When will the bleeding stop?

The metro rails are bleeding the government coffers about P5 billion a year in subsidies. If these rails were all state-owned, it would have been more understandable. But one of our three major rail systems, namely the MRT 3, is a private project, and yet the government is forced to pay for the loans taken to build the tracks. This is so because the Ramos administration agreed to give the consortium led by Fil-Estate and Ayala Corp. a guaranteed 15-percent return on equity.

In addition to the payment of the consortium loans, the government is also shelling out huge sums of money to Metro Rail Transit Corp. as monthly rental of the facility.

The funny thing is that while government makes all of these payouts, it does not get any share on the revenue from all advertisements, whether painted on the trains or posted in any portion of MRT 3 establishment. All revenues accrue to the private consortium.

Decision to subsidize fares

There’s an explanation that’s being offered to account for this bizarre tale. The culprit, according to government planners, is the inadequacy of the MRT 3 fare to cover the rental fee plus other incidental overhead costs owed MRTC.

To cover all costs in constructing and operating the MRT 3 line, the calculated economic fare in 1988 when the project was approved should have been P30 per passenger. The Estrada administration, however, decided that the riding public could only afford between P9 and P15.

Even with the successive crude oil price hikes, which had swelled the cost of power and spare parts, MRT 3 (along with state-owned LRT Lines 1 and 2) was unable to increase fare rates. And when GMA took over from Estrada, her administration also decided to continue subsidizing the metro rail operations. Part of the tax payments of millions of Filipinos now goes to subsidizing the fare of 800,000 people who use the trains daily.

Cheap rates

The government is subsidizing an average of P30 to P40 for every railway passenger. In Line 1, the subsidy is about P24 for each commuter and in Line 2, about P40 each passenger. The subsidy per passenger for MRT 3 is even bigger.

As a result of Malacañang’s political move to continue subsidizing the increasing cost of the metro rail operations, MRT 3 and the LRT lines have become the cheapest mode of transport today, a lot less expensive than jeepney and bus rates considering the trains are air-conditioned and there is no traffic along the tracks.

At least, the public is getting some benefit from state coffers instead of letting corrupt officials dry these wells. But for how long can the government afford to bleed for artificially low metro train fares?

Future projects

Now comes another ambitious mass transport project, the MRT 7. As discussed in my earlier column (Decongesting Metro Manila, Philippine Star, Dec. 12, 2005), this project, as recommended by the Dept. of Transportation and Communication, will link SM City in Quezon City to San Jose, Bulacan. The project proponent is a group called Universal LRT Corp. headed by Israeli businessman Eli Levin.

The $2-billion mass railway project has a real estate component where the consortium is committing to construct 2,500 residential units and 300 office units each a year on its 174-hectare lot in Bulacan. The group also promised to build a 22-kilometer road in Bulacan and a 20-hectare bus and train depot to improve the access to and from MRT 7.

In exchange, the government will subsidize some $108 million each year for the MRT 7’s first 10 years of operations. The project proponents say that the government can easily raise that amount from the taxes that the real estate project will generate.

Learning from past mistakes

The consortium wants the government, in effect, to pay its loans while getting a guaranteed return of 11.9 percent. Is this MRT 3 all over again? Surely, the government cannot afford another MRT 3. Now Levin’s group, according to newspaper reports, is even asking for a higher rate of return than the 11.9 percent that the NEDA-ICC had approved.

MRT 7 proponents are saying that the project’s real estate component will subsidize the recommended P20 fare per passenger, a far cry from the computed economic fare of P80.56 per person. What if the real estate component doesn’t click? Will our cash-strapped Philippine government come to the rescue again?

The consortium line-up though, is quite impressive. Levin claims that the SM Group of Henry Sy owns 60 percent of the real estate arm and 25 percent of the railway project.

Other supposed investors are Siemens, Alstom, China Railway 18, EEI Corp. of the Yuchengcos, Merlin Capital of the Tong family, George Go of Equitable PCI Bank, and exporter Sergio Ortiz-Luis. Levin is also wise to have on board influential economists like Roberto de Ocampo and Romeo Bernardo.

Can’t afford another burden

There are kinks that Levin’s group has to iron out before the project can commence. More than securing the final approval of the Cabinet level NEDA-ICC, they must show that this project will not turn out to be another burden to the Filipino people. If the potential of the project is that good together with the backing of credible industrialists and capitalists, then financing can be generated without government guarantee.

The government has been bled dry by many projects that showed a lot of promise but in the end could not deliver. It is about time, for instance, that the government gets out of the railway business.

It can start by privatizing the LRT lines. It can also try to sell the Philippine National Railways although at this point, no investor in his right mind would want to buy it. The PNR is, perhaps, the best example of why the government is not fit to run mass transport systems

Casino Filipino Angeles catches poker fever

The rash of non-wager poker tournaments has finally reached Angeles City in Pampanga. Casino Filipino Angeles branch manager Alex Ozaeta has recently announced that a team has been formed to plan and implement the staging of the 1st Casino Filipino Angeles Hold’em Tournament. The red-letter day is 4th February 2006.

Hold’em poker is not new to Angeles poker enthusiasts considering that the game has its origin from United States, and local folks had seen the game being played by American personnel from the former Clark Air Force Base. Branch manager Ozaeta and his team will also benefit from the lessons learned during the earlier staging of poker tournaments at Casino Filipino Tagaytay and Airport Casino at Parañaque.

To ensure the professional handling of the games on 4th February, several experienced card dealers were hand-picked and specially trained by the Pagcor training team headed by Dennis Dacanay. On the operations and marketing side, a committee chaired by Demetrio P. Santos, shift manager, meets weekly to sort out details and pave the way for a smooth promotion and managing of the much-anticipated tournament.

The champion of the 1st Casino Filipino Angeles Hold’em tournament automatically earns a guaranteed seat to the Main Event of the Philippine Poker Tour Million-Peso Hold’em Championship scheduled on 8th and 9th April 2006 at Airport Casino Filipino Parañaque. For more details about the biggest non-wager poker tournament with guaranteed prizes, visit www.PhilippinePokerTour.com <http://www.philippinepokertour.com/>or call Secretariat (c/o Cindy) 817-9092 or 812-0153.

Should you wish to share any insights, write me at Link Edge, 4th Floor, 156 Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected] or at [email protected]. If you wish to view the previous columns, you may visit my website at http://bizlinks.linkedge.biz