Margaret M. Calderon

Willingness to pay for improved watershed management: Evidence from metro manila, Philippines

This paper discusses the results of a contingent valuation (CV) survey that estimated the value that Metro Manila residents placed on the water supply improvements that will result from better management of the Angat, Ipo, Umiray and La Mesa watersheds. The CV survey was conducted among 2,232 respondents. These people were drawn from 13 municipalities and cities in Metro Manila that draw water from the four watersheds. There are two water distributors in the area: Maynilad Water Services, Inc. and the Manila Water Company, Inc. About two thirds of the respondents were connected to either of these two water distributors. The study found that Metro Manila residents have a low awareness level about watersheds, but possess a good grasp of the role forests play in sustaining water supply. About 60 percent of the respondents revealed a willingness to pay (WTP) for improved watershed management. The mean WTP, estimated through a logit model, was found to be P29/month/ household. Factors such as bidamount, the water distributor serving the household, additional water expenses, age, income, and house ownership affected the respondents’ WTP. They were willing to pay mainly for a reliable water supply for both present and future generations, and also because they wanted the watersheds to continue providing a range of environmental services. Some respondents were not willing to pay because of income constraints and because they thought that watershed management should be the governments responsibility. The respondents who were willing to pay said that they would prefer a water user fee to be added to their monthly water bills, with the proviso that this should be used solely for the management of the four watersheds supplying water to Metro Manila.

Institutionalization of a water user fee for watershed management

Four watersheds, namely, Angat, Ipo, Umiray and La Mesa watersheds, supply the water requirements of Metro Manila. Due to the increasing demand, water scarcity is getting to be a problem among the water users, which include the households and the industries. Hence, the concern is to maintain the health of these watersheds so that they can continuously provide water to all sectors especially during the dry season. The inadequacy of budget, however, remains to be a great challenge among the managers of these watersheds. There is a need to generate funds to finance the management activities in these watersheds. The contingent valuation study reveals that the Metro Manila households are willing to pay P29/month/household and this amount could be the basis of the water user fee, which is the most appropriate economic instrument. The preferred mechanism of payment would be through the monthly water bill collected by the water distributors. A Multisectoral Council, which will be responsible for the management of the fund, is proposed.