Privatization thesis statement

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The severe devaluation of the Philippine peso against the US dollar required the concessionaires to make larger concession fee payments in Philippine currency which they had to source from revenues of their local water operations. Though there was a price adjustment mechanism available to recover losses from these two unforeseen events, the price adjustment formula computed the recovery of these losses over the life of the concession. As such, the additional cash flow from the price increase would not immediately cover the financial impacts of these events, requiring the concessionaires to borrow money or inject additional equity into the 23 company in order to meet their cash flow requirements.

Following the collapse of loan negotiations with a syndicate of international lenders, MWSI applied for a new water tariff in that would result in a faster recovery of foreign exchange losses. In January , a rate rebasing exercise was conducted by the MWSS Regulatory Office for a 5-year tariff rate adjustment, as provided for in the contract. In November , an international arbitration panel ruled that neither party was in default of the concession agreement and as such, neither could call for an early termination. Extensive negotiations were then entered into by the government and the MWSI shareholders and creditors, which resulted to a revised rehabilitation plan.

A timeline of events for the west concession is illustrated in Figure 2. Some of these contributory factors may relate to operational and management concerns, such as the inability to reduce non-revenue water, meet operating and capital budgets, cultivate a merit-based culture, and promote stable boardroom politics. Moreover, it is also uncertain whether or not fundamental ideological issues may have prevented such a partnership from succeeding. I explore these issues further in a later section of the chapter.

The chart presents the important events for the west concession, from initial bidding for the concession in to its return by the original concessionaires and ultimately, its successful re-privatization in Peaks and valleys represent high and low points in the timeline of the west concession, as determined by the author.

To make matters worse, the existing network design at that time required MWSI to supply water to its southern service areas through the Manila water distribution system. Supplying water to the southernmost areas through the Manila system meant losing much water before it reached its destination. With the award of the concessions, both private water firms also took over government personnel who were previously involved in MWSS operations. In 9 Non-Revenue Water is the amount of water in the system that is lost by way of pilferage commercial loss and leakage physical loss.

With a better understanding of the Metro Manila water supply and sanitation requirements, MWCI joined the bidding for the re-privatization of the west concession, which was eventually won by the DMCI-Metro Pacific consortium. Since taking over, the new owners of MWSI have poured in the much needed investments to meet their service target requirements. Eight years after the re-privatization of the west concession, how have both concessionaires performed? For a better appreciation of their performance, I present their operational results using the general scorecard used by observers of the program.

Independent of any other performance assessment framework, the results provided by the scorecard Table 2 show that the concessionaires have performed relatively well. A great majority of the served population now enjoys 24 hours of good quality water at a pressure of 7 psi Table 2. Regular performance scorecard shows generally improved services provided by the concessionaires in terms of NRW levels, water supply availability, water pressure, and water quality.

While the scorecard presents a very good picture of the water privatization, there is still further need to determine whether or not such progress has been equitably shared and experienced by all consumers. Of major interest are details of how poor households have fared in relation to other socio-economic classes. Understanding the diffusion of consumer welfare across 10 The original concession agreements called for water pressure of 16 psi MWSS, a, b , but this requirement was relaxed to 7 psi until , upon which time the concessionaires will be required to supply water at the original pressure of 16 psi MWSI Officer, Personal Interview, August 1, These groups assert that water is only available for those who can afford to pay, and as such, the program excludes majority of the people who are poor, whom they say should be the main beneficiaries of the program IBON Foundation, ; Freedom from Debt Coalition, ; Water for the People Network, ; NGO officials, Personal Interviews, November 25, , December 1, Compared to the urbanization experience of developed countries where urbanism becomes the prevailing culture in the cities, the increased rural-urban migration in cities of the developing world has resulted in more ruralisation of the cities, thus blurring the distinction between rural and urban Caoli, Such is specifically true for slums and squatter communities in general, which Laquian , p.

Before the arrival of the Spanish colonizers in , the patterns of Philippine political, social, and economic life were decentralized among various barangays, which are communities comprised of thirty to one hundred families generally related to each other by blood, marriage or dependency Stanley, , p.

At that time, Manila, like any other barangay, was ruled under a paternalistic system by chieftains who looked after the welfare of their subjects in return for paid tribute and rendered services, particularly in times of war. By co-opting these local leaders, the Spaniards were able to subjugate the local inhabitants as they had previously done in Latin American countries Laquian, Located at the center of the Philippine archipelago, Manila became the colonial capital from where the Spanish colonizers transformed the political, economic, cultural, and religious landscapes of Philippine society.

