Monetary Board nod needed for China Eximbank P2.72-billion fund

MANILA, Philippines – The government must secure approval from the Monetary Board before signing a loan contract with China for phase 1-A of the P16-billion South Rail Project, the Department of Justice said yesterday.

In a legal opinion, Justice Secretary Agnes Devanadera said the President may contract or guarantee foreign loans on behalf of the government with the prior concurrence of the Monetary Board.

“The subject loan facility still needs prior concurrence of the Monetary Board in order to be valid and effective pursuant to Section 20, Article VII of the 1987 Constitution,” she said.

The separate approval of the National Economic and Development Authority is also needed, Devanadera said.

Finance Secretary Margarito Teves sought the DOJ’s opinion on the matter since 95 percent of the project’s cost would come from Export-Import Bank of China.

Teves wanted to know if it would be legal for him to sign the contract on behalf of President Arroyo.

Devanadera said she sees no problem with it as long as he brings with him a full power/special authority from Mrs. Arroyo when signing the contract.

Teves also sought the DOJ’s opinion on whether a prior appropriation from Congress is necessary for the entire South Rail project, where the government would provide for 17 percent of the total cost or P2.72 billion.

Devanadera told Teves to seek the advise of the Department of Budget and Management, which is responsible for the formulation and implementation of the national budget.

However, appropriation of debt service should be “automatic” under Republic Act 4860, the Foreign Borrowings Act, she added.

Devanadera said the Government Procurement Policy Board (GPPB) must resolve the issue of whether the Chinese government’s designation of China National Technical Imports and Export Corp. as contractor for the project would be consistent with Philippine law.

“The GPPB has broad legal mandate to protect national interest in all matters affecting public procurement, taking into account the policy repercussions of addressing the question involved,” she said.

The South Railway Project involves three phases to be implemented from 2008 to 2011: Phase I-A for the rehabilitation of the existing line from Calamba in Laguna to Lucena in Quezon; Phase I-B for the rehabilitation of the line from Lucena to Legaspi; and Phase II for the extension of the line from Comun, Camalig in Albay to Matnog in Sorsogon.

It is expected to divert some 28 percent of road traffic and decongest the existing road network. 

The forecast daily passenger load per segment ranges from 8,654 passengers (Sariaya to Lucena segment) to 27,800 passengers (Manila to Calamba segment) in 2010.

Revenues of the project would come from train fares.