CREATING THE RURAL WATERWORKS DEVELOPMENT CORPORATION, PRESCRIBING ITS POWERS AND ACTIVITIES, APPROPRIATING THE NECESSARY FUNDS THEREFOR, AND FOR OTHER PURPOSES

WHEREAS, it is a declared policy
of the State to provide a complete coverage of water supply services for the
whole country;

WHEREAS, the provision of water
supply in Metropolitan Manila and in the larger municipalities and cities has
been assigned to the Metropolitan Waterworks and Sewerage System (MWSS) and the
Local Water Utilities Administration (LWUA), respectively;

WHEREAS, the other areas not
covered by the MWSS and the LWUA are predominantly rural areas and the efforts
of providing the water supply needs of the residents therein are fragmented
among many different agencies; and

WHEREAS, under Presidential
Decree No. 1416, the President is empowered to undertake such organizational
and related improvements as may be appropriate in the light of changing
circumstances and new developments;

NOW, THEREFORE, I, FERDINAND E.
MARCOS, President of the Philippines, by virtue of the powers vested in me by
the Constitution and the authority vested in me by Presidential Decree No.
1416, do hereby order and ordain:

CHAPTER I

DECLARATION OF
POLICY; CREATION OF RWDC

SECTION 1. Declaration of
Policy. – It is hereby declared to be the policy of the State to pursue in
an orderly and vigorous manner the attainment of complete coverage of water
supply services for the whole country. Complete coverage cannot be achieved
unless service to the urban and densely populated areas is combined with
service to the thinly settled rural areas. The rationalization of the water
supply sector structure, shall, therefore, be pursued in accordance with the
following strategies:

a) The National Water Resources
Council shall be responsible for formulating policies and framework plans for
water supply. Consistent with these policies and framework plans, the Ministry
of Public Works shall be responsible for developing integrated national water
supply plans and programs covering all sectors and agencies concerned;

b) The MWSS shall concentrate
its operations in Metropolitan Manila and such contiguous areas as may be added
to its area of jurisdiction in accordance with the provisions of its charter;

c) The LWUA shall promote water
districts in cities and municipalities with a population of at least 20,000
each; and

d) A separate and permanent
institution shall handle the rural water supply sector and areas not serviced
by the abovementioned agencies.

To attain the objectives of
water supply service coverage of rural areas, the Government shall encourage
self-help and self-reliant water supply projects and promote the organization
of non-profit, non-stock rural waterworks associations, or cooperatives
hereinafter to be referred to as RWA’s.

The heavy financial burdens that
RWA’s must sustain to become effectively established and operationally stable
indispensably necessitate every tenable support and assistance by the National
Government, its instrumentalities and agencies to the fullest extent possible.

SEC. 2. Creation of Rural
Waterworks Development Corporation. To implement the foregoing policy,
there is hereby created a public corporation to be known as the Rural Waterworks
Development Corporation hereinafter referred to as the Corporation, which shall
be primarily responsible for the formation of RWA’s that will construct,
operate and maintain water supply systems in the rural areas. It shall
likewise, provide technical, institutional and financial assistance to the
RWA’s. The Corporation shall be directly under the Office of the President.

SEC. 3. Relationship with the
Ministry of Public Works. – The Ministry of Public Works shall serve as the
principal implementing agency of the Corporation for engineering and
construction of water supply projects.

CORPORATE POWERS

SEC. 4. General Powers. –
The Corporation shall have the following general powers:

a) To have continuous succession
under its corporate name until otherwise provided by law;

b) To adopt, amend and/or repeal
its by-laws;

c) To adopt and use a seal and
alter it at its pleasure;

d) To sue and be sued;

e) To enter into relevant
contracts of every name and nature and to execute all pertinent instruments for
their execution and implementation;

f) To borrow funds from any
source, private or public, foreign or domestic, and to issue bonds and other
evidence of indebtedness, the payment of which shall be guaranteed by the
National Government;

