WATER AND SANITATION PROGRAM: LEARNING NOTE

Domestic Private Sector Participation

Beyond One-Size-Fits-All:Lessons Learned from Eight Water Utility Public-Private Partnerships in the Philippines

May 2015

Key findings•Thereisno“magicbullet”approachtowaterutilityPPPsinthePhilippines.Differentarrangementscanleadtoaffordable,reliable,andcleanwaterservices,providedthereissufficientmarketsizeandwillingnesstopay.

•Thefoundationsofsuccessarelaidbyreachingawin-winarrangement,wheretheoperatorprovidesreliableservicesthatconsumersarewillingtopayfor.Agoodarrangementisestablishedbyasharedunderstandingofthisobjective,clearroles,andabalancingofriskswithrewards.

• “Theartofthedeal”mattersmoreforsuccessthanthechecklistofsteps.Thekeyconceptistoachievevalue-for-moneyandawin-winarrangement.Thisrequiresthegoodwillofbothpartiesthroughoutthelifeofthepartnership,notjustattheselectionstage.Procurementdetails,aslongastheyaresupportedinlaw,shouldbesecondarytothisobjective.

• PPPscanthriveindiversegeographies,aslongasserviceisfocusedonmeetingthedemandforwhichconsumersarewillingtopay.

• Pro-poorapproachesarenotyetuniversal,thoughsuccessfulapproacheshavebeenimplementedinManila,Laguna,andBoracay.

WHY WATER PPPs?At a macro level, the Philippines hasmade impressive progress in watersupplyprovision:Nationally,92percentofindividualshaveaccesstoimprovedwater sources, and the number ofhouseholds with clean water pipeddirectly to their premises has nearlydoubledfrom25percentin1990to43percent in 2012.1However, within thesphere of publicly financed networks,watersystemspipedintopremisesarelimitedincoverage,andservicedeliveryis irregular at best. Local govermentunits (LGUs) struggle to expand theirutilities, leaving both rich and poorresidentsunderserved.

Public-Private Partnerships (PPP) areone potential solution to accelerateaccess to piped water services,especiallyforthepoor.Inwell-arrangedPPPs,privatesectorcapitalismobilizedfor water system improvements andexpansion at a scale far larger thanthatavailablefrompublicfunds.Waterservicesaremorereliableasoperatorsare incentivized to match supply with

consumerwillingness to pay, enablingasustainablecashflow,andfacilitatingservice coverage expansion. Theprivate sector also brings technicaland financial expertise to managewater utilities in a more efficient andsustainablemanner.

FINDING THE WIN-WIN: ARRANGING A SUCCESSFUL PPPWhat is the secret to arrangingsuccessful water PPPs in thePhilippines? To answer this question,theWorldBank’sWaterandSanitationProgram (WSP) examined eight waterutility PPPs. These PPPs varied incontract type (e.g.,concession, lease,management, build-operate-transferfor bulk water supply), procurementpathway(solicitedvs.unsolicited),andlegal basis. They also ranged in size,from700connectionsinmunicipalareastooveramillionconnectionsinoneoftheMetroManilaconcessions.Despitethesedifferences,alleightutilities (seeTable1) foundaway to remain viablewhilemeetingperformancestandards.

1WHO/UNICEFJointMonitoringProgramme,2014.Progress on Drinking Water and Sanitation: Update 2014.Geneva:WorldHealthOrganization.

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SPOTLIGHT: MANILA WATER CONCESSIONSThestoryor theManilawater concessions is a remarkablenarrativeofturnaroundintheprovisionofwaterandsanitationservicesover twodecades,first ineastManila,andnow inwestManila. Both concessions have achieved world classperformance, doubling the number of water connections

since the start of the concession period and serving as amodelforallsimilarwaterPPPsinthecountry.

TheManilaconcessionsbothfeaturepro-poormechanismsthat provide differentiated level of services that are moreaffordabletobase-of-the-pyramidcustomersandcontributesignificantlytoconcessionairerevenues.

Table 1. Summary of Water Utility PPP Case Studies

Area Partners Connectionsa Arrangementb Procurementc Legal Basis

Metro Manila

Public: Metropolitan Water-works & Sewerage System Private: Maynilad Water Services, Inc.

1,129,497 Concession Solicited The National Water Crisis Act of 1995 (Republic Act no. 8041)

Public: Metropolitan Water-works & Sewerage System Private: Manila Water Company, Inc.

