Discussion Paper

SWM Privatization in the Philippines and its effect on micro- and small enterprises

Introduction

No doubt, private companies whose expertise lie in SWM have so much to offer.  Private SWM firms can provide services in master planning, solid waste characterization, environmental impact assessment, detailed engineering design, to constructions and the operation and management of SWM facilities.

It seems on the surface, SWM issues are mainly technical in nature.  But social scientists will argue that there is a social side to SWM.  In fact, all developmental and environmental concerns, including SWM, have social, political and economic ramification.  Otherwise, they have no meaning at all.

This paper focuses on the two trends in privatization of SWM and their impact on a specific sector, the micro- and small enterprises or sometimes called the informal sector.  This sector refers to the junkdealers, the itinerant waste buyer and waste pickers.
 

Privatization trend # 1

In recent years, many foreign companies have visited the Philippines to promote their brand or method of municipal solid waste management (MSWM).  Many local government officials have been approached, wined, dined and toured to foreign lands for exposure trips.  Generally having little technical knowledge on MSWM, these local officials become vulnerable to the marketing strategies of these companies tending to believe there are cheap quick-fix solutions to SWM.  Oftentimes, LGUs are made to believe that under a BOT scheme, the LGU will have nothing to spend for, and the private companies will take care of everything.  The waste-to-energy plant designs are being promoted aggressively.
 

The Metro Manila Garbage Debacle In the first month of 1999, a garbage drama occurred near the San Mateo landfill site where Metro Manila throws 60 % of its more than 5,000 tons of daily solid waste.  For almost a week, residents of the host community and their local officials barricaded the road leading to the landfill in opposition to its continued operation.  The host municipality, located just outside Metro Manila's eastern border, has a lot to complain about regarding the operation and maintenance of the final disposal site.  The landfill started operation in 1991.  It was supposed to have been a 'sanitary landfill' (SLF), but due to technical deficiencies in construction and management, it  became what may be termed as 'controlled' landfill.  The nearby residents have been complaining about everything there is to complain about: obnoxious odor, abundance of vectors like rats and flies, contamination of surface and underground water, the aggravation of traffic and increase in vehicular accidents involving dump trucks.  There are no secondary sorting and recovery of recyclables done in the landfill before final disposal.  If only these were allowed in a orderly and hygienic manner using manual labor, this would have rendered the landfill economically beneficial to the residents.  This is unlike the Payatas open dump site located in Quezon City which has received numerous but less publicized complaints in spite the fact that its operation and maintenance history are worst than that of San Meteo.  It lies beside the La Mesa water reservoir, the main source of drinking water for Metro Manila, and is a stone's throw away from the Batasan, the Congressional legislature building of the House of Representatives.  About 2,000 families in Payatas derive their livelihood through waste picking, albeit unsanitary and unhealthy. This drama highlights the crisis situation existing in Metro Manila today which used to have four main disposal sites.  The famous Smokey Mountain closed down some four years ago.  The Carmona landfill, located in Cavite Province, was closed last March of 1998.  What are left are San Mateo and Payatas, the latter was supposed to have been closed at the end of 1998.  San Mateo landfill has been put on a six-month countdown for final shut down.  Following the 'NIMBY' syndrome, the municipalities of Carmona and San Mateo have finally refused to accept MM garbage.  In a very short time, Metro Manila will have no more place to throw its garbage. Being the primate metropolis in the country, all eyes are focused on Metro Manila.  Other local governments within the country have become anxious of what to do about their SWM in order to avoid the Metro Manila garbage debacle.

About two years ago, a national government agency was reported to have awarded to a private company the job of constructing a huge incinerator plant for Metro Manila under the BOT scheme.  The firm would invest billions of dollars for the construction of the plant with state-of-the-art emission control devices, provided that the Manila Metropolitan Development Authority would guarantee delivery of at least 3,000 tons of garbage daily for burning.  Great!  This could solve the disposal problem of more than half of Metro Manila garbage.  However, the costs involved was too high.  Metro Manila would have to pay a minimum of US$177,000 a day to burn 3,000 tons or US$59.00/ton.  Too expensive for local governments of a developing country.  Moreover, other issues were raised by vigilant environmental NGOs as to the dangers of harmful emissions containing cancer-causing dioxins, and the difficulty of handling and disposing toxic ashes and other residues.  It is like solving a problem by creating another one, according to some opposition.  Unable to secure an endorsement from the host community, the project was shelved unceremoniously.

