Government seeks rail financing from other countries

MANILA, Philippines — The government will look for financing arrangements from other countries for railway projects that China has offered to finance at exorbitant rates, a finance official said yesterday.

While the Marcos administration will still pursue negotiations with China for the railway projects, Finance Undersecretary Mark Dennis Joven said alternative funding sources would also be explored.

Earlier, the government cancelled the financing application for three railway projects with a total cost of P276 billion but stressed it remains open to renegotiation.

President Marcos said that with the project’s staggering cost, the government may consider official development assistance or public-private partnerships to put the projects back on track.

China wants to charge an interest rate of three percent, which would be too costly for the government. In comparison, Japan was offering 0.1 percent.

“Yes, of course (we will consider). It should consider issues such as project cost versus financing cost,” Joven said in a Viber message, referring to possible alternative financing plan.

“Not only these countries, but other countries which offer financing facilities as well,” he said.

Of the three projects, the biggest is the P142-billion PNR Bicol or the South Long Haul project, which is eyed to connect Laguna and Albay.

The PNR Bicol project consists of seven contract packages – four for civil works, two for the trains and one for project management consultancy.

Joven said the government has negotiated the project management consultancy contract at a fixed rate of two percent.

“We are pursuing ongoing talks with the Chinese for the remaining six contract packages, with China indicating a rate of at least equal to the marginal funding cost of China Eximbank, which is currently around three percent,” he said.

Finance chief Benjamin Diokno earlier said the administration may revisit the projects.

Former finance secretary Carlos Dominguez earlier warned that China would ask for more than three percent in interest for the loans for bankrolling the railway project.

The government remains in a tight fiscal space and is moving to consolidate and reduce its budget deficit to three percent of the economy by the end of Marcos’ term.

Transportation Undersecretary for Railways Cesar Chavez last week said Marcos ordered the Department of Transportation (DOTr) to renegotiate the loan agreements for three railway projects.

Aside from the PNR South Long-Haul Project, the two other projects are the Subic-Clark Railway Project and Davao-Digos segment of the Mindanao Railway Project (MRP).

“There was a policy discussion on three China ODA Rail Projects in last Tuesday’s Cabinet meeting during which the President commented that as a matter of policy, we should encourage more investments in rail and that we should focus more on rail transport,” Chavez said.

The contract for the P142-billion PNR South Long-Haul Project or the “Bicol Express” was awarded to the joint venture of China Railway Group Ltd., China Railway No. 3 Engineering Group Co. Ltd. and China Railway Engineering Consulting Group Co. Ltd. last January, he said.

The P83-billion Tagum-Davao-Digos segment of the MRP was also halted after China failed to submit a shortlist of contractors for its design-build contract, Chavez said.

The P51-billion Subic-Clark Railway Project was awarded to China Harbour Engineering Co. in December 2020.

Sen. Grace Poe welcomed Marcos’ directive to halt China-funded rail projects, calling it an “auspicious opportunity” to go back to the drawing board and craft deals that are fair and beneficial to the Filipino people. – Pia Lee-Brago, Paolo Romero, Roel Pareño