DOTr borrowing double Sumitomo’s rehab offer

Is the Dept. of Transportation borrowing double what it is being offered to rehabilitate MRT-3?

DOTr has been offered $150 million (P7.5 billion) for Japanese giant Sumitomo Corp. to repair and overhaul the dilapidated commuter railway.

Yet DOTr is borrowing double that amount – $300 million (P15 billion) – for the same job and company, insiders aver.

Filipino taxpayers will shoulder the $300-million loan from Japan International Cooperation Agency (JICA). No explanation has been given by DOTr.

Conversely, the money for the $150-million work by Sumitomo would be taken from MRT-3 fare revenues; meaning, from rides.

The $150-million rehab was proposed to DOTr by Metro Rail Transit Corp., private owner-builder of MRT-3. It was stated in letters thrice to DOTr Sec. Arthur Tugade and once to Malacañang last year.

MRTC is to field a hundred engineers to gauge within a month the extent of needed rehab. Sumitomo, MRTC’s 12-year-long maintenance contractor, would be rehired for the work. Rehab would take 26 months, without shutting down the railway. Included is the complete overhaul of 73 original coaches, only 30 of which are running at present. The tracks would be replaced, and the signaling, power supply, stations, and depot maintained. About $50 million would be spent on spare parts.

Either the government or MRTC would advance the $150 million. If by MRTC, it would make no profit. If by government, it directly would pay Sumitomo on pass-through arrangement.

MRTC president Frederick Parayno has been requesting Tugade and subordinates to discuss the details.

Tugade has ignored the offer. Instead he initiated loan talks with JICA. The amount was first estimated at $200 million, then $250 million, and now $300 million, insiders say.

The loan was supposed to be signed before last Christmas. But JICA officials reportedly hesitated, as the ultimate beneficiary would be the private firm MRTC. Japan soft loans and aid, from Japanese taxpayers, are supposed to be for friendly governments, never to private concerns.

MRTC owns MRT-3 under a 25-year build-lease-transfer state agreement, 2000-2025. If MRT-3 is restored to tip-top condition, the private firm would possess a valuable railway system when the BLT ends in seven years.

DOTr has used the name of Sumitomo to justify the JICA loan. U-Sec. for Railways Timothy John Batan has said that the Japanese firm is well-versed with MRT-3’s problems and needs. With partner Mitsubishi Heavy Industries, Sumitomo had designed, constructed, and equipped MRT-3 in 1998-2000. Then for 12 years, 2000-2012, it was the single point of responsibility for maintenance. Under the BLT, MRTC is responsible for technical upkeep, so put Sumitomo in charge. DOTr paid the Japanese directly, also under pass-through.

DOTr officials are mum about the actual loan amount. In a recent broadcast interview Batan denied the $300-million figure, claiming that the exact amount still is being discussed with JICA. Insiders said he was only hedging. “If it’s only $150 million or even less, then he would have bragged about it,” one source noted. “But he didn’t, he couldn’t state any figure less than Sumitomo’s price.”

In other interviews, Batan only mentioned such loan terms as one percent interest, 40 years repayment, with 12 years grace period. “Why go through a loan, if the proponent (MRTC-Sumitomo) is not even asking for it?” the other source remarked.

DOTr insiders are wary that some officials are inserting certain favored subcontractors.

Rep. Jericho Nograles has chided DOTr for negotiating a loan without first pinpointing the cost of needed rehab.

The fast-track rehab first was proposed to DOTr Sec. Joseph Abaya and U-Sec. Jose Perpetuo Lotilla in Dec. 2014. The railway was scheduled then for its eight-yearly overhaul, at the cost of $101 million. It was also presented the following year to the Senate inquiry on MRT-3’s rot.

After 12 years of maintenance, Sumitomo suddenly was removed in Oct. 2012. Days later, without public bidding, the fledgling PH Trams was put in. Sumitomo’s employees were given new IDs and uniforms under the new contractor, which did not procure spare parts.

In 2014 Global Epcom took over, and in 2016 Busan Universal Rail Inc. (BURI), also without public bidding. Again Sumitomo’s employees were retained, but the outfits stinted on parts and components. All three inept groups were owned by then-ruling Liberal Party men.

With MRT-3 rapidly rotting, DOTr fired BURI in Oct. 2017. Since then it has been striving to maintain the railway on its own, still assisted by Sumitomo’s old technicians. Engineers also have been seconded from the sister Light Rail Transit Authority and Philippine National Railways.

Opting for the much higher loan is delaying MRT-3’s overdue rehab. As negotiations prolong, trains, tracks, signaling, and power supply are breaking down daily. Hundreds of passengers perilously are offloaded on the tracks under rain or darkness, to trudge to the nearest station. Tens of thousands others are inconvenienced by shutdowns. Traffic has worsened not only on E. delos Santos Avenue that MRT-3 traverses, but in the entire Greater Manila.

The loan further is being complicated by DOTr’s arbitration in Singapore against Sumitomo and MRTC. In May 2016 the past DOTr complained at the UN Commission on International Trade Law that Sumitomo’s failure to maintain the tracks led to MRT-3’s deterioration. Before it was removed, Sumitomo had warned that DOTr’s continued overloading of trains was wearing down the rails.

The present DOTr is continuing the lawsuit. Yet it also announces it’s getting Sumitomo for the rehab. Under procurement laws, an agency is supposed to blacklist any supplier that is ten-percent in remiss of the contracted goods or services.

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