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Manila Water’s journey toward excellence is a unique story. The benefits the company continues to reap are the results of its beliefs and investment in “pipes and people;” in infrastructure and individuals. Above all else, the transformation of Manila Water is thanks to the value of the employees and their contributions. It demonstrates how individuals, teams, an entire organization transitioned from a “reactive and complacent” workforce into a much more desirable state, “proactive and responsible.” Change became evident not only among Manila Water’s employees, but also among the customers who began to take notice of the improved quality of service they received. This “always changing for the better” standard around which Manila Water has built its reputation through the years has tremendously contributed to its continued success.
The Metropolitan Waterworks and Sewerage System (MWSS) is the Philippine government’s corporate sector which is mandated to provide water and sewerage services in Metro Manila. It serves a total of 15 million people. In the mid-1990s, the water sector in Metro Manila was trapped in a “vicious” cycle. Supply was intermittent, with more than 63% water loss due to leakages and water theft, among other issues. As of 1996, MWSS supplied potable water directly to 67% of the 10.6 million residents within its service area. Wastewater management was also almost non-existent with barely 3% of households connected to the drinking water network. Due to its poor service, the government was unable to increase water tariffs because the customers were unwilling to pay, which was further aggravated by poor collection practices. The situation translated into a very low cash flow and made the utility incapable of maintaining financially viable operations. With the Philippines experiencing increased industrialization and population growth, MWSS was trapped in a vicious cycle and unable to cope with the demand for efficient and quality supply of water.
The impending ‘water crisis’ was finally what pushed the national government to prioritize the need for an improved water and sewerage service in the metropolitan area. When President Fidel Ramos succeeded President Corazon Aquino in 1992, he broadened the PPP program to include critical infrastructures such as: 1) the Build-Operate-Transfer (BOT) Law of 1990, and 2) the Telecom Deregulation Law of 1995. The BOT Law in particular provided the key framework by which the Philippine government initiated contractual arrangements under the PPP program. With BOT, the government was able to establish a partnership with the private sector in infrastructure provision and development wherein the latter is responsible for the design, financing, construction, operation and management of the infrastructure facility. Then after a specified concession period, ownership of the facility is to be transferred back to the government.
Finally in 1994 when the government became open to the concept of PPP through a concession for the water sector and the National Water Crisis Act (NWCA) was introduced and passed. The NWCA provided the mandate for the MWSS management and Board of Directors to look at several forms of PPP and saw that the concession model was ideal for improving and expanding the availability and coverage of water in Metro Manila. Two 25- year concessions were bid out - the East Zone and the West Zone. Dividing the service area further helped facilitate negotiations for the concession contracts and provide objective criteria for performance evaluation of the two concessionaires. These milestones achieved under the administration of President Ramos clearly reflected a strong political will. The authorities recognized that if the looming water crisis in Metro Manila was not addressed, the entire economic sustainability of the country would be at risk. Without an efficient and reliable water service infrastructure, it would be impossible to sustain any economic gains in the future.
When Manila Water took over, the company inherited over 2,200 former government employees, aged 45 to 55. The average employee profile was characterized by (a) low productivity, (b) highly educated managerial pool but poorly compensated, (c) a limited capacity to manage operations ‘like a business,’ and (d) concern about job security under a privatized setup. Clearly, there was a need to introduce a new mindset and a corporate style of management, where there is shared responsibility for sustainable development across all levels of the organization. As the employees were the key driving force, it was evident that Manila Water needed to start its transformation internally—starting with employees. Manila Water set out to rejuvenate the existing organization especially in terms of the employees accepting greater responsibility. Through the reevaluation and realignment of roles, the existing knowledge and skill sets of the employees were tapped and retooled to enable the delivery of the highest value services. Additionally, Manila Water also started a Cadetship Training Program to attract fresh talent into the workforce. Here, the cadets are trained to develop the highest level of technical, business, and management skills with the goal of educating Manila Water’s future leaders and managers.
Under the old MWSS operations were very centralized. Targets were set at the corporate level rather than in smaller units; creating issues in communicating and coordinating across the organization. To solve this, Manila Water decided to involve management on the ground level through the creation of a decentralized territory management system which involves dividing the East Zone into several business areas and further subdivided into smaller territorial boundaries. This approach made operations more manageable and strengthened community relations and customer management.
