DOTC to finalize MRT-3 auction details by mid-Feb

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Before improvements in MRT-3 can proceed, the DOTC has 2 resolve 2 issues--how and what aspect of the rail service will be privatized

MANILA, Philippines – The transportation department has promised to resolve 2 issues–how and what service will be privatized–in the next 2 weeks to pursue the long-awaited improvements in the congested Metro Rail Transit Line 3 or MRT-3.  

“We hope to resolve this soon. We expect a word from our legal team by end of this month,” said Transportation Secretary Mar Roxas.

At least 3 major local conglomerates–the Pangilinan-led Metro Pacific Investment Corp, San Miguel Corp., and the Ayala group–are eyeing a stake in the MRT-3 railway, which runs along the major thoroughfare in  the capital.

The MRT-3, one of the convoluted public-private partnership infrastructure projects in the Philippines, needs improvements and new investments the soonest as breakdowns have been frequent. Its carriages are carrying around twice than the system’s capacity.  


The Department of Transportation and Communications (DOTC) has to resolve what aspect of the rail service it will auction.

“The DOTC legal department will determine if we will bid out the operation and management (O&M) contract for the MRT-3 or just the maintenance contract alone,” Roxas said.

The O&M contract was initially set as the first to be bid out under the public-private partnership project of the Aquino government in 2011. When Roxas took over the transportation portfolio, however, he stopped the auction process to do a review, eventually pushing for the maintenance aspect only.

“It is the government’s view that we will bid out the maintenance contract,” Roxas said.

In the meantime, Japanese contractor Sumitomo Corp. of Japan will continue to maintain the railway system until it is bid out, Roxas said.
MPIC’s claim

Roxas is addressing a claim asserted by MPIC that it has the right to operate, maintain and expand the MRT-3 based on its own belief that it already holds a substantial stake in MRTC (Metro Rail Transit Corp.), the consortium that built the MRT3.
On the other hand, it is the impression of the government that it is in charge of the MRT3 operation since 80% of MRTC economic interest is held by the Development Bank of the Philippines and Land Bank of the Philippines.

The state-owned banks’ economic interests also include a 22.3% direct stake in MRTC and MRT bondholdings.

The MRTC and the government signed many years ago a BLT (Build-Lease-and- Transfer) agreement. Among others, the MRTC had been vested with expansion rights which meant that it is authorized to develop the MRT3.
With this, the MPIC submitted in January of 2010 a proposal pursuant to the expansion rights granted to the MRTC under the existing BLT agreement with the national government.
“MRTC’s expansion rights under the BLT Agreement prevent the government from  bidding the MRT 3 capacity expansion project. MPIC expects the government to honor MRTC’s rights under the BLT Agreement,” said MPIC vice president for legal affairs Jose Jesus Laurel last month.
MPIC had offered the government $300 million to expand the capacity of the MRT3. It plans 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.
Aside from the $300-million proposal, MPIC had also offered the government $350 million for the acquisition of equity and some of the bonds issued by the MRTC.
Part of the proposal is to buy out the state-owned banks, said MPIC president Jose Lim.

Other takers

The group of San Miguel’s Ramon Ang has recently submitted a proposal to the DOTC for the take over of  the O&M contract.

Eventually, Roxas announced that the project will be put up for auction.
The Ayala group, an original stakeholder in the MRTC consortium, has likewise expressed interest in resuming a role in the MRT-3.

Recently, DBP said it was open to selling its stake in MRTC within the year.

Meanwhile, Roxas said they have a P4.5 billion in funding available for additional train vehicles for MRT3. “The contract may also include the purchase of vehicles but we don’t know yet,” said Roxas. –

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