Paradigms of Decentralization, Institutional Design & Poverty: Drinking Water in the Philippines

Drinking Water Paradigms in Oriental Negros

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Drinking Water Paradigms in Oriental Negros
To begin, let us briefly understand the Philippines’ National Government Policies and the role of the key players in the drinking water sector. As per the National Government policies, Level 3 or piped water supply services have to be supplied on the principle of full cost recovery for capital and operation and maintenance. These have traditionally been done by the LWUA (Local Water Utilities Association). For Level 2 (public taps and standposts) and Level 1 (handpumps) the municipal, provincial and national governments provide limited funding under different programs. While capital grants are provided for drinking water sources there are no capital grants in the form of sanitation subsidies, and only restricted funding for inducing sanitation coverage.

Level 3 drinking water services have traditionally been delivered by the Water Districts organized by the LWUA. Under LWUA, about 600 Water Districts in the Philippines operate in a business-like manner and generate enough revenue from its water services to be sustainable. This income is used to meet operation expenses, debt service and reasonable reserves for rehabilitation of services. The incentives are so structured that the public agency is not directly responsive to the consumers. In the Philippines they are structured to disburse capital funds from the centre, raise loans and run a financially responsible utility rather than focus on equity, sustainability, outputs and outcomes of the investment. This is a supply driven mechanism where technology is chosen on the basis of incentives for professional managers rather than the needs of the people. The existing incentives have led to an over-emphasis on the technological super-structure rather than on the economic and social sub-structure through which people relate to and use water. The adoption of such technologies in the Philippines has ensured that the far-flung areas which the poor inhabit are not covered by safe drinking water. Even though sanitation is one of the mandates of the water districts and its integration with water is critical to ensure social and health benefits of good drinking water services, it is neglected by the water districts. The focus on cost recovery makes it difficult for the water districts to provide water supply services to the poor (though there is a bit of cross-subsidy on the basis of volume used and differential rates between residential and commercial units).

In this study, we will consider two paradigms for providing drinking water. The first was evolved in the seventies and led to the formation of the Local Water Utilities Association (LWUA) while the second was authored by the Central Visayas Water and Sanitation (CVWS) Project in the mid-nineties. Within the CVWS project three different typologies were found in the five water works that were studied. These provide level 2 and level 3 service. A comparative assessment of these six different water schemes studied along select parameters is given in Table 1. Their effectiveness in providing drinking water will be critically examined and the paper will call for a shift in the paradigm towards a greater demand driven approach that is based on a substantive interpretation of democracy.
The Sibulan Water District was created by the Provincial Water District Act of 1973 and there are three other water districts in this province (Region 7). The aim was to create an independent and professional organization to provide drinking water in the province. The Board of Directors consists of five members, drawn from the business community, the civic sector, the education sector, the professional sector and a member representing women’s interest. The Water District is not a line department of the Central or the Provincial Government, nor does it have a cadre of professionals that shift from one water district to the other. Yet, under LWUA it has evolved certain systems and standards for water supply and it has been able to raise and repay huge loans for inception and expansion of its water works over the years.
In the nineties, the Australian International Development Assistance Bureau initiated the CVWS Project and instead of supporting the LWUA, decided to set up, through the Water Cooperative Societies and Water Associations, a different paradigm. In its own way it was promoting the process of decentralization. The decision in favour of an association or a cooperative was left to the local communities. The funding was in the form of grant with the bulk coming from Ausaid and part funding from the provincial and municipal governments along with a contribution from the beneficiary communities. The project has a clear poverty focus as the objective of the project was to improve “the health and living condition as well as the economic status of poor communities in Region VII through improved water supply and sanitation.” This was to be achieved through an increase in coverage, sustainability and by strengthening agencies to meet its objectives. While the service level that was being provided was of Level 3, there was no question of full capital cost recovery merely recovery of operation and maintenance costs. Hence, it was expected that they would function very differently from the water districts.
In the CVWS Project, the area of operation of these associations and cooperatives were within Municipal boundaries. The Cooperatives need to register and get a license from the Cooperative Development Authority that acts as a regulatory structure. A similar regulatory structure exists for associations in the form of Registrar of Societies. The distinguishing feature between a cooperative and a society is that there has to be an initial capital amount that is put up by the members of the co-operative. Cooperatives can also share profits among members unlike associations. However, given that all consumers are members of the cooperatives, there is little in terms of profits that can be made for the members would insist on keeping tariffs as low as possible. Structurally, a cooperative would be less willing to expand its pipelines unless there is a market to be tapped. Even though an association would keep in mind the costs of expansion, it may be willing to extend its pipelines if supported by a grant from the municipalities or the barangays. In two cases that were studied, the local governments have decided not to hand over the project to an association or a cooperative, but to manage it themselves. In La Libertad this was done after an allegation against the association for misusing the funds transferred to it to pay the contractors – apparently the money disappeared from the accounts! In Vallehermoso the association ran the project for only one month before the Mayor took it back as it was a major source of revenue for the local government. Typically these are piped water supply projects with a source, an overhead tank and piped water connections. Community faucets are also provided in the piped network area for those who find household connections expensive. The projects that were studied cost between 6–12 million pesos and serve between 400-1,500 households (see Provincial Planning and Development Office, 1996 for more details).
Figure 1 tries to map these different institutional models along what is called a decentralization axis to understand the different paradigms of decentralization – the right axis determined on the basis of the nature of management whether democratic, public or market and the lower axis measures the nature of decentralization as understood by commonly used terminology such as deconcentration, parallel bodies or devolution. Keeping in mind the discussion on the need to decentralize above that will be elaborated in the discussion below, one would like to move institutional designs towards the point where the two axis meet, emphasizing devolution and democratic management as against say deconcentration and market management in the case of Sibulan and to an extent the water association of Sianton that is managed on the principle of financial viability. While these present an institutional arrangement that is different from centralization, they are outside the local government structure. Sta. Catalina and Pamplona are parallel bodies that are managed as public institutions, but outside the local government structure. La Libertad and Vallehermoso work as local government institutions and can address concerns related to the public nature of water very well. There are no institutions in Oriental Negros that can be categorized as democratic devolution. Even though the formation of associations and cooperatives was aimed at greater democratization, it was found that critical decisions regarding the project such as the choice of technology was not taken by the beneficiaries, similarly the composition of the beneficiary group was determined by the coverage of technology and not according to the needs of poverty alleviation, equity and universal accessibility that should form the basis of public investment in public goods like water. The existing paradigms will impact the sustainability of these projects and there may be a need to devise mechanisms to manage a transition to devolution and democratic management, as will be discussed below.

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