Philippines - First Water Supply, Sewerage and Sanitation Sector Project

Document of The World Bank FOR OFFlCDAL USE ONLY 44/ 3~24Z P/ Report No. P-5251-PH MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCT?:ON AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN A1 AMOUNT EQUIVALENT TO US$85 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A FIRST WATER SUPPLY, SEWERAGE AND SANITATION SECTOR PROJECT JUNE 7, 1990 This docment bas a resricted distribtion and may be used by recipients only In te perfonnane of their offiial duies. Its contents may not otherwise be disosed without World Bank authorization.  CURRENCY EOUVALENITS Currency Unit - Peso (P) USS} . P 22.50 (as of March 1990) US$4.44 ' P 100 USSI million - P 22.5 million U5S44,444 - P I million FSCAL YEAR January I - December 31 W-EIGHTS Atsl MEASURES 1 meter (m) 3.8 feet (ft) 1 kilometer (km) , 0.62 mile (mi) I square kilometer (sq km) - 0.3861 square miles (sq mi) I liter (!) - 1.1 quarts (qt) or 0.26 gallons (gal) I liter per capita per day (Icpd) - 0.2642 gal per capita per day ABBREVIATIONS AND BWSA - Barangay Waterworks and Sanitation Association DLG - Department of Local Government DOH - Department of Health DPWH - Department of Public Works and Highways ICB - International Competitive Bidding LCB - Local Competitive Bidding LWUA - Local Water Utilities Administration PCR - Project Completion Report  FOR OMCIAL USE ONLY FIRST WATER SUPPLY. SEWERAGiE AND SANITATION SERCTOR MROJECT Loan and Prjiect Summary govTower. Republic of the Philippines Amount US$85 miflion equivalent * Te 20 years, including a five-year grace period, at the Bank's standard variable interest rate. Einarcing flan Government USS 47.8 million World Bank US$ 8S.0 million TOTAL USS132.8 million _conomicRate The water supply component would give a financial return of about of Return 8%; benefits of the remaining components cannot be quantified. Staff Atnraisal ReDort No. 8143-PH Mae: No. 22431 This document has a restricted distribution and may be used by recipients only in the performance of their officl duties. Its contents may not otherwise be disclosed without World lank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES FOR A FIRST WATER SUPPLY, SEWERAGE AND SANITATION SECTOR PROJECT 1. The following memorandum and recommendation on a proposed loan to the Republic of the Philippines for US$85 million equivalent is submitted for approval. The proposed loan would help finance a water supply, sewerage and sanitation sector project and would be for a term of 20 years, including a five-year grace period, at the Bank's standard variable interest rate. 2. Backaround. The provision of water supply, sewerage and sanitation services in the Philippines has improved considerably over the past two decades. Nevertheless, significant * investment in the sector is still needed in view of rapid population growth, the still low levels of coverage in rural areas where most of the population lives, the poor quality of existing service in many locations, and the need to cater for future economic expansion. In 1987, about 63% of the total population of 57.4 million had access to safe water supplies, including 86% of the population in Metropolitan Manila, 55% in other urban areas and 62% in rural areas. The quality of service in the areas covered was often noor, however, and the 21.2 million people still unserved by water supply systems depended on water sources of doubtful quality. As of end- 1986, about 69% of all households had safe excreta disposal faciiii;m, about 15% had unsafe facilities and about 16% were totally unserved. Of the 17.3 million people underserved or unserved countrywide, the majority, 12.6 million, were in the rural areas. One reflection of the level and quality of servIce in the sector is the country's steadily increasing morbidity rate and a 3.2% a year increase in the number of cases of diarrheal diseases during 1981-85. The Government is attempting to respond to the need for improved and expanded service in the sector, particularly in the rural areas, through its Water Supply, Sewerage and Sanitation Master Plan 1988-2000, which provides a well-integrated, ambitious package of policies, programs and projects. 3. In line with its overall movement toward decentralization, the Government intends to involve local government units at the provincial, municipal and village levels in the planning, implementation, and operation and maintenance of development activities under the Master Plan. Provincial Water Supply, Sewerage and Sanitation Sector Plans will therefore be prepared and implemented to achieve the objectives of the Master Plan but under the overall coordination of the provincial and municipal governments, with the aim of promoting community self-reliance in sector activities. Local waterworks and sanitation associations will also be formed and trained to operate and maintain facilities at the village level. 