g) To receive, take and hold by
bequest, devise, gift, purchase or lease, either absolutely or in trust for any
of its purposes, from foreign and domestic sources, any asset, grant or
property, real or personal, subject to such limitations as are provided in
existing laws and regulations; and to convey such assets, grants or properties;
invest and reinvest the same under this provision and deal with and expand its
assets and income in such manner as will best promote its objectives;

h) To exercise the right of
eminent domain whenever the Corporation deems it necessary for the attainment
of its objectives;

i) To prescribe rules and
regulations in the conduct of its general business as well as to fix and
implement the terms and conditions of its related activities;

j) To establish, operate and
maintain branch or field offices when required by the exigencies of its
business subject to the provisions of Section 24;

k) To determine its
organizational structure and the number, positions and salaries of its
personnel; and

l) To exercise such powers and
do such things as may be necessary to carry out the business and purposes for
which the Corporation was established or which from time to time may be
declared by the Board of Directors to be necessary, useful, incidental or
auxiliary to accomplish such purposes; and generally, to exercise all powers of
a Corporation under the Corporation Law that are not inconsistent with the
provisions of this Executive Order.

SEC. 5. Specific Powers.
– The Corporation is hereby authorized and empowered to promote, encourage and
assist RWA’s to the end of making adequate water supply services available to
residents of the rural areas not served nor covered by the LWUA and the MWSS
and for this purpose it is hereby specifically authorized and directed:

a) To prepare feasibility
studies and development plans for water system development including the
procurement of necessary facilities, devises and accessory equipment;

b) To cooperate, coordinate and
exchange such information, studies and reports with and to seek the cooperation
of other agencies and instrumentalities of the National Government including
government-owned or controlled corporations, as will be most effectively
conducive to the achievement of the purposes of this Executive Order;

c) To provide managerial or
administrative expertise including the rendering of professional and training
services for the development of the staff and employees of the RWA’s;

d) To have exclusive
jurisdiction to receive from RWA’s all articles of incorporation and by-laws
and amendments thereof, consolidations, merger, conversion, dissolution, annual
financial statements, changes in the location of principal offices, annual
elections and other related documents and, upon determining that such are in
conformity with this Executive Order and the pertinent provisions of related
legislation, to certify the same, to file them in its records and maintain a
registry of such filing;

e) To make loans to RWA’s for
the construction and acquisition of facilities, related properties, and
equipment for supplying water services and for the restoration, improvement or
expansion of such facilities;

f) To provide or arrange for
grants to RWA’s for point source development, under such terms and conditions
as the Board may determine;

g) To approve or disapprove any
request for permission to acquire loans from other lenders to RWA’s which at
the time are borrowers of the Corporation; and

h) To report annually to the
President of the Philippines on the status of its operations, including a
comprehensive report of loans extended, areas serviced as a result of such
loans, and other activities.

CHAPTER III

CAPITALIZATION
AND FINANCING

SEC. 6. Capitalization. –
The authorized capital stock of the Corporation is one billion pesos divided
into ten million shares with a par value of one hundred pesos per share which
shall be wholly subscribed by the National Government and shall be
appropriated, programmed and released upon consultation with the Minister of
the Budget and in accordance with Presidential Decree No. 1177.

A standing annual sum of P20
million is hereby authorized to be appropriated out of any funds in the
National Treasury not otherwise appropriated to cover grants, institutional
development, manpower developmental training and technical assistance of the
Corporation.

SEC. 7. Loan Standards. –
Only RWA’s shall be entitled to loans from the Corporation. In extending the
loans authorized under Section 5 (e) hereof, the Board is hereby authorized,
empowered and directed:

a) Prior to approving such loan
to determine that:

1) The project is financially
feasible for the purpose for which the loan is applied for;

2) Funds are or will be
imminently available for the total advancement of such loan to the borrower on
the schedule contemplated under the loan agreement;

3) The borrower is financially
capable of complying with the terms and conditions of the loan;

b) To require that the loan be
self-liquidating within the terms and conditions specified;

c) To require that the amount of
loan applied for does not exceed ninety (90) per cent of the total cost of the
project;

d) To impose reasonable interest
rates;

e) To fix schedules for
repayment; and

f) To require compliance with
the pertinent procedures, rules and regulations promulgated by the Board of
Directors of the Corporation to assure that the purposes of such loan will be
timely achieved and that the loan agreement and the provisions of this Act
shall be complied with.

