More left over from Mar's list

Last Wednesday, I tried to make a rundown of the more important and highly visible projects in the “to do” list of Mar Roxas that is being inherited by newly appointed DOTC Sec. Joseph Abaya. Business Mirror columnist Stella Arnaldo commented on Facebook she has lowered her expectations and just wants to see the MRT/LRT loop completed and CATEGORY 1 status regained and she will be happy.

Unfortunately, the expectations of many of our long suffering commuters and the public in general demand a longer list of accomplishments by 2016 when P-Noy exits. Fully delivering NAIA 3, for instance, is a must. So is completion of the extension of LRT1 and 2 to Cavite and Masinag, Antipolo.

And there are more things crying out for action. There is, for instance, the need to get the LTRFB and LTO to work together and deal with excess buses on EDSA and reckless bus drivers too. Work on MRT-7 must also get going but in this case, the ball is supposedly in the court of the Department of Finance. We haven’t started talking about our accident prone maritime industry.  

But first the good news...

The National Economic and Development Authority (NEDA) board’s Investment Coordination Committee (ICC) approved last Tuesday the MRT 3 Capacity Expansion project at a cost of P8.63 billion. This involves the acquisition of additional 52 Light Rail Vehicles (LRVs) and the implementation of required ancillary works, to enable operating the MRT 3 system at a four-car train configuration.

NEDA also approved LRT Line 2 East Extension project to Masinag, Antipolo. The P9.76- billion project involves the construction of a 4.19-kilometer extension from the existing Santolan Station to Masinag Junction (intersection of Marcos Highway and Sumulong Highway). Two stations will be built at Emerald Drive, Cainta (in front of Robinson’s Place Metro East) and Masinag Junction, Antipolo City.

It will be recalled that P-Noy previously withheld approval of the LRT 2 extension to Masinag. Sec. Mar explained P-Noy wanted a new population study.

“Do we stop at Sta. Lucia, or do we go all the way to Masinag? The President wanted to make sure that there would be a sufficient population base that can be served,” Roxas said. We are talking about an extra two kilometers.

Roxas said the first two kilometers to Sta Lucia is a sure thing. But Roxas said the NEDA board can only allow the technical planning for the project to proceed after the new population study is completed. We pointed out in this column that a new study is superfluous because the area is obviously well populated, with a SM mall as testimony to that fact.

Furthermore, there was a thorough ridership study undertaken along with a feasibility study funded by JICA. The first feasibility study was made in 2002, followed by two updates - in 2006 and in 2008.

There was another JICA funded study in 2010 and in 2011. All had the same conclusions: it is economically feasible. None ever suggested building only one additional extension and ending at Imelda Avenue.

Extending Line 2 only to Sta Lucia is also not efficient. It would cost the contractor the same to mobilize and demobilize on 1.8-km and on 4.2-km extension. Having two additional stations, transferring passengers (from jeepneys and other road-based vehicles) will be dispersed at two locations. Otherwise, it will be concentrated on the intersection of Marcos Highway and Imelda Ave, which is already chaotic as it is now.

Well, I am glad they didn’t require another study to verify the other studies and just approved the Masinag extension. However, it was not common sense that made them do it. It was political expediency.

I heard that Rizal Governor Jun Ynares appealed to Mar to do the right thing. They were supposed to have discussed this when they met at the national day celebration of Columbia.

It helps that Ynares belongs to the Nationalist People’s Coalition (NPC) that is coalescing with the Liberal Party for the election next year. The LPs also need Ynares’ political clout in Rizal to elect a majority of their senatorial ticket.

It is a case of doing the right thing not because it makes sense in terms of economics and public service but because of plain politics. But I am not complaining. I am happy it is going to get done and won’t be delayed by more studies.

Now, let us look into the issue of how to finance the big ticket projects. The new DOTC Secretary must clarify his preference between PPP or ODA to finance the big ticket projects. Mar vacillated on this issue. He first said he prefers ODA and then changed his mind and talked of PPP and now we simply don’t know what he finally prefers.

These projects are traditionally financed by ODA or Official Development Assistance from developed nations. Such foreign aid projects can either be an outright grant or a loan with very low interest rate.

Weeks after P-Noy assumed office, they made a big hoopla unveiling what was called the administration’s approach to financing these big projects through PPP or Public Private Partnership. Financing here would be private sector, which was and still is fine given our highly liquid financial system.

The advantage of letting the private sector undertake a big project is the promise of quicker delivery with better quality as what happened with NLEX. PPP also frees scarce government resources to work on other initiatives with high social impact like the Conditional Cash Transfer program.

On the other hand, low or below market interest rates make ODA attractive. But ODA had been abused. In the words of a seasoned bureaucrat, it doesn’t matter if there is corruption in ODA financed projects because the terms are so friendly and the interest rate so cheap. But money is wasted this way through corruption and bad decisions.

One disadvantage that must also be considered is currency appreciation years after the project had been completed and the grace period has lapsed. It could happen that the effective cost of money would approach commercial rates because of appreciation of a currency like the Japanese yen. The other disadvantage is the supposed requirement to only procure services and equipment from companies in the donor country.

But I had just been informed by a Filipino academic who also has had extensive experience managing such projects here and abroad that the strings attached have been at the insistence of our bureaucrats. Otherwise, the preference of developed countries is to open all assisted projects to international public bidding because they have signed an agreement to untie development loans.

According to the OECD website in the section on export credit, OECD countries have agreed to open bidding for projects financed by untied aid credits since November 2004. The website clearly points out that “Untied aid credits are development assistance loans that can be used to pay for purchases of goods and services from any country, rather than just the country providing the loan.

“The Agreement is designed to create more effective competition in the use of such loans, so as to allow developing countries themselves to choose the goods and services they need at the most advantageous price.”

The website explains that the “Participants to the Arrangement agreed to enhanced transparency for these loans, which are increasingly important modes of development assistance, in the hope that this will improve their effectiveness... Participants to the Arrangement include Australia, Canada, all member states of the European Union, Japan, Korea, New Zealand, Norway, Switzerland and the United States.”

Apparently, even that Cagayan de Oro airport which the Koreans are financing, bidding out requirements should not be limited to Korean companies. That’s in violation of the OECD Agreement of which Korea is a signatory.

The story I am getting is that it is our bureaucrats who insist on the strings attached. The only explanation I can think of why they are doing this is for personal gain.

It is no secret that there is a mafia of sorts composed of local bureaucrats, foreign consultants and marketing agents who thrive on ODA projects. An international bidding is too transparent for their purposes. I am told, contrary to popular impression, that even Japan’s loans are now untied. COA should look into this angle.

More on the other left over items in Mar’s “to do” list in future columns.

Incidentally, a reader wrote to correct something in my last column. “Distance from Roosevelt Station to MRT-3 North Avenue Station at Trinoma is more like 1.38 kilometers, not just 500 meters. And mostly uphill too, I have walked it many times!”

I stand corrected.

Virtue and power

 The quote for today is from Benjamin Franklin.

Sell not virtue to purchase wealth, nor liberty to purchase power.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco