Water

Water Champion: Antonino T. Aquino
Living Up to the Promise of Private Sector Involvement in the Water Sector
August 2005

By Ma. Christina Dueñas
Water Knowledge and Communications Coordinator, ADB

Antonino T. Aquino is currently President of Manila Water Company, Inc. and Managing Director of Ayala Corporation. He has been with Manila Water since its concession agreement with Metropolitan Waterworks and Sewerage System began in 1997, becoming President of the company in 1999. Before joining Manila Water, he was the President of Ayala Property Management Corporation from 1990 to 1998 and Senior Vice President of Ayala Land, Inc. from 1989 to 1998. He was also a business unit manager at IBM Philippines, Inc. from 1968 to 1980. At present, he is a member of various organizations: Makati Fire Safety Authority, Management Association of the Philippines, Christian Family Movement and Makati Environment Foundation, Inc. Mr. Aquino holds a bachelor of science degree in management and has completed his academic units for a masteral degree in business management at Ateneo de Manila University.

What has Manila Water done differently than other private water service providers that you believe is making a sizeable difference?

Manila Water is one of the few companies that has aligned its business plans with its sustainable development goals of social and environmental improvement. In the process, we emerged a more successful business enterprise.

Early on, we recognized that we are in the business of providing a very basic need. And since a huge portion of our customer base belongs to the poorer sections of society, we thought of prioritizing water for the poor programs. And so Tubig para sa Barangay (TPSB) or Water for the Community was born to provide safe drinking water to informal settlements, while reducing water losses caused by unregistered connections from these areas. All our other sustainable development programs, of which TPSB is one, are directed towards improving the lives of our customers.

In addition to these, we attained operating efficiency improvements and financial viability. The Manila Water concession is now regarded as one of the successful public-private partnerships in the world. We have a progressive regulatory framework that has proven to be highly effective. Part of the credit for the success of the concession goes to the strong professional partnership that has been established between Manila Water and the regulators in the past 8 years.

What are your biggest challenges with delivering water supply to Manila neighborhoods, particularly the slum areas?

Our system losses continue to be a major challenge for the company. We were fairly successful at reducing non-revenue water (NRW) to meet our regulatory targets in the past year. But a considerable amount of capital investment is needed to further bring down the level of NWR from its present level of 36%. We had to work at NRW reduction because without water, poor communities are at a bigger disadvantage. In the past, they had to pay five times the current rates, had fewer hours of water supply and bought water from vendors.

So we went to depressed communities via our Territory Management program. We assigned a territory manager to take care of the needs of a particular area such as Manggahan Floodway. Through our territory managers, we started to establish partnerships with local organizations to facilitate the implementation of projects. A key learning for us was that stakeholder participation is important to ensure that the project objectives are met. Now, we have one Territory Business Manager for every poor community being served through TPSB, which is a flagship project of the company.

Has Manila Water reached its target for connecting poor households as new users?

Over the past 8 years, Manila Water has already served about 820,000 people in 517 low income communities through our TPSB program. We will aggressively pursue our TPSB projects for the medium term by providing properly connected water system for urban poor communities. Our target is to serve 100,000 people from poor communities every year. And this will materialize with the support of our partners in the communities we serve.

What are Manila Water's plans and targets for addressing sanitation services?

Under the concession agreement, Manila Water was initially required to extend the existing sewerage system by making new connections and offering sanitation services every 7 years. We estimated that these targets would require a huge investment which, realistically, would not be recovered through tariff increases to customers. In addition, there are physical constraints to building large, centralized sewage treatment plants because of the road congestion in Metro Manila.

During our business plan review in 2003, we agreed, together with the Metropolitan Waterworks and Sewerage System (MWSS) and the regulators, to adopt a different approach. We are now implementing a decentralized approach by providing on-site sewerage treatment plants to medium and high rise housing establishments and by taking control of existing sewerage systems.

From 1997, we have already doubled the sewerage capacity and have invested $23 million to rehabilitate and improve our sewerage operations. We also constructed 26 package sewage treatment plants located in small communities within the East Zone. We expect to double coverage to 30 percent of the population in the next 5 years. This will cost us $64 million with loan facilities from the World Bank, plus $21 million in equity.

In the same program, septic tank desludging services will be offered to 100% of the population within the next 5 years. We are currently building 3 septage treatment plants for this purpose and will be procuring a fleet of 134 tankers over a period of 10 years.

Civil Society groups often use the 1997 Manila Water concession as an example for opposing private sector involvement in the sector. What do these groups have right and wrong about the Manila experience?

In our public consultations, the vast majority of civil society groups are supportive of Manila Water's efforts, particularly in poor communities. A very small minority, however, decry the periodic increase in tariffs.

However, we continue to have affordable tariff rates at 0.33 US cents per cubic meter. Besides, we would have higher tariffs now had there been no private sector participation in Manila. Moreover, our tariff increases have gone largely to capital expenditures to improve access of the poor to piped water supply. Over and above the tariff increases, we have even raised $322 million in equity and loans to supplement our capital spending program. Our initial public offering on the Philippine Stock Exchange in March enabled us to raise funds to help finance our capital investments in the next few years.

To what length will Manila Water pursue a stake in the troubled Maynilad concession in East Manila?

Manila Water would like to share its best practices with the other concessionaire, particularly with regard to service to urban poor communities, NRW reduction, and operational efficiencies. We would like to be involved in the operations of Maynilad, together with other investors.

With 8 years experience as a large water service provider in Manila, what challenges prepare the company for doing business elsewhere in the Philippines and Asia?

Manila Water's added value, as a large water service provider, will really be sharing its best practices. We have 8 years experience of improving the East Zone water/ wastewater system and our track record speaks for us. I think that our experience will be most applicable to similarly situated systems as well as third world countries in South East Asia.

What does Manila Water hope to gain from its recently published Sustainability Report?

Our Sustainability Report clearly defined for us the vision, organizational commitment and buy-in by employees. It also defined for us the performance metrics by which we can measure our initiatives and we are committed to publish a report each year.

Publishing the first report is an opportunity for us to demonstrate the social and environmental dimension of our business and to highlight the success of Public-Private Partnership. We hope that through this, we will also obtain access to developmental funds by multi-lateral organizations with shared objectives.

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