SEC. 8. Enforcement Powers.
– If any RWA with an outstanding loan(s) with the Corporation shall default in
the payment of its principal and/or interest or shall fail to comply with any
of the terms and conditions of the loan agreement or any rule or regulations
promulgated in implementation of this Executive Order, the Board of Directors of
the Corporation is hereby authorized to do any or any combination of the
following:

a) Refuse approval of any new
loan to the borrower;

b) Withhold without limitation
the Corporation’s advancement, or withhold its approval for any other lender
with respect to which the Corporation has such approval power to make
advancement of any funds pursuant to any loan already made to the borrower;

c) Withhold any technical or
professional assistance being furnished or that might be furnished to the
borrower;

d) Foreclose any mortgage or
deed or trust or other security held by the Corporation on the properties of
the borrower. In this connection, the Corporate may, subject to any superior or
co-equal rights in such lien held by any other lender;

1) Bid for and purchase or
otherwise acquire such property(ies);

2) Pay the purchase price
thereof and any cost and expenses incurred in connection therewith out of the
revolving fund;

3) Accept title to such
properties in the name of the Republic; and

4) Even prior to the institution
of foreclosure proceedings, operate or lease such properties for such period
and in such manner as may be deemed necessary or advisable to protect the
investment therein, including the improvement, maintenance and rehabilitation
of facilities and systems to be foreclosed, but the Corporation shall, within
three years from acquiring such properties in foreclosure proceedings, sell the
same for such consideration as it determine most conducive to the purpose of
this Executive Order; or

e) Take any other remedial
measures which the loan agreement may provide.

In addition to the foregoing,
the Corporation may petition any court having jurisdiction for such purpose or
any administrative agency possessing regulatory powers for such purpose to
issue such order and afford such lawful relief as may be necessary.

SEC. 9. General Conditions of
Loans. – All loans extended by the Corporation shall be subject to the
following general conditions:

a) No borrower shall, without
the prior approval of the Board and of any other lender holding and sharing a
lien on such borrower’s properties, sell or dispose of the whole or any part of
the property, rights, franchise, permits or any other assets acquired and/or
mortgaged pursuant to the provisions of this Executive Order until all the
outstanding indebtedness including interest thereon to the Corporation and any
other such lender shall have been fully paid; Provided, That the
Corporation may be appropriate rule or regulation grant general permission to
borrowers to dispose of incidental real and/or personal properties, rights,
franchise, permits or other assets no longer deemed necessary or useful in
conducting the borrower’s operation.

b) No association with an
outstanding loan with the Corporation shall borrow money from any source
without the prior written approval of the Corporation; Provided, That the Board
of Directors of the Corporation may, by appropriate rules or regulations, grant
general permission to such associations to secure short term loans not
requiring the encumbering of their real properties or a substantial portion of
other properties or assets.

The foregoing conditions shall
be included by reference or incorporation in all loans approved by the
Corporation.

SEC. 10. Foreign/Local Loans.
– With the prior approval of the President, upon recommendation of the Minister
of Finance, the Corporation may borrow from local or foreign private or public
institutions such amount as may from time to time be required by its operations
or to issue bonds and other evidences of indebtedness. Notwithstanding the
provisions of any law to the contrary, the Central Bank is hereby authorized to
extend loans and advances to the Corporation, subject to such terms and
conditions as may be prescribed by the Monetary Board. The bonds, promissory
notes and other debt instruments shall be at such interest rates, maturities
and other terms and conditions as the Corporation may determine and shall be
secured by the assets of the Corporation. Such debt instruments shall be fully
exempt both as to principal and interest, from any and all taxes imposed by the
government or any of its branches. They shall be fully negotiable and
unconditionally guaranteed by the National Government. No part of the proceeds
of the loans provided in this Section shall be used for the operation of the
Corporation.

