Philippines - Rural Water Supply and Sanitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 3866-PH STAFF APPRAISAL REPORT PHILIPPINES FIRST RURAL WATER SUPPLY AND SANITATION PROJE August 25, 1982 Urban and Water Supply Division East Asia and Pacific Projects Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Pesos (F) P 1.00 US$0.120 P 1 million US$120,480 EL I billion US$120 million US$1.00 P 8.3 US$1 million = P 8,300,000 MEASURES AND EQUIVALENTS mm = millimeter = 0.04 inches cm = centimeter = 0.39 inches m = meter = 3.28 feet km = kilometer = 0.62 miles ha = hectare = 2.47 acres cum = cubic meter = 264 US gallons 1 = liter = 0.26 US gallons lpcd = liters per capita per day = 0.26 US gallons per capita per day PRINCIPAL ABBREVIATIONS AND ACRONYMS ADB = Asian Development Bank EC = Electric Cooperative IDWSSD = International Drinking Water Supply and Sanitation Decade LWUA = Local Water Utilities Administration MHS Ministry of Human Settlements MLG = Ministry of Local Government MOH = Ministry of Health MWSS = Metropolitan Waterworks and Sewerage System MPWH = Ministry of Public Works and Highways NEA = National Electrification Administration NWRC = National Water Resources Council PIRC = Project Implementation and Review Committee RWDC = Rural Waterworks Development Corporation RWA = Rural Waterworks Association RWSA = Rural Waterworks and Sanitation Association USAID = United States Agency for International Development FISCAL YEAR Government: January 1 to December 31 RWDC : January 1 to December 31  FOR OFFICIAL USE ONLY PHILIPPINES FIRST RURAL WATER SUPPLY AND SANITATION PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. THE SECTOR ..... .. ... . . . . . . . . . . . . . 1 A. Current Situation . . .. . . ....... . . . 1 B. Sector Organization .... . . . ........ . . . 3 C. Sector Policies and Programs . . . . . . . . . . . . . 6 D. Investment Programs... .... 8 E. Bank Lending for the Sector . . . . . . . . . . . . . . 9 II. BORROWER, BENEFICIARIES AND IMPLEMENTING AGENCIES . . . . . 9 A. The Borrower. 9 B. The Beneficiaries and Implementing Agencies . . . . . . 10 III. THE PROJECT ..... . . . .. .. . . . . . . . . . . . 13 A. Objectives. . . . . . . . . . . . . . . . . . . . . . . 13 B. Description . . . . . . .. . .. .14 C. Implementation Arrangements . . . . . . . . . . . . . . 16 D. Project Cost Estimates . . . . . . . . . . . . . . .18 E. Procurement . . . . . . . . . . . . . . . . 20 F. Disbursements . . . . . . . . . . . . . . . . . . . . . 21 G. Financing Plan .... . . . . ..... . . . . . . . 22 IV. FINANCE . . . . . . . . . . . . . . . . . .. . . ... . 23 A. RWDC's Financial Performance . . . . . . . . . . . . . 23 B. Cost Recovery for Rural Water Supply . . . . . . . . . 23 C. Cost Recovery for Rural Sanitation . . . . . . . . . . 24 V. JUSTIFICATION ..... . . . . . . . . . . . . . . . . . . 24 A. Project Benefits .... . . . . . . . . . . . . . . . 24 B. Risks ..... . . . . . . .. . . . . . . . . . . . . 27 C. Environmental Aspects . . . . . . . . . . . . . . . . . 27 VI. AGREEMENTS REACHED AND RECOMMENDATIONS . . . . . . . . . . 27 The project was identified in April 1981 and appraised in November/December 1981 by A. Saravanapavan (Sanitary Engineer) and L.V. Smith (Consultant). Messrs. C. Fernandez and A. Van Vugt (Financial Analysts) contributed to the preparation of the appraisal report. | This document has a restricted distribution and may be used by recipients only in the performance of | their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page No. TABLES 1. Project Cost Estimates . . . . . ..... . . . . . . . . 29 2. Sample Construction Costs .... 30 3. Estimated Schedule of Disbursements . . . .31 4. Allocation of Proceeds of Loan . . . . . . . . . . . . . . 32 5. Physical Targets - Rural Water Supply Program . . . . . . 33 6. Typical Operation and Maintenance Costs - Level II Systems .... . ..34 7. Internal Rate of Return Calculations . . . . . . . . . . . 35 ANNEXES 1. Project Description . . . . . . .. .36 2. Consulting Services and Technical Assistance . . . . . . . 53 3. Monitoring Indicators ... . .60 4. RWDC Income Statement . . . . . . . . . . . . . . . . . 61 5. RWDC Cash Flow Statement .. . 62 6. RWDC Balance Sheet . . . . . .63 7. Assumptions used in the Financial Projections for the RWDC 64 8. Documents in Project File . . . . . . . . . .66 CHARTS IBRD No. 23633 Organization Chart - RWDC . . . . . . . . . . . . 68 23717 Drawing of Shallow Well With Handpump . . . . . . . . . 69 23718 Drawing of Pour Flush Toilet . . . . . . . . . . . . . . 70 23683 Project Development Flow Chart . . . . . . . . . . . . . 71 23684 Project Implementation Activity Bar Chart . . . . . . . 72 23634 Project Management Chart - MOH . . . . . . . . . . . . . 73 MAP IBRD 16245 - Map of the Philippines  PHILIPPINES FIRST RURAL WATER SUPPLY AND SANITATION PROJECT I. THE SECTOR A. Current Situation 1.01 The principal source of domestic water supply in the Philippines, particularly in the rural areas, is groundwater which is generally of acceptable quality and available throughout the country in sufficient quantities. There are four major groundwater reservoirs with areas ranging from 6,000 to 12,200 sq km which, when combined with other smaller reservoirs, aggregates to about 50,000 sq km. In cities with large concentrations of population, surface water is often utilized. There are over 400 principal rivers with drainage areas ranging from 40 to 25,000 sq km and some 60 natural lakes as well as numerous small streams. Average annual rainfall is about 300 cm. This rainfall is unevenly distributed with certain populated areas in the northwest having dry seasons of about three to seven months. The Philippines has a total land area of 300,000 sq km spread over some 7,100 islands of volcanic origin. About 95% of the land is contained in eleven of the largest islands with two, Luzon and Mindanao, accounting for some two-thirds of the total area. Nearly 65% of the country is either mountainous or upland with mountain ranges dividing the islands into small watersheds (see Map IBRD 16245). 1.02 A major contribution to water resources knowledge, relevant to the development of rural water supply, was the completion in August 1981 of a rapid assessment of water supply sources undertaken by the National Hydraulic Research Center on behalf of the National Water Resources Council (NWRC). A report has been prepared for each of the country's 73 Provinces (divided into 12 administrative regions) which analyses all available data and includes maps indicating areas suitable for shallow wells or deep wells and also defines areas which are likely to be difficult for groundwater development. Popula- tion distributions and densities within each Province were also examined and recommendations made as to the most suitable type of development to meet rural water demands. These reports provide a valuable tool for the rural water supply program. 1.03 A Government Task Force established to develop integrated national water supply plans and programs estimates that as of 1980, of the total esti- mated population of 49.4 million/I, about 21.4 million (43%) were served by public water supply facilities i.e., 12.9 million (26%) by public wells, about 0.4 million (1%) by communal faucet systems and 8.1 million (16%) by municipal works systems. Service in Metropolitan Manila covered some 82% of the 6.4 million population, other urban areas with a total population of 8.9 million registered a 55% coverage whilst only 33% of the 34.1 million rural dwellers in the country received a safe public supply. The unserved 67% low income /1 This figure is based on a recent survey.  - 2 - rural population of 22.8 million is the target group for the proposed project which is part of a recently prepared national Rural Water Supply and Sanitation Master Plan. This group would be served with safe water almost entirely from underground sources such as protected wells and springs. The following table indicates the population presently covered by type of supply: --- Public Water Supply Service --- Other Piped including Wells Springs systems unserved Total Population Population Population Population Population million % million % million % million % million % Urban Population Metro Manila 0.1 2 - - 5.1 80 1.2 18 6.4 100 Other Urban 1.2 14 0.3 3 3.4 38 4.0 45 8.9 100 Rural Population 2.8 8 5.1 15 3.4 10 22.8 67 34.1 100 Total 4.1 8 5.4 11 11.9 24 28.0 57 49.4 100 1.04 Diseases in which water and sanitation are implicated - gastro- enteritis, intestinal parasites, dysentery and diarrhea - are next in frequency to respiratory diseases which top the list of leading causes of diseases in all parts of the country. The target group of 22.8 million in the rural water supply program which at present largely relies on unprotected dug wells and has poor environmental sanitation is victim to these diseases. Malaria, which is water and drainage related, is a relatively serious problem in the northern and southern extremes of the country. Schistosomiasis is reported in 6 of the 12 regions. About 28% of the approximately 7 million households in the country have unsanitary toilets and about 19%, primarily low income families, have no toilets. Such unsanitary conditions create environmental problems - water pollution, contamination of food, insect and rodent infestation and disease. The Ministry of Health (MOH) has been promoting the installation of simple household sanitary facilities for the disposal of human excreta in the rural areas (see para. 1.09). MOH is planning to intensify its program in connection with the United Nations International Drinking Water Supply and Sanitation Decade (IDWSSD), with the objective of providing all households with safe water and a sanitary method of excreta disposal by 1990. 1.05 To sum up, in the rural areas, low-income families are traditionally dependant on unsafe sources of water supply and poor sanitation facilities. Similarly, in urban areas, while coverage of piped water supply systems has improved appreciably over the last five years, the facilities have been largely based on individual house connections with a few public faucets, leaving the poor in the periphery of towns largely unserved. The result has been the continuing and widespread incidence of waterborne or water-related diseases, particularly in the countryside. The provision of safe water and sanitary disposal of excreta, properly integrated with health education, thus constitutes the single most important investment that could improve the health  - 3 - and productivity of the rural population. Review and analysis of data and estimates of morbidity and mortality show that the Philippines continues to have a serious health problem with diseases related to inadequate water supply and sanitation services. Reducing the incidence of these diseases requires a subtantial improvement of rural water supply and sanitation service levels and is the principal objective of the Government's planning for the sector. B. Sector Organization 1.06 Principal Agencies-Water Supply. As of 1980 the Philipppines had 1,531 cities and municipalities containing 39,107 barangays with a total population of 49.4 million./l The institutional responsibilities for providing water supplies is shared between the Metropolitan Waterworks and Sewerage System (MWSS) for Metropolitan Manila, the Local Water Utilities Administration (LWUA) for 688 cities and municipalities with population greater than 20,000, many of which contain rural areas within their boundaries; and the Rural Waterworks Development Corporation (RWDC) serving 815 cities and municipalities with populations below 20,000. RWDC is responsible for promoting rural water supplies through the formation of Rural Waterworks Associations (RWAs) which are village community organizations for building, operating and maintaining village water supplies (see para. 1.11). This type of sectoral organization is unique and is probably one of the best of its kind in the developing world. Within this broad division of responsibilities there are some overlapping functions between the principal agencies. The following table shows the distribution of responsibilities between the three principal institutions and the urban and rural areas: MWSS LWUA RWDC Total Urban Areas Barangays (No.) 1,940 3,305 1,201 6,446 Population (million) 6.4 7.4 1.5 15.3 Rural Areas Barangays (No.) 38 19,631 12,992 32,661 Population (million) 0.1 24.0 10.0 34.1 Totals cities/ municipalities (No.) 28 688 815 1,531 Barangays (No.) 1,978 22,936 14,193 39,107 Population (million) 6.5 31.4 11.5 49.4 /1 A barangay is the smallest political unit. Each barangay has a Barangay Council which plays an important role in the implementation of Government programs. The Barangay Council is headed by a Barangay Captain who participates in community activities.  -4- 1.07 As an example of the overlapping responsibilities it will be noted that LWUA is responsible for 7.4 million urban and 24 million rural popula- tion while RWDC covers 1.5 million urban and only 10 million rural popula- tion./l This is because a city or municipality in the Philippines is equi- valent to a county in the USA and often has a large rural population with small core urban areas. Therefore LWUA has a larger rural population within the 688 cities and municipalities (with populations greater than 20,000) in its area of jurisdiction as compared with the rural population in the 815 cities and municipalities (with populations below 20,000) for which RWDC is responsible. The Government is alert to this organizational problem and is taking steps to reorganize the sector during the course of the proposed project. The reorganization would aim at reducing overlapping functions improving efficiency and expediting the carrying out of the national program (para. 1.12). 1.08 Supportive Agencies-Water Supply. In addition to the three princi- pal agencies there are three ministries - the Ministry of Public Works and Highways (MPWH), the Ministry of Local Government (MLG), and the Ministry of Human Settlements (MHS) - and the National Electrification Administration (NEA) supporting RWDC in the development of the rural water supply sector. MPWH has two roles. Firstly, as the government ministry responsible for MWSS and LWUA, it has a coordinating function and therefore prepares sectoral plans (see para. 1.15). Secondly, the Government provides annual budgetary allocations to MPWH to construct deep and shallow wells, carry out spring developments and until recently build communal faucet schemes. MHS is the government agency responsible for RWDC. MHS also carries out important community development activities such as the formation of barangay water and health brigades. MLG is training its Provincial Engineers, through a USAID- funded Barangay Water Program (BWP) to develop local capability in about 55 provinces (soon to be extended to all provinces) for designing and construct- ing rural water supply schemes. As of September 1981, BWP's program included 287 shallow wells, 24 communal faucet systems and 24 systems with house connections. Finally, NEA assisted RWDC, through its Electric Cooperatives (ECs), with two water supply pilot projects and presently acts as a collect- ing agent for RWDC for those RWAs which purchase electricity from an EC. NEA would continue to assist RWDC in future in loan billing and collection in the areas where such cooperatives have been formed. 