Pre-Conference for Water Districts-Managed Water Systems
Welcome Remarks by
Rudolf Fauendorfer
Senior Urban Development Specialist, Southeast Asia Department
Asian Development Bank
At the Improving Water Service Performance:
Philippine Consultations on Strengthening Regulation
2 July 2008
Manila, Philippines
I. Introduction
Mr. Hondrade, participants from water districts, LWUA and other government agencies, colleagues from the donor community, distinguished guests, ladies and gentlemen.
Good morning. Welcome to ADB Headquarters. Many of you either flew in or traveled for hours by land (or both!) from across the country, and we thank you for your time and effort to be here.
This week’s series of workshops will be providing important inputs for a bigger conference in August on improving the performance of water service providers in the Philippines.
II. SETBACKS TO WATER DISTRICTS
You are certainly an interesting player in the water delivery service sector. You are not entirely public and you are not private. Yet, despite your being relatively autonomous, you are still subject to political interference. Such interference may be good or not so good.
Water districts, on average, service only about 40% of the franchised jurisdiction. And given the fact that water districts are responsible for nearly 20% of all provincial urban water services, that leaves a lot of people depending on either their own means of getting water or using private water service providers.
We understand that non-viability of areas outside of the main urban centers is what’s preventing you from expanding the service to the remaining 60% of your service area. That’s understandable. However, I’m sure you are just as concerned as everybody else in getting the service expanding because you are aware of your obligations and you are under pressure to fulfill your mandate.
More than just the failure to expand service because of non-viability, the political interference I alluded to earlier has to do with your ability to raise tariff. And we all know that failure to implement a full-cost recovery based tariff will lead to more problems and then the vicious cycle of underperformance begins.
III. BREAKING THE STATUS QUO
As we can see, the status quo does not serve anybody’s interest. But there is a way to break the status quo cycle. In a word, it is “regulation.” Yes, regulation. I can understand how that word may make you want to pack up and go home. But don’t go just yet. Let’s talk about this today, because regulation often gets a bad rap. It is often misunderstood as a “restriction.” Regulation can also serve your interests.
Effective regulation can help water districts secure the necessary tariff levels to cover debt and increase coverage. I can imagine that increasing coverage rates is likely to be a growing concern for water districts, given the recent Philippine Supreme Court ruling. The court decided that water districts are not guaranteed exclusivity. In essence, this makes room for new service providers to enter territory where water districts are under-performing in. We are not saying that this decision should allow anybody to setup shopwhere there is no piped water supply. Current institutions must strengthen their performance, however, to prevent this from happening.
So how will regulation help water districts secure higher tariffs and put you on the path to wider coverage and more sustainable operations? Well, as the saying goes, “You never get something for nothing.” With higher tariffs comes higher performance. Tariffs, targets and standards are all a part of the better performance package. Targets and standards, however, should not be unrealistic or imposed in ways that undermine possibility rather than support it. We advocate targets and standards that are incremental, realistic, and agreed upon. As any kind of framework goes, a regulatory framework should build a sound support structure. Incremental improvements should be rewarded with incremental tariff increases.
We do acknowledge that there are growing pains with regulatory reform. But as another saying goes, “No pain, no gain.” If you as water districts want to secure your current jurisdiction, you must achieve growth in your coverage rates. Today’s discussions and guest speakers are focused on helping identify the barriers you face in expanding coverage. We will also move beyond the problems to talk solutions. How can performance targets and standards help you achieve what needs to be done?
IV. CONCLUSION
Regulatory reform of water service delivery is on the horizon, and that horizon is drawing closer. The national government has asked us to submit recommendations for this reform effort. Today is all about ensuring that these recommendations consider the issues you face and the commendations you need to not just survive the growing pains that come with regulatory tightening, but that you ultimately benefit from them.
Your gain is the public’s gain. And in that scenario, everybody stands to win.
I look forward to our discussions today.
Thank you.
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