Here are 14 awful facts about the MRT that every commuter should know

Posted: September 7, 2014 in Uncategorized

Train overshoots station in the this photo from PhilStar.com

 

  1. The MRT was a BLT project where private investors will build the system while government will operate it. As a BLT project, government will pay the private investors equity rental for 25 years, after which government will supposedly own the train system. When the project started with the MRTC, the investors included Fil-Estate group of the Sobrepena’s, Ayala Land, Anglo Phil Holdings, Ramcar Inc, Greenfield Development Corp, Antel Land Holdings and DBH Inc
  2. The private investors from the Metro Rail Transit Corporation only invested $190 million from 1995 to -1997. The rest of the project was financed through $488 million in loans that the government of the Philippines fully paid by 2010. It was the Philippine government who was actually shouldering the majority of the cost of the project.
  3. Despite their relatively small investment, the private investors were guaranteed a 15% return on their investment by the government. DOTC estimated this to be a total of $2.4 billion from 2000-2025, or nearly 13 times their original investment. The BLT agreement assures the private investors that they will be paid, no matter what, even if there is no upgrade in the system or if ridership falls.
  4. According to the government, we have paid the private investors of MRTC a whopping $779 million or P32.5 billion in equity rental payments (ERP’s) from 2000-2013. That’s already more than 4 times their original investment. And according to the government, for the period in question, no new trains and significant upgrades in passenger capacity were installed.
  5. Since the ERP’s were guaranteed payments, the private investors securitzed some 77.7% of the future payments. The MRTC shareholders basically sold the rights to collect payments from the Philippine government. Some of the original private investors already cashed in on their future income and used the proceeds from the bond sales to get even more profits. This has given rise to a complicated ownership structure which even involves Manny Pangilinan’s Metro Pacific.
  6.  To corner the profits from advertising and commercial space development, the private investors created a spin-off company called MRT DevCo. This firm received most of the commercial profits from advertising, space development from the MRT system. While in other countries advertising revenues were used to subsidize fares, in our case, the revenues go straight to the pockets of the private investors. In fact, the DOTC is locked in a dispute with MRT Dev Co because the private firm owes government some P1.8 billion.
  7.  From the onset, the train system was maintained by private firms paid by government. During the first 10 years of the contract, maintenance of the train system was handled by Sumitomo, a Japanese firm that was also one of the banks that lent money to finance the project. We paid the private firm around P100 million a month, which is way higher than the P20-30 million a month paid for the maintenance of the government-owned LRT1 and LRT 2.
  8.  After two extensions, the contract with Sumitomo was not renewed. The DOTC proceeded to bid out the interim maintenance contract. Unfortunately for the riding public, the interim contract involving CB&T and PH Trams was mired in controversy after it was discovered that one of the officials of the private consortium was an uncle of the wife of then MRT GM Al Vitangcol. Again it was the taxpayers who paid $1.43 million (P61 million) a month to this private firm at a time when so many maintenance problems in the train lines were recorded. When the contract expired, another bidding took place and this time APT Global won the one-year maintenance contract worth P685 million or around P57 million a month. It was during APT’s term that the worst MRT accident took place after one of the trains overshot the terminal in Pasay Taft.
  9.  Seeing that the 15% guaranteed ROI will only place the government deeper in debt, the Arroyo regime, through Land Bank and DBP, bought 80% of the economic interests of MRTC, including bonds and other instruments representing future payments. This meant that government banks are now entitled to collect 80% of the ERP’s that government itself was paying.
  10. While government bought 80% of the economic interests in MRTC, it is not the same thing as buying ownership of the train system. The original private investors, through MRT Holdings, still claim to be the ones who own the train system. MRT Holdings still own shares of MRTC and even managed to sue the Philippine government over the purchase of new trains.
  11. Government is willing to spend P53 billion, to “buy back” MRT 3, but with the future intent of privatizing its operations and maintenance. Meanwhile, MRT Holdings thinks P53 billion for the buy out is not enough and will not give government ownership of the train system.
  12. MRT Holdings wants to be the one to purchase new trains because it thinks that it can charge the government another 15% for the installation of new passenger capacity. Government is right in rejecting this arrangement by the private investors. However, government officials involved in the purchase of trains also want to profit from the transaction through kickbacks. Remember the incident involving the Czech ambassador and Inekon?
  13. Despite the problems besetting the MRT, government has a pending proposal to raise the fares of the train system from P15 to P28 (North Ave to Taft) or an additional P8 per trip based on the average distance traveled by commuters.(The proposal was eventually implemented in January 2015.)
  14. Both the government and the private investors are to blame for the woes faced by commuters. Over the years, the BLT contract and the privatization policy have caused unbearable burden on commuters and taxpayers. The truly sad part is that government, while seeking to “buy-out” the MRT, still seeks to privatize it eventually, bringing us back to where we started. 

It is time for the government to take over the MRT 3, and fix the problems  of capacity and poor maintenance. A government take-over costing billions will be all for naught if it’s direction is re-privatization.  Government should invest in the train system as a necessary mass transport system benefiting taxpayers and the economy as a whole. Government must not abdicate on its role of providing this service to the public, even as we continue to call on government to stamp out corruption within its operations. 

 

 

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  1. […] from the DOTC will show that the government and the taxpayers have already spent $779 million or P32.5 billion in equity rental payme…, more than four times the $190 million original investment of Metro Rail Transit Corporation from […]