Economic Analyses of Policies for Household Water Services in Metro Manila

The Philippine Government privatised water services in Metro Manila, the National Capital Region (NCR) of the Philippines, in 1997, dividing the service areas between two water concessionaires-with Manila Water servicing the East Zone and Maynilad covering the West Zone. Since the privatisation, the water services have improved markedly. However, the increases in household population and water connections have resulted in increased water demand, putting pressure on the principal water supply sourced from the Angat Dam. In order to ration scarce water supplies, the water concessionaires have imposed timed water disruptions. The Philippine Government plans to augment water storage by building the Kaliwa Dam and passing on the investment cost to water users. This thesis provides economic analyses of the social welfare implications of two measures to address water scarcity in Metro Manila, namely, price-measure water-demand management and the proposed water supply augmentation. Both measures are dependent on the sensitivity of households to changes in water prices. Thus, the thesis estimates household water-demand elasticities post-privatisation of the water services in Metro Manila. The results suggest that households in the East Zone are less sensitive to changes in water prices than households in the West Zone, which can be attributed to the different performances of the two concessionaires. The results also suggest that other household characteristics, such as household head gender, household head marital status, household head age, and the household type are endogenous variables that have statistically significant influence on water demand, aside from the family size and income that existing literature has considered. The thesis considers using the risk-adjusted user cost (RAUC) as an alternative to water rationing in times of water scarcity. This pricing instrument estimates the households' willingness-to-pay to avoid water restrictions and allows households to consume water undisrupted, despite the declining water levels in Angat Dam. The findings suggest that given the current conditions in Metro Manila, households do not require a RAUC. The findings of the sensitivity analyses, however, suggest that if: (i) the Kaliwa Dam is not operational by 2025; and (ii) the concessionaires achieve their goal of 100 per cent service connections for all households in Metro Manila; and (iii) extreme dry weather events occur, then the RAUC would increase the social surplus, or the social net benefit, of Metro Manila households. To determine the optimal time at which the Kaliwa Dam should be operationalised, a dynamic optimisation model was constructed especially for this thesis. It shows that the optimal time to operationalise the Kaliwa Dam is 2042. The results of the sensitivity analyses further suggest that the optimal time is sensitive to different household growth rates and the very low water inflows scenario from the Angat Dam, but is insensitive to the changes in social discount rates. The Philippine Government currently plans to have this dam operational by 2025, but the model indicates that this is premature and will result in social losses. Overall, the thesis provides valuable insights for policymakers who are considering either a water-demand management approach or supply augmentation for managing an urban water supply system

A Proposed Method of Correcting the Construction Entries in the 2006 Philippine Input-Output Table

The construction of national input-output (IO) tables follows internationally acceptable standards such as the United Nations Systems of National Accounts (UN SNA) and European System of Accounts (ESA). These standards are used to ensure tractability and coherence between country tables. The 2006 Philippine IO table published by the Philippine Statistics Authority (PSA) assumes that the construction sector does not provide any input to the production of output for any economic sector. With the booming infrastructure development in the Philippines, this assumption that intermediate demand for construction output has a value of zero is unreasonable. This study proposes a corrective approach to determine the entries for the construction sector by utilizing the sectoral shares of intermediate demand from the 2000 Philippine IO table. This yields a more realistic inter-industry transactions matrix that will provide better insights for economic planning and impact analysis

Mitigating Emissions Associated With the Production of Traded Goods

The environmental impact of international trade is a concerning issue in the fight against climate change. Trade liberalization—combined with globally fragmented environmental policies—is often associated with the formation of pollution havens. This is because trade enables emissions leakages, which is defined as the outsourcing of emissions-intensive production to countries with weaker environmental regulations. Therefore, literature on this subject has suggested that a globally coordinated policy response is necessary to mitigate the impact of trade on climate change (Aichele & Felbermayr, 2012; Ben-David et al., 2020; Felbmermayr & Peterson, 2020). However, some studies have found that unilateral policy actions have no tangible effect on the volume of emissions associated with trade and, in some cases, the reduction of emissions volume associated with trade (Baylis et al., 2014; Kumar & Prabkahar, 2016; Hoekstra et al., 2016). This policy brief aims to provide insights on unilateral or multilateral actions countries can take to mitigate the impact of embodied emissions associated with the production of traded goods

Analysis on the Credit Accessibility and Growth of Manufacturing Firms in the Cases of Indonesia, Philippines, and Vietnam

Micro, small, and medium enterprises (MSMEs) contribute to income and employment generation, poverty reduction, and industry growth in the ASEAN region (Mendoza, 2015). Their significant contributions to economies have led countries to emphasize the importance of firm growth, which is influenced by credit accessibility. Majority of existing enterprises in Indonesia, the Philippines, and Vietnam are composed of MSMEs with limited financial resources to foster growth (Paratama, 2019). This hinders the potential of manufacturing MSMEs to have sufficient funding. However, existing literature suggests that credit access significantly provides a positive impact on firm growth only until a certain threshold point (Nizam et al., 2020). The threshold regression analysis results convey the significance of considering the potential existence of credit access thresholds, particularly with regard to firm size. This policy brief aims to provide a suggestive analysis by assessing the applicability of the established relationship and threshold levels to existing economic policies and the formulation of future programs

Can the Philippines Achieve its CO2 Reduction Commitment with Renewable Energy?

