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Philippines Export Market Plan
III. Legal and Regulatory Review

The Philippine legal system for environmental protection is fairly comprehensive. The air, water, and hazardous waste regulatory programs resemble those of the United States, and contain similar, and sometimes more stringent, ambient and point source standards. This chapter provides an overview of the basic institutional structure and regulatory framework governing environmental management, as well as recent trends in enforcement.

Institutional Structure
The Philippine Government's institutions for environmental management and protection were established in the late 1970s. Currently, the Department of Environment and Natural Resources (DENR) is the main environmental management institution in the country. It is responsible for the conservation, management, development, and proper use of the country's environmental and natural resources. The authority to exercise the mandate and functions of the department is vested in its Secretary.
Within DENR, the Environmental Management Bureau (EMB) serves as an advisory body to the Secretary of DENR and is responsible for environmental policy formulation. EMB develops and recommends environmental management and pollution control legislation and policies, and advises DENR's regional offices on their implementation. EMB also promulgates air and water quality standards, emission and effluent standards, and solid and hazardous waste management regulations.
DENR's Pollution Adjudication Board (PAB) is a quasi-judicial body charged with adjudicating cases brought by DENR's regional offices against violators of environmental regulations. PAB may assess fines and issue Cease and Desist Orders (CDOs) to polluting industries, and specify time frames for compliance with the standards violated. DENR's regional offices are responsible for implementing PAB's orders. The powers and functions of the board may be delegated to the regional offices, and the board often defers to their recommendations.
Other government agencies with environmental responsibilities include:
* Line agencies such as the Departments of Energy, Trade and Industry, Health, and Public Works and Highways; the Housing and Land Use Regulatory Board; the National Irrigation Authority; the National Water Resources Board; and the National Economic and Development Administration;
* Local government units such as the Metro Manila Development Authority; and
* Special regional development agencies such as the Laguna Lake Development Authority (LLDA), the Subic Bay Metropolitan Authority (SBMA), and the Clark Development Corporation (CDC).
Representatives of these agencies participate in the Environmental Officers Committee coordinated by EMB to ensure that their sectoral development policies and programs are consistent with the national environmental policy.
Environmental enforcement is the responsibility of the Environmental Management and Protected Areas Services divisions of DENR's regional offices. There is one regional office headquarters within each of the 14 administrative regions of the country. Each regional office is, in turn, supported by provincial and community environment and natural resources offices scattered throughout the region. The regional offices are authorized to issue permits, monitor ambient environmental quality conditions, and take appropriate enforcement actions against violators of permits and environmental standards. However, the monitoring of point source discharges is the responsibility of the enterprises themselves. The authority of the special regional development agencies (LLDA, SBMA, CDC, et al.) typically supersedes that of DENR in their areas of jurisdiction.
The Local Government Code (1991) authorizes local government units (LGUs) to enforce environmental laws and regulations, pursuant to national policies and subject to the supervision, control, and review of DENR. It also authorizes local governing councils to enact and enforce local environmental ordinances, provided these are equal to, or stricter, than the national standards. The code provides for the optional establishment of an Environment and Natural Resource Officer in all municipalities, cities, and provinces to be responsible for the development and implementation of local environmental programs and projects. Some local governments have expressed concern over the efficiency of DENR's enforcement efforts and are assuming greater responsibility with respect to industrial pollution in their territorial jurisdictions. However, LGUs are not yet universally prepared to assume management responsibility for national environmental quality programs.
Water Supply and Municipal Wastewater Treatment
The institutional framework of the Philippines' water sector is extensive and complex. The Water Code (1976) charges the National Water Resources Board (NWRB) with regulating the allocation and use of water through a water usage permit system. The board also sets tariffs for water use based on the principle of full cost recovery. NWRB is composed of the heads of the departments and other line agencies concerned with water resources.