639,066 Concession Solicited The National Water Crisis Act of 1995 (Republic Act no. 8041)

Laguna Public: Provincial government Private: Laguna Water Corporation

61,448 Concession (under a joint venture agreement)

Unsolicited 1991 Local Government Code (Republic Act no. 7160)

Boracay, Aklan

Public: Tourism Infrastructure and Enterprises Zone Authority (TIEZA, formerly Philippine Tourism Authority) Private: Boracay Island Water Company

5,531 Concession (under a joint venture agreement)

Unsolicited, and subjected to Swiss challenge

The Tourism Act of 2009 (Republic Act no. 9593); and the NEDA Guidelines on Joint Venture for Government Owned/Controlled Corporations

Sta. Cruz,Davao delSur

Public: Municipal governmentPrivate: Sig Construction

3,911 Design-Build-Lease/Affermage

Solicited 1991 Local GovernmentCode

Tabuk City,Kalinga

Public: City governmentPrivate: CalapanWaterworks Corporation

3,600 Lease/Affermage

Solicited 1991 Local GovernmentCode

Malasiqui,Pangasinan

Public: Municipal governmentPrivate: Inpart Waterworks andDevelopment Corp.

2,419 Concession Unsolicited 1991 Local GovernmentCode

Quezon(Brgy.Alfonso XIII),Palawan

Public: Provincial governmentPrivate: Alfonso XII WaterUsers’ Association

731 Management/Operation andMaintenancecontract

Unsolicited 1991 Local GovernmentCode

Norzagaray,Bulacan

Public: Water districtPrivate: Phil Hydro/Maynilad

N/A – PPP for bulk water supply for water districts

Build-Operate-Transfer for bulk water supply

Solicited The GovernmentProcurement Reform Actof 2003 (Republic Act no.9184)

a As of 2012 or 2013b These contractual arrangements refer to PPP-type contracts invoking legal bases outside of the Build-Operate-Transfer (BOT) Law and its Implementing Rules and Regulations (IRR). In addition, appropriate legal justifications were secured by the public sponsors to support their mandates in undertaking their respective projects.c The procurement methods used were justified based on the legal bases, and not on the BOT Law and its IRR. The PPP Center, a group that facilitates the coordination and monitoring of PPP programs in the Philippines, did not provide technical assistance to these projects.

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FOUR KEY DECISIONSResultsfromtheeightcasestudiessuggestthatitisnotsomuchwho initiatesadealasmuchas it ishow thedeal issignedoffandmanagedinthecourseofthePPP,includinghow financing flows from the public and private financingsources.AnLGUconsideringPPPinwatersupplyneedstomakefourkeydecisions:

Decision 1: What institutional arrangement is most appropriate? PPPsarenot theonly available institutional arrangement inwater service delivery. LGUs should weigh the decision topursueaPPPagainstalternativeoptionssuchasawaterusers’association, water districts,2 or direct LGU management.Factors to consider include available resources, financing,andthetechnicalcapabilityofrelevantstakeholders.

Decision 2: What do the consumers want?Thedemandforwaterdictatesthesustainabilityofthewaterservices. Water utilities should provide services based onwhatconsumerswantandarewillingtopayfor,sothattheoperatorisassuredofcashflowaslongasservicesprovidedmeetthecontractualobligations(Figure1).

If there is consensuson theneed to improve services, theLGUandotherstakeholdersneedtoconsidertwoadditionalissues:

1.Not all levels of access are created equal. AlthoughmostFilipinostodayhaveaccesstoatleastLevel1water(a communal point source away frompremises), therebymeeting the terms of the Millennium Development Goalbenchmarks, there are still considerable variations in thequalityofservicesreceived.LGUsneedtoconsidertowhatextenttheywanttoachieveuniversalaccessto24/7pipedwaterservices.

2.Equitable access to piped water services is expensive.Ifequitableaccessisanimportantpriority,theLGUneedstonextconsiderhowbest to leverage its limitedfinancialresourcestopipedwaterservicesintheshortestpossibletime.Theprojectwouldusuallyrequireexternalfinancingtocovercapitalinvestmentsinthemillionsofpesosrange,anamountlargerthanmostLGU-financedcapitalinvestments.

