Rails

Somewhere along the way, we took a wrong turn. We neglected our rail system.

Much of the problems concerning traffic, transport costs and pollution arises from taking that wrong turn.

Each day, 6,500 truck trips are taken to move containerized cargo from our ports. That amounts to about two million truck trips through our battered thoroughfares each year. That is one of the main reasons our economy loses more than P2 billion each day to unnecessary fuel consumption and manhours lost.

If our port was connected to a rail line, traffic would be vastly alleviated. But when the Tutuban station was converted into a retail mall, we began digging ourselves deeper into the hole.

The Philippine Institute for Development Studies (PIDS) recently released a paper titled “A System-wide Study of the Logistics Industry in the Greater Capital Region.” The paper estimates that the Philippine economy lost P43.85 billion from the impact of the seven-month truck ban imposed by the City of Manila.

Of the core Asean-6 economies, the Philippines ranks last in the World Bank’s 2014 Logistics Performance Index. Here, 98% of passenger traffic and 58% of cargo traffic used our dilapidated road system. The only way we can begin curing those unhealthy ratios is by acting quickly to expand our neglected rail system.

Climate change studies show that CO2 emissions per unit volume of transport of 152 for trucks for business use, 36 for ships and only 21 for rail. The earlier we shift our cargo volume to rail, the more we will be able to reduce our carbon footprint.

Last week, I enviously viewed pictures of scale models of trains to be deployed in Indonesia soon. They resemble “bullet trains” with sleek aerodynamic coaches, a far cry from our ancient box-type coaches from what is left of the PNR line. Assisted by China, Indonesia has begun building a fast rail system in the populous island of Java. This is part of the ambitious “modal shift” in the Indonesian transit system. The same system, if it existed here, would deliver passengers from Laoag to Legaspi in two hours.

The other day, I read a report about India building the same fast rail system from the progressive city of Mumbai. The project, this time, is supported by Japanese aid.

The poor logistical network in the Philippines is a major reason why our exports, made uncompetitive by transport costs, have been declining. It is therefore a reason why we are getting a smaller share of direct investments year after year.

It will not be an exaggeration to say we now have a logistics crisis in our hands. Because government appears too slow to realize the problem, much less to begin acting on it, the private sector has stepped in to do the hard task of finding solutions. On Oct. 28, an important forum will be held under the auspices of the ADR Institute on “Greater Manila Transport Infrastructure Solution: Thinking Beyond EDSA.”

We can no longer rely on the Aquino administration to do the strategic thinking about our logistics problems. Only nine out of the much-vaunted 59 projects in the PPP pipeline have been awarded thus far. Only three of those nine projects have actually begun construction. The other six are mired in all sorts of issues.

This is the main measure of this administration’s failure.

Sasa

One major PPP project apparently mishandled by the DOTC (again!) is the modernization of the Sasa port in Davao City.

The Sasa port project is based on faulty assumptions, making the project extremely expensive because it overbuilds beyond what s economically feasible. It is unlikely anyone would bid on the terms set down by the DOTC for the project.

The PPP tender projects an increase in container traffic at the Sasa Port from 633,000 in 2012 to a whopping 3.1 million by 2040. For 2020 alone, the DOTC projects a 27% increase of 300,000 containers. That projection cannot be supported by any trend in any of the industries using this port.

For example, fully 70% of all the containerized cargo passing through Sasa consists of bananas. Thus an annual increase of 300,000 containers implies an increase of 210,000 containers of banana export. To support that growth in banana exports, approximately 20,212 hectares should be added to banana cultivation in just that year alone. That amount of land is already the equivalent of Mindanao’s three largest banana companies.

Which begs the question: Who will be eating all those bananas?

The unrealistic DOTC projection of cargo volumes for the Sasa port is used to justify the equally unrealistic project cost of P19 billion. If anyone is suckered into these unrealistic projections, the private investor is bound to lose money. The only way the winning bidder could recoup losses of less-than-projected actual increases in throughput is to increase the cost of port services. If port service charges are increased, this will make our exports uncompetitive and lead to our losing market share.

In addition to unrealistic growth projections, the Region XI Development Council imposed additional conditions on the winning bidder. These conditions include the acquisition of an additional 6.2 hectares of right-of-way; specify which party shoulder Real Property Tax and ensure not only affordable port services but also the proper resettlement of informal settlers around the Sasa port facility.

Despite its inflated project costing, it turns out the DOTC-packaged PPP project has not secured the prior approval of the Davao City Council. This is indispensable to actually breaking ground for the project.

No wonder so many PPP projects are stillborn. Agencies like the DOTC design these projects to fail.