Will Japan gov’t lend for Philippine firm’s benefit?

Will the Japanese government fund a project to benefit a private Philippine firm? That’s the buzz among foreign lending experts in Manila about a supposed Japan loan to fix the rotted MRT-3 commuter railway.

“That has never happened,” a senator’s technical aide told The STAR yesterday. “Japan official development assistance, or ODA, goes to public, not private, purposes.”

A government official who used to deal with the Japan International Cooperation Agency also expressed doubts that a loan is forthcoming.

They were reacting to the transport department’s repeated announcements to borrow from Japan for the MRT-3. Sec. Arthur Tugade has stated that the assistance would be signed by the third week of Dec. He mentioned no amount, but said it would be government-to-government under the Philippines-Japan Infrastructure Development Cooperation Framework.

The loan would be used to rehabilitate the MRT-3, which deteriorated starting 2012 under a succession of inept but politically connected maintenance outfits. Tugade has said that the railway’s long-time servicer, the Japanese giant Sumitomo Corp., possibly would be rehired for the rehab work. Or it could be a Singaporean or French rail company.

Two other sources said Japanese assistance overseers are reluctant to endorse the DOTr loan application to the JICA, for fear that it would breach ODA rules. They cannot find a legal basis for it.

The MRT-3 is owned by its private builder, sources said, however. The JICA allegedly would break its rules by lending under soft terms to a project that would boost the interest of a private concern.

Metro Rail Transit Corp. (MRTC) owns MRT-3 under a 25-year build-lease-transfer deal, 2000-2025. The contract has eight years to go, and may be extended for another 25 years.

MRTC had hired Sumitomo and Mitsubishi Heavy Industries Corp. in 1998-2000 to design and construct the system, then retained Sumitomo to maintain the trains, tracks, power supply, signaling, and stations. In 2012 the past DOTr suddenly took over the MRT-3 operations under an interim project management office, and fired Sumitomo. Three unqualified, inexperienced, undercapitalized firms, all linked to the then-ruling Liberal Party, took over in succession from Oct. 2012 to Oct. 2017. The railway rapidly deteriorated.

The present DOTr now is maintaining the railway using engineers from the Light Rail Transit Authority and Sumitomo’s past technicians.

MRTC maintained that it has no part in Tugade’s borrowing from Japan. It has its own rehab proposal, submitted thrice to Tugade and once to Malacañang this year. MRTC is to field a hundred engineers to evaluate the MRT-3’s state of dilapidation. Then, its old partner Sumitomo is to overhaul the trains, replace the tracks and power lines, and refurbish the stations for $150 million (P7.5 billion). It would take 26 months without shutting down the daily runs.

MRTC said either it or the DOTr can advance the $150-million rehab cost. It would not profit from the rehab, but merely serve as pass through of the funds to Sumitomo.

Under Tugade’s loan, taxpayers would bankroll the rehab, but the benefit would be to MRTC, which still owns MRT-3 till 2025, sources said. MRTC, which is not asking for the loan in the first place, would have a newly retrofitted railway, with increased value, at the end of the 25-year deal, courtesy of Japan and the taxpayers.

Rep. Jericho Nograles has questioned Tugade’s loan. He said the system must first be audited, and the extent of the dilapidation assessed, before any foreign loan amount may be discussed. The systems audit would pinpoint exactly how much the rehab would cost, and therefore also the amount of the Japanese loan, he said.

The MRT-3 has been mired in shady foreign deals. In 2013 the DOTr purchased 48 new but defective trains from China’s Dalian Corp. Delivered in 2015-2017, none of the units are operative. Former MRT-3 general manager Al S. Vitangcol has sworn in court that there was a five-percent kickback, or P190 million, in the P3.8-billion purchase price.

In Oct. 2015 Korean train operator Busan Transport Corp. was used as a front of four unknown Filipino firms to bag a three-year maintenance deal, 2016-2018. The four firms borrowed the Korean’s name to form Busan Universal Rail Inc., in which Busan Transport ended up as a puny four-percent minority.

Amounting to a separate P3.8 billion, the maintenance deal was packaged by the same LP official who brokered the Dalian purchase. The deals have embarrassed the Chinese and Korean governments, the sources said. And now comes a potentially questionable loan from Japan.

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