Northrail execs to be invited to Senate hearing

MANILA, Philippines – The Senate Blue Ribbon committee will invite officials of the North Luzon Railways Corp. (Northrail), including its former official who recommended the termination of the railroad project contract with a Chinese contractor, when the investigation resumes in August.

Senators also lamented that the project was continuing despite reports of irregularities.

Arsenio Bartolome III, former president and chief executive officer of Northrail, sought the termination of the contract with the China National Machinery and Equipment Corp. Group (CNMEG) after the firm unilaterally suspended construction of the initial phase of the project.

Bartolome refused to pay close to $300 million in additional cost for phase 1 of the Northrail project, saying there are ways to avoid the payment sought by CNMEG.

Sen. Alan Peter Cayetano, chairman of the Blue Ribbon committee, said Bartolome and other past and present officials and employees of Northrail must speak up regarding the project to save the country billions of pesos from an irregular contract.

Cayetano said it was unfortunate that projects like Northrail, which could reduce transportation costs of people and even goods in going to the rural areas, were being delayed by allegations of corruption.

Senate Minority Leader Aquilino Pimentel Jr. wants the investigation to be revived to scrutinize developments in the project.

Sen. Francis Escudero noted the apparent “double standard” for local and international contractors was “alarming and offensive.”

“Just because they (Chinese) loaned us money does not give them the right to violate our laws and since it’s a loan which we will pay for anyway, I don’t see the logic and reason why some of our officials feel somewhat indebted to them,” Escudero said.

Sen. Rodolfo Biazon said the government had incurred losses because of the project, including payment of financing interest charges, and thus it must be decided at once whether to continue with the contract or not.

“We also need to determine not only in terms of the funds but the effect on our economic life – meaning the transport of goods and people to some parts of Luzon to Manila and back,” Biazon said.

The CNMEG suspended construction of the Northrail project pending resolution of issues concerning project design, additional right of way acquisition, utility relocation and probable variation orders and cost overruns.

But Bartolome said the CNMEG had yet to submit any documentation to support its claims relative to the variation orders.

Bartolome’s successor, new Northrail chairman and chief executive officer Edgardo Pamintuan, earlier claimed that CNMEG had withdrawn from the project but the official later clarified that the project would push through after all.

Pamintuan noted, however, that the cost of the entire project, which is supposed to be funded from a $400-million loan from the Chinese government, was likely to be adjusted amid variations in its design, increase in the cost of materials and currency fluctuations, among other factors.

In its June 3 letter or “notice of demand,” CNMEG said Northrail failed to take necessary “satisfactory steps” to comply with the terms of the contract within 30 days from receipt of their demand.

In the event that Northrail fails to remedy each of the breaches it enumerated within 60 days, “CNMEG may, without prejudice to the exercise of any other rights or remedies which may be available to it, terminate the contract,” it said.