SEC. 11. Sinking Fund. –
A sinking fund shall be established for the payment of the Corporation’s bonds
in such manner that the total contribution thereto accrued at such rate of
interest as may be determined by the Minister of Finance in consultation with
the Monetary Board shall be sufficient to redeem the bonds at maturity. Said
fund shall be under the custody of the Central Bank which shall invest the
same, subject to the approval of the Monetary Board, provided that the proceeds
thereof shall accrue to the Corporation.

A standing annual appropriation
is hereby made out of any general funds in the National Treasury in such amount
as may be necessary to provide for the sinking fund created herein and for the
interest on bonds which may be issued by the Corporation by virtue hereof.

SEC. 12. Earnings of the
Corporation. – Earnings which may be realized from the operations of the
Corporation shall accrue to and be automatically appropriated as part of the
corporate earnings of the Corporation, any provision of law to the contrary
notwithstanding.

SEC. 13. Expenditures and
Disbursements. – The Corporation, the Commission on Audit, and the Ministry
of the Budget shall adopt special procedures on expenditures and disbursements
of the Corporation, which procedures shall be most responsive to the needs and
operation of the Corporation.

SEC. 14. Auditor. – The
Commission on Audit shall appoint, a representative who shall be the auditor of
the Corporation.

CHAPTER IV

MANAGEMENT AND
PERSONNEL

SEC. 15. Board of Directors.
– All powers of the Corporation shall be vested in and exercised by the Board
of Directors hereinafter referred to as the Board, which shall be composed of
the Minister of Human Settlement as Chairman and as members, the Minister of
Public Works, the Minister of Local Government and Community Development, the
Minister of Health, the Executive Director of the National Water Resources
Council, the General Manager of the Local Water Utilities Administration and
the General Manager of the Corporation.

The General Manager shall be the
Vice-Chairman of the Board. In the absence of the Chairman, he shall act as
Chairman.

SEC. 16. Vacancies. –
Board vacancies may be temporarily filled by appointment by the President from
senior responsible officials of the Ministries/agencies concerned.

SEC. 17. Meetings, Per Diems,
Allowances. – The Board shall meet regularly at least twice a month. Upon
call of the Chairman, special meetings of the Board shall be held as often as
exigencies demand.

The Chairman and Members of the
Board shall be entitled to a per diem per actual meeting attended at such
amount as may be fixed by the Board but not exceed P1,500 a month.

The Board may provide for
travelling and representation allowances for the Chairman and members of the
Board in such amount as it may determine.

SEC. 18. Notice. – Notice
of meetings shall be served on Board Members either personally or by mail at
least twenty-four (24) hours prior to the date of the meeting.

SEC. 19. Quorum. – The
presence of at least four (4) members shall constitute a quorum to do business.
Unless otherwise provided by law, the affirmative vote of the majority of the
quorum shall be sufficient for the approval of any resolution, decision or order.

SEC. 20. Powers and Duties of
the Board. – The Board shall have the following powers and duties:

a) To formulate and adopt
policies and plans for the management, operation and conduct of the affairs of
the Corporation;

b) To implement the provisions
of this Executive Order and for this purpose to formulate and promulgate rules
and regulations;

c) To adopt or amend the annual
budget of the Corporation;

d) To approve the organizational
structure of the Corporation its staffing pattern and to determine the powers,
duties, and salaries of its personnel;

e) To determine the powers and
duties of duly designated personnel from other government agencies called upon
to assist the Corporation in the exercise of its powers and to grant honoraria
and/or allowance to such personnel;

f) To exercise all the general
and specific powers of the Corporation unless otherwise provided in this
Executive Order; and

g) To delegate any of its powers
to a duly designated representative.

SEC. 21. Secretary of the
Board. – The Corporate Legal Counsel shall act as the Secretary of the
Board and shall have such additional duties and functions as the Board may
determine.

