Senate to probe rail contract

The Senate will convene itself into a Committee of the Whole on Thursday to investigate the North Railway contract the government signed with China, Senate Minority Leader Aquilino Pimentel Jr. said yesterday.

Pimentel said the minority bloc senators fully support the Senate inquiry into the North Railway project in the face of allegations that it is overpriced and the terms and conditions of the contract are grossly disadvantageous to the Philippine government.

Expected to testify before the Senate are Vice President Noli de Castro, Transportation Secretary Leandro Mendoza, Budget Secretary Romulo Neri, former finance secretary Juanita Amatong and North Luzon Railways Corp. president Jose Cortez Jr.

Lawmakers want to know why the $503-million project was awarded to the China National Machinery and Equipment Corp. (CNMEC) without the benefit of public bidding, in violation of the government procurement law.

During President Arroyo’s state visit to China last year, Cortez and CNMEC president Ren Hongbin signed a memorandum of agreement for the project.

Lawmakers have also questioned why the government apparently gave up effective control of the $421-million loan. Under the contract, the Export-Import Bank of China will disburse it to the contractor once the project is completed.

Opposition Sen. Juan Ponce Enrile said the loan is for the Philippines so the funds should have been deposited into the country’s account. The Philippine government agreed to provide the remaining $82 million to cover the cost of the project.

Lawmakers also pointed out that the project contractor has not started actual construction of the rail system even after it received a $126-million down payment in September 2004.

Another provision in the contract the senators found questionable was that the Philippine government agreed to have any disputes regarding the project heard in China courts rather than in the Philippine courts or neutral countries.

Senate President Franklin Drilon earlier said the anomalies in the North Rail project were one of the reasons why he withdrew his support for Mrs. Arroyo and called for her resignation.

A preliminary study conducted by the University of the Philippines (UP) College of Law, with the participation of 11 experts in economics, finance and law, concluded that the North Railway contract suffers from serious infirmities.

The UP panel also assessed that the government officials who had a hand in the deal could be held liable for the mistakes, Pimentel said.

Pimentel said the government is being shortchanged by entering into the $503-million deal with China for the North Rail Project using outmoded and much slower trains and railway trucks.

"The Arroyo administration committed a monumental blunder when it awarded without public bidding the rehabilitation of the 32-kilometer rail line from Caloocan City to Malolos, Bulacan to the CNMEC," he said.

Pimentel alleged that Beijing hoodwinked the Arroyo administration into awarding the contract to CNMEC, in which the Philippines would have to pay through the nose for diesel-powered trains that can run no faster that 120 kilometers per hour on narrow gauge tracks.

Because of this serious flaw, Pimentel said transportation experts have cast doubt on the commercial viability of the railway project.

The government is obligated to spend P900-million for every kilometer of the railway project, which is to be financed by loans from the China Export-Import Bank.

Last year, Pimentel delivered a privilege speech in the Senate on the anomalies in the North Rail project and delays in the relocation of about 40,000 families living along the railway tracks to resettlement sites in Metro Manila and Bulacan.

Pimentel’s speech prompted the Senate committee on housing, resettlement and urban development to conduct an inquiry.

The alleged anomalies were among the grounds cited by opposition lawmakers in the impeachment case against President Arroyo, which was dismissed by the administration-dominated House of Representatives.

Cortez earlier denied the allegations that the North Rail project is overpriced. He said the project is a deal between China and the Philippines and "all the money coming from China will go directly to the developer."

Reports quoted Cortez as saying the project could be completed in three years if politicians would stop interfering with it, particularly in the relocation of squatters.