Policy and Financing on Sewerage and Septage Management in the Philippines

Chairman Rene C. Villa, Local Water Utilities Administration

East Asia Ministerial Conference on Sanitation and Hygiene (EASAN 3)Bali, Indonesia

September 10, 2012

Presentation Overview

Legal mandate

Goal and objectives

Targets

Strategies

Septage and sewerage financing options

Lessons

Industrial, 42%

Domestic, 58%

Source: Philippine Environment Monitor 2003 (World Bank)

Agricultural37%,

Industrial, 15%,

Domestic 48%

Philippines

Metro Manila

Water Quality On The Development Agenda2.2 million metric tons of organic pollution produced per year

Legal Mandate for NSSMP

The Clean Water Act of 2004 requires

The Department of Public Works and Highways (DPWH) to prepare a national program on sewerage and septage management (Section 7)

Include a priority listing of projects for LGUs and to come up with a priority investment list, for national government allocation of funds for construction and rehabilitation of sewerage and septage infrastructure

Goal and Objectives

Goal: to improve water quality and public health in the Philippines by 2020.

Objectives:

- to enhance the ability of local implementers to build and operate wastewater treatment systems

- promote the behavior change and supporting environment needed for systems to be effective and sustainable.

NSSMP Targets

Septage Management

All LGUs have SMP serving their urban barangays

• 43.6 million people with access (total urban population less Metro

Manila)

• Capital costs range from $95,000 to $1.5 million/project

• Pollution reduction: 260 million kg of BOD (24% of total generated)

• Total capital costs of $297 million

17 HUCs have sewerage systems (interceptor type) serving 50% of urban barangays to be done in 2 phases

• 3.2 million people with access

• Capital costs average $9.1 million/ project/phase

• Pollution reduction: 64 million kg of BOD (80% of total generated)

• Total capital costs of $333 million

Sewerage

Role of septage and sewerage infrastructure providers in the country

Local governments contribute in managing and improving water quality within their territorial jurisdictions (from planning, appropriation of site and access, and water quality monitoring)

Water districts operating within the 17 highly urbanized cities are encouraged to finance 50% of the capital cost in septage and sewerage.

Strategies

Local governments to develop local sustainable sanitation programs in line with the National Sustainable Sanitation Plan

Develop and plan septage management and sewerage projects for implementation (on-going World Bank-WSP TA)

Department of Public Works and Highways (DPWH) is the lead implementing agency – coordination office and management of training and capacity building for the 17 highly urbanized cities

Department of Health (DOH) is co-leader in capacity building for local government units (nationwide training and promotion on septage management)

Recent development on cost-sharing policy: National government approval of the NSSMP

A 40% subsidy for sewerage projects is made available for the 17 HUCs (10 years implementation)

40% NG cost share is consistent with Solid Waste Management policy for 1st and 2nd class cities.

LGU Income Class

Municipalities & Provinces

National Government

Cities National Government

LGU share(loan/equity)

Grant LGU share Grant

1st & 2nd 60/20 20 60 40

3rd & 4th 45/15 40 75 25

5th & 6th 40/10 50 80 20

Financing Options: promising but limited examples

Encourage 50-50 cost sharing between local governments and Water Districts - Dumaguete City example

Private sector is becoming active – Metro Manila concessionaires moving outside MM, can finance, but will most likely cherry pick only a few of the best areas

Zamboanga City and Cagayan de Oro City will bid out septage collection and treatment to private companies

There are many existing financing options available – government financing institutions & private banks.

Environment Department developing National Water Quality Management Fund and Area WQM Funds, but will only be able to fund project preparation, not capital costs

Financing - Septage

Septage management projects can achieve full cost recovery through user fees in 8-15 years

Capital costs range from $95,000 to $1.5 million.

Financing - Sewerage

• Sewerage projects can achieve full cost recovery through user fees in 15 years

• Average capital cost is $18.2 million

Financing -Sewerage

Sewerage projects can achieve full cost recovery through user fees in 15 years.

However:

Capital costs average $18.2 million for an HUC to cover 50% of its urban population.

If this is shared 50/50 with the water district, this leaves $9.1 million for the LGU to finance upfront

Therefore, NG cost share is CRITICAL to help cover capital costs

Recommend the 50% coverage be done in two phases of 25% each to make it more affordable

Key obstacles and lessons

Design of sanitation programs and projects should be based on sound evidence and backed by strong political will.

Full participation of key stakeholders is always necessary.

Implementation remains to be a huge challenge – weak capacity at the local level

Major bottlenecks in current service delivery systems have to be addressed.

There are promising innovative financing models but limited in practice - focus on doable approaches

Be opportunistic in instituting reforms - the playing field will always be imperfect!

Thank You!