New DBP head backs government exit from MRT 3

MANILA, Philippines - The new head of the Development Bank of the Philippines (DBP) is in favor of unloading government’s exposure in MRT III by early 2011.

DBP president and chief executive officer Francisco del Rosario said the presence of Land Bank of the Philippines (LBP) and DBP in MRT III was just a temporary arrangement.

“The issue is that we want to remove the burden from the National Government,” he said yesterday.

He said the first step is to be able to buy out the existing owners of MRT III, including the funding of the acquisition costs. Having done this, the two government financial institutions (GFIs) will then turn to the National Development Corp. (NDC) as the buyer of their equity holdings in MRT III.

“This is just a temporary investment, and we want to transfer (ownership) to a more permanent holder,” Del Rosario said. “We should be looking towards the end of this year or early next year.”

For the meantime, the DBP chief said they will ensure that the MRT is profitable for the government.

DBP and LBP made their investments with the Metro Rail Transport Corp. (MRTC), the owner of the 17-kilometer Metro Rail Transit (MRT) 3, which, in turn, is being operated by the Department of Transportation and Communications (DOTC) under the build-lease-transfer (BLT) agreement. 

Documents indicate that the MRTC is not a losing entity since investors are guaranteed a return of 15-percent per annum on their investment for 25 years through equity rental payments (ERPs).

The acquisition of MRTC also allowed government to manage the arbitration cases filed against DOTC in Singapore and Washington DC by the former owners of the securitized bonds and shares of MRTC. The claim is worth at least $2.5 billion.

When DBP and LBP took over, government was running in arrears of about P5.6 billion since April 2006 in its payment obligations to MRTC and Sumitomo (the private investor).

Ultimately, DBP and LBP will unload its holdings to NDC, which, in turn, will look for interested private sector buyers. NDC will issue securitized bonds worth $740 million as payment to the two GFIs.

Meanwhile, Del Rosario said that they will launch a review of the profitability and efficiency of DBP’s subsidiaries, including three that were included in a Congressional bill seeking abolition of government-owned and controlled corporations (GOCCs).

The DBP Data Center Inc., DBP Management Corp., and DBP Maritime Leasing Corp., wholly-owned subsidiaries of DBP, were included in the said bill.