1.09 Principal Agencies-Sanitation. MOH is responsible for rural sani- tation, and has a successful toilet construction program for simple pit privies and some pour flush toilets, averaging about 200,000 units per year, being undertaken at the barangay level. MOH sanitary inspectors supervise the fabrication of squat plates and water sealed toilet bowls and advise upon the siting and installation of toilets by householders. MWSS and LWUA are responsible for sewerage and sanitation within their respective areas /1 A proportion of the rural population live on the fringes of urban areas and are not presently served by LWUA.  of jurisdiction. MWSS has made a start in providing these services in Metropolitan Manila, but because of the low ability to pay in the small cities, LWUA has no immediate plans for sewerage and sanitation improvements. 1.10 Water quality surveillance, needed to ensure the quality of drink- ing water, is a responsibility of MOH. MWSS and LWUA have laboratories and carry out their own quality control. Similar laboratory facilities are not available for the rural systems and MOH has plans for expanding its presently limited laboratory facilities with assistance from UNICEF. MPWH, which is one of the implementing agencies assisting RWDC, is also planning to build laboratories to ensure safe water supplies for the systems built by them. This is an example of duplication in effort which the Government would be reviewing as part of the reorganization of the rural water supply and sani- tation sector (para. 1.12). 1.11 Organizational Improvements. The Government has recently intro- duced legislation for the RWAs to also undertake rural sanitation and be called Rural Waterworks and Sanitation Associations (RWSAs)./I RWDC's principal function is to promote the formation of RWSAs, providing financ- ing, technical assistance and training and implementing rural water and sanitation projects with assistance from MPWH, MLG and MOH. An RWSA is a community organization formed to build, operate and maintain rural water supply and sanitation projects for which financial assistance is provided by the Government (see para. 2.06). The availability of adequate supplies of safe water, when combined with health education and disposal of excreta by water sealed household toilets, would have a favorable impact on health, personal hygiene and general domestic sanitation. The Government has therefore through the formation of RWSAs made an important organizational improvement by integrating the rural water supply and rural sanitation programs at the barangay level. 1.12 RWDC, as the lead agency in the rural water sector is attempting to coordinate the activities of the principal and supportive agencies. However, most of the construction-oriented type agencies (MWSS, LWUA, MPWH) are not yet fully sensitive to the priorities and special needs of the rural areas. In addition to the anomalies of LWUA being responsible for servicing a larger rural population than RWDC, and RWDC being responsible for servic- ing about 10% of the urban population, there is often unnecessary duplica- tion of effort, such as in water quality surveillance and the training programs of these agencies. The Government recognizes the problem and has recently established a high level committee to review the organization, the roles of the various agencies in the sector and to make recommendations. The Rural Water Supply Sector Review Committee's composition and terms of reference are satisfactory and have been accepted by the Bank; the committee would be reporting to the Prime Minister/Minister of Finance. The review would be completed by April 30, 1983 and the recommendations agreed with the Bank would be implemented by December 31, 1983. /1 Future references in this report would be to RWSAs.  - 6- C. Sector Policies and Programs 1.13 Service Levels. In the areas of developing design and construction manuals, training programs and procedures for working at the local level, RWDC has done a great deal of preparatory work and made a start in the development of policies and programs for the rural water supply sector. Design criteria appropriate to rural systems have been developed with Bank and UNDP assistance and used in the training on low cost designs aimed at providing three levels of water service: (a) Level I (or Point Source) is generally a protected well (deep or shallow) with handpump, or a protected spring and outlet, without a distribution system. It is generally suitable for rural areas where houses are thinly scattered, the well sited at a distance of not more than 250 metres from the furthest user. On average some 15 to 50 households can be supplied from a single source at an average cost of about $5 to $10 per person./I (b) Level II (or Communal Faucet System) is generally intended for rural areas where the houses are clustered densely enough to justify a simple piped distribution system with public faucets sited at not more than 25 meters from the furthest house. In general, such systems are designed to supply an average of 100 to 150 households with 40-80 liters of water per capita per day and with one faucet per 4-6 households. Costs, excluding source development, average about $10 to $20 per person./2 (c) Level III (or Individual House Connection System) is generally suitable for densely populated urban areas. Distribution networks are provided, with individual house connections and some public faucets, to serve an average of 600 households per system. Costs of these systems vary depending upon economies of scale. There are no Level III systems in the proposed project. 1.14 Financing and Cost Recovery. Grants are provided for the construc- tion of Level I water supply systems and loans for Levels II and III systems. Water charges are set to cover operation and maintenance costs and debt servicing. In respect of sanitation, the Government provides toilet bowls free of charge to the individual families who in turn install them with their own resources under the guidance of trained sanitary inspectors (see also paras. 4.04 and 4.05.) /1 There are about 10,000 wells in the proposed project and it is assumed that each well would serve an average of 25 households and each household has a family size of six persons. /2 There are 400 communal systems in the proposed project, each assumed to serve a cluster of 100 households and each household has a family size of six persons.  - 7 - 1.15 Government Plans for the Sector. The Government has produced two major plans for the sector. The first of these is the national "Integrated Water Supply Program 1980-2000" dated July 1980; based upon IDWSSD targets i.e. by 1990 all rural families would be provided with safe drinking water. The second is the recently prepared "Rural Water Supply and Sanitation Master Plan". Both these plans are comprehensive and were prepared by Inter-agency Committees chaired by MPWH. The first document sets out general policies for the water supply sector and indicates short, intermediate and long-term targets. The Rural Water Supply Master Plan's long range targets are that by the year 1990 about 37% of the population would be served by piped systems with public faucets and 29% by piped systems with house connections and 27% through protected wells. By the year 2000 these percentages are expected to be 52%, 34% and 7% respectively. These service targets are ambitious. In the early years of the program, annual targets are unlikely to be achieved given institutional and funding constraints. However, these targets provide a useful framework within which short-term targets can be adjusted as imple- mentation proceeds. Physical targets for the period up to 1990 are as follows: Immediate - By end 1984, all barangays in the country would have a minimum of Level I service; all existing nonfunctional public wells (as of 1981) would be rehabilitated, replaced or repaired jointly by the Government and the RWSAs; about 50% of rural towns and 10% of the rural barangays would have Level II service; about 25% of the rural towns would have Level III service. Intermediate - By end 1986, around 30% of the rural barangays would have Level II service; the incremental demand for repair and rehabilitation of wells would be satisfied; all clusters of population with 50 households or more, would have a minimum of Level I service; and all small towns would have a minimum of Level II service. Long-range - By end 1990, around 50% of all rural barangays would have a minimum of Level II service. By end 1995, all rural towns would have Level III service. By end 2000, 70% of the clusters of households would have a minimum of Level II service while 30% would have Level I service. 