Decision 3: How will the PPP be financed?The size of the necessary capital investment is not asimportant as whether there is sufficient willingness to payforwaterservices. Ifthedemandforwater is largeenough,thepipedwatersupplysystemcangeneratesufficientcashflowtoenabletheprivateoperatororLGUtoservicealoan.LGUsmaybeable toaccess loans fromglobalandprivatefinancialinstitutionsthatarewillingtoprovidelong-termloansamortizedthroughtariffcollectionsoverfive,10,andeven20yearsataffordableinterestrates.

Thefundingportfolioanddistributionoftheinvestmentcostswill impact the water tariff. Customers benefit most whenloan liabilitiescanbesharedwith theLGU from its InternalRevenue allocation and other revenue sources, and fromavailablegrantfundingasthesewilllowertherequiredtariffs.

Decision 4: What contractual arrangement is the most sustainable for this situation?PPPs are long-term commitments, lasting between five to30 years. As such, both the LGU and operator need to beconfident in the economic benefits of entering such a long-termrelationship.Thecontractdefinesthe“rulesofthegame”bothpartiesarerequiredtoobserve.SuccessfulPPPcontractsspecify,withintheframeworkofPhilippinesLaw,how

• Responsibilitieswillbedivided• Customerswillbeprotectedfromarbitraryactions• Operatorpropertyrightswillbeprotected• Disagreementswillbejudiciouslysettled• Tariffswillberebased

2Waterdistrictsarelocalcorporateentitiesinitiatedbylocalgovernmentsthatoperateandmaintainwatersupplysystemsincitiesandmunicipalities.TheyarecreatedonthebasisofPresidentialDecreeNo.198of1973,alsocreatingtheLocalWaterUtilitiesAdministration(LWUA).

Figure 1: Water PPPs succeed when services are provided on the basis of what consumers want and are willing to pay.

Consumers Operator

Reliable service

Timely tariffpayments

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Beyond establishing satisfactory written contractual terms,waterPPPsinthePhilippineshaveworkedwellwhentheprivateinvestor isreasonablyassuredofhisorherabilitytomitigatepoliticalrisks,includingtheinevitabletransitionsinthepoliticalenvironment. Additionally, including steep buy-out provisionsanddrawingthecoverageareaboundariestoincludeabaseofhighvolumeinstitutionalandcommercialconsumershelpsassurethelong-termsustainabilityofthecontract.

CASE STUDY COMPARISONThissectionbringsmoreclaritytoDecisions2-4bydrawingspecificexamplesfromtheeightcasestudies.

Demand Drivers (Decision 2)Each of the eight investigated water PPPs was initiatedbecauseofadesperateneed.Forinstance,inMetroManila,thedriverwasthewatercrisisof1995,declaredbythethen-president,whofounditunacceptableforManilatolagsofarbehindotherregionalcapitals.Atthetime,theMetropolitanWaterworks andSewerageSystemonly suppliedwater foran average of 16 hours a day to just two-thirds of MetroManila, while experiencing nearly 60 percent nonrevenuewater.Inanotherexample,thebeachcommunityofBoracayturnedtoPPPwhenmassivesewagecontaminationonthe

area’sbeachesledtothecancellationofinternationaltourismeventsthathadbeenheldannuallyinBoracayfornearlytwodecades.Inothercases,therelevantpublicinstitutionoptedtopursueaPPPafterassessingtheconsumerbase’sdesireand willingness to pay for higher levels of water services(Table 2). Their communities demanded a safe and reliablewatersupplythatmetminimumperformancestandardssuchas24/7service,sufficientwaterpressure (at least3metersinsmall towns;at least7psi inManila),anddrinkingwaterqualityaccordingtonationalstandards.

The contracts also had clear provisions on tariff settingandadjustment (e.g., indexed to inflationor to risingpricesof major cost components, intermittent across the boardincreases,forcemajeuresituations)aswellasonrisksharing.

Project Structure (Decision 3)At a high level, water PPPs share a common structure(Figure2).Fortheeightcasestudies,thepublicandprivatecontractingpartiesaresummarizedinTable1.Yet,asnotedintheprevioussection,howthePPPisarrangedandmanagedover its lifetime matters more than who initiates the deal.Table3thuscapturesthedifferentaccountabilitymechanismsemployedforeachPPP.

