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Quantifying the Economic Spillover Effect for Citywide Fecal Sludge Management Programs

Publication | July 2019
Quantifying the Economic Spillover Effect for Citywide Fecal Sludge Management Programs

Developing countries throughout Asia have made impressive gains in sanitation improvement through efforts to reduce open defecation and improve toilet coverage, and hygienic citywide fecal sludge management programs have become critical.

Fecal sludge management (FSM) is implemented to transport fecal waste from residential environments, improve wastewater systems, and reduce the spread of pathogens and organic matter from human waste. The economic spillover effect describes ancillary benefits of citywide sanitation improvement programs for a community, including (i) increased property values, (ii) improved tourism and livelihood opportunities, and (iii) improved health and productivity. We introduce a model describing the full financial realities of FSM projects; a methodology for quantifying the costs, direct effects, and economic spillover effects; and a toolkit (under development) to calculate their net present values and the overall program’s internal rates of return. Understanding the economic spillover effect values offers innovative policy options for local decision makers to accelerate citywide FSM.

We demonstrate this effect through two citywide FSM programs in the Philippines. In Dumaguete City’s FSM program, the direct effects include the cost savings in the collection, treatment, and disposal of fecal sludge. For Project 7, an urban initiative in Metro Manila, the direct effects include fleet savings by moving the discharge location for desludging truck operators closer. The shorter trucking distances resulted in higher efficiency, fewer trucks and human resources, less fuel and consumables, and a smaller carbon footprint. In both programs, economic spillover effects include improved tax revenues, property values, and health outcomes.

For both programs, the present values of the direct effects and economic spillover effects exceed the original capital expenditure. This implies that when the policy makers set user charges to cover the recurrent costs such as operation and periodic maintenance, the FSM programs would be sustainable.

Watch The Spillover Effects from Fecal Sludge Management: Dumaguete City.

Development Case Study No: 2019-1