In Quezon City, the Mayor is currently considering the services of a foreign company that proposes to treat 2,000 tons of garbage a day through pyrolytic gasification.  The cost per ton is US$12.00.  Some critics warn that this method has been tested only for low volume and homogeneous waste.  Its application to municipal solid waste (MSW) is therefore still in question.  Again, the problem of dioxin emission is also being raised.

In Batangas province, a public-private partnership on SWM is in the offing.  The plan is to select a strategic private sector partner and create a Project Operating Company which shall design, build, finance, operate and maintain the facility.  The Company may also be in-charge of collection and transport.  The major criteria in the selection of a private partner are its track record, financial capability and SWM vision for the province.

Since big capital investments are involved, the main consideration of the private companies is therefore sustainable economic rates of return.  Other major concerns are efficient collection, transport and disposal of garbage.  This has many implications on the role of micro- and small enterprises which will be discussed later.

Privatization trend # 2

This trend is spearheaded by the program called SWEEP, acronym for Solid Waste Ecological Enhancement Project.  This is an initiative of the national government through the Department of Environment and Natural Resource (DENR) and supported by the World Bank.  The Bank provides or facilitates grant money for the environmental impact assessments and the financial feasibility studies.

Through the professional services of private companies, highly urbanized LGUs will be assisted in the design, construction, operation and management of their sanitary landfills while phasing out their old open dumpsites.  SWEEP has selected five LGUs and one LGU cluster as pilot sites to serve as models for other LGUs to follow.  They are the cities/municipalities of Iloilo, Tacloban, Naga, San Fernando, and Malay.  The LGU cluster involves the City of Dumaguete and three other neighboring municipalities.

As its name suggests, the vision of the Project is in line with Ecological Waste Management (EWM).  This means that the principles of waste minimization and recovery are integral to the project.  It will involve separation-at-source, recycling, reuse and composting as the primary methods of handling and treating waste.  The secondary methods are incineration (or other special means) to treat hazardous waste and the sanitary landfill as final disposal of residual waste.

In terms of priorities, SWEEP is mindful of 1) proper site selection of the SLF to minimize environmental impact, 2) extension of collection services to unserved or under-served areas, 3) micro enterprise development (referring to mainly, but not limited, to junkdealers and itinerant waste buyers), 4) information, education, and communication campaigns, and 5) the full compensation or rehabilitation of project affected persons/families (PAP/PAF).  The PAP/PAFs are the waste picker who will lose their livelihood upon closure of the dumpsite, and the landowners, residents and tenants who will be displaced from the site of the SLF.

In terms of funding source, the World Bank has opened a loan facility for this program.  The LGUs can apply for long term loans with three year grace period for the detailed design and construction of the SLF.  The World Bank will also identify and tap grant funds for social and ecological support programs.

At this point, it is important to reiterate that under SWEEP, the basic concept design of the SLF is guided by the ecological waste management approach.  This means that the SLF will have waste recovery, composting and recycling components integral to its design and not just a land filling area. As such, further detailed engineering design will follow this basic concept design.  In contrast therefore with the first type of privatization, LGUs under the SWEEP will tap private companies to do all the technical, engineering and managerial tasks but with a clear view of how things will materialize using the SWEEP vision of ecological waste management.
 

Discussion

In Trend # 1, the private contractors or partners have more leeway in terms of the mode of collection, transport, treatment and disposal of garbage.  As business enterprises, the primary motivation is towards profit rather than service and ecological consideration.  This is not to say that the these firms have no service or ecological orientation.  The fact is they do.  There is also nothing wrong in doing business for profit as long the people and environment are not adversely affected.

It is likely that the revenue stream will come from the volume of solid waste collected, transported, treated and disposed of.  The more garbage burned or disposed of in the landfill, the more tipping fees collected.  The need for maximum and efficient collection is therefore evident.  The private contractors will even have an interest in the recovery of recyclables since this will increase their revenues.  This could lead to the marginalization or loss of livelihood for those who depend on small scale waste buying and selling, i.e., the itinerant waste buyers and the junkshop operators.

In Trend # 2, the LGU is the project holder. The LGU bears the cost of loan from the World Bank. As such, its primary financial objective is to make the most out of the expensive infrastructure like the SLF.  Finding a new site in the future will be harder and much more expensive.  Therefore, there is the inherent desire or motivation to prolong the economic life of the SLF as long as possible.  This can only be achieved through waste minimization and recovery.