Table 2. Demand Drivers for Increased Access to Improved Water Services

Area Key Driver for Use of PPP

Metro Manila (West and East)

Water crisis of 1995, declared by then-president Fidel Ramos. PPP target was set, reaching 24/7 water service within six years and universal coverage for water within 11 years, while ensuring drinking water quality according to national standards at a pressure of 16 psi.

Laguna Expensive yet poor quality water supply leading to severe water-related health issues in the cities of Cabuyao, Sta. Rosa, and Binan; these conditions prompted the then-governor to consider PPPs in 1998 and eventually close a deal in 2002.

Boracay, Aklan Inadequate water and wastewater infrastructure that did not expand at the same rate as the area’s population, leading to noncompliance with environmental standards, cancellation of International Kiteboarding Event in 2008, and dwindling tourism.

Sta. Cruz, Davao del Sur

Both LGUs have limited capacity to expand and experienced intermittent water supply, which prompted their chief executives to look for innovative financing approaches. The LGU Urban Water Supply and Sanitation Program, financed by a World Bank loan in 2000, sought to work with LGUs to create viable models of PPP according to the principles of providing (a) services according to what consumers want and are willing to pay for, (b) commercial standards for utility management, and (c) the lowest appropriate level of management.

Tabuk City, Kalinga

Malasiqui, Pangasinan Poor service (one hour in the morning, and one hour in the afternoon) limited to mainly the poblacion of the town, despite the municipality’s affluent constituency; by 2000, the local government began seeking a private investor in recognition of its limited ability to improve and expand services.

Quezon (Brgy. Alfonso XIII), Palawan

Complete lack of a water supply system before 2004; local residents depended on shallow wells and water tankers that charged volumetrically for water of uncertain potability.

Norzagaray, Bulacan Observed increasing content of manganese and iron in wells in the northern part of the municipality and drying up of wells in the southern part in 2008; estimates of developing alternative surface water by tapping the Angat River was beyond the affordability of the water district because it would have led to a doubling of the water tariffs at a time when it would be investing in expanding its supply network.

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Risk ShareThe share of private sector responsibility in PPP contractscanbe viewedas falling along a fully public to fully privatecontinuum.Manyof the risksassociatedwithawaterPPPcanbegroupedas:

1.Investment/financingrisk2.Designrisk3.Constructionrisk4.Operationsandmaintenancerisk5.Market/commercialrisk6.Watershedprotectionrisk7.Environmentalrisk8.Forcemajeurerisk9.Serviceunderperformancerisk

PPPprojectstructuresshouldstrivetobalancetheseriskswith reward. For instance, in the Quezon managementcontract, given the small size of the system, it wasimportantthattheprovincialgovernmentbothboresomeoftherisksinthePPPandadequatelyoversawthetermsof the contract. In contrast, the operators in the MetroManilaconcessionsstoodtogainduetoalargeconsumerbase. Those PPPs could therefore generally place moreriskontheoperator,becausetheystoodtogainasizeablerevenuestream.

Figure 2: Each investigated water utility PPP shares a common project structure, with different contracting parties, funding arrangements, and regulatory bodies.

Contractual Arrangement (Decision 4)ThecontractsfortheeightcasestudiesallspecifythedurationofthePPP,theoperator’sexpectedperformancestandards,any exclusivity provisions, and responsibilities for assetinvestments, operations, and maintenance. The contractsalsospecifytariffadjustmentmechanisms.Takenasawhole,thesefactorscontributedtotheallocationofriskacrossthecontracting parties. Especially on tariff adjustment and riskshare,thecontractingpartiesacrosstheeightutilitiesreacheddifferenttermsthatwouldinfluencetheiroverallsuccessandchallengesencountered.

Tariff Adjustment ApproachesThefrequencyandparametersoftariffadjustmentrangefrommonthly changes based on movements in the consumerprice index (e.g., in Sta. Cruz and Tabuk) to automaticadjustments any time the price of electricity increases bymorethan5percent(e.g.,inMalasiqui).InLaguna,thetotaltariffautomaticallyincreasesby10percentoverthe25yearsoftheconcessionperiodaccordingtoascheduledefinedinthecontract,solongastheNationalWaterResourcesBoard(NWRB)reviewsandapprovesthefinaltariff.InManila,tariffsareregularlyadjustedbasedonmovementsoftheconsumerpriceindexandforeigncurrencyrate,andfurtherreseteveryfiveyearstotakeintoconsiderationactualinvestmentsmadeandapprovedinvestmentsmovingforward.