From Manila, these colonizers were able to set up a centralized administration system for the entire country, getting help as well from the missionaries who set out to Christianize the rest of the population Caoili, ; Stanley, Aside from being the focal point of political and religious administration, Manila also served as the entrepot in the galleon trade with Acapulco for Mexican silver and Chinese 31 merchandise during the first two centuries of Spanish rule.

After the galleon trade ended in the early 19th century, Manila was opened to world trade, supplying commodities such as sugar, coconut oil and copra to more developed countries and at the same time, accessing manufactured goods for local requirements Doeppers, Increased foreign trade led to the establishment of industrial firms in Manila and its suburbs and stimulated agricultural development in the surrounding regions. An unfortunate consequence arising from increased agricultural production for export was the increased private ownership of land by fewer individuals resulting in large numbers of landless sharecroppers and agricultural laborers.

Under Spanish rule, Manila developed into an enclave community where the Spaniards lived in the walled city of Intramuros; the rich merchants, comprised mostly of Chinese inhabitants, in Binondo across the Pasig River; and the native Filipinos, in the nearby villages and suburbs see Laquian, American colonialism in the Philippines introduced universal public education, democratic ideals and institutions, and the amenities of modern living Caoli, ; Stanley, The American colonizers also organized a popularly elected local government system as well as a national legislature where the Filipinos were gradually allowed to participate in the governance of their own affairs.

Despite the introduction of democratic ideals and institutions, the Americans left unaltered the uneven socio-economic structure that had prevailed under many centuries of Spanish rule Caoili, Several historians, political scientists and other academic writers e. Anderson, ; 32 Constantino, ; Hutchcroft, ; McAndrew, ; McCoy, ; Putzel, ; Wurfel, , analyzing the impact of Spanish and American colonialism on land ownership patterns, document that agricultural commercialization during the Spanish occupation had created an elite base of landowners with tremendous economic influence throughout the country.

They argue that American colonizers were able to partner with this elite class by providing the latter with political power at all levels of government. As such, the modern Philippine state was largely borne out of a compromise between the American colonial masters and the willing Filipino elite, as part of the U.

Essentially, U. When the Americans granted independence to the Philippines in , the oligarchy had already entrenched itself and legitimized its political and economic clout through the electoral process. The particularistic activities of a powerful oligarchy affected the ability of the government to formulate a sound economic development policy. Hutchcroft , p. The Philippine economy was dependent on agricultural exports to the United States and, at the same time, imports of manufactured goods 33 from the latter.

Yet, according to Hutchcroft , p. Though the traditional elites were able to co-exist and survive, only a few select individuals connected to the First Couple by familial relation or political affiliation, were able to accumulate tremendous wealth under this regime. Compounding the problem was the return to a political patronage system that was based on convenience and personal gain as well as the resurgence of old local clans and their private armies Rivera, ; Hutchcroft, The succeeding presidency of Fidel Ramos in sought to achieve newly industrialized country status for the Philippines by the end of the twentieth century through the introduction of bold economic reforms.

Hutchcroft p. Arroyo held one of the longest tenures in the Philippine presidency, second only to Marcos who extended his stay through the imposition of martial law. Despite this longevity, the Arroyo administration had difficulty gaining political legitimacy, spending most of her presidency facing several crises that included corruption and bribery scandals, military and urban poor uprisings, alleged rigging of national elections, and impeachment attempts. Hutchcroft seems to suggest so, based on what he perceives as the economic success of the market-oriented, outward-looking policy framework implemented during the Ramos presidency, which included the liberalization of trade, foreign exchange, and foreign investment, as well as the privatization of major state corporations.

Rivera also makes a case for market-oriented reforms by saying that the Ramos administration pursued economic liberalization to pry open the highly protected and oligopolized economic sectors.

Nonetheless, he cautions government to constantly be alert and cognizant of the danger of producing new monopolists and oligopolists when pursuing such programs. Today, Metro Manila14 also known as the National Capital Region has officially grown into 17 cities and municipalities with a population of As the primate city for more than four centuries, the state has always prioritized Metro Manila for the implementation of major government programs, using the results in Metro Manila as the bell weather for success or failure of national policies supporting these programs.

The MWSS privatization was implemented during the Ramos presidency in the s, when the Philippine government was seriously hooked on the privatization schema, exerting major efforts to deregulate oil, transportation, communications, and other industries. Fabella notes that during this time, the Washington Consensus15 had pushed for state disengagement from economic activities where the market has shown better competence or conversely, where the state has demonstrated its inability to achieve the desired results.

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Fabella 15 Coined by John Williamson in to describe a set of 10 Neoliberal policies imposed by Washington-based financial institutions on crisis-ridden developing countries Center for International Development at Harvard University, 38 , p. Such corporations were either originally set up by the government or taken over from the private sector during the martial law regime, a number of which were bankrupt firms set up by the business cronies of Marcos and were beneficiaries of large loans guaranteed by state financial institutions Rivera, Specifically, Executive Order No.