Being the project holder, the LGU retains much of the decision and policy making powers on how to conduct SWM.  The primary motive is proper SWM service to the community, clean surroundings and better environment.  Given the EWM approach, the LGU will promote and legislate waste minimization and recovery. Under the guidance of the DENR and the close monitoring of the World Bank, the LGU will tap the private sector to implement its SWM program given all its integral components on extension of collection services to unserved or under-served areas, micro enterprise development, information, education, and communication campaigns, and the full compensation or rehabilitation of project affected persons/families (PAP/PAF).  Among others, the role of the itinerant waste buyers (IWBs) and the junkdealers and small recyclers will be safeguarded and expanded.  Under the Social and Ecological Support Program of SWEEP, the former waste pickers, IWBs, junkdealers, people's organizations and NGOs are encouraged to organize cooperatives to engage in small scale collection in highly dense communities, street sweeping, sorting, recycling and composting.

This is social integration or the formalization of the informal sector in MSWM.  This has not been done anywhere in the country.  SWEEP is trying to show the way through its six pilot projects.

Role of the Local Government

In Trend # 1, the LGUs can also include recycling and composting targets of so much percentage of waste generated.  MMDA plans to increase the waste recovery rate for recycling from 6 percent to 10 percent.  Moreover, MMDA is targeting 50 percent of wet market waste for composting.  The Batangas Province SWM project aspires to recovery 25 percent of waste for recycling.

These are decent targets for waste recovery.  Surely these targets are achievable if the project proponents set their hearts and minds seriously into working these out.  Unfortunately, it remains to be seen whether they are serious or not.  And assuming they are serious, the next question is who will run or benefit from the waste recovery, recycling and composting activities.  Most probably, it will be the private partners.

The main reason for the skepticism is the lack of an overriding framework of EWM or something similar to EWM on the part of the LGUs.  The existence of SWM framework or the lack of it on the part of the LGUs is therefore crucial.  With or without private partners, the LGUs must have a SWM framework crucial to an integrated and sustainable waste management (ISWM).  It is the LGU that must guide, monitor and evaluate the performance of the private partners whenever or however they are hired.  They must never abdicate these roles.  The private partners must plan, design and implement SWM projects in accordance with certain parameters set by the integrated approach.  Fortunately, part of the national strategy proposed under SWEEP is that any SWM system from now on should be comprehensive and integrated.  This strategy was approved by the national government middle of last year.  The LGUs need to internalize this strategy yet.

Role of the Informal Sector

One essential parameter LGUs must adopt has to do with the recognition of the role of the informal sector in MSWM.  This sector has been largely ignored in the past, and once upon a time, even threatened.  In the early 1970's, the government established a parallel system of recovering recyclables under the Cash-for-Trash Project.  It failed because it could not compete with the existing informal sector.  Another initiative that failed to recognize the role of the junkshop system is the Paper Exchange Project of the Makati Business Club (MBC).  In 1993, the MBC had an idea to segregate the paper waste of the member firms for collection by a paper mill for recycling.  The project worked for two year.  Then collection problems emerged.  Because of the heavy traffic volume in the Makati area, transport and maintenance cost of the collection vehicle increased and collection schedules became erratic.  Eventually, the project was suspended.  The existing informal sector could have easily provided the primary collection service needed by the project had it been included in the plan.

The informal sector has a function in MSWM and it has to be recognized.  This sector, aside from the traditional role of small scale waste buying and selling, it can also perform door-to-door collection and street sweeping in highly populated areas were road networks and pathways are not suitable to regular dump trucks.  The informal sector has the potential to provide alternative services more efficiently and less costly.  In the end, the LGUs and the private partners can also benefit from reduced operational costs from working together in synergy with this sector.

Postscript on sustainable development and SWM

The prevailing concept of SWM common among most people is simply the collection and disposal of garbage.  For example, not many people appreciate the nutrient cycle which flows from the agricultural areas to the urban areas.  Urban dwellers, who consume most of the food produced in the rural areas, need to complete the nutrient cycle by returning the organic waste to the rural areas.  By doing so, it will contribute to a certain extent towards ecological balance.  Moreover, solid waste that will go to the SLF will be reduced by 30 to 50 percent

The EWM approach is one attempt towards sustainable development.  A recent program of the UN Habitat is called the Sustainable Cities Program ((SCP).  Urban environmental issues, like human settlement, health, air pollution, solid waste management, water supply and sanitation, are its primary concerns.  Equally important is the process used by SCP.  Called the Environmental Planning and Management approach, it promotes consensus and alliances among the stakeholders.  Fortunately, the program has reached Philippine soil with the inclusion of three pilot municipalities to the program.  Hopefully, together with SWEEP-EWM, this program will strengthen the push towards sustainable development in SWM in the Philippines. 

Author
Dan Lapid
CENTER FOR ADVANCED PHILIPPINES STUDIES
EMail: danlapid@mnl.sequel.net