UP twits wrong firm in Northrail

Mistaken identity works as comedy plot. In governance or diplomacy mistaken identity can lead to tragedy. That is what happened to the opinion of the U.P. Law Center on the North Luzon Railway to be laid by the China National Machinery and Equipment Corp. (Group), or CNMEG.

Senate boss Frank Drilon had commissioned the study after Congress trashed Gloria Arroyo’s impeachment, in which Northrail was a complaint. Among U.P. Law’s conclusions was that CNMEG, personally picked by two Chinese presidents and two prime ministers for the work, is a mere import-export firm with no ability or experience in railways in China or elsewhere.

The item slighted officials of CNMEG, which up to 1997 used to be China’s Ministry of Machineries with 70 subsidiaries, and whose chairman holds cabinet rank. Having built through some of its 50-year-old ancillaries most of China’s 70,000 km of rail, CNMEG is the country’s 6th largest state firm. Engineering News Report lists it 37th of 225 top constructors worldwide, with business turnover of $4.7 billion and income of $3.6 billion in 2004, in such lines as power generation and transmission, port construction, mining, metalwork, telecommunications, petroleum and chemicals, environment, agriculture engineering, construction materials, and spacecraft parts. In railways alone, among its recent works were: rehabilitation of 78 km in Angola, subway electricity and ventilation in Iran, 90 locomotives and 74 trains to Turkmenistan, the Karachi light railway, and 200 km in Jamaica. In China: Qing Shen tracks of 400 km and 300 km/hr trains, Shuo Huang rail (600 km), Da Qin rail (500 km), Nan Kun rail (800 km), Qing Zang rail (900 km), Jing Bing light rail (45 km), Chongqing light rail (21 km), Guangzhou subway Line 2 (31 km) and Line 4 (45 km), and Nanjing subway (22 km). It is about to lay tracks from Beijing to Tibet, all of 1,000 km and up to 4,000 meters above sea level.

How could U.P. Law have missed all this?

The answer is in its report. U.P. Law had searched the Internet for "CNMEC", which it thought to be the acronym of "China National Machinery and Equipment Corp. (Group)," What appeared on its computer screen was "China National Machinery and Equipment Import-Export Corp. (CNMEC)". From there, U.P. Law deduced that "CNMEG", the Group, was a fraud disguising as "CNMEC". What it failed to state – advertently? Northrail officials ask – is that CNMEC, truly engaged in import-export, is but one of CNMEG’s 70 subsidiaries.

It was clearly a case of mistaken identity. Yet from its "discovery", U.P. Law accused Northrail of deliberate lying, supposedly by deleting from the construction contract the "Import-Export" portion of CNMEC’s full name. In turn, Drilon goaded the Senate to investigate as a committee of the whole, only the tenth time it will be so constituted since 1987 and risking a diplomatic tragedy with China where he often vacations.

Ren Hongbin, CNMEG chair and Chinese cabinet member, refuses to speak ill of U.P. Law’s clumsy research and Drilon’s consequent fooling. Instead he invites inquisitive senators for a look-see of CNMEG’s facilities. He can be reached at the CNMEG compound on #5 Nanwuxiang, Sanlihe, West District, Beijing 100045. Tel.: 8610-68595816. Fax: 8610-68595629. E-mail: [email protected]. For more info: www.cnmeg.com.

At any rate, after U.P. Law mistook CNMEC for CNMEG, Drilon rushed to declare its contract anomalous, implying kickbacks. Here again, Northrail officials are surprised. China Export-Import Bank is financing the project from a $400-million loan, 20 years to pay, with five years’ grace period on the principal, at 3 percent interest, and with RP putting up only 5-percent equity ($21 million). This is much softer than preferential loans China Exim grants to other poor nations: 15-year repayment, three years’ grace, 4-1/2 percent interest, and 15 percent counterpart. In Northrail, China Exim releases money directly to CNMEG based on progress billings. This modern practice by international lenders prevents not only work delays from fund squeezes, but also the possibility of kickbacks. The only money that changes hands between China and RP is from the latter to the former, in the form of interest payments, as in the first such remittance for China Exim’s first release early this year of $100.02 million. No kickbacks there.

This again can be easily checked with Liang Xiang, China Exim assistant president directly in charge of the Northrail loan. Her address: #77 Beiheyan St., Dongcheng District, Beijing 100009. Tel.: 8610-64099016 or 64099127. Fax: 8610-64005186.

Another U.P. Law opinion is that CNMEG’s contract is illegal since it has no license to operate in RP. Too, that there was no public bidding, in violation of the Government Procurement Reform Act. From there, Drilon proceeds to compare Northrail with his pet Iloilo airport project funded by Japan.

Northrail retorts that U.P. Law must be unfamiliar with foreign contracting. For, all international contractors now awarded or doing work in RP have no local licenses. (The Taisei-Shimizu-Kajima consortium of Japan had no RP license when it began work at Drilon’s airport; in fact, Kajima had no license even in Japan, having been suspended for bribing a construction minister.)

Too, there couldn’t have been any public bidding for the Northrail tracks and trains, since the cabinet has drafted implementing guidelines of the Procurement Act only for local contracts. Drilon’s airport did undergo some sort of bidding, in which the Japanese lenders questionably imposed Taisei-Shimizu-Kajima on the transportation department. And that’s no comedy either.

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