As a benchmark for new PPP projects, the MWSS water privatization offers many lessons that may help improve the implementation and regulation of these projects. Considering that a thorough understanding of this water privatization program is essential for effective policy making, I also review the transformations related to water governance in Metro Manila to complement the discussions on the broader political and economic considerations of this privatization program. The notion that water systems represent past technical, socio-economic, and political decisions of operators and policy makers stems from linked concepts associated with social and hydrological systems, a topic that will be explored at length in the next chapter.

In this regard, I present a detailed history of water governance in Metro Manila, noting several transformations over the last years. A summary of the governance and policy reforms that have transpired during this period is presented in Table 3. In , Father Juan Peguero, a Dominican friar, developed a crude distribution network composed of an open aqueduct and a small navigable canal to deliver water coming from a spring behind the San Juan Del Monte monastery.

Covering a limited area, residents had to walk long distances just to reach the different watering points of the system. In , Francisco Carriedo Y Peredo, a retired Captain-General, bequeathed 10, pesos to the City of Manila to serve as the nucleus of a fund to be used for the construction of a public water supply system for the city Metropolitan Water District [MWD], , p.

Known as the Carriedo Waterworks, the oldest water system in Asia was built at a cost of , pesos and was capable of supplying 16 million liters of water per day to , residents MWD, , p. Water from the Marikina River16 was pumped to a reservoir in San Juan which then flowed by gravity to Manila. This underground reservoir consisting of interconnected galleries of solid adobe blocks lined with tile still continues to draw interest from engineers because of its unique design. The supply capacity of the system was increased to 92 million liters per day after the completion of the Wawa Dam and the million liter reservoir in San Juan in MWSS, b, p.

Between and , MWD was able to tap a larger source of water supply, the Angat River17, through the Angat-Novaliches System which consisted of the Ipo Dam and its major conveyances, the billion liter Novaliches raw water impounding facility, the new million liter San Juan treated water reservoir, and the Balara Filtration Plant. The post war era, a period of economic expansion and population growth, created a higher demand for water.

This prompted the construction of additional raw water aqueducts, expansion of the Balara plant, and installation of new storage reservoirs and distribution mains MWSS, b, p.

Water Privatization | Teen Ink

It supplies water for power generation, rural irrigation, and drinking water for Metro Manila. This Act created the Metropolitan Waterworks and Sewerage System to service the water and sewerage needs of greater Metro Manila and returned the municipal water systems to the local government units. From congressional records, it appears that the centralization and decentralization of water services were envisioned at the time of their implementation, as solutions to the same problems: operational inefficiency, mismanagement, and rent seeking practices by certain officials of the agency.

Moving into the s, MWSS initiated projects to reduce the high levels of non-revenue water, rehabilitate the small sewerage system in central 18 2 billion liters is equivalent to 2 million cubic meters as 1 cubic meter is equal to 1, liters 42 Manila, and build the first La Mesa water treatment plant19 with a capacity of 1. Coupled with low tariffs, cash flows from operations were very minimal, necessitating extensive borrowings and government support to maintain and expand the system.

The decision to privatize was reinforced by the success of a similar program in the power sector plus the strong push by IFC20 and multinational water companies see Dumol, This was at a time when developing countries were being required to privatize their public utilities as part of their structural adjustment programs and developmental loans see Harvey, ; Goldman, Weiss calls a resource on intergenerational equity be effected?

As asset manager of the downstream facilities, MWSS will ensure that the maintenance of existing facilities as well as the construction of new ones conform to the standards and compliance targets set forth in the concession agreement. In compliance with the fourth legacy area, MWSS will make sure that water tariff levels are set in accordance with actual accomplishments and future plans of the concessionaires, as vetted by the MWSS Regulatory Office.

The last three legacy areas recognize the need for the organization to build capacity for its human resources through actual work learning or outside training, the ultimate goal of which is a level of expertise in the field of water security. Whether or not booty capitalism can be tamed by market forces, particularly those coming from international shores, is a subject that needs further study and deliberation. However, I would like to offer certain insights on this issue in relation to the Metro Manila water privatization.

Privatization is one of the programs of liberalization also termed contemporarily as Neoliberalism , a loosely organized set of political and economic beliefs working under the proposition that the sole purpose of the state is to promote individual liberty, usually in the form of free markets, free trade, and private property rights. The Neoliberal ideology espouses minimum state intervention arising from the belief that the market is more efficient than the state, and that powerful interests usually influence state interventions for their own interests.

Neoliberalism strongly promotes privatization, deregulation and competition in the belief that these programs will result in increased productivity and efficiency, eliminate bureaucracy, 46 reduce costs, and improve the quality of products and services. Bakker , p.