Government (e.g., LGU, WD, GOCC)

(Contracting party)

Private operator(Contracting party)

3rd party funders and guarantor(e.g., LGUCC,GFI, PFI, equity)

Targeted subsidies/public contributions

Consumers

NWRB, DILG, Contract Administration Unit

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Reg

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Loan repayment

Long-termfinancing

Subsidy(e.g., Output-based aid)

Outcomereporting

Reliablewater distribution

Subscription,tariff payment

Feedback

Technical assistancePerformance monitoring & public disclosureRegulatory oversightGuarantee on LGU/WD payments, if any

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3Mayniladinherited90percentofMWSS’loans,mostlydollar-denominated.Whenthe1997Asianfinancialcrisisoccurred,thepesodevaluedby100percent,makingitdoublyexpensivetoservicetheseloans.

Nonetheless,contractprovisionsshouldbeabletocoverasfar as possible unforeseen circumstances or forcemajeureevents that can potentially have a significant impact onthe viability of a contract. For example, Maynilad (withprevious owners Benpres and Suez) became bankrupt asa consequence of the 1997 Asian financial crisis andwasunabletofulfillitsobligationsinthecontract.3

Conflict of Interest and Performance MonitoringInLagunaandBoracay, thepubliccontractingparty isalsoa shareholder in the joint venture company. This opens up

the possibility of conflict of interest, particularly in regardto monitoring and enforcing the contract. For instance, inLaguna,theprovincialgovernmentdoesnothavearegulatoryunitandreliessolelyontheoperatortoprovidetechnicalandfinancialdata.

ThepublicentitiesinMalasiqui,Tabuk,andSta.Cruzalsodonothaveaunitdedicatedtomonitoringandenforcingthe contract, which has hampered decision-makingprocessesandresultedinunverifiedtechnicalandfinancialdata.

Table 3. Approaches to Regulation of Financial Flows in PPP Project Structures

Area Financial Flows Accountability Mechanisms

Metro Manila (West and East)

•Concessionaire collects tariffs from consumers, pays concession fees to MWSS

•Regulation is contractually stipulated, and administered by MWSS Regulatory Office (RO)

•Annual third-party administered Public Assessment of Water Services directly allows consumers to assess concessionaire

Laguna •Provincial government and Manila Water both hold shares of Laguna Water joint venture company, which pays dividends to each owner

•Joint venture company collects tariffs from consumers, and pays concession fees to the provincial government

•Joint venture company is governed by a nine-member board, with three representing Provincial Government of Laguna and six Manila Water, reflecting the ownership structure of the company

•Regulation is contractually stipulated, with tariffs submitted to the National Water Regulatory Board for review and approval

Boracay, Aklan •TIEZA and Manila Water both hold shares of Boracay Island Water joint venture company, which pays dividends to each owner

•Joint venture company collects tariffs from consumers, while paying concession fees to TIEZA

•Joint venture company is governed by board with four members representing Manila Water and one from TIEZA, reflecting the ownership structure of the company

•Regulatory Office is established and reports directly to the TIEZA Board, which is overseen by the Department of Tourism

Sta. Cruz, Davao del Sur

•Operator collects tariffs from consumers, pays lease fees to the LGU

•Development Bank of the Philippines provides long-term loan to LGU

•Operators responsible for reporting asset conditions every five years

•Contract Administration Unit is responsible for contract regulation and dispute resolution

•Operators are responsible for reporting asset conditions every five years

Tabuk City, Kalinga

Malasiqui, Pangasinan

•Operator collects tariffs from consumers, shares revenues with the LGU

•Tariffs are submitted to the National Water Resources Board for review and approval

Quezon (Brgy. Alfonso XIII), Palawan

•Operator collects tariffs from consumers, remits 80 percent of net revenues to the LGU

•Land Bank of the Philippines/World Bank funded on-lending program that provides long-term loan to LGU

•Tariffs are subject to public hearing and approved by the provincial government

Norzagaray, Bulacan •Water district collects tariffs from consumers and royalties from the bulk water supplier, while paying a tariff to the bulk water supplier and premium to the LGU Guarantee Corporation

•LGU Guarantee Corporation guarantees the water district’s financial obligations

•Water district tariffs are submitted to LWUA for review and approval

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4AchievedbymostutilitesexceptTabukandQuezon,Palawan