1.16 The parallel Rural Sanitation Master Plan is based upon IDWSSD tar- gets i.e. by 1990 all families would be provided with sanitary excreta dis- posal facilities. In total it is estimated that during the period 1982-90, some 1.5 million new facilities would have to be provided and 2.5 million will have to be rehabilitated./l Of the total of 4 million new or rehabili- tated units envisaged, it is estimated that approximately 1 million will be built in urban fringe areas. /1 The proposed project has a rural sanitation component which provides for about 150,000 household toilets to be built each year (total 750,000) as part of a five-year program.  - 8 - 1.17 Guided by past experience in project implementation in the sector and the need for improving the sectoral organization, the Government intends to make a start with a small and manageable Bank-assisted first phase rural water and sanitation program chosen from the Master Plan to service the rural areas with the greatest need. However, should the implementation of the program proceed at a faster pace than envisaged, the Government could consider advancing of a possible follow-on project. D. Investment Programs in the Water Sector 1.18 Third Plan. The sector strategy for water resources in the Govern- ment's Third Plan (1978-82) was that: "priority will be given to areas with greater population size and density, greater industrial, commercial and insti- tutional concentration or where water supply can propel development". The creation of RWDC in January 1980 and the publication of the Integrated Water Supply Program of July 1980 by MPWH, together with the Government's subscrib- ing to the IDWSSD goals caused a significant change in emphasis and some shift in priority. The 1981 revised total Third Plan expenditure is about P 4.3 billion (as compared with the original provision of P 5.4 billion). If 1982 expenditure keeps to the previous proportional pattern, then only about one- third of the program would be achieved. Some agencies have been more able than others to reach their programmed level of expenditure. LWUA has been on target, MPWH has, as of now, achieved 47% of its program, but MWSS has only spent 27% of its programmed allocation. However, because MWSS is committed to heavy expenditures in 1982, it is likely to utilize a substantial proportion of its allocation. This apparently poor performance in the sector is mainly due to initial implementation delays, insufficient counterpart funds and unrealistically high program targets. It is estimated that expenditures in the rural water supply sector would reach only about 25% of the program; per- formance in the fourth plan is expected to improve as RWDC gains more experi- ence in project implementation. 1.19 Fourth Plan (1983-87). Government's plans are that 5% of GNP is allocated to public infrastructure investment, and that a similar proportion as in the Third Plan, estimated at about 0.8% of GNP, or about P 30 billion, goes to water resources. Water and irrigation agencies have estimated their requirements at P 33.7 billion. In addition, an estimated P 300 million is likely to be required for the Fourth Plan rural sanitation program under the MOH, but this would appear under Health, rather than Water Resources, in the Plan. On the basis of past experience in the speed of project implementa- tion, this investment program is ambitious and is prompted by the agencies' desire in the sector to achieve the IDWSSD targets to provide safe water and sanitary excreta disposal facilities to all the population by 1990. It should be noted that the Government did take early steps within the sector to further improve organization and management of MWSS and LWUA, create RWDC and also prepare feasibility studies and detailed designs needed to implement the planned program. Multi-lateral and bi-lateral assistance from Asian Develop- ment Bank (ADB) and the Governments of Switzerland, Japan, Germany and USA is also being drawn upon for the program. Nonetheless, it is quite unlikely that the absorptive capacities of the sector agencies would have improved to the extent that the targetted investment would be achieved.  - 9- E. Bank Lending for the Sector 1.20 A Bank loan of $23 million (Loan 1415-PH) made to the Government in 1977 for the First Provincial Cities Water Supply Project had components for providing water supplies to six relatively large provincial cities and feasibility studies and detailed designs for future water supply and sanita- tion projects. A second Bank loan of $88 million (Loan 1615-PH) was made in 1978 to help improve and expand the Metropolitan Manila water supply system and also finance detailed design and feasibility studies for water supply in provincial cities and prepare the rural water supply program. The third Bank loan/credit of $38 million (Loan/Credit 1710-PH; 920-PH) made in 1979 financed water supply projects in some 50-60 small towns and prepared projects for some 150 towns; a fourth loan of $63 million (Loan 1814-PH) made in 1980 financed sewerage and sanitation in Metropolitan Manila and technical assistance for the preparation of future projects. The first two projects had significant delays during the first two years caused partly by the time taken to prepare detailed designs and award contracts, but recent progress has been satis- factory. The other projects had relatively minor implementation problems at the beginning and are now showing better progress. To avoid similar delays in the proposed project the preparation of detailed designs is underway and preliminary procurement action has been initiated (para. 3.18). 1.21 Despite the initial delays, the Bank's participation in the four projects in the sector resulted in significant improvement in institution building and management both in MWSS and LWUA. The Bank was also instrumental through sector studies and UNDP-funded technical assistance projects in laying the foundations which resulted in the creation of RWDC and has assisted all three institutions in making technological and institutional advances. Bank- financed urban and rural development projects are also providing water supply and sanitation systems for low-income groups. The Bank's strategy in the water supply and sanitation sector is to continue to support the Government's investment program for improving watet supply, sewerage and sanitation facili- ties and to provide technical assistance and training for institution building and staff development. The Bank would also continue to support Government in its efforts to improve the organization and management of the rural water supply and sanitation sector, provide technical assistance for the preparation of future projects, and support cofinancing wherever this is feasible. The proposed project and future Bank loans in the sector are planned to be more of the sector type so as to benefit from the local institutional capability developed over the past five years; this capability would be further increased by the additional institution-building support in the proposed project. II. BORROWER, BENEFICIARIES AND IMPLEMENTING AGENCIES A. The Borrower 2.01 The Borrower will be the Republic of the Philippines. The equiva- lent of $5.0 million of loan proceeds would be relent by the Government to the RWDC for constructing communal faucet systems. The equivalent of $14.7 mil- lion and $12.3 million of the loan proceeds would be allocated by the Govern- ment to MPWH to construct protected wells with pumps and for water source development and to the MOH to develop rural sanitation schemes, respectively. The Government would utilize about $3.0 million of the loan proceeds for technical assistance to prepare future drainage, flood control and solid waste disposal projects.  - 10 - B. The Beneficiaries and Implementing Agencies 2.02 Rural Waterworks Development Corporation. The Rural Waterworks Development Corporation, created on January 12, 1980 under Executive Order No. 577, is authorized and empowered to promote, encourage and assist rural waterworks associations (RWAs) with the objective of making adequate water supply services available to residents of the rural areas at the barangay level, not served or covered by LWUA and MWSS (see Organization Chart of RWDC - IBRD 23633)./1 It provides grants for point source development and makes loans for the construction and acquisition of facilities and equipment for supplying water services and for the restoration, improvement or expan- sion of such facilities (para. 4.01). It is responsible for the development of sectoral plans and programs for the rural water supply sector which is coordinated with LWUA and MWSS insofar as their respective areas of responsi- bility are concerned. The culmination of RWDC's efforts in sectoral plan- ning is the national Rural Water Supply and Sanitation Master Plan, prepared for RWDC by an Interagency Master Plan Preparation Committee headed by MPWH; the proposed project is a part of the first stage of the Master Plan. With the support of MPWH, MLG, MOH and such other government agencies as the Board of the Corporation may designate and with the direct participation of the local governments through their waterworks committees and task forces, RWDC provides institutional, technical and financial assistance for the construc- tion, operation and maintenance of the water supply systems. RWDC has a permanent staff of 91 persons which is considered adequate. No major staff increase would be required during project implementation. 2.03 RWDC has been concentrating its activities towards self-sufficiency at the local level through the strengthening of the local organizations and the involvement of RWSAs in all phases of project activity. RWDC utilizes the services of the Provincial Engineers Offices for design and construction management of Level II schemes and requires active involvement of the commu- nity to be served, culminating in the formation of a local RWSA which is responsible for management and operation of the completed system. Prior to commencing any local water supply activities at the barangay level, RWDC pro- cedures require the establishment of policymaking, planning and technical capabilities at the Provincial and Municipal/City levels. This includes: Policy - Provincial Waterworks Committee/Municipal/City Waterworks Committee; Planning-Provincial Waterworks Development Task Force/Municipal/City Water- works Committee; Technical - Provincial and/or Municipal/City staff to support Committees and Task Forces (see para. 2.11). Technical capability in water resource planning, engineering design, feasibility studies, training, public information, community organization, construction, accounting and waterworks technology as required is achieved through RWDC initiated training programs. 2.04 The determination of water charges is the sole responsibility of the RWDC in consultation with the RWSA and is not influenced by the Provincial Waterworks Committees. MOH sanitary inspectors would provide assistance to the RWSA in determining charges, as may be applicable, for sanitation works. /1 Under recent legislation (para. 1.11) RWAs would undertake rural sanitation.  - 11 - 2.05 As of March 31, 1982, RWDC's physical accomplishments were as fol- lows: (a) it had ordered 31,000 locally made handpumps, for installation in Level I supplies on drilled wells, of which 26,000 had been delivered and 22,000 installed; and (b) some 330 Level II systems had been completed in selected RWSAs and 260 low-cost drilling rigs had been ordered for use in Provincial Engineer's workshops. The handpumps are allocated to Provinces on a pro rata basis by population and on-allocated by the Provinces on a similar basis, at the barangay level./L 2.06 Rural Waterworks and Sanitation Associations. Following upon dis- cussions with local health and community development officials, interested residents would approach the Barangay council to initiate a request for a water supply and/or sanitation subproject. The request would be inserted into the provincial planning process which establishes priorities and makes prefeasibility studies./2 For Barangays where subprojects appear to be feasible, based upon technical studies made at the local level (paras. 2.11 and 3.04) information is provided to the residents and a public meeting (or meetings) held. If residents are positive about proceeding, the community participates in a more detailed study which includes financial and technical aspects of the various options available and selects the level of service which is desired and which can be afforded. The community then passes a resolution to form a RWSA and appoints a board of directors. The RWSA is duly registered with RWDC and assumes the responsibility for further development of the system. This includes further negotiation with RWDC on financing and repayment schedules, the levying of adequate water charges, and on the details of design, construction, operation and maintenance of the system. The RWSA is also responsible for organizing the community input to construction. 2.07 Through the entire procedure, from the time the community decides to form an RWSA to the time when the project is completed, and during the time the facilities are in daily use the district provincial and municipality/city water supply staff of the MLG and MPWH and sanitary inspectors of the MOH provide professional and technical support. This includes expertise in organization of the community, the completion of forms and reports, location and siting of wells and toilet units, the supply of information and the train- ing of all personnel who will be required to operate, maintain and keep simple accounts to administer the system. Service will be provided by Government for replacement parts and any major maintenance for water supply systems that is beyond the capacity of the RWSA. Follow-up, monitoring and evaluation ensures that the objectives of safe water supply, proper sanitation and community self-reliance are met to the greatest extent possible. RWSAs will benefit from pumps, pipes, toilet bowls and equipment provided by RWDC and MOH and included in the proposed project. The RWSAs would also benefit from the com- munity health education component of the project. /1 Until the introduction of legislation changing RWAs to RWSAs the emphasis was on water supply. About 6,000 RWAs had been registered as of March 31, 1982. /2 The Provincial Waterworks Committee for water supply subprojects (para. 2.11) and the Provincial Sanitation Committee for sanitation subprojects (para. 3.14).  - 12 - 2.08 The Ministry of Health. MOH is responsible for promoting safe water supplies, approving the site of water sources, exercising surveillance of water quality and for rural sanitation. A network of regional laboratories and a central laboratory with technicians is used to carry out a water quality surveillance program that requires periodic bacteriological and chemical examinations of all water supply sources. Like the MPWH, its operational and capital expenditures come from its share of the annual budget allocated by the Government (see para. 2.10). MOH has a Health Education Division staffed with 14 health educators and three administrators to disseminate information on safe drinking water and good environmental sanitation. A production unit for information, education and communication materials is being staffed and equipped. The 12 regions have two health educators each; one for delivery of' services and the other for training. This staff is inadequate for the large scale training of rural health workers and the rural community health educa- tion program envisaged in the proposed project. Furthermore, the salaries, travel and per diem paid to health workers are inadequate, causing under- utilization of staff potential and health extension work suffering because of infrequent field visits./l Many of the field staff do not have motorcycles and have to rely upon an inadequate public transport system which does not service remote communities. Senior supervisory staff have official vehicles that are not provided with adequate fuel supplies, resulting in poor supervision of the work of the field staff. MOH will benefit from the incremental administra- tion, training and health education activities in the proposed project (para. 3.09). 2.09 Ministry of Public Works and Highways. MPWH activities range from the construction and rehabilitation of deep and shallow wells for Level I services to the provision of source facilities of Level II and III systems in rural and urban areas. The MPWH program has been integrated within the over- all RWDC program and has the same criteria. In the execution of its program MPWa has the advantages of its regional and district structure. In each regional and district office there is a section in charge of water supply. Project implementation is undertaken utilizing either force account labor, contractors or village labor provided as a contribution to project costs. MPWH will benefit from drilling rigs and related equipment such as pipes and pumps for source development and research activities in the proposed project. 2.10 Operation and maintenance funds have been available to MPWH under the General Appropriations Act to support village inputs as grants, but with the formal establishment of RWSAs and the introduction of a firmer policy of self-reliance these costs would only cover replacement parts and major main- tenance which is beyond the capacity of the local RWSAs. There is a provision in the project for the construction and equipment of maintenance workshops to carry out monitoring and major maintenance on demand. 2.11 The Ministry of Local Government. The MLG Barangay Water Program (BWP), evolved in 1977 from a USAID-funded Provincial Development Assistance Project, has the objective of strengthening planning and implementation /1 The health workers include rural health nurses and midwives, school health workers, sanitary inspectors, sanitary engineers and medical doctors at the municipal, provincial and government levels in supervisory positions.  - 13 - capacity through staff development at the Provincial level. Provincial Development Staff attached to Provincial Governor's offices include a water resources analyst who prepares a water resource inventory which is used as a basis for project identification. Through the Provincial Waterworks Commit- tee and the Provincial Waterworks Development Task Force, a Five-Year Water Resources Development Plan was prepared as part of an overall provincial capital investment program. The Five-Year Water Resources Development Plan was integrated into the national Master Plan for Rural Water Supply and also translated into annual implementation plans which are coordinated by RWDC and executed by: (a) the MPWH Provincial or District Offices for the con- struction and rehabilitation of Level I systems and development of sources for Level II systems described in para. 1.13; (b) the MLG Provincial Engineer's Offices which contain units for designing and constructing Level II systems; and (c) MWSS and LWUA in rural barangays lying within their areas of responsibility. The Provincial Engineer's Offices would benefit from the detailed designs of most of the 400 Level II systems in the proposed project. 2.12 MWSS and LWUA. MWSS and LWUA are responsible for the rural com- munities within their areas of responsibility. They would utilize their existing trained units designated for rural water supply and sanitation to implement those systems allocated to them in their respective areas of responsibility, through RWSAs. The activities of these institutions would be coordinated by RWDC. LWUA would also work closely with MOH in the construc- tion and monitoring of the 12 stabilization ponds in the proposed project. III. THE PROJECT A. Objectives 3.01 The proposed project's major objectives are the development and mobilization of local resources for the water and sanitation sector, and the organization and strengthening of the local institutions responsible for the sector. These objectives would be achieved through the financing of part of the Government's rural water supply and sanitation program, with priority given to the areas of greatest need. The project is part of the first stage investment program and has flexibility for the Government to adjust targets based upon early experience. Under the project the efforts of the several agencies involved in the sector would be better coordinated and channelled towards the single task of improving public health in the rural areas. 3.02 The project supports the objectives of the Rural Water Supply 1Master Plan and will be implemented throughout the Philippines, with priorities given to 19 provinces which have inadequate rural water supplies. The project concept is to support a part of the first stage (1983-87) of this program and be a catalyst so that local capability could be mobilized and institutions developed for the efficient implementation of as much as possible of the full program. Similarly the project supports a part of the first stage (1983-87) of the Rural Sanitation Master Plan which aims at providing most rural households in the country with sanitary excreta disposal facilities by 1990. The project also has provision for training, administration and health education, technical assistance for research and project implementation and for the preparation of future projects in the water and wastes sector.  - 14 - 3.03 While previous Bank operations in the sector concentrated upon cities and small towns, the proposed project would go deep into the country- side focussing upon small clusters of households far from the main arteries. The project is designed to offer a better balance in opportunities, between the urban and rural areas, through the improvement of key elements of social infrastructure which support the country's agriculture-based economy. Last but not least, the project would not only organize and strengthen the rural water supply and sanitation sector institutions but would also help develop local community participation thereby promoting higher standards of hygiene, personal cleanliness and public health. B. Description 3.04 Rural Water Supply. The proposed project provides for the con- struction of about 4,500 shallow wells and 2,300 deep wells (Level I systems) for unserved communities and the rehabilitation of 2,900 existing wells (which are not functioning at present) to restore service to these communi- ties. All of these wells would be equipped with handpumps or electric pumps as appropriate to serve clusters of about 50 and 150 households. The proposed project provides well casings and screens, drilling equipment, pumps for these systems and vehicles for project implementation. The project also includes the construction of 400 Level II communal faucet systems. A typical protected shallow well installation is shown in IBRD Drawing 23717 and criteria for well construction are in the project description at Annex 1. 