Forget the dream of Luzon railways

The Senate President’s Office has been misinformed. Experts sensed so upon reading the rejoinder of its chief aide Antonio Gallardo (Feedback, 25 July 2005) to my piece on politics getting in the way of progress, such as the North Luzon Railway.

Stripped of its non-essentials, Gallardo’s reply challenges the 32.2-km project from Caloocan to Malolos on the grounds that:

(1) foreign loans are subject to bidding, or at least a Swiss challenge, under the new procurement law;

(2) any dispute over Northrail shall be decided by Chinese courts;

(3) loan funds should have been "placed under the control of our government";

(4) there is no need for trains since the "route is already adequately served by a network of modern highways" used by a large number of buses and other public utility transport; and

(5) Northrail will use "outmoded locomotives like our PNR trains".

Gallardo’s first complaint holds no water. The Procurement Reform Act (R.A. 9184) covers all national agencies. It has implementing rules for local procurement, but none for foreign loans. A quick check with NEDA would show that no such rules are forthcoming. Thus, the rules of foreign lenders apply. In Northrail’s case, the Chinese government picked its top engineering firm to build the railway.

Nowhere in the contract are Chinese courts given exclusive control over disputes, to the exclusion of Philippine courts. Northrail president Jose Cortes Jr. points to the pertinent provision: "Sec. 15.3 – The Borrower hereby irrevocably agrees that any suit, legal action or proceeding arising out of or relating to this Agreement may be brought in the courts of the People’s Republic of China, and hereby irrevocably and unconditionally submits to the non-exclusive jurisdiction of the aforesaid courts."

At the alleged need to deposit the loan outright in Philippine banks, a finance official laughs, "Do we get the cash when given a credit line by a card company?" To which Cortes adds, "This is not the first time the Philippines entered into such credit facility; it is accepted practice."

Gallardo’s line that trains are unnecessary deserves no rebuttal. Same with his beef that China would provide only outmoded units. That Asian governments are investing in railways debunks him. Too, China happens to be tops in rail construction. It may not supply RP with the expensive ultra-modern magnetic-track railcars it is using in bullet routes, but Northrail promises cheap, comfortable, reliable, safe and fast transport of commuters and cargo. How can a mile-a-minute train be like PNR’s dilapidated units?

Cortes fires a last shot – at Gallardo’s claim that the Spanish Railway Group offered to shoulder the relocation of squatters from PNR’s right-of-way. "That’s fiction," he sighs. "Records show they were not even aware of the number of informal settlers, or ever considered them in their studies."

All this talk about Northrail may now be pointless, however. The Opposition, which now counts though still balks at welcoming the Senate President, has included it in the impeachment complaint against President Gloria Arroyo. The plan to build a railway, first from Caloocan to Malolos, then on to Clark Field and La Union in North Luzon and Fort Bonifacio in Metro Manila, will now be mired in a partly legal, mostly political exercise.

The Opposition could have done well to focus its oust-Arroyo moves on her election rigging or hidden wealth. Too eager to throw in everything to show massive crime, it inserted among Arroyo’s alleged corrupt acts the signing of the Northrail and Piatco projects. The latter is preposterous. Rep. Ronaldo Zamora, who will head the prosecution panel, will find Piatco exploding in his face. It is clear that the Ramos administration had signed the mother contract for Piatco to build and operate a NAIA Terminal-3. As soon as Joseph Estrada became President in 1998, with Zamora as executive secretary, the Piatco deal was revised four times to insert provisos onerous to the government. It was the Arroyo administration that questioned the insertions and had the Supreme Court void the contract.

The Northrail project is a government-to-government deal – China’s biggest foreign project and the Philippines’ first with the emergent dragon. A product of diplomatic initiatives, its roots can be traced back to RP’s prop for China’s entry to the UN Security Council, its adherence to a one-China policy, and the warming of strains over the Spratlys. China’s soft loan irked other governments that wished to lend only double (thus truly overpriced) the $400 million needed for Northrail, the same way China’s $3.2-million military aid to RP rankled the US. Still, it was the best RP had ever come by. A Senate inquiry spurred by the Opposition a year ago turned up nothing wrong with the deal, although it had the Chinese wondering about RP’s politics. Prolonged negative publicity arising from an impeachment trial could make China think twice and rescind the loan. That means kissing goodbye to better housing for relocated squatters, construction jobs for 3,000 Filipinos at a time, and new enterprises springing around Northrail stations.

The effects would be far-reaching. Northrail was but the first of five main railways to be financed through foreign loans. It would have been the model for future deals for a Manila-Calamba rail line with Korea, a Calamba-Albay-Sorsogon line with Poland and again China, and the Iloilo-Roxas Panay line and Cagayan de Oro-Iligan Mindanao line with Austria, Germany and the Arab-owned OPEC Special Fund. Kiss all those goodbye, as well. For, in the Philippines, politics always gets in the way of progress.

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