MRT-3 saga continues: Gov’t may want MVP out

MANILA, Philippines – The government is about to make up its mind on how to proceed with the ownership issue hounding efforts to improve and expand a crucial urban infrastructure, the Metro Rail Transit line 3 (MRT-3).

In a press briefing on Monday, October 22, Department of Transportation and Communications (DOTC) Secretary Joseph Emilio Abaya stressed that the government is now moving towards regaining full control of the MRT-3 before it bids out the rail’s operation and maintenance (O&M) under a public-private partnership (PPP) scheme.

This direction, which President Aquino still has to approve, means the government may go against the group of Manuel V. Pangilinan. The businessman chairs Metro Pacific Investment Corp. (MPIC), which claims it has the right to operate, maintain and expand the MRT-3 through its controlling stake in Metro Rail Transit Corp. (MRTC), the consortium that built the railway system.
 
“We want to buy everything and make [MRT-3] fully-government owned. This should allow us to refinance [what] we think is a 15% too-high return enjoyed by the MRTC. In this way, we could refinance, make it less costly of shifting funds from left pocket to right pocket,” said Abaya.

The complicated structures of MRT-3’s ownership and economic interest were both a result of the government’s generous financial guarantees to the private proponents in the 1990’s and the succeeding efforts to resolve the mounting debts the government had to shoulder following populist moves to keep fares down.

While these past issues became stalled efforts to improve services, the Aquino government’s wavering on its previous efforts to privatize the rail’s O&M via the PPP scheme also delayed interim efforts, including the purchase of new and more cable cars.  

MRT-3 has been bursting at the seams, with commuters packed like sardines or enduring occasional stalling of the system.

Full control

Abaya said that if the government would could assert full control of the MRT-3, it would no longer have to pay the MRTC huge fees every year.

According to the Build-Lease-Transfer (BLT) deal on the MRT-3, the government paid MRTC P7.87 billion in 2010 broken down as follows:

• P5.29 billion represented Equity Rental Payments (ERP)
• P1.18 billion as maintenance cost
• P1.15 billion as debt guaranteed payment
• P207 million as insurance expenses
• P34 million as other fees and costs

The government, through the Land Bank of the Philippines and the Development Bank of the Philippines (DBP), already owns 80% of MRT-3’s economic interests. However, Abaya noted that MRTC, despite holding the remaining 20% of economic interests, has more voting rights than the government.

“Despite government having 80% economic or beneficial interest in MRT-3, there is an irregularity because the decision making policy was left with the private sector. The irregular thing is that Land Bank and DBP mainly bought the economic interests of MRTC without getting or acquiring the more important political rights which is the voting and decision making rights,” Abaya explained.

“We want to make everything now in the hands of the government, meaning all decisions will emanate from policies of government rather than dealing with private interests,” he stressed.

“After doing this, probably we will still end up doing a PPP on the operation and maintenance (O&M) of MRT-3,” said Abaya.

Sins of the past

These plans have been presented to President Aquino and some Cabinet agencies.

What have been keeping Malacañang from making a final decision are concerns that past wrongdoings committed when the government would not be dealt with accordingly.

“The only issue that was raised by former DOTC secretary Mar Roxas is that the buy-out might tend to give a white wash of the sins of the past. We will make sure that it won’t happen again,” said Abaya referring to the private sector’s “political interest” in MRT-3.

Previously, Senate hearings on the business deals of businessman Roberto V. Ongpin touched on his group’s role in the MRT-3 re-financing efforts. Ongpin had denied any wrongdoing.

For now, Abaya said the DOTC would coordinate with the Department of Finance (DoF), which had previously approved the project restructuring, to finalize these plans.

“We have no timeframe. It has been brought to the President and we will sit down with the DoF because the DOTC feels this is a DoF issue. It will have to address the books of the DBP and Land Bank. So we need to go back to [Finance] Secretary Purisima,” said Abaya.
 
MVP and others eyeing MRT-3

Pangilinan-led MPIC has coursed its interest in MRT-3 through MRTC, which in turn, has a contract with the government that vested it with rights to develop and expand the rail system.

MPIC’s January 2010 proposal to expand MRT-3 “prevents the government from bidding the MRT-3 capacity expansion project. MPIC expects the government to honor MRTC’s rights under the BLT Agreement,” MPIC vice president for legal affairs Jose Jesus Laurel said in January.

MPIC had offered the government $300 million to double the capacity of the railway system to 700,000 passengers a day from the current 350,000 by adding more cars to one train so that trains will be carrying more cars at faster intervals.

Part of MPIC’s proposal was a $350 million acquisition of equity and some of the bonds issued by the MRTC that the state-owned Landbank and DBP had bought out, according to MPIC president Jose Lim.

DBP had earlier expressed it was open to selling its interest in MRT-3.

Just recently, MPIC said it submitted a modified proposal to the DOTC.

Aside from MPIC, the Ayala Corp. and the group of Ramon Ang also expressed interest to make a bid for the O&M contract.

Interim contract

On October 19, the DOTC awarded a maintenance contract  to PH Trams-CB&T valid  for 6 months while the procurement process of a regular maintenance provider is being undertaken.

PH Trams CB&T PH Trams-CB&T replaced Sumitomo Corp., whose contract has expired.

The new contractor agreed to maintain all the upgraded and newly installed components of MRT-3, including the signaling, AFCS, CCTV and other equipment that will be installed by DOTC or a third party, for a monthly cost of $1.15 million.

This is better than the $1.433 million it used to pay Sumitomo, Abaya had said.

The interim service provider started maintenance works on October 20. – Rappler.com