Achievements since PPP InitiationAlthoughsomeofthePPPshaveonlybeenineffectforfouryears,theeightevaluatedsitesareachievingthefollowingkeyoutcomeindicators:

• 24/7waterservice• Wateravailability≥100liters/capita/day• Waterpressure≥7psi(0.48bar)• Drinking water quality according to Philippine NationalStandards

• Working ratio >50 percent, assuring adequate revenuegenerationtooperator

• Collectionefficiency>90percent• Non-revenuewater≤20percent• Numberofstaffper1,000connectionswithininternationalbenchmarksof3to54

NATIONAL AGENCY ROLESThe case studies underscore the need to tailor each PPPbased on the specific geography, market size, and utilitymanagementtype.LGUsthatmaywanttopursuePPPscanbeparalyzedbythecase-by-casenatureofthetransaction.Duetotheirrolesinsettinguptheoverallbusinessenvironment,national government agencies canbe critical supporters ofLGUsseekingtoclosewatersupplyPPPdeals.

PPP CenterThe PPP Center’s mandate is to provide capacity buildingsupporttoimplementingagenciesandlocalgovernmentsinall aspects of project preparation and development.Withinthismandate,thePPPCenterispositionedtofacilitatedeals,including water PPPs at the local level. The Center canconnectLGUsseeking toenterPPPswithpotentialprivatepartnersand linkbothpartiestofinancing.ThePPPCenteris also well-positioned to champion “productization,” i.e.,efficientlyinstitutionalizingtheprocessbywhichPPPscanbeidentified,negotiated,andconcluded.

Department of the Interior and Local GovernmentAs the oversight department for LGUs, DILG is mandatedto assist LGU administrations in delivering basic services,including water. DILG can help by informally securingthe political commitment needed to pursue development

Box 1. Promoting Pro-Poor ProgramsHalf of the case study utilities are implementing pro-poor programs. Manila, Laguna, and Boracay provide installment plans for connection charges. Boracay and Maynilad also offer discounted tariffs for consumers with monthly consumption below a minimum bracket of 10 cu.m, while also providing a network of tap stands to poor communities. In a PPP arrangement, this can be set as a parameter in the bidding documents, or as an incentive mechanism in structuring the PPP transaction.

Contract DeviationsInsomesystems,contractdeviationshave leftoperators inavulnerablefinancialposition.For instance, inTabuk, therewere580connectionsinplaceuponwatersystemhandoverasopposedtothe3,600connectionsdescribedintheleaseagreement. InSta.Cruz,theoperatorhasnotbeenabletoimplement a contract-specified 10 percent tariff increaseevery two years (to finance increases in the lease fee) duetononapprovalbytheLGU.TheManilaconcessionairesarecurrentlyinarbitrationoverdisallowancesofsignificantcapitalexpenditures and recoveryof corporate income taxes fromthetariffs.

Access to FinanceMalasiqui facesfinancialchallenges,mostlydueto itssmallsize.Theoperatorisconstrainedfromexpansionduetothelimitedavailabilityandhighcostoffinancing,asmuchoftheoperator’sfinancingisfromtheinformalmarketatexorbitantinterestrateswithshortpaybackperiod.

Cost ManagementQuezon struggleswith costmanagement. Some expensesareoutoftheoperator’scontrol.Forexample,thetownisnotconnected to thegridand thus reliesondieselgenerators;however, fuel costs are twice that of electricity. On theotherhand,theoperatorpaysaremittancetotheprovincialgovernment calculated as a percentage of net revenue.Because thispayment isnotasetamount, theoperator isincentivizedtonotfocusonreducingcosts.Perhapsduetothis,salariesmakeup57percentofthesystem’soperatingcosts,withastaffto1,000connectionsratioof13.7,or3to4timestheinternationalbenchmark.

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initiatives, including honoring PPPcontracts. DILG can also leveragenationalgrantstoenhancetheviabilityof water PPPs, and encourage LGUsto improve water services throughselective award of its prestigious SealofGoodGovernanceaward.

National Water Resources BoardNWRB has a considerable bodyof case law and data on privatelysupplied communities that, coupledwith its mandate to oversee waterservice regulations, gives NWRB auniqueopportunitytomanageavirtualplatformtoshareinformationwithPPPstakeholders, disclose performancedata,andsupportdisputeresolutions.