The Philippines always aims to achieve economic growth, which requires expanding economic activities, resulting in increased pollution (Stern, 2017). The country signified its intention to reduce carbon dioxide (CO2) emissions by 75% in COP26 (United Nations Framework Convention on Climate Change [UNFCCC], 2021). Part of its strategy to combat CO2 emissions is by increasing its share of renewable energy (RE) sources to at least 35% of the total energy matrix (Department of Energy [DOE], 2021). The Philippines’ ability to reach its COP26 commitment through a scenario approach on the effects of increasing GDP and share of RE to CO2 emissions using Kaya Identity and EKC was investigated. Geometric growth and target-oriented forecasting were performed to generate the forecast period. The Kaya Identity computed the total factor CO2 emissions of the country. The EKC investigated whether increases in GDP, incorporated with the share of RE, result in declining CO2 emissions. Results showed that in scenarios 5 to 7, where GDP and share of RE are increasing based on targets, the Philippines enters post-industrialization stage 3 of environmental responsibility, wherein increases in GDP result in declining CO2 emissions. Evidence suggests the Philippines must remain aggressive in its RE investments to reach its COP26 carbon dioxide emissions reduction commitment

Philippine Structural Transformation - With or Without Maharlika

It appears the Maharlika Investment Fund (MIF) is a fait accompli. As we write, our finance officials are in New York and Toronto, pitching the MIF to international bankers and representatives of Middle East sovereign wealth funds. This means once President Marcos, Jr. affixes his signature, a newly-created Maharlika Investment Corporation (MIC) will pool, before the year is over, PhP 75 billion in seed capital from the LandBank and Development Bank of the Philippines. With a further PhP 50 billion plus two full years of dividends from the Bangko Sentral ng Pilipinas (BSP), its nine directors, all presidential appointees, will be able to invest in tradable commodities, overseas instruments, and local development projects to earn dual bottom line returns — financial and social — for the country

Economy-wide impact of water reallocation decision in a small open economy

This study examines the economy-wide effects of water reallocation decision. It takes off from the point that the existing surface water supply cannot be increased by tapping groundwater or building new dams which could take years to construct and operationalize. Thus, the available surface water supply must be reallocated to pursue certain policy objectives. This requires rigorous empirical analysis to ensure that such decision can improve or inflict the least negative impact on lhe economy. In line with the results of existing literature, this study has attempted to test the hypothesis that water reallocation can produce negative impacts not only on the sectors whose water supply is reduced but on the entire economy as well. In testing the hypothesis, the study focuses on one policy objective: accelerating induslrialization that requires a reallocation of water from the agricultural sector to the industrial sector. It uses a small CGE model for an open economy with water being explicitly included as one of the factors of production. The simulation results suggest that withdrawing some amount of water and transferring ii to the industrial sector to support a rapid industrialization of the economy can indeed produce a negative impact on the economy. This may well be a reflection of the structure of the Philippine economy in which key manufacluring sectors such as food processing and beverage sectors are heavily dependent on agricultural outputs as their primary inputs. The results, which appear consistent with existing literatures, send signals to policymakers to look at the economy-wide impacts of water reallocation policies. Future work on the issue of water reallocation decision can perhaps yield better insights when more disaggregated data become available to warrant the use of a larger CGE model with less constraints

A qualitative analysis for flood risk indexing in Malabon City

Malabon City in the Philippines, which consists of 21 Barangays (Districts), needs proper assessment of flooding for the city has been adversely affected by rainfall, high tide, and simultaneous events of rainfall and high tide for more than two decades. Both local and regional government agencies have put in place structural as well as non-structural measures to alleviate the flooding and its damages however it has been observed that up to this time these adverse effects still exist.The study attempts to do a risk-based analysis-based on the study of the city\u27s flooding events due to rainfall, high tide, and simultaneous events. It uses a methodology based on the study of Kannami (2008) for measuring flood risk in each barangay, where risk is a function of Hazard, Vulnerability, Exposure, and Capacity. The results show that of the 21 barangays, the two (2) barangays that are consistently most exposed to flood risk are Catmon, and Tanyong while the barangay that has been consistently least exposed to risk is Flores. The results also show that out of the four (4) factors (Hazard, Vulnerability, Exposure, and Capacity) Exposure contributes most to the Flood Risk in the barangays.To reduce the exposure to the risk of flooding in the barangays of Malabon City, the study recommends the use of risk-based analysis that includes both structural and non-structural measures to alleviate flooding and its damages to the residents. The flood risk indices and the radar graphs produced in this study give an objective assessment of which barangays should be given more attention in terms of programs aimed at alleviating the effects of flooding and which among the components that contribute to flood risk be addressed first especially when resources of the local government are limited

Climate change, food availability, and poverty: The case of Philippine rice

The Philippines is experiencing the effects of wide swings in weather conditions in recent years. The country experienced super typhoons, floods, and extended periods of drought recurring in most of the regions. The agricultural commodity that is severely affected by climate change is rice, which is the staple food of Filipinos. Using a computable general equilibrium model calibrated to Philippine data, the paper analyzes the effects of climate change as it affects palay productivity. The analysis looks at the impact on palay production and rice supply, prices, consumption, household income, and welfare. The paper extends the analysis by computing the income distribution and poverty effects of the productivity changes by applying a poverty microsimulation using the 2012 Family Income and Expenditure Survey. The results indicate that climate change decreases palay production in rainfed (or non-irrigated) areas, leading to higher prices, reduced rice consumption, decreased real income of households, decreased welfare, increased income inequality, and poverty. These effects however are minimized or reversed if the limits imposed by the government on rice imports are relaxed. If the government reduces the trade barriers on imported rice which is considerably cheaper than domestically produced rice, supply of rice improves which decreases prices, rice consumption increases, real household improves, welfare increases, and income inequality and poverty decrease. © 2018 by De La Salle University