DOTC confused on MRT 3

Even if Mar Roxas brought in four lawyers as his undersecretaries at DOTC, it seems it is not enough to show that they knew what they were doing. Incoming DOTC Secretary Joseph Emilio Abaya must now spend time trying to sort out the legal booby traps in their approach to MRT 3’s rehabilitation.

Recall that the NEDA board, on Mar Roxas’s sponsorship, approved setting aside P8.63 billion for the so-called MRT 3 Capacity Expansion Project. This involves the purchase of 52 light rail vehicles to enable the service to operate a four-car configuration. The MRT 3 expansion would increase the capacity of the system by 60-70 percent. This should be cause for jubilation because finally, the much needed upgrade of the MRT 3 is about to happen. But is it?

A few days after the NEDA announcement, a DOTC usec said they are studying if the government needs approval of Metro Pacific Investments Corp. (MPIC) for any expansion of the Metro Rail Transit Line 3. Huh? Didn’t any of the four usec lawyers studying this for the past two years think of that before asking NEDA to approve their proposal?

Unbelievable but that’s what DOTC usec Rene “Timmy” Limcaoco told reporters on the sidelines of the Philippine Economic Briefing. To be exact, this is what Timmy said: “We are still studying that on what approvals if any are needed.” 

They apparently realized that under the build-lease-transfer agreement between the government and Metro Rail Transit Corp. (MRTC), the company has the right to expand the system. Manny Pangilinan’s MPIC earlier signed a cooperation agreement with various groups holding rights and interests in MRT 3.

I imagine Timmy and his compañeros realized that they have a problem using that P8.6 billion to buy rail cars for MRT 3 for the simple reason that government cannot spend money for the capex of a private corporation. Tangled as the ownership of MRTC may seem, it is clear that it is owned by private sector entities. Only the economic rights were securitized and later bought by GFIs (DBP and Landbank).

It actually gets better or worse depending on your inclination. P-Noy actually already released P4.5 billion of that P8.6 billion in 2011 as part of the Economic Stimulus Fund. The release was made before the NEDA authorization which only came recently. The money was supposed to buy rail cars.

But they were not ready to buy rail cars as Mar was still studying what exactly he wants to do with MRT 3. They however had to get the money from the Treasury otherwise it will revert to the General Fund by year end. So they got the P4.5 billion and lodged it “temporarily” with LRTA which was supposed to be its purchasing agent.

Then COA objected and ruled that “there is no valid ground for the transfer of the fund to LRTA notwithstanding the MOA to that effect.” The money is still supposedly with LRTA as they try to figure out how to get out of this fix without ending with an Ombudsman case.

All that is just on the government side. On the side of the private sector owners of MRTC, it could very well assert its rights as well. A provision of the MRT 3 BLT Agreement, MRTC holds the expansion rights and has retained the right to allow third party trains into the system. This is because MRTC has a claim to ownership over the MRT facility. 

This brings us to Timmy’s statement that they are now studying if there is a need to get MRTC approval before they can start the bidding process for the LRVs or the rail cars. But as we pointed out, Timmy will also have to convince COA that a government entity can buy capital goods for a private company.

There is another issue that must be tackled. DOTC wants to infuse $100 million on top of $ 140 M annual subsidy that government has already been shelling out for MRT3.

Still another issue is the wisdom of acquiring new LRVs even before the train operating system has been upgraded to accommodate the additional trains. What happens if we get those new rail cars but we can’t use them anyway because it would be unsafe to use the current system?

This MRT 3 path that Mar wanted to take is much too complicated and can only delay the upgrade our long suffering commuters needed two or more years ago. I had advocated in this column for government to just talk to MVP and see if his proposal is a better way out.

There is this long-standing MPIC proposal for MRT 3’s expansion and rehabilitation. The $300-million bid will expand the operations of the 16.95-kilometer railway.

MPIC’s plan was aimed at doubling the railway’s capacity to 700,000 passengers per day by acquiring 73 new trains and signaling equipment. MRT-3 currently transports an average of 500,000 passengers per day, well beyond its capacity of 350,000.

Also included in the proposed investment are the implementation of best practices in rail operations and maintenance, the ability to integrate MRT3 with LRT1,  operational expenses, freeing the government from the annual $140 M subsidy and the payment of the necessary government fees.

In exchange for the investment, MVP’s group wants a charge of P28 per passenger. It will be implemented on a staggered basis over a period of 25 years.

Now MPIC’s offer has reportedly been revised. According to a BusinessWorld story, MPIC chief executive Jose Mari K. Lim told reporters they submitted “an unsolicited proposal, so it has different legal framework. In the first proposal, it is an assumption of the existing contract. We will take over the company (Metro Rail Transit Corp., or MRTC) and expand it...” he added, hinting the new proposal entailed a new concession agreement altogether, the BusinessWorld reported.

“Under the new proposal, the [DoTC] will give us a new concession overlaying the existing contracts.” Lim also said MPIC will be undertaking the project with Ayala Corp. The two conglomerates earlier signed a memorandum of agreement “to form an exclusive strategic partnership to jointly pursue and develop light rail projects in the greater Metro Manila area.”

As I reported in an earlier column, a source told me that Sec. Mar Roxas at one point changed his preference for direct investment by DOTC in favor of the MPIC option so that it was presented to Malacañang. But he was half-hearted about it, and quickly withdrew when P-Noy commented “baka naman masyadong malaki ang kikitain ni Manny dyan?”

Now, they will have to sort out pretty complicated legal and financial matters and still have to talk to and get the cooperation of MPIC anyway. It also seems DBP and Landbank also missed the deadline given to them by the BSP to divest all their equity and preference shares in MRTC by June 2012.

Now that MPIC has a new proposal, expect a further delay in realizing the much needed improvement in the MRT 3 equipment and operations. Sec. Mar then justified the delay saying it will give them the time to do a diligent study of legal and financial aspects of projects. Now, we have the delay and all the time they had, the legal work done still leaves much to be desired.

Hopefully, the new DOTC secretary, who is both an engineer and a lawyer, can more effectively sort things out fast enough to deliver some benefit to the commuting public.

In memoriam

Those who have followed this column from way back know Dr. Ernie E. He is Dr. Ernesto Espiritu, a schoolmate at UP Prep. Well, he just passed away in Texas. I couldn’t believe the news. He was here about two years ago and we had lunch at Galleria in Ortigas. He was thinking of moving here for retirement and was looking for a condo unit to buy.

Ernie completed an orthopedic surgery residency at UP-PGH and did a year fellowship at UCLA Westwood. He practiced ER medicine at various hospitals in South Texas around the Beaumont area. He will be remembered as a gentle spirit, a loyal friend and classmate and for his wry dry sense of humor. His jokes were a staple of this column.

Doctor joke

I am sure wherever he is now, Dr. Ernie E will be chuckling at this joke. It is almost as if it came from him. Dr Ernie… this is for you!

A man comes home from work and finds his wife admiring her breasts in the mirror.

He asks, “What are you doing?”

She replies, “I went to the doctor today, and he told me I have the breasts of a 25-year-old.”

The husband retorts, “Well, what did he say about your 50-year-old ass?”

She replied, “Frankly dear, your name never came up.”

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