China cuts loan rate for PNR Bicol

MANILA, Philippines — The Philippines is starting to look for other options in financing the revival of PNR Bicol even though China is now open to reducing the interest rate for the project’s loan.

The Department of Transportation (DOTr), with help from the Department of Finance (DOF), is weighing its alternatives on how the Philippine National Railways (PNR) South Long Haul will be funded in the event that negotiations with China fall apart.

PNR general manager Jeremy Regino said traditional funders like the Asian Development Bank and Japan International Cooperation Agency could save the project from getting scrapped.

Regino said China is willing to slash the interest of the loan for the PNR South Long Haul, also known as PNR Bicol, to 2.5 percent from three percent. Nevertheless, this remains far from the 0.1 percent offered by Japan.

Apart from obtaining official development assistance, the DOTr is assessing the viability of taking on a hybrid mode in financing PNR Bicol. Under this, the government will combine its resources with ODA and private funds in building the project.

Regino admitted that the government faces the same challenges on the negotiating table: first, on the interest that China wants to place on the loan, and second, on whether Beijing still has the PNR Bicol as a priority.

In September, Transportation Undersecretary Cesar Chavez told lawmakers that the DOTr plans to terminate the project management consultancy contract with China Rail Design Corp. (CRDC) for PNR Bicol.

If terminated, this will send a signal to Beijing that Manila is indeed serious in talking to another financier that can bankroll the project.

China was supposed to provide the loan for the civil works for PNR Bicol, Mindanao Railway Phase 1 and

Subic-Clark Railway. However, the previous leadership at the DOF withdrew the loan request because of reported inaction from Beijing.

Further, China was demanding an interest of three percent on the loans for the railways. Despite the high loan rate, President Marcos directed his economic managers to renegotiate the loan for PNR Bicol in the hope of securing a favorable rate this time.

In 2019, the Duterte administration awarded the P14 billion contract for the project management consultancy of PNR Bicol to CRDC, giving the company the authority to design the rail system that seeks to reconstruct the Manila to Bicol line.

The PNR Bicol, once completed, will reactivate the rail services in Southern Tagalog and Bicol Region, running for almost 600 kilometers between Calamba, Laguna and Daraga, Albay.