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Executive Orders

Instituting Reforms in the Financing Policies for the Water Supply and Sewerage Sector and Water Service Providers and Providing For The Rationalization Of LWUA's Organizational Structure and Operations in Support Thereof

Executive Order No. 279

MALACAÑANG
Manila


Executive Order No. 279 February 2, 2004

INSTITUTING REFORMS IN THE FINANCING POLICIES FOR THE WATER SUPPLY AND SEWERAGE SECTOR AND WATER SERVICE PROVIDERS AND PROVIDING FOR THE RATIONALIZATION OF LWUA'S ORGANIZATIONAL STRUCTURE AND OPERATIONS IN SUPPORT THEREOF

WHEREAS, Presidential Decree No. 198 ("PD 198") established the Local water Utilities Administration (LWUA), mandating it to serve as a "specialized lending institution" for the promotion, development and financing of local water utilities;

WHEREAS, the Local Government Units (LGUs) are responsible for the provision of basic services and facilities as enumerated under Section 17 of the Republic Act No. 7160 (Local Government Code), including among others, the provision of water supply and sewerage services;

WHEREAS, shifts in government financing policies and constraints in the availability of financing from the National Government, and lack of investor confidence in the water supply and sewerage sector and limited capital stock and domestic and foreign borrowing authority have constrained LWUA from providing financing assistance to qualified Water Districts (WDs);

WHEREAS, there is a need to tap financing...

Summary of Executive Order No. 279

General Provisions (Part I):
- Outlines reform objectives/policies for the water supply and sewerage sector, including:
    - Improving investor confidence (Section 1a)
    - Rationalizing allocation of financial resources through classification and graduation initiatives (Section 1b)
    - Allowing freedom of choice for water service providers (WSPs) in sourcing financing (Section 1c)
    - Increasing participation of local government units (LGUs), government financial institutions (GFIs), and private financing institutions (PFIs) in financing (Section 1d)
    - Stimulating improved service and financial self-sustainability for WSPs (Section 1e)
    - Encouraging initiatives for self-sufficiency, such as amalgamation, private sector participation, cost-recovery tariffs, and resource pooling (Section 1f)
    - Granting incentives for improvement and graduation of WSPs (Section 1g)
    - Educating consumers to treat water as a scarce economic good (Section 1h)
    - Establishing an independent economic regulator for the water supply and sewerage sector (Section 1i)
- Defines key terms, including WSPs, amalgamation, classification, cost recovery tariff, creditworthy WSPs, GFIs, graduation, LGUs, non-creditworthy WSPs, pre-creditworthy WSPs, and semi-creditworthy WSPs (Section 2)

Oversight Committee (Part II):
- Establishes an inter-agency Oversight Committee to coordinate and oversee the implementation of reforms in financing, graduation, and regulatory policies (Section 3)
- Outlines the composition of the Oversight Committee, including representatives from the Department of Finance (DOF), National Economic and Development Authority (NEDA), Department of Budget and Management (DBM), Department of Interior and Local Government (DILG), Office of the President (OP), and Local Water Utilities Administration (LWUA) (Section 4)
- Defines the functions of the Oversight Committee, including:
    - Formulating implementing rules and regulations (IRR) (Section 5a)
    - Reviewing LWUA's rationalization plan and submitting recommendations to the President (Section 5b)
    - Reviewing criteria for classification of WSPs (Section 5c)
    - Reviewing the classification of WSPs prepared by LWUA-WDG (Section 5d)
    - Preparing an action plan for reforms in financing policies, including incentive schemes (Section 5e)
    - Submitting quarterly reports to the agency to which LWUA is attached (Section 5f)
    - Reviewing LWUA's charter and proposing amendments if necessary (Section 5g)
- Establishes a Technical Secretariat under DOF to serve as the official repository of data concerning the classification and evaluation of WSPs (Section 6)
- Allows members of the Oversight Committee and its Technical Secretariat to receive honoraria and/or reimbursement of expenses, subject to availability of funds and prevailing rules and regulations (Section 7)

