Right-of-way acquisition for MRT7: Zero

Chrisee Dela Paz

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Right-of-way acquisition for MRT7: Zero
After MRT7 construction snagged an over 7-year delay due to stalled financial closure and change in terms of the deal, it faces another issue: right-of-way acquisition

MANILA, Philippines – So we all thought that the construction of the much-awaited Metro Rail Transit Line 7 (MRT7) that will connect Quezon City to San Jose, Bulacan, will begin soon.

But here’s the problem: the project may be put on ice again, as the government has not yet delivered any right of way (ROW) to concessionaire San Miguel Corporation-backed Universal LRT Corporation BVI Limited (ULC).

“None [has been delivered] yet. There are still affected areas where they have to negotiate ROW,” a source privy to the matter said in a text message.

According to the source, the Department of Transportation and Communications (DOTC) will have 6 months from contract effectivity to acquire all ROW.

Asked when will be the groundbreaking, DOTC Secretary Joseph Emilio Abaya said in a mobile phone reply: “We still have to coordinate.”

The MRT7 project entails the construction of 14 train stations starting from San Jose del Monte, Bulacan, to North Avenue, Quezon City. It will be connected to the existing Metro Rail Transit Line 3 (MRT3) and Light Rail Transit Line 1 (LRT1) via a common station on Epifanio de los Santos Avenue.

Past its target date

It is now past the MRT7 contractor’s target start of construction date – February 18.

The construction timeline submitted by MRT7 contractor Hyundai Rotem-EEI consortium has been approved by the DOTC.

Under the timeline, the start of MRT7 construction and construction-related activities should have started last February 18, with the completion on August 17, 2019.

But the transportation department has yet to set a date for the groundbreaking of MRT7.

Over 7 years since the concessionaire bagged MRT7 in 2008, it was only last week when San Miguel’s ULC fully complied with the financial closure requirements. 

Financial closure requires the concessionaire to secure necessary approvals, like the state’s performance undertaking.

MRT7, to be funded by official development assistance from Japan Bank for International Cooperation (JBIC), needs a performance undertaking from the finance department to represent a financial guarantee.

Bureaucratic snarl-ups

Performance undertaking refers to a guarantee from the government that it will finance the project should the proponent be incapable of funding it.

It was in October 2010, when San Miguel, through San Miguel Holdings Corporation, acquired a 51% stake in the MRT7 concession, and therefore holds the exclusive right, obligation and privilege to finance, design, construct, supply, complete and commission the MRT7 project.

The MRT7 deal was originally bagged by businessman Salvador Zamora II of ULC in 2008.

Original proponent ULC had failed to secure performance undertaking, thus failing to secure financial closure for the MRT7 expansion.

It was only July 23, 2014 when the finance department gave the now San Miguel-backed ULC its performance undertaking.

But the financial closure was not the only hurdle San Miguel’s ULC had to face before starting the construction.

It also faced delays due to a change in the terms of the deal, which is the location of the proposed common station on EDSA.

The original 25-year MRT7 concession agreement calls for the common station to be located near SM City North EDSA.

But DOTC afterwards decided to transfer it near Ayala Land, Incorporated’s TriNoma mall, adjacent to SM City North EDSA, saying that it will “benefit commuters more.”

“Government delayed the granting of performance undertaking.  It was just given to us in 2014 that’s why we were given a deadline to complete financial closure,” the source who requested anonymity told Rappler.

“Another cause of delay is the resolution of the common station issue, which is pending for two years now,” the industry source added.

Run into more delays?

But with zero right-of-way acquisition as of today, the construction of MRT7 might run into more delays.  (READ: A long, winding road for better Metro Manila transport)

Delayed ROW acquisition spelling delays in infrastructure projects is not uncommon in the Philippines.

Most infrastructure projects under the public-private partnership (PPP) thrust faced delayed ROW acquisition, crimping finances of concessionaires.

An example of this is the 7.1-kilometer Ninoy Aquino International Airport Expressway (NAIAX) PPP project which faced about a year delay due to stalled ROW acquisition and relocation of utilities.

This sticky issue is now being resolved by PPP through the passage of the PPP Act of the Philippines, which is yet to be approved by the 16th Congress.

“The major deterrent is under the existing RA [Republic Act] 8974, wherein the default mode is negotiation but, on the part of the government, we
 cannot offer a huge amount because under the law only the zonal value
 can be offered,” PPP Center Deputy Executive Director Sherry Ann Austria had said in 2014.

“Owners will not
 accept [the offer] because it’s very low and the zonal values are not
 updated,” Austria added.

The PPP Act of the Philippines dictates that valuations for property that will be affected by a PPP project be based on updated estimates by the Bureau of Internal Revenue, the Assessor’s office of the municipal government and a government bank. – Rappler.com

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