SEC. 22. General Manager.
– The management of the Corporation shall be vested in the General Manager who
shall be a person of known integrity, competence and experience in technical
and executive fields related to the objectives of this Executive Order. He
shall be appointed by the President of the Philippines.

SEC. 23. Powers and Duties of
the General Manager. – The powers and duties of the General Manager shall
be as follows:

a) To execute, administer and
implement policies, measures, rules and regulations promulgated by the Board;

b) To direct and supervise the
operation and general administration of the Corporation;

c) To represent the Corporation
in all its dealings;

d) To pass upon and approve the
corporate papers submitted under Section 5 (d) hereof;

e) Subject to the guidelines
established by the Board, to appoint and fix the number and compensation of
subordinate officials and employees of the Corporation; and

f) To exercise such other powers
and duties as may be provided in the By-Laws or delegated by the Board.

SEC. 24. Organization and
Personnel. – The Board shall create such departments, divisions, sections,
units and positions as may be conducive to the attainment of the objectives of
this Executive Order and shall define their functions. Additional personnel may
be hired on contract basis as the exigencies of the services may require. The
Corporation shall not establish its own regional and local organizations
staffed with personnel of the Corporation but shall instead make full use of
existing regional, provincial and/or local organizations of the Ministry of
Public Works, the Ministry of Local Government and Community Development, the
National Electrification Administration and such other government agencies as
the Board may designate, provide that the supervision and control of such
functions and responsibilities as may be delegated to these organizations shall
remain with the Corporation.

SEC. 25. Merit System. –
All officials and employees shall be selected, transferred, promoted and
dismissed on the basis of merit and fitness in accordance with a comprehensive
and progressive merit system to be established by the Board in conformity with
the Civil Service Law.

SEC. 26. Positions and
Compensations. – The positions and compensations of the officers and
employees of the Corporation shall be in line with those of comparable
positions in government corporations under the infrastructure and utilities
sector.

SEC. 27. Conflict of Interest.
– No member of the Board, officer, agent or employee of the Corporation shall
in any manner directly or indirectly participate in the determination of any
question affecting any entity in which he or any of his relatives within the
third degree of consanguinity or affinity is directly or indirectly interested
nor shall such member, officer, agent or employee become the guarantor or
surety of any loans extended by the Corporation.

CHAPTER V

RURAL WATERWORKS
ASSOCIATION

SEC. 28. Organization. –
Cooperative, non-profit, non-stock associations to be known as Rural Waterworks
Association (RWA) may be organized for the purpose of supplying water services
in the rural areas.

SEC. 29. Powers and Functions.
– Rural Waterworks Association, shall be vested with all the powers and
functions provided for non-profit, non-stock corporations and cooperatives
under the Corporation Law and other related laws, rules and regulations and
such other powers and functions as may be provided in their Articles of
Incorporation and By-Laws as approved by the Corporation.

SEC. 30. Registration. –
Any provision of law to the contrary notwithstanding RWA’s organized under this
Executive Order shall be under the exclusive jurisdiction of the Corporation.
Articles of Incorporations and other corporate papers enumerated in Section 5
(d) herein shall be in effect on the date of the issuance of the certification
by the Corporation that the same conform to the requirements of this Executive
Order.

RWA’s and the like already
existing at the time of the effectivity of this Executive Order shall register
with the Corporation to be entitled to the benefits extended by the Corporation
to RWA’s and be endowed with the powers, rights, and privileges accorded by
this Executive Order to regular RWA’s.

SEC. 31. Rules and
Regulations. – The Corporation shall promulgate rules and regulations
governing the registration of RWA’s their management, operation and resolution
of conflicts fifteen (15) days after publication in the Official Gazette.

SEC. 32. Conflicts Between
RWA’s. – In case of conflict between two or more RWA’s the Corporation shall
have the jurisdiction to settle such conflicts subject to such rules and
regulations as the Board may promulgate.

