In other words, this one railway project had yielded a series of complications that essentially robs the riding public of an efficient transport system and a lot of tax money.

A “door failure” at 5:28 p.m. on the MRT-3 train caused the offload of 700 passengers at the Guadalupe station on Independence Day, one of the highlights of which were free rides to the riding public.

While it was no longer a surprise to hear about another glitch to the country’s major railway transport system, it did open a window to a brewing issue that has put Transportation Sec. Arthur Tugade right smack in the middle of a train wreck waiting to happen.

Early this month, several news reports brought out the issue of the long-overdue rehabilitation of the MRT-3. Two options for this massive project came to light.

The first, according to information from the Department of Transporation (DoTr), is called the Sobrepeña-MRTC Option.

Robert John “Bob” L. Sobrepeña heads MRT Holdings, Inc. II (MRTH), the parent company of the Metro Rail Transit Corp. (MRTC). Sobrepeña’s other companies, says the DOTr, include “the failed College Assurance Plan (CAP) scheme and the controversy-ridden Camp John Hay Development Corp.”

Sobrepeña’s proposal, made through MRTH II and MRTC, was twice denied by the DoTr in writing, first in August 2017 and again in October 2017.

The second option that the DoTr is currently pursuing is under a government-to-government (G2G) Official Development Assistance (ODA) from the government of Japan (GOP), through the Japan International Cooperation Agency (JIwCA), and with the assistance of railway experts from the Asian Development Bank (ADB) and Australia Aid (the Japan ODA Option).

The DOTr said that Sobrepeña’s proposal does neither refer to a P7.5 billion cost, nor does it contain a broken down scope of work. “In other words,” the DoTr stated, “the Sobrepeña proposal to fix MRT-3, without saying what needs to be fixed, without saying how those will be fixed, and without saying how much it will cost to fix.”

According to the agency, the five-page long proposal only contains legal and financial conditions, and appears to have been prepared without any inspection of MRT-3.

It went on to say, “Aside from being signed off by Mr. Sobrepeña and MRTC president Parayno, the Sobrepeña proposal does not appear to have been prepared by anyone with experience in operating and maintaining a railway. Contrary to attempts at misinformation, Sumitomo is not involved and took no part in putting together the Sobrepeña proposal.”

Since the Sobrepeña option appears to be a mere “drawing in the wind,” it is not possible to compare the Japan ODA Option with the Sobrepeña Option. That is like asking to compare the shape of a rock with the shape of the wind,” the DoTr added.

Under Sec. Tugade, the DoTr vowed to fix the mess that the MRT-3 had become, what with maintenance troubles that were putting commuters’ life at risk, as well as a complicated web of political issues that had embroiled the department and the companies involved in its construction and maintenance in a standoff of sorts.

Based on reports, it seems controversy is being attached to the decision of the DoTr to reject the Sobrepena-MRTC option in favor of a tie-up with the Japanese government.

Some reports have expressed doubt over the DoTr’s apparent preference for a project that would require a P17 billion loan from Japan over the P7.5-billion purportedly proposed by Sumitomo Corp.

DoTr emphasizes that the MRT-3 is the only railway project of MRTH II and MRTC. It also notes that the MRTC was in charge of the MRT-3’s maintenance from 2000 to October 2012. For this task, it subcontracted the Sumitomo Corp.

That stopped in 2012, however, when the Aquino government obliged MRTC to bid out the maintenance contract because of what it deemed as poor maintenance, which had resulted in glitches, ill repair and breakdown of trains. When the MRTC refused to act on it, the Transportation department under then Sec. Emilio Abaya engaged a new maintenance contractor in a joint venture, which later on was also alleged to be anomalous.

Currently, there are “a number of disagreements between MRTC and DOTr on the interpretation of the BLT Agreement for MRT-3, as well as MRTC’s performance of its obligations therein,” says the DOTr.

