Concession, property issues hound EDSA Busway privatization

MANILA, Philippines— The Department of Transportation (DOTr) faces multiple challenges in privatizing the P551-million EDSA Busway, ranging from searching for a competent operator to property sharing with the Metro Rail Transit Line 3 (MRT-3), according to industry experts.

In interviews with The STAR, experts advised the DOTr to resolve various conflicts first before it pushes through with its plan to privatize the busway next year.

They said the DOTr should identify first the terms of reference (TOR) what segments of the EDSA Busway would be turned over to its future operator.

Infrawatch PH convenor Terry Ridon said the busway contains two segments that can be bid out to the private sector: maintenance and development; and bus operations. He said the DOTr may face difficulty finding a bidder that can do both, especially as they require particular expertise.

“More importantly, station development and busway operations are entirely separate businesses which have very specific competencies. Government should be mindful of this clear distinction if it undertakes a broader privatization proposal,” Ridon said.

“Including bus operations will certainly raise some concerns from the current busway operators whose operations will be terminated under a new contract,” he said.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the government has to prove that the EDSA Busway is a profitable infrastructure and that returns outweigh risks to entice the private sector to take it.

“It is important to have predictable returns and risks for the private sector partners, level playing field, equitable sharing of risks with the government, sanctity of contract – not changing the rules in the middle of the game – arbitration and dispute resolution mechanism, strong institutions and rule of law, good governance and aligned with global best practices,” Ricafort said.

Ricafort said transport services like the busway may be easy to privatize given that these assets pay off faster than usual with a captured market using them. However, complications arise when the government, as the regulator, has to consider the interest of commuters as well.

In May, the Light Rail Manila Corp. (LRMC), which operates the Light Rail Transit Line 1, filed an arbitration case against the government.

LRMC wants to recover at least P2.67-billion in losses arising from the delays in fare hikes it sought in 2016, 2018 and 2020.

Ridon said another issue that the DOTr would face in privatizing the EDSA Busway is the looming transfer of the MRT-3 to another operator by 2025.

At present, the busway has 17 median stations and four curbside stops, a number of which are linked to MRT-3 stations to ease the transfer of commuters between the transport units.

The DOTr is expected to sign a new contract for the operations and maintenance of the MRT-3, as the 25-year concession with  the Metro Rail Transit Corp. is ending in 2025.

With 2025 nearing, Ridon said the DOTr should inform the future operator of the EDSA Busway of issues that could arise from space sharing with MRT-3. If left unsettled, these problems could prevent the busway concessionaire from upgrading the infrastructure.

“The government should also clarify how the busway privatization would be integrated into the plan to privatize MRT-3 by 2025, as certain busway development projects may be limited by existing MRT-3 property rights. MRT-3 stations are currently being used as part of the busway system,” Ridon said.

Data obtained by The STAR showed that the DOTr spent at least P551 million to put up, improve and manage the busway from 2020 to 2022.

Transportation Secretary Jaime Bautista said the DOTr plans to turn over the EDSA Busway to the private sector by next year, leaving its future operator the duty of maintaining it and the perk of profiting in return.

With the privatization set in motion, the government will no longer extend its free ride program at the busway that serves nearly 400,000 commuters daily.