Local Water Utilities Administration (Part III):
- Transfers LWUA from the Department of Public Works and Highways (DPWH) to the Office of the President (OP) until its transfer to DOF, and requires LWUA's Board of Trustees (BOT) to include representatives from the agency to which it is attached (Section 8)
- Directs LWUA to review its organizational structure and internal policies and programs, rationalize its operations, and refocus its objectives to include other WSPs, whenever feasible or applicable (Section 9)
- Establishes a Water Development Group (WDG) within LWUA, responsible for:
    - Continuing institutional development services aimed at graduating WSPs (Section 9A(a))
    - Classifying WSPs into creditworthy, semi-creditworthy, pre-creditworthy, or non-creditworthy for determining appropriate financing sources (Section 9A(b))
    - Developing a graduation plan for non-creditworthy, pre-creditworthy, and semi-creditworthy WSPs based on initiatives such as cost recovery tariffs, amalgamation, private sector participation, management structure and governance, LGU/WSP resource coordination for credit enhancement, education, and technical assistance (Section 9A(c))
    - Monitoring the implementation of the graduation plan and evaluating the effectiveness of graduation initiatives (Section 9A(c))
    - Preparing and submitting quarterly reports on its activities to the Oversight Committee and DOF (Section 9A(d))
- Establishes a Water Development Financier (WDF) within LWUA, responsible for:
    - Enhancing and strengthening LWUA's lending functions and evaluating applications for financial assistance (Section 9B(a))
    - Reorienting LWUA towards banking principles, adopting development banking principles, and developing lending policies and guidelines within 90 days of the Order's effectivity (Section 9B(b))
    - Strengthening LWUA's collection function and allocating collections to debt servicing and funding for graduation and technical assistance functions (Section 9B(c))
    - Maintaining separate accounting, payment, and collection systems for existing loans and new loans granted under the reforms (Section 9B(d))
- Establishes a Technical Assistance Group (TAG) within LWUA, responsible for:
    - Continuing LWUA's program of providing technical assistance to WSPs (Section 9C(a))
    - Extending project-related technical assistance to GFIs and creditworthy WSPs on a competitive basis (Section 9C(b))
    - Extending project-related technical assistance to semi-creditworthy WSPs above a certain value threshold on a competitive basis (Section 9C(c))
    - Extending project-related assistance to non-creditworthy and pre-creditworthy WDs, which may be with or without charge within a certain value threshold, to support projects funded by LWUA-WDF (Section 9C(d))
- Requires LWUA to review its current structure and submit a rationalized plan to the Oversight Committee within 30 days of the Order's effectivity, which the Oversight Committee will evaluate within 30 days and submit to the President for final approval (Section 10)
- Upon approval of the rationalized organization and manpower structure by the President, LWUA will be transferred to DOF, with at least three trustees being employees of the National Government and DOF being represented in the LWUA-BOT (Section 10)

Financing Policies (Part IV):
- Encourages LGUs to provide delivery of water supply and sewerage services through investments in or loans to WSPs, and holds LGUs financially and operationally responsible for WSPs within their respective jurisdictions (Section 11)
- Outlines sources of financing for the water supply and sewerage sector:
    - Creditworthy WSPs are eligible to source financing at commercial lending rates from GFIs and PFIs (Section 12a)
    - Semi-creditworthy WDs are eligible to source concessional debt financing from LWUA-WDF, as well as GFIs and PFIs when possible (Section 12b)
    - Pre-creditworthy WDs are eligible to source grants from donors and deep concessional financing from LWUA-WDF (Section 12c)
    - Non-creditworthy WDs are eligible for financing under LWUA-WDF, with LGUs encouraged to provide financial and operational support (Section 12d)
    - WSPs, including eligible WDs, can access financing from GFIs, PFIs, Municipal Development Fund Office (MDFO), and LGUs whenever possible (Section 12e)
- Allows LWUA-WDG to provide incentives for graduation, such as greater flexibility in WD operations as they graduate from one stage to the next, and requires LWUA-WDG to provide guidelines to encourage graduation, subject to approval by LWUA-BOT and submission to the Oversight Committee (Section 12)
- Clarifies that the classification of WSPs determines eligibility for various financing sources but does not guarantee actual financing from the designated source (Section 13)

Final Provisions (Part V):
- Requires the Oversight Committee to formulate the implementing rules and regulations (IRR) within 90 days of the Order's effectivity, which shall be published in accordance with the Administrative Code of 1987 and other pertinent laws (Section 14)
- Specifies that the Oversight Committee shall cease to exist three years after the approval of LWUA's rationalized organization and manpower structure by the President, with any remaining functions to be assumed by DOF (Section 15)
- Subjects any violation of the Order and its IRR to disciplinary action and other penalties as provided for in the IRR and other relevant laws and issuances (Section 16)
- Includes a severability clause, stating that if any provision is declared unconstitutional or invalid, the other provisions shall remain in full force and effect (Section 17)
- Repeals or modifies all orders, executive issuances, rules and regulations, administrative resolutions, or parts thereof, inconsistent with the provisions of this Order (Section 18)
- Specifies that the Order shall take effect upon its publication in the Official Gazette or in a newspaper of general circulation in the Philippines (Section 19)

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