MOVING FORWARD: PRODUCTIZATION OF GOOD DEAL MAKINGThe case study discussion highlightsthedisparatewaysinwhichwaterPPPswereestablished.ThePPPexperiencealso demonstrates that deal closuresare affected by significant gaps ininformation and delays in receivingguidance from national governmentagencies,notablyintermsofregulatoryadviceandsupport.Tohelpbridgethegap, the PPP Center, in partnershipwithDILGandNWRB,canhelpbridgethegapthroughserviceproductization.Productization is defined as stream-lining the transaction process by

TheWaterandSanitationProgramisamulti-donorpartnership,partoftheWorldBankGroup'sWaterGlobalPractice,supportingpoorpeople inobtainingaffordable,safe,andsustainableaccess towaterandsanitationservices.WSP’sdonors includeAustralia,Austria,Denmark,Finland,France,theBill&MelindaGatesFoundation,Luxembourg,Netherlands,Norway,Sweden,Switzerland,UnitedKingdom,UnitedStates,andtheWorldBank.

Thefindings,interpretations,andconclusionsexpressedhereinareentirelythoseoftheauthorandshouldnotbeattributedtotheWorldBankoritsaffiliatedorganizations,ortomembersoftheBoardofExecutiveDirectorsoftheWorldBankorthegovernmentstheyrepresent.

©2015InternationalBankforReconstructionandDevelopment/TheWorldBank.

ThePPPCenterprovidestechnicalassistancetonationalgovernmentagencies(NGAs),government-owned-and-controlledcorporations(GOCCs),stateuniversitiesandcolleges(SUCs),andlocalgovernmentunits(LGUs)aswellastotheprivatesectortohelpdevelopandimplementcriticalinfrastructureandotherdevelopmentprojects.

AcknowledgmentsThislearningnotewaspreparedbyAileenCastrowithVijayJagannathanandMarilesRomero-Navarro(WSP).Thankstopublicandprivatesectorrepresentativeswhosharedtheirtimeinexplainingthehistoryandperformanceofeachcasestudywaterutility.ValuablecontributionswerereceivedfromEleazarRicote(PPPCenter),AlmudWeitz,JemimaSy,IainMenzies,andEdkarlGaling(WSP).

About the ProgramThePhilippinesExpandedSmallWaterUtilitiesImprovementandFinancingTechnicalAssistancePhase2(ESWIF2)isathree-yearinitiativethatseekstodevelopandimplementnewsectorapproaches—“light-handed”regulation,technicalsupporttosmallutilitiesonafee-basisbyaccreditedserviceproviders,andaccesstocredittrials—thatpromotesystematicaccelerationofwaterserviceprovisioninunservedareas.Aspartofthisproject,WSPhasdevelopedaguidancenoteforthePPPCenterofthePhilippinesonhowPPPscanbearrangedandscaledsuccessfully,basedonaninvestigationofeightwaterutilitiesacrossthecountry.WSPhasalsopreparedsnapshottwo-pagebriefsthatsummarizeeachcasestudyforquickreference.

Contact Us Formoreinformationpleaseemailwspeap@worldbank.orgorvisitwww.wsp.org.

whichPPPsare identified,negotiated,and concluded within a framework ofclear rules and responsibilities of theoperators, the LGU administration,national government agencies, andwatersupplyusers,whilefullyleveragingcurrentandfuturetechnologies.

Underproductization,thePPPCenter,DILG, and NWRB will aim to lowerbarriers for local governments toenter into and stay engaged in win-win deals. Productization of servicesfocuses on structuring the sector’sknow-how,know-what,andknow-whofor water PPPs on an online platformfor easy access. These agencies willact as connectors, facilitators, andlighthandedregulators.ThePPPCentercan be the driving champion behindthe productization process, enablingrelevant sector stakeholders to learnand apply the latest knowledge andpracticesrelatedtoPPP.Thisknowledgeincludes expanding access to reliableand sustainablewater supply servicesbasedonwillingnesstopay,economicand environmental sustainability andappropriate sharing of risks betweencontracting parties. Also important ishow to customize PPP contracts tosuitthespecificneedsofwatersupplycustomersinparticipatingLGUs,whilefulfillingnationalgovernmentstandardswith regard to quality, reliability andenvironmentalsustainabilityofwater.