From being stuck in a “vicious” cycle” characterized by decades of underinvestment that led to poor service and low coverage, Manila Water was able to transform into a water utility that is identified with a “virtuous cycle” wherein they were able to expand and provide better quality service —a major feat that was accomplished thanks to the PPP reform. One of Manila Water’s greatest operational achievements was how it reduced NRW levels from 63% in 1997 to 13% in 2022, even reaching an unprecedented low of 11% in 2010. Considered the biggest system loss reduction in the history of the country, the NRW level even eclipsed the regulatory target of 25%. With reduced NRW, there was a visible increase in water supplied to customers. This is equivalent to 99% 24-hour coverage, or around three times more customers served.
In addition, Manila Water was also able to provide affordable rates especially for marginalized communities, which account for the largest portion of the company’s customer base. As more people gained access to clean water, waterborne diseases were reduced, thereby contributing to improved community health, and families no longer needed to devote their time and energy to going out to get water each day. Moreover, Manila Water’s efforts to improve service have been validated through their high customer satisfaction ratings which are based on network quality, water quality, and service quality. In terms of investments, Manila Water disbursed over PHP 111 billion (around 1,8 billion euros) in capital expenditure for water and wastewater infrastructure, roughly twice the value of MWSS assets earmarked for the East Zone Service Area of Metro Manila and Rizal Province. Operating expenditure grew from PHP 416 million (around 6,75 million euros) in 1997 to a cumulative value of about PHP 74 billion (around 1,2 billion euros) at the end of 2021, highlighting its commitment to provide the best service possible within its territory. It was the success of Manila Water in the East Zone that paved the way for other business initiatives that have helped the company expand and introduce the best practices that it has acquired from its experience over the years in both local (Laguna, Boracay, Clark, Cebu) and international (Vietnam) regions.
Looking back, Manila Water’s 15 years can be summed up in four phases: survival, expansion of coverage, alignment of business sustainability goals, and ventures outside of the East Zone. Despite having established a strategy that resulted in it becoming a beacon of success in the water management sector, strategies must evolve with changing business landscapes. There will always be a need to constantly rethink, improve, and when necessary, revise the strategy to keep up with the challenges and issues that Manila Water continues to face moving forward. These challenges include: 1) urbanization and increase in population, 2) regulatory risk, 3) climate change, 4) replicating the PPP model in top metro cities within the Philippines and in the region, and 5) developing new talents and leaders in the water sector. No plan can stand the test of time forever. Manila Water understands that as it outlines its future plans, it is crucial that the organization develops new strategies to be resilient and mitigate the impacts of the challenges and issues that it will have to face. In any case, Manila Water promises to continue ensuring reliable service not only to their present customers, but also to the next generation.
Provision of water services is arguably the most politically sensitive among the basic infrastructure services (power, telecom, roads) since it is imbued with public interest. Private interests must have the wherewithal to align political circles, maintain their support over a long period and effectively manage the political economy for sustainability. This is an extremely difficult task to accomplish and sustain given the ever-changing world of politics. Once the political support and enabling framework are in place, the concession model, such as the Manila concessions, can be tested over time. This then allows the private operator to charge appropriate tariffs given the capital intensity of the water utility business. Political support and an enabling legal framework, however, must be matched by consistent performance of the operator because without it the relationship among the political forces, regulator, operator, and consumers immediately spirals into a very uncertain and high risk situation. From experience, the lesson from the Manila Water story can be summed up in three letters: PPP! Alignment of Politics, Prices and Performance!
Virgilio “Perry” C. Rivera Jr. was employed by the Ayala Corporation, one of the Philippines’ leading and largest conglomerates, for almost 33 years where he held various positions, most notably that of Managing Director. He moved to Manila Water Company, Inc. (MWCI) in 1997 and held key leadership roles including the position of Chief Operating Officer for New Business/Subsidiary Operations and Business Development until 2021. After retiring, he founded WatSan Analytics, a management consulting firm catering to the water and sanitation sector.
Founded in 1997, Manila Water Company, Inc. is a publicly listed company with extensive experience in the Philippine water sector, including water treatment and distribution, wastewater management, and sanitation services. The company is the concessionaire of the state-run Metropolitan Waterworks and Sewerage System, providing water supply, wastewater, and sanitation services in the East Zone concession in Metro Manila and the province of Rizal, which serves a population of over 7.3 million people. In 2021, the company was granted a 25-year franchise to operate by the Philippine government.