Metro Manila is served by the Metropolitan Waterworks and Sewerage System (MWSS), which is a self-regulating public utility. The Engineering Department of MWSS establishes specifications for all materials and processes used by MWSS. The Philippine Department of Health (DOH) is responsible for ensuring that MWSS meets drinking water quality standards and that DENR enforces water quality standards on effluent discharged from MWSS facilities. MWSS is allowed to charge rates for its services as long as the utility's overall rate of return does not exceed 12 percent per annum.
The Provincial Water Utilities Act (1973) established the Local Water Utilities Administration (LWUA), which is in charge of regulating water districts in the Philippines outside Metro Manila. Water districts are local quasi-public utilities providing water supply and sanitation services, although very few are currently set up to provide sewage collection and treatment. LWUA is responsible for virtually all aspects of water district regulation: financial, operational, and functional. It may establish water quality and technological standards for local utilities. It also reviews the rates charged by water and wastewater utilities. LWUA serves the entire country from its office in Manila and maintains no regional offices. The Rural Waterworks Development Corporation provides water supply and sanitation services to the rural areas not covered by LWUA or MWSS. Also, about 1,000 LGUs operate their own water supply systems. While most of these systems are very small individually, they serve a significant number of people in both small urban and rural communities.
The Water Crisis Act of 1995 opened the way for the privatization of state-run water and wastewater utilities by authorizing the country's President to reorganize MWSS and LWUA or any of the facilities under their jurisdiction. In early 1997, water supply operations of MWSS were awarded through public bidding to two consortia: 1) Ayala Corp. (Philippines) Bechtel Enterprises (U.S.) United Utilities Inc. (U.K.) and 2) Benpres Holdings Corp. (Philippines) Lyonnaise des Eaux (France), each covering half of the municipalities in Metro Manila.
Solid Waste Management
The Local Government Code, makes the collection of municipal solid waste the responsibility of LGUs. The code tasks the LGUs to provide efficient collection and disposal systems, and to enforce the antilittering provisions of the Philippine Environment Code (see section 3.2). LGU's are encouraged to contract with private companies for solid waste management services. The Department of Interior and Local Government is tasked to provide guidance to LGU's in designing solid waste management plans.

Legal Framework
Principal Environmental Laws
The basic regulatory framework for environmental management in the Philippines was formed during the Marcos Administration (1972-86). During that time, the following Presidential Decrees (PDs) were issued:
* The Pollution Control Law (PD 984, 1976),
* The Philippine Environmental Policy (PD 1151, 1977),
* The Philippine Environment Code (PD 1152, 1977), and
* Establishing the Environmental Impact Statement (EIS) System (PD 1586, 1978).
The Aquino Administration issued Executive Order No. 192 (EO 192) in 1987 that established DENR as the primary environmental agency in the country and created the Environmental Management Bureau and the Pollution Adjudication Board, among others.
In 1987 under a new Philippine Constitution, the Philippine Congress resumed its legislative functions and passed the Toxic Substances and Hazardous and Nuclear Wastes Control Act (RA 6969, 1990), which has been the only environmental statute enacted since that year. However, as of early 1997, seven environmental bills have been filed and are currently being debated in the Philippine Congress:
* The Environment Code,
* The Healthy Air Act,
* The Clean Water Act,
* The Solid Waste Management Act,
* The Land Code,
* The Land Use Bill, and
* The Creation of the National Environmental Management Authority.
Of these, the Environment Code is the most comprehensive, covering many areas addressed by the separate air, water, and waste acts. A revision to the original Environment Code (PD 1152), this proposed code fills in the gaps of the current regulatory programs and envisions new initiatives in air and water quality management, including emissions and discharge fee programs to provide additional revenues for DENR's enforcement programs, and new standards for lead and sulfur content in fuels.