3.05 To ensure the monitoring and the satisfactory and continued opera- tion of the rural water systems to be constructed under the proposed project MPWH will establish in its regional and district offices, 12 workshops to carry out major maintenance. The construction and equipment of these work- shops is included in the proposed project. Agreement was reached with Govern- ment at negotiations that these workshops would be organized and adequately staffed and funded to carry out the major maintenance of the water supply systems constructed under the project. 3.06 Rural Sanitation. The proposed project provides for the procurement and installation of about 150,000 toilet units per year through 1987. The first phase of procurement of toilet bowls numbers about 350,000 manufactured out of fiberglass, PVC and plastic materials. A typical water sealed pour flush toilet is shown in IBRD Drawing 23718. MOH would construct waste stabilization ponds in 12 communities, one in each region with the objective of introducing low cost safe disposal of human wastes. MOH would also make a start in the disinfection of public wells with chlorine procured through the proposed project. The RWSAs would gradually take over this activity as the rural communities, through the health education programs, get an understanding of the need to protect the safety of drinking water at source. Criteria for these sanitation activities are in the project description at Annex 1. 3.07 Research in Rural Water Supply and Sanitation. In rural water supply, MPWH and RWDC would test well screens and handpumps. Suitable vehi- cles are included in the project for this research and for operating and maintaining the stabilization ponds during the project period, including the monitoring and evaluation of the performance of the ponds and collecting pertinent data on crop irrigation with pond effluents.  - 15 - 3.08 Training, Administration and Health Education. Success in the rural water supply and sanitation activities is greatly dependent on community participation, and the health education component in the project under MOH administration and carried out by specially trained MOH staff, would play a very important role in community preparation. Small group meetings, such as of barangay officials, key barangay people, religious groups, civic organiza- tions, cultural groups, parents and teachers associations, mothers' classes and other women's organizations, school children, etc., would be held by trained sanitary inspectors and other rural health workers to underscore the importance of proper excreta disposal and safe drinking water. In turn, these groups would explain and motivate the less educated members of the community for participation in the program. This would be supplemented with the dissemination of educational materials to schools, public posters and radio broadcasts. 3.09 To carry out the health education and toilet construction programs MOH would incur incremental administrative costs in temporary staff for supervision and training, incremental travelling and per diem costs for health education and supervision of toilet construction, incentive payments to poorly paid existing staff, information, education, communication and demonstration materials required for the health education and training pro- grams and vehicles and fuel for project supervision, training and health edu- cation activities; these incremental costs are included in the project. The health education programs include the training of regional, provincial and rural health workers who in turn would carry out the training of field health workers and the health education of communities at the barangay level. Details are at Annex 1. RWDC has prepared a training program which includes the training of RWSAs in routine operation and minor maintenance and overseas training of selected MOH, MPWH, MLG and RWDC staff in areas of low cost design of rural water and sanitation systems. The proposed project assists MOH and RWDC in carrying out these training programs. 3.10 Consulting Services. Most of the engineering for the simple rural water systems will be carried out by MPWH and MLG staff supported by local consultants as needed. Consultants would participate in special areas such as hydrology, research activities, assisting with project review and monitoring and in the periodic review of the criteria in the Rural Water Supply and Sanitation Master Plan. Consultants would also be appointed to assist RWDC, MPWH and MOH to speed up financial reporting, including the procurement and use of micro-computer equipment for making detailed designs and financial projections and in training. An amount of $960,000 has been provided in the project to cover the costs of about 55 man-months of foreign consultants and 125 man-months of local consultants for these purposes. Research, development and monitoring (para. 3.07) is estimated at $90,000 for which 5 man-months of foreign consultants and about 12 man-months of local consultants have been provided. Details are at Annex 2. 3.11 MPWH under an ongoing project is updating the Manila Drainage and Flood Control Master Plan. This is expected to be substantially completed by January 1983 and additional engineering services are required to make  - 16 - soils investigations, land surveys, hydrological studies and model tests, and prepare detailed designs and bid documents. Six areas have been identified in the city which have serious drainage and flooding problems. These are Malabon, Canta, Taytay, San Mateo, Talayan and San Juan covering some 1,600 ha. Details are at Annex 2. An amount of $3.4 million has been included in the project for consulting services which includes $0.3 million for the soils investigations and model tests. The estimated requirements are: 84 foreign and 200 local man-months supported by MPWH engineering staff. 3.12 The ongoing solid wastes management study for Manila, being under- taken by the Government, is expected to be completed in November 1982. Pro- gress made so far indicates that a satisfactory least-cost alternative has been identified utilizing disposal through landfills, with some composting and incineration. An amount of $2.2 million has been included in the project for consulting services for detailed design which includes $0.2 million for groundwater studies in proposed landfill areas to control contamination by leachate. The estimated requirements for consulting services and financial and institutional consultants are: 55 foreign and 200 local man-months. C. Implementation Arrangements 3.13 Water Supply. RWDC has also made satisfactory arrangements for project implementation. The project development and implementation process is shown in IBRD Chart No. 23683. MPWH, which will have the responsibility for the implementation of Level I systems and source development of Level II systems has created a project management office. The organization and staff- ing arrangements of this office have been reviewed and are satisfactory. Agreement was reached during negotiations that MPWH would staff this office by not later than March 31, 1983. It was also agreed during negotiations that a senior RWDC official with experience and qualifications acceptable to the Bank would be designated to be responsible for the construction of the Level II systems and jointly with RWDC's General Manager for the coordina- tion of the water supply and sanitation activities under the project. 