CHAPTER VI

FRANCHISE

SEC. 33. Applicability. –
This Chapter shall apply only to franchise to supply water in areas outside the
coverage of the LWUA and the MWSS, with any question of jurisdiction to be
settled by the National Water Resources Council in case of dispute.

SEC. 34. Areas Within LWUA or
MWSS Coverage. — Areas within a water district or falling within the
coverage of the LWUA or the MWSS may avail themselves of the benefits under
this Executive Order; Provided, That a written waiver shall first be secured
from the LWUA or the MWSS, as the case may be; and Provided, further,
That for purposes of this Executive Order, the MWSS shall have jurisdiction
over water supply provisions in Metropolitan Manila; and the LWUA in larger municipalities
and cities as well as in areas having a population of at least 20,000.

The RWDC shall have jurisdiction
over areas with a population of less than 20,000. The identification of the
areas of jurisdiction of the LWUA and the RWDC shall be done by mutual
agreement. However, notwithstanding the provisions of this Section, they may,
by mutual arrangement allow the entry of one into the territory of the other
for purposes of pursuing their objectives.

SEC. 35. Franchising Power.
– The power to grant and thereafter to repeal or alter franchises to supply
water is hereby vested exclusively in the Corporation; Provided, That
this Section shall not invalidate any franchise heretofore lawfully granted.
The Corporation is hereby authorized to notify and require every person holding
a water franchise to report to its, within 120 days after such notice, an
accurate description of the area encompassed, the number of households wherein
serviced, the date the franchise was granted and such other information the Corporation
may require.

SEC. 36. Authority to Grant
Certificates of Public Convenience (CPC) and/or Certificate of Public
Convenience and Necessity (CPCN). – Notwithstanding any provision of law to
the contrary, the Corporation shall have the authority to grant Certificates of
Public Convenience (CPC) or Certificates of Public Convenience and Necessity
(CPCN), as the case may be, to persons or entities other than RWA’s that with
to operate and maintain waterworks systems in areas within the territorial jurisdiction
of the Corporation.

SEC. 37. Preference to RWA’s.
– Whenever two or more public service entities have competing interests with
respect to the granting, repeal, alteration or conditioning of the same water
franchise and one is a RWA duly organized under Chapter V herein, the
Corporation shall accord preference to the latter over any other type of public
service entity, unless the other one type of public service entity will, as
found by the Corporation, result to the immediate furnishing of water supply
service to (1) a greater number of households, and (2) over a larger geographic
area, on the comparative basis of same or lower rates and charges.

SEC. 38. Compliance with
Presidential Decree No. 1067. – Any form of authorization granted under the
provisions of these Chapter shall not exempt its holder from the provisions of
Presidential Decree No. 1067, otherwise known as the Philippine Water Code, on
water permits and registration.

SEC. 39. Furnishing Service
Without a Valid CPC , CPCN or Franchise Prohibited. – No person or entity
shall extend and charge for water supply service within any area for which such
person or entity has not been granted a valid franchise, CPC, CPCN, or after
such franchise, CPC, CPCN has been cancelled or altered so as to prohibit
service therein.

CHAPTER VII

FINAL PROVISIONS

SEC. 40. Existing Agencies.
– The Task Force on Rural Water Supply of the National Water Resources Council
is hereby abolished and its personnel shall constitute the nucleus of the
Corporation. All other agencies of the government may undertake projects on
rural water supply provided they are in accordance with the policies and
guidelines of the Corporation.

SEC. 41. Separability of
Provisions. – If any provision of this Executive Order or the application of
such provision to any person or circumstances is declared invalid, the
remainder of the Executive Order or the application of such provision to other
persons or circumstances shall not be affected by such declaration.

SEC. 42. Repealing Clause.
– All laws, decrees, executive orders, rules and regulations, inconsistent
herewith are hereby repealed or modified accordingly.

SEC. 43. Effectivity. –
This Executive Order shall take effect immediately.

DONE in the City of Manila, this
12th day of January, in the year of Our Lord, Nineteen Hundred and Eighty.

By the President:

(SGD.) JACOBO C. CLAVE
Presidential Executive Assistant