1 Mobilizing local Financial Resources for Water and Sanitation Finance High Level Panel 5th World Water Forum March 17, 2009 Kazushi Hashimoto Japan International Cooperation Agency (JICA)

2 What is required to attract private funding for water and sanitation? 1.The right management 2.The effective monitoring of the performance 3.A workable financing mechanism

3 Two success stories in managing water supply (Asia-Pacific) Cambodia - Phnom Penh Water Supply Authority (public sector) Philippines - Manila Water Company (private sector)

4 Phnom Penh Water Supply Authority (PPWSA) Cambodia Prize winner of 2004 ADB’s Water Award, 2005 JICA Award, 2005 World Bank Award, 2006 Ramon Magsaysay Award

Indicators Indicators Performance Change (PPWSA) ,000 25% 10hr/d 0.2 bar 0.2 bar 26,881 26,881 72% 72% 48% 48% 150% Subsidized Staff/1,000 connections Staff/1,000 connections Water production m3/d Service coverage Service hours Water pressure Water pressure Number of connections NRW Collection rate Running cost/revenue Financial status 4 235, ,000 90% 90% 24hr/d 2.5 bars 147,000 8% 99. ７ % 22% Independent

6 Private concessionaire of the Manila East Area Winner of 2005 ADB’s Water Award and 2007 IFC ‘Client Leadership’ Award Manila Water Company

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9 What are the common factors in the management of PPWSA and Manila Water? Reduction in water losses due to a comprehensive Non Revenue Water reduction program Thereby, increasing both water resources and financial resources Thereby, increasing investment for new connections Their method of water management is similar to that of Japanese utilities (NRW of Tokyo Waterworks is 3.6%)

10 How to monitor the performance of water projects and water utilities? In Japan, 137 Performance Indicators (PIs) were set for the Guidelines for the Management and Assessment of Drinking Water Supply Services (JWWA Q-100) in This Guideline is referred to in the ISO24512 ･ 2007 Guidelines for the management of drinking water utilities and for the assessment of drinking water services. PIs can be utilized to monitor and regulate the performance of both public and private operators.

11 Mobilization of local financial resources (public and private) for water projects In the Philippines, JICA and USAID provided technical and financial support in establishing the Philippines Water Revolving Fund (PWRF) as a mechanism to mobilize the resources of local private banks for water and sanitation projects carried out by the local municipalities through the capacity development of both the central government and the municipalities.

12 What is the challenge in mobilizing local financial resources for water? Water utilities in local municipalities are not normally creditworthy borrowers from the viewpoint of private banks. Therefore, credit risk enhancement by local guarantee agency, backed by USAID’s co-guarantee is required. The maturity of the loans from private banks is not long enough to finance water projects, even if a guarantee is provided. Therefore, it should be blended using ODA loans with a longer maturity. Ring-fenced Revolving Account is established to ensure sustainability of funds.

13 DBP administers the Philippine Water Revolving Fund credit enhancement and lending reflows DBP/ MDFO provides Stand-By Credit Line to cover liquidity risk of the PFI loan (if 20 year tenure) The Stand-by Credit Line will be used to refinance the PFI loan if it is decided not to extend the tenure beyond the original seven years. Creditworthy Water Service Providers LGUGC provides partial credit Risk guarantees for the PFI loan PFIs/MFIs co-lends through PWRF/DBP to Water Service Providers GRP provides a sovereign guarantee for a JICA Loan USAID/DCA co-guarantees LGUGC JICA lends to DBP PWRF Special (Revolving) Account for re-lending, stand-by credit line or additional credit enhancement Lenders Credit enhancers Borrowers Co-Financing Principal Repayment Financial Structure of the Philippine Water Revolving Fund (PWRF)

14 New move in Japan Team Water Japan ， Water Security Council of Japan Team Water Japan has the will to support water security activities around the world. Water Security Council of Japan will serve as the catalyst for coordinating Japanese expertise and resources towards achieving water security, in Japan and worldwide.

15 New move in Japan ODA Reform – Creation of new JICA (Japan International Cooperation Agency) JICA will implement Japan’s ODA program comprehensively, Including ODA Loans, Grant and Technical Assistance (T/A). JICA is fully equipped to support developing countries’ investment in water while strengthening their capacity in managing water. JICA’s support is world-wide.