This trend was in part structural, resulting from the Asian, Russian, and Argentine financial crises as well as the bursting of the high-tech bubble that significantly reduced foreign direct investment flows to emerging economies. After , cancellations for all utility sectors increased, the highest rate of which was observed in the water sector, a reflection of its high investment-high risk nature. Moreover, private companies moved away from long-term concession agreements, which were the mode of privatization projects in the s, and veered towards shorter, lower-risk contracts, such as management contracts, that required little or no investment.

Bakker also notes that public protests significantly raised the level of political risks to private companies by posing serious challenge on their legitimacy to the public, and in certain instances, playing a major role in the cancellation of their contracts. For many privatization programs, direct state intervention was necessary to correct market failures, as regards the production of desired goods and services, in order to keep these programs afloat see Feigenbaum and Henig, Gleick et al.

Essentially, weak governance and state institutions have made developing countries vulnerable to the pitfalls of privatization. One such pitfall is the regulatory capture by large foreign water firms whose financial and technical resources have allowed them to negotiate contracts with the state, often to their advantage.


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In the long-run, the absence of a level playing field between the state 47 and the multinational water companies has commonly resulted in non-renewal of the contract upon its expiry or its cancellation through government action or public protest and political demonstrations, as in the case of Cochabamba, Bolivia and Tucuman, Argentina see Gleick et al.

From a political-economic perspective, there are two possible worst case scenarios with respect to the participation of multinational water companies in a Philippine water privatization program, or any PPP program for the matter. Weak governance and regulatory institutions that are unable to prevent the regulatory capture by foreign water firms would result in a privatization program that not only fails to address the particularistic efforts of the oligarchic business class but, in effect, also substitutes rent-seeking by multinationals over local oligarchs. This is particularly true under a partnership between a local business elite and a large water transnational company where the former brings to the table its knowledge of the local business environment and its contacts in the bureaucracy while the latter, supposedly the technology and best practices in the delivery of water services.

Such was the form of partnership required to qualify and thus, be given a chance to bid during the MWSS privatization process. Under a weak regulatory environment, this working arrangement would be worse than one involving only pure local business elites.

Such a scenario would result in transnational outflow of local wealth and decisions being made from offices thousands of miles away, regarding such critical local issues as who gets water and how much these consumers should pay see Swyngedouw, on the overhaul of power relationships between different privatization actors. Allowing this type of arrangement to prevail in privatization projects of government would be akin to subjecting the Filipino people to another form of colonialism, albeit that of the economic variety.

Eventually, the local and foreign sponsors may decide to dissolve the partnership and even return the concession to the government. Though purely a conjectural exercise, this may have been one of the scenarios prevailing at the time the original sponsors returned the west water concession to the Philippine government.

For privatized water services, I stress the need for strong regulatory and oversight agencies see Gleick et al. Aside from the establishment of clear and effective regulations, Casarin et al. In addition to these operational results, I also would like to highlight the importance of gathering consumer feedback related to their lived experiences under a privatization scenario. I discuss this further in the next chapter. Through legislative initiatives, the water system was centralized under a national agency, and then devolved to a government corporation within a span of only 16 years.

After 25 years, there was a shift towards privatization in the hope that the private sector would succeed where previous government agencies had failed, in terms of providing better water and sanitation services to the consumers. If success were measured in terms of physical accomplishment and longevity of contract, then there are indications that the Metro Manila water privatization may have achieved some measure of success. In , Hall and Lobina , p. While acknowledging that these two privatization programs were able to increase the number of new connections, Hall and Lobina also state that this was possible only after a renegotiation of the contracts as the private companies failed to meet the required investment levels.

Several years later, Hall , p. On the other hand, in Metro Manila, the two concessionaires have installed a total of 1. In some ways, such longevity is also a testament to the effectiveness of the concession agreement binding both state and private actors. Despite the initial failure by an original private concessionaire, the concession agreement has allowed the Philippine government to secure a replacement operator in the west zone that has made notable progress in improving operating efficiencies. As seen in Table 2, overall water service has significantly improved under the two concessionaires.

What major factors influence water expenditures and how do these influences vary across socio-economic classes? How have impoverished households fared as regards water services, in comparison to other socio-economic classes? Where do these communities source their water requirements and how much of their household incomes do they spend on their water needs? To answer all these questions, MWSS needs to address the bigger issue related to its current performance assessment methodology.

MWSS must ask: What parameters and assessment methodology should it implement to ensure that it is able to meet its goal of providing equitable access to clean and affordable water as expressed by its mission statement? To answer these queries, this research engages the concept of social and hydrological systems, with the former encompassing the water users and the latter embodying the natural and built environments of the water system.

