Manila Water: An IFC Client Improves Lives

IFC has selected Manila Water as the recipient of its 2007 Client Leadership Award. The award acknowledges a highly successful corporate client, which, in line with IFC’s mission, has demonstrated its management’s commitment to environmental and social sustainability and corporate governance, while achieving commercial success. Since 1997, the company has made water available and affordable to thousands of low-income families in the Philippines.

Weathering Challenges

Armando Awa-ao still remembers what he calls the "dark ages" of waking up at the crack of dawn and lining up to fetch water from the only deep well that served his village of 500 people. He would pay about $45 a month for water from various sources, including deep wells, truck deliveries, and mineral water stations. His was among the 76 percent of households in the eastern zone of Manila, home to 5 million people, who did not have access to 24-hour water.

The dilemma in this village was part of a near-crisis situation in Manila in 1997. The rate of water loss was the highest among major cities in Asia—two-thirds of the water produced was lost to leaks and illegal tapping, and only 26 percent of 325,000 households in the metropolitan area had access to clean and affordable piped-in water.

Providing Solutions In response to the crisis, the Philippine government enlisted IFC's help for advice on how to privatize the Metropolitan Waterworks and Sewage System, a state-owned utility. A 25-year concession contract was awarded to Manila Water Company for the eastern section of metropolitan Manila. Despite significant external challenges to its operations, including the Asian financial crisis and a severe drought in 1998, Manila Water continued to grow and is now considered one of the best-managed companies in the Philippines. Through a revitalized organizational culture that emphasizes efficient service, Manila Water successfully rehabilitated an aging utility and extended services to previously underserved communities. Seven years after IFC acted as transaction advisor for the privatization, we helped Manila Water financed a further upgrade of its water infrastructure network. Today, with IFC’s help, the company has transformed the public utility into a world-class provider—showing that water privatization can succeed economically and deliver for poor people.

IFC’s Engagement with Manila Water

Acted as transaction adviser in structuring the concession Provided a $15 million equity investment Granted three $30 million loans to help finance infrastructure rehabilitation, expanding water, sewerage, and sanitation services to Manila’s low-income areas Brokered a relationship with a local microfinance institution Helped develop a sustainability strategy and report Contributed to the company’s corporate governance manual

Walking the Talk

A critical part of Manila Water’s strategy is to align its business objectives with its sustainability and corporate governance initiatives. It has adopted a grassroots approach to serving low-income consumers, integrated key stakeholders into its operations, and created a decentralized structure that gives frontline staff more authority and a greater sense of ownership in the company’s activities.

One of the company’s corporate values is customer service, as exemplified by its "walk-the-line" program. Every employee, including the CEO, goes from house to house to visit customers, allowing them, particularly those living in informal settlements, to assess firsthand the company's services. This interaction increases employees’ knowledge, while enriching work experience and building customer loyalty and goodwill.

Manila Water also serves as a model of World Bank Group collaboration. In 2005, it obtained a $64 million loan from an IBRD facility through a government bank to expand and upgrade its sewerage infrastructure.

A Star Performer

In a decade after taking over the concession, the company has increased the number of households with water connections to over a million, 98 percent of which have a 24-hour water supply. The volume of water running through its distribution network has increased substantially, from 440 million to 1.04 billion liters. The company has also reduced its revenue losses from leaks and illegal connections.

Manila Water accomplished all this in a cost-effective manner that has ensured growing profits every year since 1999. It has had a 47 percent growth rate in the past six years and was able to raise $65 million from its initial public offering in 2005, allowing it to keep investing in water and wastewater infrastructure services.

This is particularly good news for someone like Armando Awa-ao, who now spends only about $5 a month for his family’s total water consumption.

The company has developed a corporate governance manual and communicates its social and environmental performance to the public through an annual sustainability report that IFC helped it produce—this is also the first for a Philippine company.

Rewarding Excellence

Announcing the Client Leadership Award, IFC Executive Vice President and CEO Lars Thunell said, "Manila Water’s innovative programs to bring water to poor people and its success in supplying the city’s eastern zone are just some of the ways that the company embodies IFC’s ideals in social sustainability and corporate governance."

In receiving the award, Antonino Aquino, President of Manila Water Company acknowledged IFC's contribution. He said, "IFC has been a valuable partner in helping us prove that business objectives and sustainability initiatives, which are the core of our business strategy, are perfectly aligned. We are honored to receive this award and proud of our long-standing partnership with IFC. We hope to enhance this valuable relationship as we continue to grow."

In addition to efficient business management, Manila Water attributes its success to a clear understanding of the business case for proactive outreach to communities and solid business reasons for protecting the natural environment.

Providing Added-Value Services

Manila Water's culture of community engagement is most evident in its flagship program, "Tubig Para Sa Barangay" (water for poor communities). This program helps poor people apply for water connections collectively and teaches them to manage and protect their own connections. This has reduced costs significantly, as well as leaks and illegal tapping of water lines, while winning the company a significant customer base. The company is building on its relationship with these neighborhoods to launch a pilot microenterprise program.

Alliances with government agencies and nongovernmental organizations to protect upstream water resources have also been useful for the company, which is involved in reforestation efforts and livelihood programs for illegal residents, whose presence in the watershed area has contributed to erosion and pollution, threatening the water supply.

Manila Water's performance provides an example of successful private sector involvement in the water sector and positions it to help the Philippines make significant progress toward the Millennium Development Goals.


For more information, please contact:

In Washington D.C.
Zibusiso Sibanda
E-mail: ZSibanda@ifc.org
Phone: (202) 473-0605

In Manila
Lumen Balboa
E-mail: LBalboa@ifc.org
Phone: +632 8487333