Supporting the President's call

The administration of President Aquino is set to launch this October its private-public partnership (PPP) program to encourage private investors to bankroll big-ticket, labor-intensive infrastructure projects.

But this early, some government entities already appear to be working at cross-purposes with the President’s PPP campaign.

Take the case of the Manila Metro Rail Transit 3 system (MRT) along EDSA, which has been cited in the international community as a model for other PPPs in the world insofar as light rail transit projects are concerned.

The MRT 3 was built without spending a single centavo taxpayers’ money until its operation, and was delivered to the government on schedule and in good operational condition.

Under its agreement with Metro Rail Transport Corp. (MRTC), the government only starts paying for the project once it is operating and starts earning revenues from it. The Equity Rental Payments (ERPs) that the Department of Transportation and Communications (DOTC) is mandated to pay to investors for building MRT 3 is equivalent to a 15 percent internal rate of return (IRR) for the 25-year duration of the Build-Lease-Transfer (BLT) agreement.

However, instead of being an instrument that would attract investors, the EDSA MRT project is now becoming a bane to its private partners, particularly MRTC’s business arm—the MRT Development Corp. (Devco).

Some sectors are questioning why one particular DOTC official seems to have taken a personal crusade against Devco.

They say DOTC assistant secretary for administrative and legal affairs Raquel Desiderio has reportedly been issuing letters without the authority of her superiors, to act against Devco and favor its corporate adversary Trackworks.

Desiderio had sent a demand letter last June 22 to Devco, for the payment of over P1 billion representing Devco’s unpaid development rights payments (DRP) to DOTC since 2005. The letter was not coursed through then acting DOTC secretary Anneli Lontoc, and had been sent straight to Devco without seeking the authority of her superiors. 

In response to this demand letter, Devco wrote back to Desiderio and implicitly stated that it knows that she is assisting Trackworks inspite of court orders prohibiting the DOTC from doing so.

According to Devco, Desiderio’s computation omitted the fact that the former no longer had to make DRPs on the undeveloped areas of the EDSA MRT, particularly 11 of its 13 stations, because these reverted to the DOTC upon the completion date of the project as stated in the BLT contract signed between the DOTC and MRTC. 

Because Desiderio had included DRPs that Devco no longer had to pay, the amount ballooned to P1 billion.

As MRTC’s business partner, Devco was assigned the development, commercial and advertising rights to the EDSA MRT structure.

Devco called on the official to categorically state in writing that her demand means that: first, the DOTC does not recognize certain provisions of the BLT Agreement and second, the DOTC has “re-awarded” the development rights to Devco on the undeveloped areas of the EDSA MRT, which was automatically reverted to the DOTC on July 15, 2000,  without the benefit of any public bidding.

Devco also asked Desiderio to furnish it a copy of the notice of re-award to Devco if she wants the DOTC to be paid P1 billion.

Moreover, Devco also warned her that she was opening herself to a graft case by insisting on the payment because her act means that the DOTC had unilaterally re-awarded the development rights to the undeveloped areas of the MRT to Devco without public bidding. The fair market value of the undeveloped areas in the MRT has been appraised at P5 billion.

Meanwhile, Devco is now saying that it may have even overpaid the government by P64 million and is entitled to reimbursement, because the DOTC and the MRTC had made errors in computing the airspace above the 13 MRT stations that need to be developed. The DOTC had pegged a total area of 16 hectares against an actual area of only 12 hectares.

Now for the battle between Devco and Trackworks.

As the business arm of the MRTC, Devco was given the sole authority and prerogative to exercise advertising rights in 13 stations of the MRT 3 system.

Devco named Trackworks as concessionaire authorized to sell advertising space in the EDSA MRT structure in 1998. The agreement was extended up to 2015,

Trackworks is now demanding P504 million from Devco as reimbursement, claiming the latter had no right to collect the payments because the owner and builder  of the MRT, MRTC, holds the development rights to the project.

But according to Devco, it has been awarded by MRTC the development rights to the MRT, recognized by no less than the DOTC when it forged a tripartite agreement with the two parties in August 1997.

Devco claims that Trackworks has been resorting to such desperate means because it has to pay the former P367 million in dues.

Devco has terminated its agreement with Trackworks last year due to non-payment of dues and has forged a new contract with its new advertising partner Media Puzzle.

Trackworks filed separate complaints before the Pasig and Makati regional trial courts against Devco to stop it from terminating their contract. It also sued Devco for P504 million.

But the courts threw out Trackworks’ petitions against Devco in at least four instances, pointing out that their contract was already terminated as of September last year when it ignored a final demand letter from Devco to settle its debts to the company.

Devco also claims that the the temporary restraining order (TRO) issued by the Makati City Regional Trial Court against Devco and Media Puzzle, based on Trackworks petition, had already lapsed last June 3. Thus, the permits issued by the DOTC to Trackworks on June 9 had no legal basis.

It added that the Makati MTC had also denied Trackworks’ plea for an injunction to prevent the DOTC from issuing any kind of permit to Devco, which means that the DOTC has no legal ground to withhold access permits to Devco and Media Puzzle.

The company also pointed out that the forfeiture of development rights to the government in the undeveloped areas of the MRT on July 15, 2000 excluded the advertising and commercial rights, which was still retained by Devco.

Let us hope that for the sake of the riding public, the government and the courts will finally put a stop to this mess that the MRT system has found itself embroiled in. If the PPP program were to work, we need to send out good signals to the business community. And so far, we have not been doing a good job.

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