In addition to the national laws currently in force, the Philippine Congress has ratified several international environmental treaties, including:
* Montreal Protocol on Substances that Deplete the Ozone Layer;
* Basel Convention on the Control of Transboundary Movement and Disposal of Toxic and Hazardous Waste;
* UN Framework Convention on Climate Change;
* Bonn Convention on Migratory Species of Birds;
* Ramsar Convention on the Conservation of Wetlands of International Importance; and
* Convention on Biodiversity (UN).
The Philippine Congress is deliberating on two bills that will affect the environmental technologies market:
* The Civil Liability Convention and
* The International Oil Pollution Convention.
There were eight pending resolutions for ratification of the International Labor OrganizationĂs Conventions for Occupational Safety and Health in Factories and Other Workplaces.
Licensing and Permitting
The principal environmental permits required under Philippine law are the Environmental Compliance Certificate, the Authority to Construct, and the Permit to Operate. DENR has the authority to issue these permits; however, LLDA is authorized to issue Authority to Construct Permits and Permits to Operate within its jurisdiction.
The issuance of Environmental Compliance Certificates is part of the Environmental Impact Statement (EIS) system. An Authority to Construct Permit is issued to a facility or project when it has demonstrated that it: 1) will comply with applicable air and water quality standards, and 2) has complied with the conditions attached to the Environmental Compliance Certificate. Permits to Operate may be applied for upon the completion of construction and the satisfactory completion of all the conditions attached to the Authority to Construct Permits. Permits to Operate are issued for one year and are subject to renewal. Temporary Permits to Operate may also be issued if a set of compliance measures is required before a Permit to Operate is issued.
Compliance with conditions to obtain Environmental Compliance Certificates, Authority to Construct Permits, and Permits to Operate is overseen by DENR regional offices. In cases of chronic permit violations and after all other enforcement means are exhausted, PAB may issue a Cease and Desist Order (CDO) at DENR's recommendation, thereby closing the violating facility until it comes into compliance. An appeals procedure exists for a violator to obtain a temporary lifting order (lifting of the CDO) provided it submits plans for coming into compliance with the standard(s) violated, as well as a performance bond equivalent to 25 percent of the total value of the compliance investment to be made.
Beginning January 1997, the Permits to Operate for wastewater treatment facilities were replaced with a single discharge permit in the area under LLDA's jurisdiction. The discharge permit contains allowable loading limits for biological oxygen demand, as well as concentration-based limits for the other pollutants under DENR's Administrative Order 35. The discharge permit has been adopted by LLDA as the primary mechanism for collecting fees for wastewater discharges under its environmental user fee program launched in January 1997 (see section 3.3 for details). DENR plans to implement this program nationwide beginning in 1998. The new Environment Code bill currently awaiting passage contains provisions for a national discharge and emissions permit program, to replace the existing Authority to Construct Permits/Permits to Operate system.
Environmental Impact Statement System
The Environmental Impact Statement (EIS) system in the Philippines applies to activities that are part of DENR's list of environmentally critical projects or are located in designated environmentally critical areas. The EIS system serves both a planning and a regulatory purpose. As a planning tool, the EIS system affects project design so as to mitigate environmental impacts associated with construction and operation. The regulatory function is realized through the issuance of Environmental Compliance Certificates, which certify that the requirements of the EIS system have been met. Facilities that are constructed or operate without an ECC face a penalty of up to US $2,000.
A full EIS is required for environmentally critical projects, while a more simplified project description is required for environmentally critical area projects. Environmental Impact Statements for environmentally critical projects are reviewed by a Technical Review Committee comprising academics and other technical experts, and coordinated by the Environmental Management Board. Project descriptions, on the other hand, are the responsibility of DENR regional offices. Once the technical acceptability of the project is established, the local community must express its approval of the project either through endorsement by community leaders or, in cases of major projects, through a prescribed public hearing procedure.
Air Quality Regulations
The regulatory structure for the air quality sector in the Philippines includes ambient air quality standards, point source (industrial) emission standards, vehicle emission standards, and standards on fuel content.
