The Clean Water Act Law of the Philippines: The Use of Incentives to Promote Investments

Date posted: 
Jan 26 2010

The Philippines is once known to be relatively abundant in water resources. However, the pressures of population growth, urbanization, and industrialization placed a toll on the resource. One of the most pressing concerns is the increased competition in the various uses of water. There is also serious concern regarding watershed degradation and unmonitored extraction of groundwater by illegal users. The Clean Water Act Law of the Philippines aims to promote and encourage the protection of the country’s water resources. To fully encourage local governments, water districts, communities, and the private sector to partake in efforts on reducing water pollution, provisions on incentives are provided for in the law.

Responsible Party: 
Compliance
I. Objectives or Impact: 

The Philippines is once known to be relatively abundant in water resources. However, the pressures of population growth, urbanization, and industrialization placed a toll on the resource. One of the most pressing concerns is the increased competition in the various uses of water. There is also serious concern regarding watershed degradation and unmonitored extraction of groundwater by illegal users. At the same time, pressing issues on water pollution is present. From a World Bank study, 90% of the sewage generated in the country is not treated. Major rivers and waterways are also confronted with pollution and degradation due to the encroachment of settlers, especially in urban centers. The Clean Water Act Law of the Philippines aims to promote and encourage the protection of the country’s water resources. To fully encourage local governments, water districts, communities, and the private sector to partake in efforts on reducing water pollution, provisions on incentives are provided for in the law.

II. Description of the Good Practice (Outputs): 

The Clean Water Act provides incentives to local government units, water districts, enterprises, private entities, and individuals to develop or undertake efforts that would result to effective water quality management and pollution abatement. Specifically, it encourages efforts on wastewater treatment, cleaner production, and adoption of technologies that minimizes waste. Incentives specifically mentioned in the law are tax and duty exemption on imported capital equipment and tax credit on domestic capital equipment.

III. Outcomes or Results: 

The guidelines and procedures on availing the incentives provided by the Clean Water Act have just been recently formulated. However, from the consultations conducted by the Department of Environment and Natural Resources (DENR) with various stakeholders (manufacturers, private sector, NGOs, and local government units), positive response on the incentives was generally elicited.

A. Policy Framework: 

An initial barrier that was encountered was the Clean Water Act’s harmonization with preceding laws on incentives and taxation. For instance, heavy discussions with respect to exemption from Value-Added Tax (VAT) occurred. Also, it was realized that other government agencies are tasked on evaluating the merits of an application for tax exemptions. In the case of the CWA, heavy coordination with other government agencies, specifically with the Bureau of Investments (BOI), was necessary. Another barrier encountered is that though the law mentions the involvement of private lending institutions, it was discovered that lending institutions do not have a regular source of funding for environment projects like waste water treatment and pollution abatement. The funds they are using for existing environment projects are dependent on support given by various international donor agencies.

B. Budgetary and Financial Requirements: 

Another input that was identified as necessary is the availability of personnel within the DENR who can assess whether an application merits the CWA incentives. Also, it was also important to have a unit or regular staff that will assess the performance (in terms of pollution control, discharge) of those who would avail of incentives.

C. Human Resources: 

A complete program on evaluation to monitoring of CWA-related investments and efforts would require funding for regular operations. It was identified that regional DENR office need to have resources in order to conduct evaluation and monitoring of those granted with CWA incentives. Also, additional staff needs to be hired in order to accommodate the administrative tasks related with accommodating applicants.

D. Material Resources: 

The additional administrative tasks related with evaluating the applications would require additional resources like vehicles for inspection and evaluation, and an information and data base system for keeping track of the performance of those granted with the incentives. At the same time, the Bureau of Investment would also require an information system that will aid whether the incentives given were really spend on CWA-related activities.

E. Institutional Support: 

Partnerships with the local government and other stakeholders (NGOs, civic groups) are required to ensure that performance actually improves due to the provision of incentives. Also, regular coordination with other agencies like the Bureau of Internal Revenue and the Department of Finance needs to be undertaken.

F. Planning, Scheduling or Sequencing of Activities: 

Typical programs that provide subsidies or incentives for environment programs have a gestation period. This provides an incentive to stakeholders to immediately implement their program their investment plans. In the case of the Clean Water Act, less than ten years is provided for the the provision of incentives.

V. Further Information: 

Bureau of Investment. www.boi.gov.ph Department of Environment and Natural Resources. www.denr.gov.ph