FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
Introduced by Senator Loren Legarda 
EXPLANATORY NOTE 
Presidential Decree 198 recognized the role of an effective system of local 
utilities, such as domestic water systems, to the orderly and well-balanced growth of 
urban areas. This law provides that local water utilities, which should be locally- 
controlled and managed, must also be supported on a national level in the area of 
technical advisory services and financing to prevent deterioration in services. 
Under P.D. 198, the Local Water Utilities Administration (LWUA) was created to 
furnish technical assistance and provide a specialized lending institution with peculiar 
expertise in the financing of local water utilities. Once a water district meets the 
standards and requirements of LWUA, it shall be eligible to avail of financial assistance 
from the agency in the form of short and long term loans at concessionary rates for the 
development, improvement or expansion of its water supply systems. In addition, 
LWUA's broad spectrum of technical assistance ranges from engineering studies to 
project construction supervision and system start-up to operation and maintenance 
requiring water district management and technical personnel to undergo skills training 
to make them ready for technology transfer. 
LWUA has been able.to establish and put into operation water districts in some 
600 cities and towns out of the 1,500 that fall under its coverage and directly benefiting 
some 14 million Filipinos in the countryside. The agency was able to attain this despite 
having exhausted its authorized P2 billion capital stocks many years ago. 
However, this makes only 15% Filipinos served out of the country's projected 
2007 population of 88.7 million. With this data, 85% of the residents in the countryside 
have no access to sufficient supply of safe and potable water mainly because of local 
government units (LGUs) not initiating yet the formation of water districts in their 
respective areas. 
A World Bank study in 2004 pointed out that 58% of the Philippines' 
groundwater sampled was contaminated with coliform and requiring treatment. The 
World Health Organization (WHO), however, said that these water-borne diseases are 
preventable with the provision of safe, potable and adequate water supply and 
sanitation facilities. It is time that we save these residents from the perennial threat of 
epidemics and water-borne diseases as a result of contaminated drinking water. 
This bill seeks to increase LWUA's authorized capital and its domestic and 
foreign borrowing authority, thus amending P.D. No. 198, otherwise known as the 


Provincial Water Utilities Act of 1973, thus ensuring that LWUA continues to perform 
its functioils of promoting, developing and financing autonomous and viable water 
districts in the provinces. 
This proposal seeks to increase LWUA's authorized capital from P2.5 billion to 
P25 billion, and its domestic and foreign borrowing authority, from P1 billion and 
US$500 million, to P10 billion and US$700 million, respectively, addressing the need to 
infuse additional funding for expansion and improvement of the agency's financial and 
technical servicing. 
LWUA must be strengthened to further spread the benefits of improved water 
systems in places in dire need of the services of efficient and professionally run water 
districts. 
In view of the foregoing, the passage of this bill is earnestly sought. 
eF- 
EGARDA 
Senator 


FOURTEENTH CONGRESS OF THE ) 
REPUBLIC OF THE PHILIPPINES 
) 
First Regular Session 
. .  
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S E N A T E  
S.B. No?&,ll 
Introduced by Senator Loren Legarda 
AN ACT 
FURTHER AMENDING PRESIDENTIAL DECREE NO. 198, OTHERWISE 
KNOWN AS THE PROVINCIAL WATER UTILITIES ACT, AS AMENDED, 
PROVIDING FUNDS THEREFOR, AND FOR OTHER PURPOSES 
Be it enacted by the Senate and the House of Representatives of the Philippines in Congress 
assembled: 
SECTION 1. Section 67 of Presidential Decree 198, as amended, is hereby 
amended to read as follows: 
"SEC. 67. Capital Stock. - The authorized capital stock of the Local Water Utilities 
Administration is TWENTY-FIVE BILLION PESOS (P25,000,000,000.00) divided into 
SIXTY-TWO MILLION FIVE HUNDRED THOUSAND PESOS (P62,500,000.00) shares 
of stocks with a par value of Four hundred pesos per share which shall be subscribed by 
the National Government' and opened to subscription by private investors or 
government financial institutions." 
SECTION 2. Section 72 of Presidential Decree No. 198 shall hereby be amended 
to read as follows: 
"Sec. 72. Domestic Borrowing Authority. - The Administration shall have the 
authority to borrow money from all domestic loan sources whether government or 
private. Provided, that its loans outstanding from domestic sources at any one time shall 
not exceed TEN BILLION PESOS ($lO,OOO,OOO,OOO.OO)." 
SECTION 3. Section 73 of PresidentiaI Decree No. 198 shall be amended to read 
as follows: 
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“See. 73. Authority to’ Contvact Foreign Loan. - The Administration is hereby 
authorized to contract loans, credits, in any convertible foreign currency or capital 
goods, and to incur indebtedness from time to time with foreign governments, or any 
international financial institutions or fund sources, including supplier’s credits or 
deferred payment arrangements, the total outstanding amount of which, excluding 
interests shall not exceed SEVEN HUNDRED MILLION US Dollars (US$700,000,000.00) 
or the equivalent thereof in other currencies, on terms and conditions promulgated by 
the Secretary of Finance and the Monetary Board for the accomplishment of its 
objectives; and to enter into and execute contracts and other documents specifying such 
terms and conditions. 
The President of the Philippines, by himself or through his duly authorized 
representative, is hereby authorized to negotiate and contract with foreign governments 
or any international financial institution or fund sources in the name and on behalf of 
the Administration, one or several loans, for the purpose of implementing the 
Administration’s program for the promotion and development of local water utilities 
through the Administration’s financing or lending operations. 
The President of the Philippines, by himself or through his duly authorized 
representative, 
is hereby further authorized to guarantee, 
absolutely and 
unconditionally, as primary obligor and not as a mere surety, in the name and on behalf 
of the Republic of the Philippines, the payments of the loans, credits and indebtedness 
up to the amount herein authorized, over and above the amounts which the President 
of the Philippines pursuant to loan agreements entered into with foreign governments 
or any international financial institution or fund sources. 
The loan credits and indebtedness contracted under this section shall be in 
accord with the provisions of the Foreign Borrowing Act, as amended. 
SECTION 4. Repealing Clause. - All or any provision of the Provincial Water 
Utilities Act of 1973 which are contrary or inconsistent with any provisions hereof are 
hereby repealed or modified accordingly, 
SECTION 5. Effectivity. - This Act shall take effect after fifteen (15) days 
following its publication in two (2) newspapers of general circulation. 
Approved, 
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