The Philippine National Conference on Environment & Natural Resources Financing was held at the Crowne Plaza Hotel in Quezon City from Sept. 23-24, 2009. The conference was hosted by the United Stated Agency for International Development (USAID) thru its Philippine Environmental Governance Project (EcoGov).
You will find below the PowerPoint presentations used in the seminar. I wrote a short overview of the discussion per topic, but as you will find out, towards the end, it becomes quite a drag so I'm leaving it up to you to read the presentations.
The seminar was indeed very informative. Though I'm already familiar with some market-based instruments for financing ENRs, its a welcome surprise to learn about LGUCC the MDFO and other local financing institutions with an environmentalist agenda. But for some who are hoping to receive dole outs, grants and donations, it might be a bit of a let down. I think it was only NEDA who spoke about grants and it was only in the form of technical assistance. But who needs grants when it is a proven fact that ENR projects can indeed pay for itself. And I'm not just talking about monetizing environmental benefits. We should all learn about ENR projects falling under the realm of social businesses.
The seminar aimed to provide the venue for creating further awareness on ENR Financing and strengthening the ability of LGUs to generate and access financing for their ENR projects.
The seminar was pursued following the results of as survey conducted by the DENR on the level of knowledge and experience of LGUs with respect to the various mechanisms for financing ENR projects. The survey revealed that most LGUs (92% of the 107 LGUs surveyed) are heavily dependent on public sector financing (IRA, CDF, Public Bank Loan) and only a few (23%) has had access to market-based instruments which were in the form of private sector initiatives (CSR and EMS).
1 Overview - Atty Analiza Teh
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National Economic Development Agency (NEDA)
Ms. Shiela Marie Encabo, OIC-Director of the NEDA, discussed the Green Philippines Component of the Medium Term Development Plan (Forest Management, Pollution and Hazard Control, Energy Independence, Protected Area and Wildlife Management) which provides the policy framework for ENR projects in the country. She also gave an overview of different forms of Official Development Assistance (ODA) extended by bilateral and multilateral development agencies with present ties with the country. She also expounded on the existing ODA terms and conditions, and provided an inventory of available loans and grants for ENR projects.
2 NEDA - Shiela Marie Encabo
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Municipal Development Fund Office (MDFO)
Ms. Helena Habulan, Executive Director of the MDFO, introduced the Municipal Development Fund (MDF) of the Department of Finance. This is a special revolving fund exclusively created for re-lending to LGUs. She discussed different financing facilities available from the fund, which LGUs may access to finance ENR projects. Below are some examples.
- The Millennium Development Goals Fund (MDGF) is available to 4th to 6th class municipalities for financing ENR projects in line with the 7th MDG of ensuring environmental sustainability. MDGF offers 100% loan financing payable up to 15 years with 7.5% annual interest.
- The Municipal Development Fund may be availed by any LGU for infrastructure and equipment financing of environmental projects related to solid waste management, land conservation, air quality management, and water management. It offers 100% loan financing payable up to 15 years with 9% annual interest.
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Public-Private Infrastructure Advisory Facility (PPIAF)
The PPIAF is a global multi-donor technical assistance facility managed by the World Bank, which aims to develop an enabling environment for private sector participation in infrastructure development. According to its representative Hope Gerochi, the organization offers technical assistance grants averaging $210,000 per project thru its Sub-National Technical Assistance Program which aims to help Sub-Nationals (LGUs, state-owned enterprises, utilities, etc.) get access to market-based finance without sovereign guarantees.
4 PPIAF - Hope Gerochi
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LGU Guarantee Corporation (LGUGC)
The LGUGC is the first private guarantee corporation which offers guarantees on loans made by LGUs to private financial institutions. It was created by members of the Bankers Association of the Philippines initially because of their desire to finance rural development in the provinces and to act as the private sector counterpart of government financial institutions.
According to Lydia N. Orial, President/CEO of the LGUGC, LGUs were once regarded by private financial institutions as high-risk borrowers, mainly because of their transitory political nature. Hence, LGUs have very limited relationships with private banks. But because of the assistance of LGUGC, their credit ratings improved and have enjoyed more access to the private financial market. In fact, to date, a total of Php 4 B worth of projects of LGUs was guaranteed by the LGUGC.
LGUGC also assists LGUs in issuing municipal bonds to its constituents as a means to finance projects. Municipal bonds are any interest-bearing or discounted government security that obligates the issuer (LGU) to pay the bondholder (LGU constituents as investors) a specified sum of money, usually at specific intervals, and to repay the principal amount of the loan at maturity.
