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FY 2018 Study on Business Opportunity of High-Quality

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FY 2018 Study on Business Opportunity of High-Quality FY 2018 Study on Business Opportunity of High-quality Infrastructure to Overseas (Feasibility Study for the Sewerage System Development Project in the Philippines) Final Report February 2019 Ministy of Economy, Trade and Industry Outsourcing Contractors: Deloitte Tohmatsu Financial Advisory LLC General Incorporated Association, Global Water Recycling and Reuse System Association, Japan Original Engineering Consultants Co., Ltd. Table of Contents Introduction .............................................................................................................................. 6 (1) Background and Objective of Study ................................................................................... 6 (2) Outline of the Study ....................................................................................................... 16 1. Reexamination of Existing Pre-F/S ....................................................................................... 22 (1) Overview of Existing Pre- F/S ......................................................................................... 24 (2) Results of Existing Pre-F/S ............................................................................................. 25 (3) Results of Reexamination of Existing Pre-F/S .................................................................. 25 (4) Countermeasures ............................................................................................................ 27 (5) Other Issues ................................................................................................................... 28 2．Basic Design of Water Treatment System ............................................................................ 30 (1) Review of Water Treatment Processes .............................................................................. 30 (2) Facility Capacity to Ensure A-SRT .................................................................................. 37 (3) Facility Capacity of Final Sedimentation Tank .................................................................. 38 (4) Flocculent Equipment (for phosphorus removal) ............................................................... 39 (5) Filtration Process............................................................................................................ 41 (6) Sludge Treatment Facility ............................................................................................... 42 (7) Effective Use of Filtered Water ........................................................................................ 43 (8) Water Treatment Facility ................................................................................................. 44 (9) Dealing with Effluents Containing Heavy Metals .............................................................. 54 3．Review of Project Implementation Scheme and Project Feasibility ........................................ 57 (1) PPP Application Status in Water Supply/Sanitation Sector in the Philippines ....................... 57 (2) Feasibility When Implemented as a Public Utility ............................................................. 58 (3) Review of Project Schemes ............................................................................................. 60 (4) VfM When Project Implemented as PPP .......................................................................... 62 (5) Feasibility Evaluation When Implemented as PPP Project ................................................. 65 (6) Feasibility Evaluation When Implemented as JV with Baguio City Water District ............... 66 (7) Sharing of Feasibility Review Results with Related Organizations ..................................... 68 4．Review of Benefits to Baguio City and the Philippines ......................................................... 69 (1) Review of Benefits to Baguio City ................................................................................... 69 (2) Expected Benefits to the Philippines as a Whole ............................................................... 72 5．Review of Financing .......................................................................................................... 75 (1) Overview of NSSMP ...................................................................................................... 75 (2) Expected Fund Sources for This Project ........................................................................... 77 (3) Interview Survey of Domestic and Overseas Financial Institutions ..................................... 81 (4) Review of Financing ....................................................................................................... 83 6. Review of Future Policy ....................................................................................................... 84 (1) Sharing Results of This Feasibility Study with Local Public Institutions (Baguio City, DPWH, PPP Center)......................................................................................................................... 84 (2) Steps After This Study .................................................................................................... 85 (3) Challenges Towards Project Achievement ........................................................................ 86 (4) Future Schedule ............................................................................................................. 88 Abbreviation Table Symbol English Term A-SRT Aerobic Solids Retention Time BDO Banco Deoro BOD Biochemical Oxygen Demand BOT Build Operate Transfer BPI Bank of the Philippine Islands CAS Conventional Activated Sludge CBD Central Business District CDIA Cities Development Initiative for Asia CEPMO City Environment and Parks Management Office CLUP 2013-2023 Comprehensive Land Use Plan of Baguio City COD Chemical Oxygen Demand CODCr Chemical Oxygen Demand by potassium dichromate DBP Development Bank of the Philippines DENR Department of Environment and Natural Resource DOF Department of Finance DPS Department of Public Services DPWH Department of Public Works and Highways EIRR Economic Internal Rate of Return E/S Engineering Services FIRR Financial Internal Rate of Return NPV Net Present Value HUC Highly Urbanized Cities IRA Internal Revenue Allotment JICA Japan International Cooperation Agency JV Joint Venture Kj-N Kjeldahl Nitrogen LCC Life Cycle Cost LGU Local Government Unit LOI Letter of Intent MBBR Moving Bed Bio-film Reactor MLSS Mixed Liquor Suspended Solids NCR National Capital Region NEDA The National Economic and Development Authority NO3-N Nitrate Nitrogen NSSMP National Sewerage and Septage Management Program OD Oxidation Ditch PAC PolyAluminum Chloride PDMF Project Development and Monitoring Facility PO4-P Phosphate Phosphorus PPP Public-Private Partnership PWRF Philippine Water Revolving Fund SBR Sequence Batch Reactor SS Suspended Solid T-N Total Nitrogen T-P Total Phosphorus UN United Nations UPS Uninterruptible Power Supply USAID United States Agency for International Development VfM Value for Money WD Water District Introduction (1) Background and Objective of Study The National Sewerage and Septage Management Program (NSSMP) in the Philippines was was approved by the Administrative Board of the National Economic and Development Authority (NEDA) in 2012. It sought to promote and develop sewerage infrastructure in urban areas beyond Metro Manilla. Under this program, the central government introduced an implementation support system where 40% of total development costs for sewerage infrastructure of local government units (LGUs) would be subsidized by the national government, subject to standard appraisal procedures headed by the Department of Public Works and Highways (DPWH). The said 40% subsidy cover was eventually increased to 50% with the intent to attract more interested LGUs to apply for the support facility.. However, as of February 2019, only one local government unit has officially applied for the NSSMP support facility (Zamboanga City. In order to remedy this situation, the DPWH established a policy of striving to increase the application of this system through the expansion of local governments receiving the subsidy by means of infrastructure development. Instead of restricting the subsidy facility only to highly urbanized cities (HUCs), the facility was also made available to component cities (cities not regarded as highly urbanized) as well as first class municipalities. One of the reasons that sewerage infrastructure development has not progressed at the same pace as what the Philippines requires is due to the limited basic infrastructure in urban localities outside Metro Manila. However, the government of the Philippines is aware that delays in the provision of sewerage services would not only lead to environmental degradation, but also have an adverse impact on the tourism industry as well as agriculture, forestry, fisheries and other such industries. Improving sewerage and septage conditions in the Philippines was manifested in the much publicized closure of the popular resort island of Boracay in April 2018 by no less than President Rodrigo Duterte at a cabinet meeting. The president at that time decided to close down the island due to utter failures in sewerage management in the locality and due to sewerage management violations of several establishments in the island. Furthermore, announcements that effluent standards were not being upheld in 82 of 351 resort hotels in Bohol (another similar
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