Ambient and point source emission standards were updated in 1992 (DENR Administrative Order No. 4, Revised Air Quality Standards of 1992 (DAO 14)). DAO 14 specifies standards for 6 criteria air pollutants (as in the United States) and 11 hazardous air pollutants. In fact, these standards are as or more stringent than those in the United States. Point source standards are concentration-based and do not take into account overall pollutant loadings, resulting in ambient standards being exceeded in areas where individual sources may be in compliance.
Vehicle emissions are regulated through standards for fuels and vehicle emission standards. Standards for lead content in gasoline and sulfur content in diesel fuel are significantly less stringent than in developed countries. The existing opacity standard for vehicles is only loosely enforced. Vehicle emission standards for carbon monoxide, nitrogen oxides, and hydrocarbons are envisioned but not yet specified.
Water Quality Regulations
Water quality standards in the Philippines are based on a beneficial use classification of waters (from public water supply sources to irrigation and livestock watering sources). They are similar to those used in developed countries and represent realistic regulatory targets. However, as is the case with air quality standards, the system of monitoring ambient water quality is limited and not well integrated with the enforcement of point source effluent standards.
DENR Administrative Order No. 35, Revised Effluent Regulations of 1990 (DAO 35) prescribes effluent standards for 8 toxics and 12 other parameters, including biological oxygen demand (BOD), chemical oxygen demand (COD), pH, and color. The effluent standards are concentration-based, and dilution is commonly used as a compliance strategy. According to PD 984, maximum discharge volumes may be set on a case-by-case basis when required for the protection of public health and aquatic resources, but this provision is not widely applied.
Waste Management Regulations
The Philippine Environment Code mandates the setting of guidelines for sound, efficient, comprehensive, and effective waste management. LGUs are responsible for municipal waste management programs, including sanitary landfills and incineration and composting plants. Open dumping is not explicitly prohibited in the code, which is a major handicap of the municipal waste management program.
Because the majority of LGUs lack the technical capacity to assume their solid waste management responsibilities, the Presidential Task Force on Waste Management was created in 1987 to coordinate policies at the national level. Initially headed by the Presidential Management Staff, the task force is now coordinated by a secretariat housed within the Environmental Management Board of the Department of Environment and Natural Resources, and has the following members:
* Department of Health,
* Department of Public Works and Highways,
* National Economic and Development Authority,
* Metro Manila Development Authority,
* Development Bank of the Philippines, and
* City of Manila.
The Presidential Task Force on Waste Management recently formulated the Integrated National Solid Waste Management System Framework and the Interim Action Plan for its implementation, which aims to:
1) Ensure that the Department of Public Works and Highways' development and rehabilitation of solid waste management facilities will follow the prescribed guidelines;
2) Commence the phased closure of all open dump sites and shift to environmentally acceptable facilities (original target dates, 1994 and 1996, respectively); and
3) Operate a new Metro Manila solid waste management agency and a national solid waste management authority.6
In addition to the Framework and Interim Action Plan, the following guidelines have been completed and are available from the Secretariat of the Presidential Task Force on Waste Management:
* Guildelines for the Preparation of Solid Waste Management Criteria, Strategies, Plans and Programs
* Criteria for Selection of Potential Sanitary
* Landfill Sites
* Manual on Sanitary Landfill
* Criteria for the Initial Evaluation of Solid Waste Management Scheme Projects Proposed Under BOT Scheme
* Guidelines on the Drafting of a Comprehensive Municipal Ordinance on Solid Waste Management
The Toxic Substances and Hazardous and Nuclear Wastes Control Act of 1990 (RA 6969) and its implementing regulations (DAO 29) cover most relevant aspects of hazardous waste management. These include a list of regulated chemicals and hazardous wastes (by characteristic) and contain provisions for inventories, testing, inspection, and manifest-type requirements for the storage, transportation, treatment, and disposal of hazardous wastes. Enforcement of the national hazardous waste management program is awaiting the imple-mentation of a detailed set of guidelines completed by DENR in 1996.