Water security, as defined by Grey et al. In pursuing such an ideal, MWSS must address fundamental issues related to the socio-economic, political and technological aspects of the water system, generally ascribed to its social and hydrological systems. Hydrological parameters such as rainfall level, stream flow, reservoir levels, water production volumes, network flow, water pressure, supply availability, water quality are generally easy to measure.

Parameters pertaining to the human component are equally important, though generally difficult to identify and, even more, to measure. Of special interest for the research will be to measure the success of the water provision from the viewpoints of equity and social welfare. Water is a highly politicized resource, and oftentimes, the continuity of programs in this sector is determined by the election results. As institutionalization is a difficult process, MWSS will need to provide continuing support and intervention for its privatization program, within the bounds of the concession agreements it had signed with the concessionaires, and at a level that has been properly ascertained.

In order to do so, MWSS will need a performance assessment framework that balances the interests of consumers and private water operators, one that ensures the attainment of equity with improved efficiency. In the absence of such a regulatory tool, MWSS may provide too much support for the concessionaires without the benefits of increased household connections, improved service, and affordable tariffs for all consumers. If properly enforced, policies that promote equitable benefits for all consumers will become part of their operating process and practices.

With much optimism, consumers in other water concessions, whether within or outside the Philippines, would be able to benefit as well. Much attention has been given to the provision of water supply, but there have been relatively few activities for sewerage service. Conspicuously absent from the privatization scorecard is the extent of sewerage service coverage which both concessionaires are aptly responsible for. It should be mentioned that the sewerage service targets have been pushed significantly back during the rate rebasing exercise and the term extension agreement see MWSS, Despite the softening of sewerage targets, both concessionaires have fallen short of these targets by 3 to 4 percentage points as of MWSS, a, p.

A reflection of the global results on the MDG for sanitation, the existing sewerage service coverage in Metro Manila illustrates that the concessionaires are still a long way from meeting the urban sanitation requirements. Because capital investments for sewerage is higher than those for water supply, it is more difficult to get the consumers to pay for sewerage services. Again, how does MWSS determine the proper level of sponsorship it must provide to the concessionaires concerning the provision of sewerage services? The research advocates that 54 the level of state support should be based on the level of services provided to the most vulnerable of all consumers, the impoverished households.

Nevertheless, I am confident that the SHS methodology that I have developed for this research, which deals with water provision, is also suitable for assessing equity conditions related to urban sanitation. As sewerage targets start ramping up in MWSS, a, p. It is in this light that I examine privatization experiences of households across the different socio-economic classes and assess these 55 experiences using a new policy norm, that of water inequity. I do so using the concept of social and hydrological systems, which I comprehensively discuss in the succeeding chapter.

The chapter then presents a methodology to examine the equity dimensions of current water provision in Metro Manila using information obtained from the consumers social system and the natural and built environments hydrological system. This framework utilizes a set of select indicators i. In assessing equity conditions related to urban water provision, the chapter suggests a broader equity review for the Metro Manila water system, noting the existence of a rural-urban equity nexus arising from contested water supply allocations for rural farmers and urban consumers during periods of severe water scarcity.

La Porte p. Hence, network measurements do not only provide information on the physical attributes of the water system, but they also represent the interlocking effects of consumer habits, management strategies, institutional governance, politics, and economic policies. Urban water systems in the developed world represent many phases of industrialization and corporatization of water management.

For cities in the developing world, the urban waterscape is not homogenous, often characterized by many alternative service delivery mechanisms see Bakker, Water systems are thus embodiments of the social, economic, technical, and ecological footprints arising from successive generations of governance, political ideologies, operations, and investments.

To understand their state of interlocking operations means understanding the hydro-social cycle and inner workings of their social and hydrological natures. This research develops a holistic approach to better understand the complex processes and relationships between the social and hydrological components of a water system. The SHS framework is also guided by Liu et al. Sivapalan et al. Socio-hydrology, a branch of the hydrologic science, explores the dynamics and co-evolution of coupled human-water systems through quantitative means in order to test hypotheses, model the systems, and predict their future states Sivapalan et al.

For this research, I use the Social-Hydrological Systems framework as shown in Figure 3 to assess the state of equitable water provision across the Metro Manila waterscape. Contextually, the social component encompasses the consumers, their consumption requirements, traditions, practices, and habits. The hydrological component embodies the natural and built environments that produce, process, and distribute water, inclusive of the water reservoir, bulk water conveyance system, water treatment plants, treated water distribution networks, pumps, and meters. Coupled SHS are affected, shaped, and modified by the governance capacity of state agencies, technical capability and management strategy of water operators, enabling laws and 59 regulations, politics, climate change, economic conditions, and other influences see Figure 3.

