the water supply system and preserving public assets at the same time. Various modes for privatization may range from franchise agreement to operate certain divisions in the water supply system, e.g., treatment plant operations, billing and collection of revenues and BOT schemes, to full privatization and sale of government assets. There are two reasons which tend to lead to the privatization of the financing and management of water supply: (a) a decrease in the government subsidy, and (b) an increase in operation costs needed to rehabilitate aging infrastructure.

MWSS

Facilities

MWSS supplies Metro Manila, Rizal and Cavite annually with over 800 million cu. m. (MCM) of water sourced from surface water drawn from the basins of Angat, Ipo, and La Mesa. The raw water is then treated at two treatment plants located in Balara and in La Mesa which have a total rated capacity of 2,600 MCM. About 97 percent of MWSS' raw water is drawn from these basins through a series of tunnels and aqueducts. The water is then transmitted to the treatment plants and to the central distribution system (CDS). The remaining three percent is drawn from groundwater which feeds isolated distribution networks in fringe areas which are not yet connected to the CDS. The monthly water production of MWSS ranges from 70 to 80 MCM. The CDS is divided according to pipe sizes which are primary (larger than 300 millimeters or mm), secondary (150 to 300 mm), and tertiary (smaller than 150 mm). Pipes of small diameters are frequently used as interconnections between trunk mains. Consumers are directly connected to all sizes of main (principal pipe or line in a distribution network). The supply zones are not separated from the primary and secondary networks. The total length of the distribution network is estimated at 5,500 to 6,500 kilometers.

September-October 1994

For instance, in the case of municipal water supply systems, they are perceived to be facing little competition; hence, they fail to operate efficiently. Meanwhile, while it is true that private systems are also bound by rate regulation and have ceratin competitive disadvantages, they nonetheless enjoy more flexibility that can ensure good operation, efficiency and cost recovery. At the same time, private capital markets have more confidence in privately managed operations. A public water supply company, for one, can thus be transformed into an independent enterprise but still subject to the same tax and regulation policies. A transitory phase of privatization as well as full privatization would expand the tax base of the municipality/city, encourage the full-cost pricing and lead to less reliance on government financing for the expansion and upgrading of facilities. Technically, the magnitude and coverage of the present MWSS makes the agency an unattractive candidate for full privatization. The need to serve the blighted poor, numbering to over three million within the service area, hinders the derivation of a rational price that can compete in the market. MWSS is likewise mainly anchored on a single supply source, the Angat watershed. In addition, a centralized distribution system fed by two treatment plants and a subdivision into small private water districts poses a cumbersome situation. MWSS may learn from the experiences of different water authorities which ventured into privatization. Water system management can be financially viable in an environment with minimal interference but with consistent support from the political area. Privatization is attainable once the following issues are addressed: (a) credibility of the utility agency in attracting long-term investments; (b)


DEVELOPMENT RESEARCH NEWS

increase in service charges to cover subsidies that were previously granted; (c) the amount of shares that large investors may be allowed to control; (d) the possibility of a militant union that normally thrives under the climate of a private enterprise which may in turn pose substantial risk; and (e) a defined role of the government regarding water rights, price setting and stock-allocation issues. Integrated Water Resource Management Water is an integral part of the ecosystem, a natural resource, and a social and economic good; therefore, it demands a holistic and integrated management approach. Developed countries, particularly the United Kingdom, have experienced success from the water basin management approach. Under this scheme, a single body is tasked with setting policies for the usage of the resource, abstraction of raw water, operation of the supply system, the multi-use of water, discharges of effluent to the water resources, water quality monitoring, and the construction of infrastructural support facilities to enhance the capability of watersheds. This set-up allows both usage and conservation of water resources to be centered on one authority, thus, the efficient use of funds by a streamlined agency results in a more realistic pricing of water. It may be premature to adopt a similar scheme for Metro Manila and the whole country as well. The country’s present geo-political division may hinder any possible move towards the water basin/watershed approach. Under the present administrative setup, too, various agencies manage the water resource. The water supply management for Metro Manila covers a wide base of watershed area that goes beyond Metro Manila's political jurisdiction of and the MWSS service area.

15

September-October

1994

Pricing and Tariffs THE setting of water tariffs is based on the attained revenue level sufficient to The setting of water tariffs is based on the attained revenue level sufficient to sustain operations and maintenance as well as provide for depreciation adjustments, debt servicing and system expansions. Since 1988, there has been no increase in the real value of the water tariff except for inflation and currency exchange rate adjustments to cover operational costs. MWSS applies a uniform tariff for the entire service area. It should, however, study whether the same tariff structure is applicable to areas like Rizal and Bulacan where water services are to be extended, or the current cross subsidy applied to existing customers ought to be nullified to be able to extend services to unattended areas. In the allocation and pricing of water, sound economic principles must be applied wherein it is recognized that water is both a social and economic good, and that it is a basic human need that must be met. Such principles will direct the effective use of available water and financial resources and will set the equitable levels of tariffs for industrial, commercial and domestic users.

Nevertheless, such integrated setup may prove to be the answer to the present overlapping mandates of several agencies and simplify sectoral authority and responsibility for water resource management. Concerns Affecting the Environment Although the MWSS is tasked to deliver water and to collect wastewater, the latter is given less attention and consideration based on the present condition of sewerage facilities in the service area.

