Teves: Still no railway for $921-M Northrail

MANILA, Philippines – Finance Secretary Margarito Teves admitted that actual construction of the Northrail system has not yet started.

Teves also confirmed at a House budget hearing that government loans for the planned railway system from Manila to Malolos and then to Pampanga have ballooned to $921 million (about P43.3 billion).

He said aside from the original $421-billion loan from China for the Northrail project, an agreement for an additional $500 million borrowing has been signed with Chinese officials.

He said the first loan was for section 1 of the railway system, while the second loan was for section 2.

“There are some issues that need to be threshed out with the contractor,” Teves said when asked why the project has not been started.

He did not say where sections 1 and 2 of the system are located. Apparently, the 32-kilometer Manila-Malolos phase is section 1, while the Malolos-Clark (Pampanga), also measuring 32 kilometers, is section 2.

Teves was not asked why the government had to sign an agreement for the second loan despite the fact that construction of the railway has not yet started.

The 64-kilometer railway would cost an average of $14.4 million or P677 million at an exchange rate of P47 to the dollar, excluding the cost of relocating thousands of squatters along the railroad system.

According to former Senate president Franklin Drilon, the Manila-Pampanga railway project is costlier than the Beijing-Tibet rail system that China began operating not too long ago.

“And yet, their system is electric, which is modern technology, while ours will be diesel-run,” he said.

He said the Beijing-Tibet system also soars several thousand feet because of Tibet’s high elevation.

Such a project should be more expensive to build than the envisioned Manila-Pampanga railway that would cut through Central Luzon plains, he added.

He pointed out that the Arroyo administration has advanced between $100 million and $150 million to the Chinese contractor of Northrail despite the fact that not even an inch of railway has been built.

Citing a Commission on Audit (COA) report, Drilon also said Northrail is full of irregularities.

The COA said the Northrail contract was awarded to China National Machinery and Equipment Group (CNMEG) without any public bidding in violation of the law requiring public bidding for government projects.

It said the government has been paying huge interest charges and “commitment fees” on the loans it obtained from China.

The Chinese contractor has asked the government for an additional $299 million. In the meantime, it has abandoned the project.

According to lawyer Harry Roque, who is involved in a court case against the Northrail project and its contractor, the bulk of the $100 million to $150 million advanced to CNMEG “has been lost to corruption.”

This is the principal reason why the contractor is asking for a huge cost adjustment, he said.

Former banker Arsenio Bartolome, who used to head the state corporation in charge of Northrail, has suggested to President Arroyo that CNMEG’s petition for an adjustment of almost $300 million be rejected and its contract cancelled.

Bartolome said the government should look for a new contractor.

His successor, former Angeles City mayor Edgardo Pamintuan, has come up with exactly opposite recommendations.

Pamintuan recommended that the contract be honored and the $299-million adjustment be given despite COA’s findings of irregularities, including lack of public bidding.