Whether public or private provision of water service, these influences leave imprints on the social and hydrological systems that are distinct for each and every water system. Water governance also requires effective assessment programs and feedback mechanisms to ensure that both systems work towards policy directions set by the state. Figure 3. An understanding of complex water systems requires an understanding of the hydro-social cycle and the inner workings of their social and hydrological natures. While water governance may differ for these two modes of provision, the underlying requirements are the same.

The state needs to strengthen institutions and implement informed policy decisions to ensure the delivery of water for all users. For public water systems, the line separating the roles of provider and regulator is often blurred, with informal relationships and common staff performing both functions. As previously noted, a common response of the state to problems of weak governance and inefficient operations is to privatize public utilities see Bakker, However, governments implementing water privatization projects face certain challenges arising from the natural monopoly character of water, weak regulatory environment, legal issues on private provision of public infrastructure, and opportunistic behavior of the private entities involved.

This shift from an approach that had previously emphasized public infrastructure provision has placed increasing demand on the public sector to build capacity to meet these challenges. After privatization, the state takes on new functions, bascially transitioning from service provider to regulator. For privatized water systems, the absence of a competent and effective regulatory institution has led to opportunistic and purely profit seeking motives by private operators, eventually resulting in many contract renegotiations see Casarin et al.

Ultimately, failed renegotiations end up in litigation, 61 arbitration and government takeover. Thus, a weak regulatory regime may cause a failure of privatization and create a situation which returns the operation of the water system to the government. Essentially, the state must also be able to institute a regulatory environment that adequately balances the interests of both consumers and private service providers.

Towards this end, the SHS framework helps calibrate and foreground equity and efficiency issues that regulators and policy makers normally deal with. As earlier stated, water systems are defined by a set of influences that affect and even modify their social and hydrological systems. The proportion of people with access to clean water supply increases with economic development as measured by per capita GDP, though the relationship is not linear but logarithmic, implying that very large investments are necessary to deliver this service to underserved populations Prasad, Likewise, the implementation of such programs is also intended to create jobs related to the construction and operation of public infrastructure that otherwise would not be available.

Noting that the mix and scale of external factors that influence water systems are unique for each country, the implementation of the SHS framework will therefore require strategies, policies and modes of action that are adapted to its social, natural and built environments. With concentration on the operational aspects of water utilities, the results of these studies tend to offer a limited view of the overall performance of municipal and urban water systems. Mbuvi, De Witte, and Perelman evaluated the performance of water utilities, mostly public, in 21 African countries using measures of efficiency and effectiveness the ability to provide universal coverage of quality and reliable water supply , concluding that these utilities were more technically inefficient than ineffective.

From a study of public and private water utilities across the Netherlands, England and Wales, Australia, Portugal, and Belgium, De Witte and Marques established that providing clear and well-structured incentives increase the volume of water supply and the number of new connections.

Prasad acknowledges that some studies show improved profitability and operating efficiency by privatized water systems. However, Prasad declares that it is still uncertain as to whether or not this improved micro-economic performance translates to poverty reduction, given the few research projects that look at privatization-related poverty issues. As such, there is a pressing need to conduct research that assesses the effects of privatization on poverty reduction and consumer welfare. It is necessary to ensure that practices favoring economic returns should be replaced with paradigms promoting a balance between the well-being of the consumers and the critical requirements of the natural and built environments, between profitability and public service, as well as between efficiency and equity.

Given the realities on the ground, how then do we define and assess the state of equitable provision in an urban water system, particularly for poor communities? Moreover, from an environmental justice perspective, I evaluate the influence of socio-economic class on performance indicators that are used to identify the existence of urban water inequity. The poor are important urban residents as they provide many of the essential goods and services necessary to keep the city running.

To assess the pro-poor performance of the private operators, I use the coupled Social-Hydrological Systems framework as shown in Figure 4, utilizing feedback from the consumers as well as information on the natural and built environments of the Metro Manila water system. Hydrological system data were obtained from field measurements made by the private concessionaires, contained in the regulatory and performance reports submitted to the Metropolitan Waterworks and Sewerage System.

Moreover, they contain current financial information such as billed volume and collection, operating expenses, and capital 65 expenditures. When necessary, other relevant regulatory reports were also requested from MWSS, as with additional data or clarifications from the two private water firms. Figure 4. Findings arising from the consumer survey of the Metro Manila Water Demand Study are triangulated with field measurements reported by the concessionaires, privatization documents, field interviews, and literature review.

This consumer survey was part of a study undertaken in , the purpose of which was to forecast the water demand for Metro Manila over the next 25 years UP NEC, a, b. In the context of public policy, they provide value-free metrics for decision-making and help set policy directions.

