DOTC asked to account for P120.7B gov’t poured into MRTC

MANILA, Philippines – The Department of Transportation and Communication (DOTC) must account for the P120.7 billion the government has poured into the Metro Rail Transit Corp. (MRTC), the owners of the 25-year build-lease-transfer contract of a rapid transit line system traversing Edsa, before it demands higher fares from the public.

Bayan Muna Rep. Neri Colmenares made the demand as he claimed that the Light Rail Transit 1 and 2 (LRT) and Metro Rail Transit 3 (MRT) were generating close to P2 billion in operating revenues between them annually which would belie DOTC’s claims that these trains were operating in the red.

“Malacañang is taking the people for a ride because there is no need to increase fares. Annual MRT and LRT revenues outstrip operation expense so it is deceptive for government to insist that it is losing. MRT earned P2.2 billion in ticket sales and only spent P1.8 billion in operation expense last year. LRT earned P2.5 billion but only spent P1.03 billion for operation expense,” Colmenares said in a statement.

He said that even DOTC officials, in their testimony during the House budget hearings, were in agreement that revenues for both LRT and MRT were bigger than their operating expenses.

Colmenares said the DOTC officials admitted that the MRT was losing money because the revenues were used to pay income taxes of concessionaires and their guaranteed loans.

“I hope that the Supreme Court would immediately issue a TRO to derail the fare hike and stop this injustice dead on its tracks. The fare hike is beyond doubt unjustifiable because up till now the DOTC has yet to account for the more than P120.7 billion it has spent on the MRT for the pass 10 years. Worse, with all the funds spent, the MRT service is very dismal and still deteriorating,” said Colmenares.

Colmenares said the government has pumped in P120.7 billion into MRT in the last 10 years alone (the government had a five-year grace period) or more than four times its original project cost of P28 billion in 1999. For P120.7 billion, the government could build two more MRTs at current prices. Colmenares said the original private owners of MRT pumped in only P7 billion with the balance of P21 billion borrowed from foreign banks.

The project started in 1995 during the Ramos administration with a group of investors led by the Fil-Estate group of Robert John Sobrepeña. It was completed in July 2000 during the Estrada administration. The project was valued at $675.5 million. From 1995 to 1998, the peso exchange rate fell from an average of 25.71 to the dollar in 1996 to 40.90 to the dollar in 1998.

In a radio interview, Transportation and Communications Secretary Joseph E.A. Abaya explained that any savings from the fare hike would be used to reduce the government’s P600 million monthly payment to MRTC as part of its BLT contract in 1999.

This is unlike the LRT 1 and 2 system where all savings from the fare hike would go to the administrator to spend for operations, maintenance and other capital expenses.

This was the reason, Abaya said, that the government was pushing to buy out the MRTC-MRTH from MRT and pursue the arbitration case filed back in 2009, which would allow the government to exercise its equity value buyout (Evbo) exit clause in the BLT contract.

Abaya said that if the government took charge of MRT’s finance, it could immediately slash its borrowing costs to three or four percent from the 15 percent embedded in the contract. Abaya said MRTC’s refusal to hand over control to the government was the reason why it was blocking government’s plan to bring in 48 new coaches for MRT. He said the government has rejected offers from the private sector to take over the MRT because while it would relieve the government of any expenses, it would mean passing the full cost to commuters. “I’m not saying that all businessmen will get your whole arm after giving them your hand,” said Abaya who noted that the President has already issued an executive order way back in 2013 to execute the buy-out.

Colmenares said that this P600-million payment to the private concessionaire has been the reason why the contract has been wrought with irregularities.

“It is the government which entered that sweetheart deal which is the reason why it is losing. Why will they pass their sin to the public? They should deal with the problem and jail negotiators who handled that contract,” Colmenares said.

Abaya said that the MRT contract was unconventional from the very start as the private company owned the facility but the government operated; the private party took care of the procurement of facilities but the government was responsible for paying it. “This is the first time I saw this kind of set-up. It’s usually good practice that the one who procures is also the one who pays. It will not be difficult for the one procuring to make a deal. It raises a lot of questions,” said Abaya who noted that the government’s takeover of the maintenance contract, which was widely criticized, had done away with this bad practice. “We should ask them (MRTC) why insist on this set-up and not an open and transparent one.”

Abaya described MRTC as a “shell company” after selling out economic interest or future revenue earnings to a new group, MRT Holdings, which was majority owned by government banks. “In fact, if we require (MRTC) to pay or make an upgrade, I think it will have a hard time,” said Abaya.

Abaya said that the MRT rail tracks needed replacement as early as 2008 when then contractor Sumitomo Corp. noticed vibrations. After the upgrading of the tracks and signalling system, Abaya said the MRT could double its speed from 40 to 60 kilometers per hour.

Abaya said that up to the present, the MRTC has merely presented a one-page proposal of “generalisms” on their plan to overhaul the MRT to the DOTC while it has been going around media outlets giving sound bites.

For Colmenares, the MRT’s contract should have been declared void for being an “onerous contract consummated against the interest of the people and disadvantageous to the government.

“Secretary Abaya is right when he says it is difficult to understand the corporate layering in MRTC because it is un-transparent. But if it is void, it should be voided whether it is going to end in one year’s time or 10 years’ time,” said Colmenares.