Conclusion The MWSS has lined up programs until year 2020 to meet the growing water demands of Metro Manila. However, these must be matched by plans to control the unprecedented growth of industrial centers within the metropolis. The current pattern of water consumption may not be sustained if environmental sanitation measures cannot keep up with the rate water resources are depleted and degraded.

This is quite understandable since the MWSS’ attention is focused on trying to meet the continuously increasing demand for water. Besides, a huge financial investment is required to build and maintain present-day sewerage and treatment facilities. This needs to be subsidized in order to increase the present coverage of sewerage facilities.

Meeting the consumers’ water demands should go hand in hand with the protection and conservation of the environment and its resources. Charges on services and consumption must be set on a realistic level to be able to provide an adequate supply for everyone. This can be accomplished through an efficient use of water and an efficient disposal system that will benefit the future generation.

Despite these financial and operational constraints, MWSS has already adopted various measures to optimize its wastewater collection capabilities and has tested several methods to deal with domestic liquid discharges.

A super body that operates either as a public or private institution can be set up in the future to oversee the operations and use of water resources. The possible privatization of the MWSS calls for the turning over of the To page 16


DEVELOPMENT RESEARCH NEWS

16

September-October 1994

Philippine Institute for Development Studies NEDA sa Makati Building 106 Amorsolo Street, Legaspi Village 1229 Makati, Metro Manila, Philippines

STAMP

DEVELOPMENT RESEARCH NEWS is a bi-monthly publication of the PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS) . It highlights the findings and recommendations of PIDS research projects

and

important

policy issues discussed during PIDS seminars.

PIDS is a nonstock, nonprofit government research institution engaged in long-term, policy-oriented research. This publication is part of the Institute's program to disseminate information to promote the use of research findings. The views and opinions published here are those of the authors and do not necessarily reflect those of the Institute. Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions or comments on the publication are welcome. Please address all related correspondence and inquiries to: Research Information Staff Philippine Institute for Development Studies Room 304, NEDA sa Makati Building, 106 Amorsolo Street, Legaspi Village 1229 Makati, Metro Manila, Philippines Telephone Numbers 892-4059 and 893-5705; Telefax Number (632) 8161091 Re-entered as second class mail at the Makati Central Post Office on April 27, 1987. Annual subscription rates are: P90.00 for private firms and individuals; P80.00 for students, libraries, academic and research institutions; and US$16.00 for foreign subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.

Metropolitan...(from

Vol. XI I

No.5

September-October

1994

E ditorial Board Dr. Ponciano S. Intal, Jr. President Dr. Mario B. Lamberte Vice-President Ms. Jennifer P.T. Liguton Director for Research Information Mr. Mario C. Feranil Director for Project Services and Development Ms. Andrea S. Agcaoili Director for Operations and Finance

p. 15)

operation of the water supply system to private enterprises but with the government still controlling most of the agency’s assets. The privatization issue must be centered not on the conversion of MWSS into a profit-centered venture but rather on achieving the prime goals of attaining maximum efficiency in the delivery of basic water services. DRN Notes: Watershed refers to an entire catchment area whose surface water is drained by a stream or system of connecting streams such that all water originating and flowing in the area is discharged through a single outlet. On the other hand, an aquifer is an underground water-bearing formation which transmits water in sufficient quantity to support wells and springs.

Rx: Reforms...(from p.8)

DIA Policy...(from p. 8)

of the UP School of Economics and one of the team members of the DIA project, said that trade policy reforms (TPR) enhanced competition among domestic firms that resulted in the increase in the number of small manufacturing establishments (SMEs) between 1983 and 1988. For his part, PIDS president Ponciano S. Intal Jr., said that the government must have a better macroenocomic policy environment to accompany the tariff reduction and removal of non-tariff barriers measures of the TPR. GEManaog

* The number of activities selected for promotion should be few, three to five industries at a time, and the incentives should be timebound.

The small number reduces the probability of error in judgement that could be made. The definite time period should hold, whether the selection is a success or a failure. DRN

Atty. Roque A. Sorioso Legal Counsel

S taff Jennifer P.T. Liguton Editor-in-Chief Genna Estrabon-Manaog Issue Editor Cora P. Desuasido Odette M. Salcedo Suzy Ann D. Taparan Lezyl B. Ponce Contributing Editors Valentina V. Tolentino and Anne P. Cleofas Exchange Necita Z. Aquino, Delia S.Romero, Galicano A. Godes and Federico D. Ulzame Circulation and Subscription Jane C. Alcantara Genna Estrabon-Manaog Lay-out and Design

The Development Incentives Assessment (DIA) papers on the packaging, motorcycle, resin and plastic, agricultural machinery and appliance industries and Dr. Rosario G. Manasan's Breaking Away From the Fiscal Bind are now available at the Publications office, PIDS. Inquire at tel. no. 892-4059.

DIA Policy Recommendations  

by Maria Corazon M. Ebarvia* No. 5 September-October 1994 ISSN 0115-9097 Population explosion, and agricultural and industrial growth result...

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