4. The proposed project would support these initiatives by financing rural water supply and sanitation investments included in the Sector Master Plan and by providing training and technical assistance to the local government staff and rural communities preparing and implementing Provincial Sector Plans and maintaining facilities provided under the project. The project reflects the Bank's current sectoral strategy, which is aimed at supporting sector-type operations under the Master Plan, with an emphasis on meeting the basic needs of the poor in the rural and provincial areas. This is the eighth Bank-assisted project in the sector since 1977, and its design particularly reflects experience gained during implementation of a Rural Water Supply and Sanitation Project (Loan 2206-PH), which is expected to be completed by June 30, 1990. S. Rationale for Bank Involvement. The project addresses several areas of special importance. By providing safe water supplies and improved sanitation in the rural areas, it would meet important basic needs of the rural population, the majority of whom are poor. Project-supported sanitation investments would help improve environmental conditions in the targeted areas. And, by promoting institutional changes to enlarge the role of women in sectoral  -2 - operations in the rural areas, it would increase the involvement of women in the development process. The project would also allow the Bank to continue its sectoral dialogue with Government, which has bern important both in gaining Government acceptance of community and local government participation in preparins provincial sector investment plans as well as in identifying external financial support for the investments proposed. The project provides the Bai-k with an opportunity to assist Government in establishing a set of integrated procedures, practices and standards for the implementation of rural projects in the sector. Among other things, this should help to facilitate and coordinate the mobilization of financial support by other donors and lending agencies in implementing the Sector Master Plan and in reaching the approximately 25 provinces with about 16 million rural people not yet included in identified rural water sup$y projects. 6. Proiect Obiectives. The primary project objective is to assist Government to meet the basic needs of the rural population through the provision of safe, adequate and easily accessible water supplies as well as adequate sanitation. Institutionally, the project is aimed at (a) promoting effective community participation to achieve sustainable sector development; (b) developing organizational arrangements for improved operation and maintenance of water supply facilities; (c) supporting government decentralization by providing local government units with a greater role in planning, implementation and monitoring of sector activities; and (d) training staff in the planning and implementation of water supply and sanitation systems. 7. Proiect Descrigtion. The proposed project would help finance rural water supply and sanitation investments included in the Government's Sector Master Plan 1988-2000. The project would include: (a) the provision by the Department of Public Works and Highways (DPWH) of safe, accessible water supplies to some 18,000 rural communities in about 37 provinces in the Luzon area, largely through the construction of wells and development of springs; (b) the provision of sanitation facilities by the Department of Health (DOH) to rural communities nationwide, including the provision of toilet facilities for about one million households; (c) technical assistance for (i) project implementation, (ii) the preparation of Provincial Sector Plans, (iii) updating of the Master Plan, (iv) training and community development for the local staff and communities which will operate and maintain facilities provided under the project, (v) quality assurance and control, and (vi) the preparation of feasibitity and other studies by the Local Water Utilities Administration (LWUA) for the prepatation of future projects. The training and community development component would be carried out by DPWH and DOH, with the assistance of the Department of Local Government (DLG). 8. The capabilities of the implementing agencies are adequate to handle the proposed project activities. Both DPWH and DOH, which would have the greatest project responsibilities, have already implemented similar works under the earlier Rual Water Supply and Sanitation Project, and their technical performance, with some exceptions, was satisfactory. Technical assistance will be provided for project implementation and quality control. 9. The total cost of the project is estimated at US$132.8 million equivalent, with a foreign exchange component of US$54.1 million or 41% of the total. The cost excludes the value of voluntary contributions in the form of labor, etc. to be made by the beneficiary communities, which is expected to amount to about P 200 million or 10% of the cost of the water supply component and about P 600 miilion or 80% for the sanitation component. To ensure continuity of activities begun under the Bank-assisted Rural Water Supply and Sanitation Project and to be expanded under the proposed project, retroactive financing, not to exceed US$8.5 million, is recommended for relevant project expenditures made after January 1, 1990. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement, the proportions of expenditures to be financed and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in the Philippines are given in Schedules C and D, respectively. A map is also  attached. The Staff Appraisal Report, No. 8143-PH dated May 31, 1990 is being distributed separately. 10. Agreed Actions. The Government has agreed on the. following: (a) the preparation and implementation of satisfactory Provincial Water Supply, Sewerage and Sanitation Sector Plans by the 37 provincial governments in Luzon, in acco-dance with agreed guidelines; (b) a program for implementation of the project; (c) to maintain the Project Coordination Committee during the project period; (d) the posting by DLG of a Community Organizer to each of the project provinces during the period of Provincial Sector Plan preparation and implementation; (e) the training and community development program to be carried out under the project; (f) implementation of quality assurance measures agreed with the Bank for specified goods provided under the project; (g) commencing in 1991, Government's biennial review of its water pricing policy and cost recovery principles, the results and recommendations of such review to be discussed with the Bank and subsequently implemented in the year of the review; and (h) provision to women of equal access to membership and management roles in water and sanitation associations. A condition of loaf effectiveness is the preparation, adoption and putting into effect of at least eight Provincial sector Plans, approved by the Bank. II. Benefits About 3 milion people would benefit from project-supported water supply facilities, and about 6 million would benefit from sanitary latrines for excreta disposal. Since diarrheal diseases, which are strongly associated with unsafe water and poor sanitation, are ranked second among the ten leading causes of morbidity in the Philippines, the safe drinking water and improved sanitation provided under the project are expected to considerably improve the health of the population reached, increase their effective nutrition - especially in children due to the reduction of intestinal parasites - and foster their increased productivity. The project would also put in place procedures, standards and specifications for the implementation of rural water and sanitation projects and would thereby facilitate the participation of other donors and lenders in the sector. It would also promote and formalize an increasingly participatory role for local government in the planning and implementation of sector activities, in 37 of the country's 75 provinces. The water supply component, comprising almost 60% of the base cost of the project, has an estimated weighted economic rate of return of about 8%, which is satisfactory for a social project of this type. The health and institutional benefits of the project's other components cannot be quantified. 1. Women will be the main beneficiaries of the project. In addition to the health benefits expected, women in the lower income rural households will benefit from the more accessible water supplies delivered under the project, which would obviate the need to carry water over long distances. The project has also been designed to increase the participation of women in planning, operating and maintaining the water and sanitation services provided. Government has agreed to provide women with equal access to membership and leadership roles in Barangay Waterv ,rks and Sanitation Associations (BWSAs). 13. The environmental benefits of the proposed project would be: (a) cleaner home and community environments; (b) less stream pollution; and (c) more rational and prudent water us Water supply and sanitary facilities would be planned, designed and constructed under criteria which protect the conditions of the natra and man-made environment. Such facilities are not expected to have adverse environmental impacts because of their simplicity and low volumes of water used. No resettlement of the local population will be required. 14. Risll. The project's success will depend on the coordinated delivery of water supply and sanitation improvements with community development and training. To minimize the risk of poor coordination, the project provides for the establishment of a Project Coordination Committee to oversee the various project participants, sets out the procedures to te followed by the Committee and establishes comprehensive performance monitoring requirements. There is also the risk that the decentralization of responsibilities expected under the project may not proceed at the pace anticipated. The Bank is concurrently assisting the  - 4 - Government in carrying out a Decentralization and Local Government De. ielopment Study, which is expected to lead to recommendations on a fiscal framework that would facilitate government decentralization plans. Ultimately, however, the sustainability of the project will depend on the ability and willingness of the local communities to maintain the facilities provided. The large training and community development program is designed to this end. 1S Recmendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve the proposed loan. Barber B. Conable President Attachments Washington, D.C. June 7, 1990  &i