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The following indicators were identified and systematically examined across different socio-economic classes: access to water connections; water pressure; water quality; duration of water supply; affordability. These indicators were used to ascertain the existence of urban water inequity, generally considered as conditions for which impoverished communities experience low service connection rates, poor water quality, low water pressure and short availability periods, and unaffordable water tariffs. Since conditions in the field vary across spatial and temporal scales, results may not be homogenous, with water inequity scenarios determined by realities on the ground.

Low or no access in poor neighborhoods, a possible indication of the undesirability of this consumer class as far as the private concessionaires are concerned, may require the implementation of new or revised policy guidelines to address service connection issues in such neighborhoods. On this issue, it is worth mentioning that the definition for service coverage at the time of bidding for the concessions was a bit vague and subject to interpretation. Hence, there is a need to define service coverage properly using guidelines that enable connections to as many households as possible, in a manner that is both fair and reasonable.

For connected poor households, conditions of water inequity are present if the levels of service provided to them in terms of water supply availability, pressure, and quality are below the standards set by MWSS or the standard norms for urban drinking water. As an indicator, water pressure also affects water quality and supply since low water pressure may result to low water quality and may indicate poor water supply conditions. In the field, the private operators measure water pressure and supply availability at several gauging points in their networks see MWSI, c, d; MWCI, e, f. For both connected and unconnected poor households, affordability of water tariffs is also a good water inequity indicator as it brings to light the different reasons why such a life-supporting resource is beyond the reach of ordinary people.

Specifically, these results covered water supply availability, water pressure, water quality, consumption, water tariff, water expenditures, number of persons per household, connection fees, and other data necessary to complete the water inequity assessment. Furthermore, these results were cross-checked with documentation obtained from MWSS regarding tariff pricing, regulatory decisions, new water sources, and other related privatization concerns, together with primary information on actual operational results provided by the private concessionaires.

These findings will help inform MWSS regulatory practices related to the service targets of the water providers, water infrastructure for the poor, tariff setting, and new water sources. Additionally, they will inform policy on future government programs requiring private sector participation in water systems and other key public utilities to better and adequately address the needs of low-income households.

In the interest of transparency and fairness, I again disclose that my previous involvements in the MWSS privatization, both in the private and public sectors, have helped facilitate access to primary sources of information as well as to officers and staff of major stakeholders in the water privatization program. Hence, I am committed to use the information I have obtained for the conduct of an independent and scholarly research that will determine the prevailing conditions of water provision in Metro Manila, which will allow me to offer policy recommendations to address existing water equity concerns.

Feedback from consumers on their experience, impressions, and thoughts on vital privatization issues were obtained from a comprehensive household survey conducted by the UP National Engineering Center for the Metro Manila Water Demand Study. A barangay 70 zones, covering 53, respondents Table 4 presents the number of barangays and respondents surveyed in the service zones while Appendices A. The number of barangays are not uniform across all Metro Manila cities and municipalities, with the west zone having more barangays, and its barangays being more densely populated than those in the east zone.

Table 4. This research uses the MMWDS residential consumer survey which covers 53, respondents from 2, barangays. Aside from consumption-related data, consumer feedback for the Metro Manila Water Demand Study provided information related to water supply, water quality, customer service, socio-economic profile, willingness to pay, and housing mix. Based on a review of the questionnaires and datasets, information provided by this consumer survey were similar to those contained in the household survey of the Public Assessment of Water Services.

However, as previously noted, the consumer survey for the water demand study also covered households in areas that were not connected to the private water networks, such areas consistently not being included in consumer surveys of all 6 PAWS studies in the past. This was also confirmed in an may be created out of a contiguous population of at least 2, people and 5, people, for local government units outside and within Metro Manila, respectively Local Government Code of MWSI only provides bulk water supply to the water districts in these municipalities.

Much as results of the PAWS consumer survey are commonly used for monitoring and evaluating performance of the two private concessionaires UP NEC, e , the consumer survey of the water demand study can also be used for the same purpose; albeit with an even more robust database because it includes responses from consumers both served and unserved by the private water firms. Results from these two areas are essential for proper evaluation of equity issues related to urban water provision and for crafting policies that will address such issues.

These indicators were examined across the different socio-economic classes to determine possible influences of socio-economic status on the provision of water services. In addition, geospatial trends for these indicators were investigated by processing consumer data and mapping out with GIS software the results for all the barangays that were included in the survey.

Trends that were observed were cross-checked with actual field data measurements made by the concessionaires as well as personal interviews with the relevant parties. The remainder of this section discusses the manner in which information on water inequity indicators were determined from raw data provided by the consumer survey. Aside from identifying the locations of these two sets of households, the survey provided essential information and defined certain patterns related to consumption, water expenditures, willingness to pay, water supply options, willingness to get connected to the networks, and other significant issues.