Issuance of municipal bonds encourages transparency in LGU project implementation since accounting books related to the project will necessarily be opened for investor information. It also results to the constituents having a greater stake through the bond purchase, and encourages ring fencing of an LGU enterprise or project making it possible for the LGU to determine whether or not it is earning from the enterprise or project. Ring fencing in this context is the act of financially separating an LGU enterprise or project from the normal accounting of the whole LGU to focus on the cost and revenues incurred by the LGU from the particular enterprise or project.
5 LGUCC - Lydia Orial
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ECC International
ECC International is a leading training and business consulting firm providing pragmatic yet dynamic solutions to organizations in Asia. Its mission is to help companies achieve performance excellence by unleashing their full potential through enduring, business-oriented advisory services.
According to Karthik Subburaman, representative of the ECCI Group, investors nowadays are as interested in the environmental benefits of projects as they are with the economic. Aside from the monetary returns, the following are some key considerations which enhance the attractiveness of projects to investors: 1) conservation of biodiversity; 2) sustainable management of natural resources; and 3) fundamental principles and rights of employment, health, safety and security of local communities. This is summarized as the triple bottom line of “people, planet and profit”, which captures the expanded spectrum of values and criteria of the economic, ecological and social.
Mr. Subburaman introduced the concept of Market-Based Instruments (MBIs) as policy instruments that use price or other economic variables to provide incentives for organizations to improve performance. Several MBIs are already in place that encourages environmental sustainability. Among these are carbon trading, voluntary certification systems (e.g. ISO certification for Environmental Management Systems), corporate social responsibility (CSR), green procurement policies, etc.
One project that the group undertook in the country is the GreenPhilippines Project. The project assisted 20 private companies in adopting energy efficiency measures. The results of the project were very encouraging. One company, for example, realized savings of about Php 1 M per month.
6 ECCI - Karthik Subbaraman
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Private Sector Financing
Private sector financing is another financing option explored in the seminar. Mr. Alexander Gilles, a chartered financial analyst, talked about investors in the private sector and how they make decisions. According to him, there are only four questions that need to be considered to understand how investors decide which projects to invest in:
- Is the project bankable?
- Is investment money available?
- Is the investor willing and able to invest?
- Is the proponent able to communicate?
7 Investors in the Private Sector - Alexander Gilles
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Accessing Funds from E.R. 1-94
Energy Regulations No. 1-94 (ER 1-94) is the IRR of Section 5(i) of R.A. 7638 otherwise known as the DOE Act of 1992. This mandates the provision of direct benefits to the province, city or municipality, and community that hosts energy resources and/or energy-generating facilities.
According to Mr. Leo S. Carias of the Rural Electrification Administration and Management Division of the Electric Power Industry Management Bureau of the Department of Energy, ER 1-94 requires all generation companies and/or the energy resource developers to set aside one centavo per kilowatt hour (P0.01/kWh) of their total electricity sales as financial benefits to host communities.
Three types of benefit funds compose the ER 1-94 fund. These are the Electrification Fund (EF) (50%), Development and Livelihood Fund (DLF) (25%) and Reforestation, Watershed Management, Health and/or Environment Enhancement Fund (RWMHEEF) (25%). The latter may be used to fund ENR projects.
As of July 2009, 845 projects, worth a combined value of Php 1.02 B, have been funded thru the RWMHEEF. Examples of these projects include the acquisition of waste management equipment and the construction of sanitary landfills, MRFs, and wastewater treatment facilities.
8 Accessing Funds From ER 1-94 - Leo Carias
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Opportunities from the Operations of the National Power Corporation (NPC)
To give the participants an idea on how the ER 1-94 Fund applies to a power generation company, Mr. Emmanuel Umali, manager of the Watershed Management Department of the NPC, discussed how their Reforestation, Watershed Management, Health and/or Environment Enhancement Fund (RWMHEEF) is managed and gave an overview of some of the environmental services that their company provide such as watershed rehabilitation and management and biodiversity conservation.
According to him, any proponent who wishes to implement a project which is in line with the objectives of the RWMHEEF may submit a project proposal to the corporation, provided that the project will benefit communities within the vested areas of the corporation. Proposed projects will be subject to the approval of the Energy Regulatory Commission (ERC) and the Power Sector Assets and Liabilities Management Corporation (PSALM).
The RWMHEEF accumulates from the Environment Charges that is derived as a small percentage (0.25%) of the corporation’s total electricity sales. To date, almost Php 340 M worth of ENR projects was financed thru the fund and another Php 428 M worth is pending approval.
9 Investment & Financing Mechanisms in Environment Services
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Cost Recovery Mechanism & Ring Fencing of LGU Accounts – Jagna SWM System
Jagna is a 3rd class municipality in the Province of Bohol. Hon. Municipal Councilor Senen Lloren talked about how they were able to implement an ecological SWM system thru cost recovery mechanism and ring fencing.
