MRTC welcomes government initiative for a review of MRT-3 fare

MANILA, Philippines - President Aquino’s declaration that the previous administration’s action of absorbing huge subsidies in maintaining low MRT3 fare that is cheaper than comparable bus fares is consistent with the representation by the Metro Rail Transit Corp. (MRTC) shareholders to the previous administration.

Arnold Laigo, assistant vice president of the MRT group of companies, said that under the Build, Lease Transfer (BLT) agreement that was signed in 1998 between the Department of Transportation and Communication (DOTC) and the MRTC shareholders, the base fare was set at P17. He further stated that this base fare should be adjusted for foreign exchange and inflation changes that happened since the signing of the BLT agreement, and that they have been pushing government to increase these fares since 2004.

The 1998 Asian financial crisis materially affected the US dollar-based operating expenses of both LRT2 and MRT3. Both projects started in 1998 when the exchange rate was P25 to $1 and completed after the Asian crisis when the exchange rate increased to P50 to $1. As a result, DOTC already presented before a congressional committee on transportation a minimum fare of P17 and maximum fare of P34 as early as February 2000 up to January 2001 to address this economic adversity. This proposal was put on hold by the previous administration even when MRT3 fare is less than comparable bus fare rates.

Generally, rail transit fares are higher than comparable bus fare rates according to Laigo. This will minimize government support for the 500,000 passengers along the EDSA corridor who are looking for an all weather reliable and timely means of transportation. The MRT-3 Project was delivered in operating condition at no cost to the government. In effect, the government only starts paying for the project once it is operating and government has received revenues from operations. This clearly shows that this is a favorable business model that should be used for other infrastructure projects to conserve government funds. This is the opposite for the LRT-1 and LRT-2 projects which were fully funded by the government and went beyond the project cost and scheduled completion date.

Also, the MRTC shareholders welcome the initiative of the government to review the procurement by government financial institutions (GFI) of the MRT3 bonds, according to Laigo. It was also stressed that what DBP and Landbank bought was the bonds representing the cash flow from MRT-3 Phase 1 as issued by the MRT III Funding Corporation, Ltd. (not MRTC the company), and 23 percent of the shares of stock of MRTC from the foreign shareholders of MRTC. The original shareholders of MRTC still own 77 percent of MRTC through MRT Holdings, Inc. The DBP and Landbank board representatives in the MRTC board sit as nominees of these original MRTC shareholders.