In the process, the survey results were able to present the underlying dynamics in water provision for all types of households. Their responses were converted to numerical scores using the conversion table below: Table 5. The table shows numerical equivalent of qualitative responses provided by respondents on queries about the water pressure at the taps.

Average scores for two daytime and two nighttime pressure responses were computed. Appendix B provides a copy of the results of pairwise ratings determined from a previous PAWS survey. Using Table 6, this score was transformed back to a qualitative rating of water pressure. Table 6. The table provides descriptive ratings for unified scores of water pressure and water quality.

Water Privatization: Private vs. Public Essay

A sample determination for water pressure rating by a respondent is presented in Table 7. Table 7. Sample responses to daytime and nighttime water pressure queries converted to numerical scores. Pairwise ratings are used to generate unified scores which have equivalent qualitative ratings. Like other indicators, individual ratings are then used to determine the overall ratings for each socio-economic class and each barangay. Appendix C provides sample questions from the consumer survey pertaining to water supply, pressure, quality, and acceptable price increases.

Their answers provided the number of hours per day of continuous water supply they were able to receive. Affirmative responses to these parameters received a score of 5 while those in the negative received a score of 1. Unified water quality scores from these sub-indicators were computed using a weighted average formula, with weights provided by barangay-level pairwise ratings obtained from a previous PAWS survey see Appendix B.

Using Table 6, the unified score was then converted into a single qualitative rating of water quality, facilitating ease of understanding and appreciation. Table 8 illustrates the manner of determining the water quality rating from the responses of a surveyed household. Table 8. Responses to sub-indicators of water quality are converted to numerical scores. Pairwise ratings are used to generate unified water quality scores, which have equivalent qualitative ratings. However, these estimates will be adjusted to account for a higher number of persons per household, arising from many instances of multiple families sharing a common household connection, specifically in low income communities.

The following chapter provides a more detailed discussion on the average number of persons per household for different socio-economic classes based on the consumer survey results. Table 9. Family income distribution in the Philippines, Essentially the same. Quezon City: Social Weather Stations, p. This table provides the estimated average annual income for each socio-economic class.

Questions on acceptable levels of increases were organized as increasing price hike intervals, where the respondent stops to answer only when the final acceptable price hike interval was reached. Used as a proxy for wealth or household income, this classification is based on the community where the household is located, the construction materials used, available furnishings, and ownership of the house and lot see UP NEC, In terms of average annual salary, an AB household earns 30 times more than that of an E household. This research focuses more on the E households as they suffer the most from lack of water and other basic services.

C Middle Class Dwellings are made of mixed heavy and light materials, well-constructed, painted, may or may not have a garden, adequate furnishing but not necessarily expensive. Sample PAWS survey questionnaire. With permission to use The ABCDE classification, used as proxy for wealth or household income, is based on the community where the household is located, the construction materials used, available furnishings, and ownership of the house and lot. In addition to household level evaluations, the indicators were analyzed and mapped at the village level to assess geospatial variations across the service areas of the concessionaires.

Villages with AB neighborhoods, whether as a majority or part of the predominant socio-economic classes, were classified as belonging to the extremely rich and rich neighborhoods.

Information on PSU Privatisation

Conversely, those with E neighborhoods, as a majority or part of the predominant socio-economic classes, were classified as extremely poor neighborhoods. Other combinations were considered, but these two types of villages played a major role in determining 78 the geospatial trends for the indicators. The effectiveness of these concepts will be more apparent when the results and findings obtained from the field data are presented in Chapter 4.

The field research was designed to support the coupled Social-Hydrological Systems approach using available consumer and technological data for the Metro Manila water system. The researcher was embedded into the MWSS organization, working at an office in their headquarters. This facilitated meetings and discussions with officers and staff of MWSS and the concessionaires.

Likewise, this arrangement allowed for better access to privatization documents from MWSS and operational data from the concessionaires. A total of persons were interviewed, most of them particularly those from MWSS and the two concessionaires being interviewed on more than one occasion to get supplementary information or clarify certain issues regarding the program. Table 11 provides a general overview of the interviews undertaken, inclusive of the number of interviewees and the topics associated with them.

Table A total of people were interviewed during the field research in Metro Manila. Aside from other source materials, the research used documents related to the MWSS history, privatization strategy, water tariffs, urban poor supply programs, water security, existing facilities, regulatory concerns, and future MWSS programs. Information on the urban watershed and water supply were obtained from documents on Angat Dam, inclusive of schematic diagrams, water operating protocol agreement, flood control and discharge guidelines, and an integrated water management study.