China flakes out of railway projects

Apparently, all the kowtowing of Duterte before his Emperor in Beijing didn’t deliver the funding he was expecting for several rail projects, including the one in Davao, his campaign promise. Yet, Duterte continues to whisper sweet nothings to Xi Jinping.  Duterte once again paid obeisance to his master in Beijing last Monday. He should have asked why his projects were abandoned.

China flaking out is not surprising. It was obvious China was just toying with Duterte so he would give up on the West Philippine Sea. In 2020, Duterte’s own socioeconomic planning secretary Ernesto Pernia said China was “slow” in providing funding for the country’s infrastructure projects.

In contrast, the Japanese quickly funded rail projects that would connect Clark with NCR and Calamba. Not only that, Japanese ODA only charges 0.25 to 0.75 percent interest compared to the two to three percent for Chinese funding. And Japanese assistance comes with no political strings attached unlike with the Chinese, as we have seen in countries where they provided infra funding. Japan is also financing a megaproject, the Metro Manila subway.

The only fruits of Duterte’s embarrassing servile attitude towards China are the Binondo-Intramuros and Estrella-Pantaleon bridges costing P5.9 billion. China was also supposed to fund the building of the Kaliwa Dam, but that seems to be going nowhere. We should cancel that too and accept the offer of the Japanese to build a weir instead, which is easier to build, provides just about the same benefits, with least disruption to the mountain communities.

In a report by Jacque Manabat of ABS-CBN News, she quotes DOTr Usec Cesar Chavez saying the China-backed railway projects could not move forward because they have yet to be funded.

“Ang gusto nating malaman ng tao, walang pondo. Para sa Calamba to Bicol, iyong P142 billion na pinag-usapan, walang pondo iyan. Iyong Clark to Subic, walang pondo yan. Iyong Tagum-Digos, yung 110 kilometers, walang pondo yan,” Chavez said. He added that they are disclosing this “to manage expectations ng taumbayan, by both Houses of Congress, the Cabinet and the people… Iyong mga umaasa.”

The 380-kilometer PNR connection from Banlic, Calamba to Daraga, Albay was the largest contract among railway projects in the pipeline. On Jan. 18, 2022, Duterte’s DOTr awarded the contract for the PNR Bicol Package 1 to the Chinese joint venture China Railway Group Ltd, China Railway No. 3 Engineering Group Co. Ltd., and China Railway Engineering Consulting Group Co. Ltd.

The PNR Bicol Package 1 construction was expected to be completed by 2024, and would start operations by the third quarter of 2025. The P83-billion Mindanao Railway Project, which was set to begin its Phase 1 construction for the Tagum-Davao-Digos segment in January 2019 was also left stranded with the Chinese bailing out.

Then finance secretary Carlos Dominguez III tried following up on the Philippines’ loan applications with China. Because there was no reply, they were withdrawn.

Chavez added that President Marcos instructed them to reopen the loan application and renegotiate with the Chinese government. Probably should leave this at that because it may be a blessing that China is not involved in funding the rail projects given its propensity to use such funding for political leverage.

A transport expert told me that the Subic-Clark Railway is not viable anyway and is likely to end up as a white elephant. The expressway and the public highway connecting Clark with Subic are more than sufficient to move cargo from both points. The Davao Railway, he said, is also not economically viable, which is probably why ADB bailed out, followed by China.

The Bicol Railway is viable, he said, if they make it bare-bones, but unfeasible with the gold-plated specifications made by the Duterte DOTr. Also expected to affect the economic viability of the Bicol railway project is the expressway that San Miguel is supposed to build. But Ramon Ang of San Miguel said both are economically viable side by side and he is interested in both.

Now, the current DOTr is looking at private sector support for the railway projects abandoned by China. Transportation Secretary Jaime Bautista said they “are looking for private investors for such projects, such as the PNR North Long-Haul that will link Metro Manila to the Ilocos and Cagayan regions; the South Long-Haul project that goes all the way to Bicol; the Subic-Clark Railway; and the Mindanao Railway project, a hybrid passenger and freight line that will be the first railway in Mindanao.”

DOTr is also awaiting approval of NEDA to start building MRT-4, which stretches nearly 13 kilometers from San Juan to Taytay, Rizal to serve 400,000 passengers daily. They are trying to get a $537.4-million loan for MRT-4 from Beijing-based Asian Infrastructure Investment Bank (AIIB).

There is also apparently a plan to build, via PPP, the San Mateo Railway – which will run from Marikina City to San Mateo and Rodriquez in Rizal, with six stations traversing mostly parallel to the riverbanks.

Actually, we should have learned by now from our experience with China building the original NorthRail under then president GMA. The project was plagued by reports of corruption that made the costs too high and had to be eventually abandoned. We ended up paying back the loans released by China on that project. What little was accomplished by the Chinese contractor, who had no experience in this kind of project, was demolished by the Japanese when they took over.

It is good that DOTr is now turning to the private sector for funding some of the rail projects. But we haven’t had good experience with private sector involvement in rail, the prime example of failure is MRT3. I heard that Ayala is also not happy with LRT1. Only Ramon Ang has the patience for such projects that get bogged down in government red tape. His MRT-7 took 10 years to get approval.

Indeed, San Miguel has a pending proposal to modernize PNR, which the government didn’t even read. I recall him explaining that the Bicol line will be profitable because he will build logistics depots alongside. In fact, he wants to build the train line to Laoag too. Anyone else? Aboitiz Infra?

Boo Chanco’s email address is [email protected]. Follow him on Twitter @boochanco