Lost opportunity?

Are the nearly one-million strong daily commuters at EDSA headed for a major disappointment?

A few months back, the everyday riders of EDSA MRT were elated over the news that the government has cooked up a plan that would meet their clamor for additional trains and for the extension of the present EDSA MRT line from North Triangle to Monumento.

The plan was for the government to refinance a P1.3- billion obligation to the EDSA MRT consortium. The refinancing would generate some $485 million in savings for the government – more than enough to improve the current service and extend the line.

Our media friends covering the finance beat earlier told us that Secretary Gary Teves had almost completed all the administrative and legal requirements for the refinancing. Transportation department insiders, however, said lately that DOTC Secretary Leandro Mendoza is balking at the plan and may actually not move on it despite the urgency of the plan as expressed by the President herself.

We hope the story proves inaccurate. Secretary Mendoza should quickly dispel talks that he is about to kill the refinancing plan. Otherwise, the President faces the specter of disappointing the commuters along the country’s busiest thoroughfare.

And the country as a whole risks losing the opportunity to cash in (pardon the pun) on the weak dollar and the strong economy.

The idea of refinancing the EDSA MRT obligation was actually fueled to a large extent by the strength of the peso. Secretary Teves had earlier explained that the government can actually borrow less pesos today to pay off the obligation.

The added bonus is that, if the government pays off the debt today, it doesn’t have to deal with the entire $1.3 billion in current obligation. Secretary Teves can pay that off at the reduced cost of only $865 million.

In short, pay off a reduced obligation with cheaper money at peso denomination.

The way things are, the government is amortizing the entire obligation at 16 to 17 percent per annum – in dollars. Compare that with amortizing a much smaller debt at three percent – in pesos.

But the more important thing is that the government would then have enough savings  to give millions of Filipinos what they are clamoring for – better MRT service and a full EDSA line.

The scuttlebutt is that some quarters appears to have frightened Secretary Mendoza out of supporting the President’s move on the EDSA MRT refinancing plan.

Again, we hope this is not true. Otherwise, the President could lose what is potentially her biggest infrastructure legacy for Metro Manila. Compared to other transportation facilities being built under her administration, the EDSA MRT promises the biggest impact to the most number of people in the country’s busiest and most important urban center.

Furthermore, the refinancing of the EDSA MRT obligation would showcase what is perhaps the most memorable economic achievement of her administration – the strong peso. Once the refinancing is consummated and the savings generated, her legacy writers could always point out that the EDSA MRT’s improved service and extension to Monumento became possible because the peso was strong during the Arroyo years.

We wonder why the people who have Secretary Mendoza’s ears are not showing him these advantages. The sad thing about it is that these persons would not be answerable to anyone when the country loses the tremendous opportunities present today.

It will be the President who will face a seriously disappointed public.

That’s an obligation that might never be settled. History will come to collect it. And she won’t have the goodwill resources with which to pay it off.

Not so hidden agenda

Global steel organizations such as the International Iron and Steel Institute and the Steel Business Briefing predicted an upward movement in steel prices for the next five years with China as one of the four countries to push the growth.

TKC Steel, the only public listed steel manufacturer in the country, is set to take advantage of  the demand as it expands its operations in China through its subsidiary Zhang Zhou Stronghold Steel Works Co. Ltd. (ZZs).

This early, TKC has benefited from the increasing demand in China, bagging $3 million worth of steel supply contracts and another $7 million in the pipeline.

Expect more contracts for ZZs as it doubles its production capacity of steel pipes from 40,000 MT a year to 80,000 MT by the first quarter of 2008.

Furthermore, ZZs plant, located in southeastern Chinese province of Fujian , is one of the few major steel pipe producers strategically located in a Special Economic Zone that will be able to easily supply the larger demand within its area.

In the local scene, the country is set to have its own steel craze from the current property boom cycle, which is expected to last until the 2012.   Property development and infrastructure are the two heaviest consumers of steel, 56 percent of which is imported semi-finished steel products.

This provides a huge growth potential for TKC Steel as it introduces the country’s first blast furnace project that, if I may say, is at synch with the Arroyo administration’s economic development program.  TKC Steel has the largest installed steel billet production capacity in the country at 300,000 MT.  The blast furnace facility will double the capacity to 600,000 MT by end 2008 and address the large gap between supply and demand of steel billets in the Philippines with hi-grade steel products.

As steel consumption increases, prices are expected to rise as well by law of supply and demand. Steel prices have steadily been increasing since October 2005, where demand for steel picked-up and never looked back.

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