Place-Based Public Policy in Southeast Asia:
Developing, Managing, and Innovating for Sustainability

The economic crisis has taken its toll on place-based programs as well. For instance, the Philippine Industrial Estates Association reports that although the government approved the development of several more industrial estates in 1998, few companies were in any financial position actually to act on their new licenses. Instead of expanding, developers and manufacturers reduced their labor forces, postponed projects, or closed down altogether. Subic Bay Freeport Zone in the Philippines reported an economic nosedive in 1997 and 1998. Subic�s Vice President Sean Chen recently reported that of thirty-three Taiwanese firms that leased land to build factories in Subic Industrial Park, only eighteen have arrived and begun building.⁶ In the same vein, only four of the twenty Japanese firms planning to build in Subic Technopark have done so. Philippine government agencies report an across-the-board budget cut by 20 percent in 1998, resulting in a decrease in labor force and other resources for regulatory monitoring and enforcement.

Laguna de Bay, also known as Laguna Lake, is the second largest freshwater lake in Southeast Asia and is located on the Philippine island of Luzon. Laguna de Bay comprises the traditional fishing grounds of the local population; provides a source of water for agricultural, commercial, and domestic use; and, until recently, has served as a waste disposal site for all these activities. Industrial development in the watershed boomed in the last twenty years, producing approximately 30 percent of the country�s total manufacturing output, providing about 7 percent of the country�s gross national product growth, and contributing 30 percent of the pollution in Laguna de Bay.⁷ Eventually, the lake and its tributaries were overwhelmed by industrial, commercial, and domestic use, resulting in massive fish kills and polluted water. The abuse has required drastic cleanup efforts and policy interventions.

The Laguna Lake Development Authority (LLDA) was created by a Republic Act in 1966 as a quasi-governmental agency, purely involved in development activities within the lake basin. Its role was amended by executive order, adding environmental protection and expanding its jurisdiction over the waters of the lake basin in 1975. LLDA�s mandate is the environmental regeneration and sustainable development and use of the waters, fisheries, and shorelands (wetlands) under its purview. LLDA�s jurisdiction includes twenty-one river tributaries of Laguna de Bay, five provinces (referred to as CALABARZON), sixty-six municipalities, and nine cities (including the capital of Manila). Within this area, LLDA has identified fifteen industrial estates with approximately 3,200 facilities, as well as about 10,000 stand-alone manufacturing facilities.

Although the Philippine Department of Environment and Natural Resources supervises LLDA, it remains an independent body through a special charter. The government owns 94 percent of it and private investors own the rest. LLDA receives no funds from the national budget. As such, it retains, invests, and uses collected fees without turning them over to the national treasury. LLDA maintains an environmental fund to help administer the system. Fee revenues are placed here to (a) subsidize owners� clean technology investments through grants or loans, (b) recover the costs of administering the system (data management, monitoring, and so on), and (c) obtain loans in the capital market to build domestic wastewater treatment plants. In 1998 alone, LLDA collected 6.7 million pesos ($174,000) through its Environmental User Fee Program.⁸

LLDA is the only development authority in the Philippines with regulatory powers over industrial estates. The Public Hearing Committee handles adjudication of environmental issues within LLDA, whereas the Pollution Adjudication Board handles the process outside of LLDA. The authority�s institutional goal is to transform itself "from a predominantly regulatory to a market- and client-driven developmental agency" through an environmental user fee program and a river rehabilitation program that partners LLDA with local governments, private organizations, and NGOs. LLDA would ultimately like to see corporations in the habit of "self-regulation," with only periodic monitoring by LLDA officials and the eventual devolution of primary environmental authority to local governments. Although a 1994 law mandated that all cities and municipalities must have an environment officer, the lack of qualified professionals and finances to hire them has prevented full implementation of this law. (Local government units do implement some of the solid waste programs.) As such, LLDA is actively promoting the development of industrial estates as manufacturing models, because they are so much easier to monitor and regulate.

Along with Malaysia, Egypt, and Jamaica, LLDA is one of a handful of bodies outside the Organization for Economic Cooperation and Development to implement an "environmental user fee" or pollution fee system. This system has demonstrated its success in giving an incentive to corporations to construct and use wastewater treatment plants at a lower cost than dumping waste into Laguna de Bay.