Legal expenses for these and other ongoing cases between MRTC and DoTr, and between MRTC and various local governments, are being paid for by Filipino taxpayers to MRTC.

In other words, this one railway project had yielded a series of complications that essentially robs the riding public of an efficient transport system and a lot of tax money.

The total project cost for the MRT-3 was P35.6 billion. MRTC used P10 billion of its own money, and borrowed P25.6 billion from various lenders, payable over 10 years, at interest rates of 2.8%, 7.52%, and 9%.

The project was inked under the government’s Build-Lease-and-Transfer (BLT) agreement, which is valid up to 2025.

Under this agreement, DoTr notes, Filipino taxpayers have been paying, and will continue to pay, MRTC a 15% return on the P10 billion that it used in MRT-3. Over 25 years, Filipino taxpayers will pay MRTC a total of P126.4 billion for its P10 billion equity.

As of early-2018, the department sums up, “Filipino taxpayers have already paid MRTC close to P73.7 billion, and will continue to pay MRTC more than P52.7 billion up to 2025.”

In other words, Filipino taxpayers have already paid the MRTC in full (as of 2010, says the DoTr), not just the money it borrowed from lenders, but also the interest, and will continue to pay MRTC until 2025.

Filipino taxpayers, says the DOTr, also pay for the MRTC’s staffing, administration costs and taxes.

In total, after investing P35.6 billion to build MRT-3, MRTC already received:

+ P32.4 billion as payment for its debts

+ P463.5 million as paymet for its staffing and administration costs

+ P27.1 billion as payment for its taxes

“By 2025, MRTC stands to receive close to PhP200 billion in return for its P35.6 billion investment.

“Nominally, Filipino taxpayers will be paying MRTC the equivalent of almost 6 MRT-3’s in exchange for building one MRT-3.”

The question is: How was it that the MRTC was able to ink this deal that has earned for it billions in pesos in return, paid for by Filipino taxpayers, who are now suffering from the mess that the MRT-3 has become?

To address the “pressing need” that is the rehabilitation of the MRT-3, a problem that has been affecting the Filipino riding public for years now, the DoTr has considered the JICA-financed MRT-3 Rehabilitation and Maintenance Project by starting a due diligence.

A comprehensive system inspection was conducted by a combined team of 150 JICA and Filipino engineers early this year. The next step was a loan appraisal for the MRT-3 Rehabilitation and Maintenance Project made by JICA headquarters’ railway, finance and economic experts.

The DoTr says the JICA-appraised indicative base cost for the rehabilitation component is P11.6 billion, and P5.5 billion for the maintenance component.

Further review of this was done by a team of railway experts from the Asian Development Bank and Australia Aid, which were mobilized by DoTr, free of charge, to further enhance its diligence process.

The loan for the project has an interest rate of 0.1% per annum, repayment period of 40 years, and grace period of 12 years.

In comparison, MRTC’s loans had a repayment period of 10 years and interest rates of 2.8%, 7.52%, and 9%. The Sobrepeña-MRTC proposal, the DoTr believes, “is largely based not just on continuing, but even expanding, what MRTC gets under the BLT agreement” up to 2040.

The DoTr is counting on Japan’s sterling reputation for safe and reliable railway systems that have carried more than 7 billion passengers per year.

The DoTr has clarified that the Sobrepeña-MRTC proposal is not an offer from Sumitomo; neither does its proposal state an offer from said corporation.

“To reiterate, there is no offer from Sumitomo Corporation to undertake the scope of the JICA-financed MRT-3 Rehabilitation and Maintenance Project, and much more, there is no offer from Sumitomo Corporation to do it for P7.5 billion,” it states.

The DOTr also maintains that it is “borrowing from Japan to finally, and once and for all, fix MRT-3 with a comprehensive, single point of responsibility solution, delivered by a highly-qualified and highly-experienced provider, backed by the government of one of the leading railway powerhouse countries in the world.”

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