Cost recovery mechanisms instituted in the municipality include requiring all residents to buy official trash bags bearing the residents’ name. These bags are color-coordinated specific to a type of waste. Thru this system, it is easier to determine which households fail to segregate their wastes. In addition, it serves as a form of disincentive to households that dispose a lot of waste since they would have to purchase more bags.
They also have a centralized MRF where composting and recycling is carried-out. The unique feature which they have established to recover the cost of composting is to charge households with a “Composting Fee” of Php 5.00 for every sack of compostables collected at the household.
Apart from these other sources of cost recovery comes from the sale of compost and recyclables, garbage fees imposed to both households and businesses, and the transport permits (for dump trucks) issued by the municipality. Thru ring fencing, they were able to determine their level of cost recovery in solid waste management which stood at 68.6%.
10 Cost Recovery Mechanism and Ring Fencing LGU Accounts - S
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Payment for Ecosystem Services (PES) in Tropical Forests
Ecosystem Services (ES) refer to the benefits derived from the functioning of ecosystems. These include carbon sinks, watershed, biodiversity and eco-tourism. In the past, these benefits have not been accorded economic value as modern societies would normally do for any form of service in the market. Beneficiaries do not pay for ES and protectors/providers of ES do not get compensated.
This form of injustice is hoped to be addressed by the concept of Payment for Ecosystem Services (PES). PES establishes an economic value for ES. As for any market, the value arises from the relationship of buyers and sellers. Buyers are the beneficiaries of ES who want to secure the continued provision of ES from those who protect it (sellers). An example is a hydropower plant which benefits from watershed protection activities of upland communities. Without the PES, upland communities would have no incentive to protect watersheds which might eventually lead to a decrease in water levels in the dam, thereby compromising the operations of the plant.
Ms. Emma Abasolo from the International Fund for Agricultural Development talked about her experience with the RUPES Project (Rewarding Upland Poor for Environmental Services). They lobbied for the compensation of the upland poor in Bakun, Benguet and Kalahan, Nueva Viscaya thru the PES for the latter’s role in watershed protection and carbon sequestration.
11 Payment for Ecosystems Services in Tropical Forests - Emm
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View/Download Video here.
Funding the Management of Protected Areas: The Integrated Protected Area Fund (IPAF)
Ms. Theresa Mundita Lim talked about the IPAF, examples of its uses and the status of collection and disbursement.
12 Implementing and Accessing IPAF - Thess Blastique
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Sewerage & Wastewater Treatment Plant Project : The Puerto Galera Experience
I've never been to Puerto Galera. But I know it's one of the top Philippine tourist destinations for beach-loving creatures and diving enthusiasts. A wastewater treatment plant for LGUs dependent on marine tourism should be a no brainer. Puerto Galera shares its experience in setting-up its own thru a public-private partnership. I just wish they have also explored its CDM potential thru biogas capture to enhance the sustainability of the project.
13 Public - Private Partnership Sewerage Treatment Facilitie
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Carbon Trading and Finance
This is quite a familiar presentation. I have seen this at least three times in other seminars. Ms. Joy Goco of the DENR-EMB (the Philippine Designated National Authority for CDM) talked about Climate Change, Clean Development Mechanism and the Philippine experience in CDM.
14 Carbon Trading & Finance - Joy Goco
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Project Proposals
The second day of the seminar saw the presentation of project proposals from different LGUs. The objective is to have a panel of experts critique their proposals and give recommendations on how to better package the proposals by emphasizing the feasibility and financial viability and sustainability of the projects.
Below is the guide template in preparing the project proposals.
Template Questions for Project Proposals
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Reforestation of Critical Watershed in Sebaste, Panay, Philippines
The project proposal was presented by Hon. Mayor Jose Christopher A. Varona of Sebaste.
Reforestation of Critical Watershed in Sebaste, Panay, Philippines
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Establishing a Vermicomposting Program in Gonzaga, Cagayan, Philippines
The project proposal was presented by Mr. Joshua Wayland, a US Peace Corps Volunteer, and Bennyfred G. Sandi, MENRO of Gonzaga.
Establishing a Vermicomposting Program in Gonzaga, Cagayan
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Agro-Forestry Project in Libmanan, Camarines Sur, Philippines
Agro-Forestry Project in Libmanan, Camarines Sur, Philippines
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Rehabilitation and Protection of the River Bank of Pulupandan, Negros Occidental, Philippines
The project proposal was presented by Hon. Magdaleno M. Peña., Municipal Mayor, and Federico F. Infante Jr., Municipal Administrator.
Rehabilitation and Protection of the River Bank of Pulupandan, Negros Occidental, Philippines
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