These user fees build onto traditional "command-and-control" regulations by providing more flexibility about how and when a user or industrial facility cleans up. Two concurrent fees are assessed at the plant level on pollution discharges based on both volume and toxicity, providing incentives both for water conservation as well as pollution abatement.⁹ The fees are raised or lowered as the volume and/or toxicity of the discharge is likewise raised or lowered. Policy analysts find the pollution fees an effective tool, because, unlike other market-based incentives such as taxes, refunds, and tradable permits, these fees directly relate to and consequently affect plant discharges at a micro level. "The fee can be designed to apply to as few or as many air and water parameters as policymakers choose, with the goal of easing in the system over time."¹⁰ LLDA has set the fees quite high, so that it costs more to pay the fine than it would be to prevent the pollution in the first place. The fees apply not just to industrial, but also fishing, commercial, agricultural, and domestic liquid wastes. Officials in LLDA have shown great flexibility on how plant managers pay the fines. "The plant owner has the option of paying the fee to the government or paying himself by investing in environmental improvements to reduce the discharge."¹¹

To date, LLDA has issued discharge permits to 386 facilities. Either the rest of the factories have not been visited by LLDA or their water quality has been below compliance levels; LLDA is holding those permits in abeyance until the facilities come into compliance. LLDA eventually hopes to monitor each facility at least once each quarter and plans to hire more than twenty engineers to bring the full complement of staff to thirty-five. When LLDA officials find flagrant violations of its environmental user fee process, they issue cease and desist orders to the facility, although the local courts often issue injunctions against the order at the behest of the manufacturers.

Today, Laguna de Bay is well on its way to environmental recovery. Results in the first year alone have shown reductions in biochemical oxygen demand (BOD) of 2 million kilograms; medium- and large-sized firms�both domestically owned and multinational corporations�have averaged 88 percent reductions. Licensed fish pens have been placed strategically around the water�s edge, and several hundred facilities are part of the monitored user fee system.

Despite the steady collection of fees from LLDA�s program and the demands placed on companies by the economic crisis, LLDA reports that investment within its jurisdiction actually increased in 1997�98, with Ford Philippines and other corporations establishing production bases in the area. On the heels of this successful implementation of the environmental user fee system, estate managers themselves have approached LLDA to help promote industrial environmental management and provide clear policy guidelines, because no specific policies exist at the national level to guide the environmental regulation of industrial estates in the Philippines. LLDA negotiated with the fifteen industrial estates under its jurisdiction to write and publish environmental policy guidelines in February 1999. The resulting guidelines are designed to accomplish five goals:

• Recognize the unique role of industrial estates and parks as LLDA�s partners in effectively implementing pollution control laws, rules, and regulations. Industrial estates and parks have a unique role in that they represent bounded areas administered by a single industrial estate manager. They are, therefore, easier for LLDA to monitor and regulate.

• Require all new industrial estates and parks to install a centralized wastewater treatment plant for all of their locators to use and require individual waste treatment installations for all existing locators in parks without a centralized plant.

• Recognize and monitor internal effluent standards for every locator within industrial parks.

• Assess environmental user fees on park management wherever central treatment facilities exist and on individual locators in parks without central treatment.

• Monitor and report protocols.

The guidelines themselves note that "Laguna de Bay Region has been the center of industrialization and urbanization, thereby prompting LLDA to become proactive in its efforts to protect and manage the resources of the region toward sustainable development."¹³ LLDA plans to sign a memorandum of agreement with each estate and then begin implementation in mid-1999.

LLDA reports that extensive public participation has been the key to the success of all its programs and projects. Because the Laguna Lake watershed transcends several political, social, and economic boundaries, it is important to involve all stakeholders in the watershed in creating a successful river rehabilitation plan; hence, LLDA has adopted the following strategies:

• "Adopt a river system," in which local government units, NGOs, and civic organizations in the area adopt a river by creating a plan for its rehabilitation.

• Creation of river councils/foundations that are composed of government units, NGOs, and industries who add to the pollution of a particular river. This program guarantees multisectoral involvement in and support of cleanup efforts.