3.14 Sanitation. MOH as the lead government agency for the management of sanitation has created sanitation committees comprising the lead agencies (MPWH, MLG, MWSS, LWUA) at all levels of Government including the Provincial, Municipal and Barangay levels. MOH has also created a project management office which would be responsible for implementing the sanitation component (Organization Chart IBRD 23634). The organization of this office has been reviewed by the Bank and is satisfactory, the implementation arrangements being similar to those followed under MOH's ongoing toilet construction pro- gram. Agreement was reached during negotiations that the staffing of this office would be completed by not later than March 31, 1983. The Provincial Health Offices would, under the guidance of the project management office, carry out the health education, training and toilet construction activities in the sanitation component, through the assistance of some 60 sanitary engineers, 3,000 sanitary inspectors, 4,500 municipal health officers and about 8,000 public health nurses using the well established rural health  - 17 - delivery organization. MOH sanitary inspectors would carry out feasibility studies and recommend the provision of toilet bowls free of charge to bene- ficiary households that have agreed to participate in the program. The individual households are in turn responsible for carrying out the necessary construction (pit and enclosure) and installation through self-help under the guidance of the sanitary inspectors. 3.15 Pilot Scheme. In an attempt to further maximize the health benefits of the project, accelerate project implementation and reduce administrative and supervision costs, a pilot scheme integrating the rural water supply and sanitation construction would be undertaken during the early stages of project implementation. In such a pilot scheme, expected to comprise about 100 villages mainly with Level I systems, each village would be treated as a unit. The facilities to be built under contract would be the water supply system and the basic core of the toilet unit - the toilet bowl, supports and underground structure - vault or pit. The householder would complete the installation by grading the site and erecting the shelter. The RWDC would have a single account for the village and the RWSA would have subaccounts. Based upon the results of the pilot scheme, new concepts would be implemented as appropriate. 3.16 Maintenance Arrangements. The project's design includes two levels of maintenance for the capital equipment to be financed under the project. First, routine preventive maintenance would be undertaken by villagers trained in hand-pump installations; every effort being made to ensure that the wells are properly constructed, the well screens and pumps are of good design and are correctly installed (para. 3.07). Second, breakdown maintenance which requires special equipment would be carried out by MPWH field offices with assistance from the needy RWSA. The 12 regional maintenance workshops in the project (para. 3.05) provided for major maintenance would complement existing MPWH facilities. 3.17 Project Implementation and Review Committee. A Project Implemen- tation and Review Committee (PIRC) has been established and its staffing would be completed by March 31, 1983. PIRC is chaired by the Deputy Minister of MPWH and would include as members, MOH's Assistant Minister and RWDC's General Manager and would be assisted by a technical secretariat. According to PIRC's terms of reference, which have been reviewed by the Bank and found to be acceptable, PIRC's responsibilities would include monitoring project performance, overall coordination of the project's implementation activities and verifying disbursement claims/Statements of Expenditure before submission to the &ank. PIRC would be initially guided by the priorities and design criteria in the Master Plan and employ consultants to assist in the reviews. An important aspect of PIRC's work would be to review the progress on the pilot scheme with integrated water supply and sanitation components and consider extending the scheme with improvements, for implementation on a larger scale. PIRC would also provide information and work closely with the review and periodical updating of the Rural Water Supply and Sanitation Master Plan.  - 18 - 3.18 Status of Project Implementation. Typical designs, specifications and bid documents have been prepared by RWDC and are currently in use by MPWH's Regional and District Offices and the Provincial Engineers Offices. Manuals for design, construction, operation, maintenance and accounting for the rural water systems have also been prepared and are in use. All these have been reviewed and are satisfactory. A large part of this work was done by consultants financed under Loan 1710-PH and a UNDP-funded project assisted with the development of low cost designs. RWDC has used all of this material in its training programs. MPWH has advertised in the Development Forum Magazine all pipe fittings, drilling rigs, etc. required for the Rural Water Supply component. Bid evaluation is now under way. MOH has also advertised for prequalification of bidders for the fibreglass/plastic toilet bowls, vehicles and chlorine for the rural sanitation program. RWDC has confirmed that 200 of the 400 Level II communal faucet systems have been designed by the Provincial Engineers Offices and all 400 designs would be completed by early 1983. iMPWH also confirms that the first year work program for the Level I systems has been prepared along with the tentative program for the second year. MOH reports a similar position in regard to the toilet construction program. It would, therefore, be reasonable to predict that by the time the loan becomes effective, around December 1982, the project would be implemented without delay. The project includes the formation in each year of about 1,500 RWSAs, about 2 per province per month - an achievable target. The implementation schedule is shown in IBRD Chart No. 23684; monitoring indicators are at Annex 3. D. Project Cost Estimates 3.19 Total project cost, net of duties and taxes, is estimated to be $57.9 million, of which about 43% is the foreign exchange component. The project cost includes an estimated $27.3 million for rural water supply, $25.0 million for sanitation and $5.6 million for technical assistance. The estimates have been made to a baseline of July 1982, to which were added physical contingencies of 10%. Price contingencies were calculated as follows: 10% for 1982 and 8% thereafter for local costs; and 8% for 1982 and 1983, 7.5% for 1984, 7%. for 1985 and 6% for 1986 for foreign costs. Foreign consultants' costs, including fees, salaries, travel and subsistence are estimated at about $11,800 per man-month. Local consultants' costs are about $2,500 per man-month. The detailed cost estimates are at Table 1 and sample costs of the different types of construction are shown at Table 2. The summary of project cost estimates is given in the next page. 3.20 The sanitation component in the project cost estimates includes the incremental training and administration costs essential for health education and project implementation. The incremental costs on administration and training during the project period would be P 116.7 million as follows: temporary staff P 1.1 million, incentive pay 3P 20.2 million, travelling/per diem P 54.9 million, fuel and transportation P 11.3 million, training, health, education, supplies and demonstration materials P 29.2 million. Details are given in Annex 1. Given the need for ensuring  - 19 - PHILIPPINES FIRST RURAL WATER SUPPLY AND SANITATION PROJECT Summary of Project Costs Foreign Local Foreign Total Local Foreign Total as % of ----Pesos million----