Some basic provisions concerning medical waste are contained in the Code of Sanitation. However, these do not stipulate any special treatment or disposal methods for infectious wastes, which constitute a major waste management problem in urban areas throughout the country. The new Environment Code bill currently being debated in Congress contains provisions on health care and biomedical waste management that require all health care facilities to submit waste management operations plans to the Department of Health in consultation with DENR.

Status of Enforcement
The enforcement of environmental regulatory programs in the Philippines generally follows the principle of crisis management. In other words, enforcement actions are taken primarily as a response to public outcry following major accidents such as fish kills or landslides. Most agencies with enforcement responsibilities do not have the budget or manpower to institute a regular enforcement program based on regular monitoring, inspections, and sound recordkeeping. With regards to municipal environ-mental management, the national agencies recognize that most LGUs are unprepared to assume the environmental management responsibilities granted to them by the Local Government Code and other recent laws. The national agencies have thus adopted a more cooperative strategy towards LGUs, helping them to build the capacity needed to assume their responsibilities instead of regulating them with fixed time frames for compliance and the threat of penalties for nonperformance.
Despite these limitations, certain agencies have made real progress in the enforcement of pollution control laws over the last two years. Among DENR regional offices, for example, the National Capital Region has been very active in the issuance of Cease and Desist Orders for a wide range of industries (table 3).
In 1996, National Capital Region (NCR) was responsible for 39 of the 79 Cease and Desist Orders issued by the Pollutions Adjudication Board that year (figure 5). This number can be attributed, in part, to the fact that Metro Manila remains the primary hub of economic activity in the Philippines, accounting for 70 percent of all industrial establishments (1993), 48 percent of the total registered businesses (1990), and 56 percent of the country's construction industry (1993).8 NCR is also under pressure from the DENR Secretary (and sometimes Malacaűang itself) to tackle Metro Manila's most visible polluters. These include the large industrial and commercial establishments discharging untreated wastewater to the Pasig River. The end of 1996 marked the beginning of a wave of NCR enforcement activities against these violators, which include such big name corporations as the Shangri-La EDSA Plaza Hotel and Continental Milling (a division of Universal Robina Corp.).
The Laguna Lake Development Authority (LLDA), which shares responsibility for environmental management of the Laguna de Bay watershed with DENR, NCR, Region III and Region IV-A, is another example of enforcement initiative. Covering 90,000 hectares, Laguna de Bay is the second-largest fresh water body in Southeast Asia and an important potential source of drinking water for Metro Manila. The lake's watershed covers nearly 482,000 hectares and is home to about 1,600 industrial establishments. During the last decade, water quality has deteriorated significantly in certain sectors of the lake, threatening fish stocks and other resources upon which the surrounding communities critically depend.

In January 1997, LLDA launched a program of environmental user fees, in which they will collect a charge based on biological oxygen demand (BOD) loading from industrial and commercial dischargers to the lakeshed. The charge is set at a level that is projected to result in a 50 percent reduction in industrial BOD loading to the lake during the first year of the program. Initially, the program will target firms in the sectors responsible for 90 percent of the organic industrial pollutant load to the lake: food processing, beverage firms, piggeries, slaughterhouses, and textile mills. Later this year, the program will be expanded to cover major municipal and commercial dischargers.
LLDA expects to raise several hundred million pesos through the collection of the user fees. Sixty percent of the funds collected will go towards covering LLDAĂs cost to administer the program, while 20 percent will be given to LGUs (based on their contribution to enforcement) to finance wastewater collection and treatment projects, and 20 percent will go to a trust fund to assist industries and municipalities in finding technically and economically feasible compliance alternatives. The United States-Asia Environmental Partnership will support this assistance through its Clean Technology and Environmental Management Information Center in Manila.
