Chinese envoy says Beijing open to review of North Rail project

MANILA, Philippines - China’s top diplomat to the Philippines said Beijing is open to a review of the $503-million North Rail project by the new government but would like to see the project continue and brought up to speed without interference.

In a media forum on Wednesday, Ambassador Liu Jianchao said he has met with officials of the Department of Transportation and Communications (DOTC) because China would like to see the project proceed smoothly after a review is done by the agency.

The DOTC announced in July that it would review the status of the 32.2-kilometer North Rail project which runs from Caloocan City in Metro Manila to Malolos City in Bulacan. The project remains unfinished.

Transportation Secretary Jose de Jesus said the DOTC would review the project to find out its status in order to be able to move forward.

The DOTC reassumes jurisdiction over the project after the previous administration gave administrative jurisdiction to the Bases Conversion and Development Authority (BCDA).                    

The alleged overpricing in the project made it the most expensive railway in the world at $25 million per kilometer. Reports said $299 million was added as “cost overrun” to the $503-million original contract price.

“I have talked to DOTC officials and they would like to see the project proceed in a smooth and efficient way. And that is also the wish of the Chinese government and Chinese companies,” Liu said.

“We are open and ready to provide any kind of information the Philippine government needs and we are ready to work for the continuation of the project so that it could be completed at an early date and benefit commuters.

“We are patient but we do wish that things will be speeded up. We are open to review and we would like to see that the project will continue without any unnecessary interference in the future,” he added.

A Transparency International report had cited the North Rail project where corruption risks continue.

The report said the foreign-assisted North Rail project, also funded by the Export-Import Bank of China, had its own issues of corruption, including “alleged onerous terms and conditions imposed upon the Philippine government in the contract.”

During a December 2003 state visit to China, former President Gloria Macapagal-Arroyo signed a Memorandum of Agreement (MOA) between the North Luzon Railways Corp. and the China National Machinery and Equipment Corp. (CNMEC).

On Feb. 26, 2004, a buyer credit loan agreement was made between the Export-Import Bank of China and the government, in order to fund the North Rail project. The bank agreed to lend $400 million of the total $503 million, the remainder to be funded by the Philippine government.

Allegations of corruption in the project were rife, however. Protests began when it was found that the contract had been awarded without going through a competitive bidding process.

Notwithstanding the serious infirmities in the agreement, billions of pesos in public funds will be spent by the government pursuant to agreements in the contractual implementation of the North Rail project once it is resumed.

“Meanwhile, the government continues to pay interest charges for the North Rail project loans to the tune of P1 million ($21,250) a day,” the report said.

Despite these alarming issues, requests from media organizations for certified copies of the North Rail contract from the Philippine National Railways have been ignored.