AVP gives facts and figures on MRT

MANILA, Philippines - We would like to call your attention on the “inaccuracies of facts” contained in the column of Federico D. Pascual entitled “MRT Riders Also Pay for Cost of Corruption” that appeared in the Philippine STAR last August 12, 2010. It is disturbing that there is a lot of misinformation and baseless innuendos for a columnist such as Mr. Pascual and in a publication such as the Philippine STAR. In reality, this group of respectable corporations that include Ayala Land Inc., Greenfields Development Corporation/Unilab Group, Anglo-Philippines Holdings Inc./National Bookstore, the Ramcar Group and Fil-Estate Corporation entered into a private-public venture at a time of great uncertainty in the Asian region, to do a landmark project that also offers numerous economic benefits to Metro Manila. It is in fact a perfect business model for public-private partnership that the government should replicate in these trying times.

The statements that have no factual basis that appeared in the column of Mr. Pascual are as follows:

1. “The plan to raise the fare in the light rail transit lines in Metro Manila is a tough balancing act for the Aquino administration seeking to cut losses without overburdening an estimated 750,000 daily commuters.”

We would like to call your attention that the actual average peak ridership of the MRT3 System is not 750,000 passengers a day, but average peak ridership is 500,000 passengers a day. Further, the train fare, as compared to say, Hongkong, where the minimum rate between two stations is already HK$9, or P54, is unreasonably low.

2. “MRT-3 has been taken over by the government through the Land Bank and the Development Bank of the Philippines from a private consortium led by the Sobrepeña family.”

We are formally informing you that the Metro Rail Transit Corporation owns the rail assets of the MRT3 System, while Metro Rail Transit Development Corporation (MRTDevco) owns the commercial development rights including the depot, selected stations, advertising rights and others.

Please be further informed that Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) own only a 23% equity share of Metro Rail Transit Corporation (MRTC). The current board members are nominees of the original MRTC shareholders, except for the equity shares formerly held by Ayala Land Inc. and Allante Realty.

3. “COSTLY CORRUPTION: The sad thing about the light rail operations is that taxpayers could be subsidizing not only government advances but also the high cost of corruption. The private investors who built and operated the MRT-3 had to recover their expenses — plus the 15-percent profit they were guaranteed to recoup”…… “In addition to the sovereign guarantee, the investors were guaranteed a whopping 15-percent profit. This means that whatever happens, these capitalists will walk away with 15-percent more than their investment”…….“The problem was that the expenses included the high cost of negotiating and acquiring the contract from the top authority and nursing it down through the bureaucracy. Any investor will have to input these hidden extra expenses into his computations. The fare would be much lower in build-operate-transfer (BOT) systems if these abnormal expenses were minimized or, in the words of the former NEDA Secretary Romulo Neri, if only approving officials moderated their greed”.

This public private partnership project was bid out and awarded during the term of President Cory Aquino and was upheld in April of 1995 by the Supreme Court and was approved by the ICC-NEDA during the term of President Ramos. The private consortium built the system at no cost to Government, on time and within budget, unlike most government projects which are over budget but surprisingly are not even being reported.

The DOTC granted a 15% Internal Rate of Return guarantee over 25 years to MRTC’s US$190 million investment in return for MRTC’s guarantee to complete the project within US$679 million budget and 2-year project duration.

All cost overruns are to the account of MRTC and MRTC will pay the government liquidated damages of US$100,000 for every day of delay. The LRT-2 System, in comparison, was also started in 1998 by Light Rail Transit Authority and was completed until 5 years after the MRT3 project was completed. This immense delay in the LRT-2 project potentially represents a minimum liability of US$180 million in liquidated damages if government projects were given the same strict restraints and guidelines as the MRT-3 project. This is to prove that it was no sweetheart deal.

The Build, Lease Transfer (BLT) Agreement between the DOTC and MRTC shareholders was signed in 1998 and the base fare was set at P17.00 when the US$ exchange rate was 27 to 1. This base fare should be adjusted for reasonable bandwidth for foreign exchange and inflation movement from date of signing of the BLT Agreement, but was never implemented by the previous administration.

Also, the columnist didn’t take into account the abnormal bandwidth of the depreciation of the Philippine Peso against the US$ after the Asian Crisis. The Philippine Peso to US$ exchange rate was P27.00 to US$1.00 entering the year 1998, and depreciated almost 100% to P50.00 to US$ 1.00 by the year 2000.

After investing US$190 million, MRTC shareholders held the right to collect the full amount of the Equity Rental Payment for the period 2000 to 2025. MRTC shareholders eventually discounted their receivables and sold the MRT3 Bonds, which were mostly picked up by foreign bond holders.

DBP and LBP acquired an estimated 80% of these MRT3 Bonds from the foreign bond holders to save the Philippines at least US$300 - 400 million if it were re-financed during the past administration. However, LBP and DBP has chosen to collect the full face of the MRT3 Bonds instead of refinancing the remaining balance of the MRT3 Bonds. It is DBP and LBP who are benefiting from the collection of the full face of the MRT3 Bonds and not the MRTC shareholders. GMA-appointed DBP and LBP executives continue to misrepresent to the DOTC and the National Development Corporation (NDC) that ownership of the MRT3 Bonds is equivalent to ownership of the MRTC shares.

4. “The investors did not have to pay for right of way on EDSA. They got bonuses from the leap in the commercial value of their stations, advertising revenues from the MRT structures and the collateral boon to supermalls built at busy terminals. An investor need not have any track record in the operation of light rail systems. All he needed is “laway,” meaning the right connect and right approach to the approving authority.”

We would like to remind the public that in 1998 when the MRT Consortium invested in the MRT-3 project, the North Triangle Area was occupied by 5,000 informal settlers and frequented by criminal elements. The development spearheaded by MRTDevco changed the depressed area into a bustling commercial business district in this millennium. The surrounding residential communities were also grateful for the ensuing peace and order situation which was greatly improved. This area is now contributing to the tax income stream of the local and national government.

The MRT-3 Consortium that includes Ayala Land Inc., Greenfields Development Corporation / Unilab Group, Anglo-Philippines Holdings Inc./ National Bookstore and Ramcar Group already have a successful track record in the development of commercial business districts before the development of the MRT3 System and did not relay on “laway” as reported by Mr. Pascual. These companies’ confidence in the Philippine economy and keen a business sense led to a venture to what was then an ambitious development against the backdrop of the Asian financial crisis. Bunching MRT3 Consortium in the same fold as the unfortunate Secretary Neri and the anomalous transactions of the past administration maligns the track record these companies.

We have provided you with the “facts” that we pray you will allow to be published in your respected newspaper to grant our companies and shareholders an arena that upholds just and accurate reporting, as well to have Mr. Pascual correct the inaccuracies and malicious drift of his column that has maligned the respectable members of the MRT consortium, which include several listed corporations.­