The ability of LLDA to tap program revenues to fund monitoring and enforcement makes the program unique. The agency has already invested over 9 million pesos of its own funds to guarantee a successful launching. For the initial 120-150 firms covered, LLDA has assigned 35 inspectors to monitor the facilities four times a year. As fees are collected, LLDA will hire more staff and add more firms to the system. If the program proves successful, DENR will expand it nationwide.
Other Enforcement Initiatives of DENR
In addition to undertaking region-specific activities, DENR has launched a nationwide industrial ˘eco-rating÷ program called ECOWATCH. ECOWATCH aims to leverage public pressure on firms to encourage industry compliance with pollution control regulations. The program was inaugurated in December 1996 with the presentation of an implementation pact between the DENR and 23 industry associations to President Ramos. ECOWATCH will rate industries according to a five-color scale based on compliance performance. Those receiving a black rating will be subject to sanctions and closure, in addition to receiving the highly publicized annual Lason (poison) Award. Companies participating in the program will be tracked using a computerized database housed at the DENR headquarters (see table 4).

Table 3: Types of Firms with Cease and Desist Orders and/or Temporary Lifting Orders by the Pollution Adjudication Board in 1996

Industry Category
Number of Firms
NCR Coconut oil refining1
Cord, twine manufacture 2
Dry cleaning/steam laundry 2
Food processing 4
Glass & glass products 1
Hotel 2
Industrial gases 2
Meat processing 2
Paint & pigments 4
Paper milling, paperboard 3
Plastics, plastic products 1
Restaurant 2
Soap, detergent, consumer products 1
Soy souce manufacture 1
Sugar milling & refining 1
Textile mill 4
I Fertilizer manufacturing1
II Sugar milling & refining 1
IIIDistilling 1
Food processing 1
Metal finishing 1
Sugar milling & refining 1
IV-A Coconut processing1
Pig farm1
IV-B Mining1
V Food processing 1
Mining 1
VI Distilling1
Mining 1
Sugar milling & refining 5
Miscellaneous 2
VII Chemicals1
Food processing 3
Sugar milling & refining1
Wood furniture manufacturing1
VIII Coconut oil refining1
IX Agroprocessing 1
Fish canning1
Miscellaneous 2
X Coconut oil refining1
XI Fish canning 2
Food processing1
Wood products/processing1
CARAGA Mining 1
Source: Department of Environmental and Natural Resources, Environmental Management Board, March 1997
Table 4: Rating Scale for DENR's Industrial ECOWATCH Program

Level of Management &
Environmental Impact
RatingColor Code
Maintain & sustain the GREEN rating Excellent Gold
Use of clean technology, resource conservation, pollution prevention and waste minimization, and self-regulation beyond regulatory requirements Very GoodGreen
Effort level sufficient to comply with applicable regulations Good Blue
Not in compliance but committed to comply within agreed upon time frame In Process of Improve-
Candidate for Blue
Some effort applied but not sufficient to comply with applicable environmental
No effort to comply, deliberately resisting compliance and pollution causes extremely serious damage Very BadBlack
Source: Business and Environment Magazine, March-April 1997, p. 12.

On the air quality side, DENR and the World Bank's Metropolitan Environment Improvement Program have recently revived the Urban Air Quality Management (URBAIR) project. URBAIR will tackle air pollution in Metro Manila through:
* Improved traffic and transport demand management policies;
* Promotion of fuel switching and improved fuel quality;
* Technical assistance for the mobilization of cleaner engines and vehicles;
* Private sector partnerships in air quality monitoring; and
* Strengthened enforcement of source and mobile air quality standards.
In addition to these special programs, the relative proportion of DENR's general budget allocated to pollution control has risen significantly over the past few years, from 1.5 percent in 1990 to 6 percent in 1995. Although the absolute percentage remains low, the increase is indicative of the higher priority that pollution control has been accorded in recent years. Likewise, it is significant that the budget for pollution control is increasing steadily at a time when the total DENR budget (including the forestry, mining, and protected
areas divisions) has remained stagnant or declined (see figure 6).

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