Efficiency and Environmental Effects of Privatizing Waterworks and Sewerage

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In 1997, the Metropolitan Waterworks and Sewerage System (MWSS) was privatized to meet the rapidly growing demand for water, and sewerage and sanitation services in Metro Manila. The purpose of the study was to determine the impacts of private sector participation in the water supply and sanitation sector in Metro Manila, the foremost urban region of the Philippines. The methodology of the study used two lenses—microeconomic efficiency and environmental sustainability. It was found that MWSS privatization resulted in improvements in efficiency that translated into greater social welfare. Social welfare increased with the expansion in the water supply service coverage, and the reductions in the costs of acquiring water for those previously not connected to MWSS and in the operational costs of MWSS. The privatization, however, had not adequately and appropriately addressed two environment-related concerns with important implications on long-term water supply sustainability. First, sanitation and sewerage facilities had not been expanded sufficiently to address the Metro Manila waterways pollution problem largely caused by domestic wastewater. Second, there were no explicit provisions and concrete programs to reduce dependence on groundwater and curb groundwater depletion.