Victories, blunders mark transportation sector in 2014

Major victories and blunders marked the year that passed for agencies tasked with improving badly needed transportation infrastructure in the country.

Some sectors, like aviation and overseas maritime, emerged winners after a coveted safety rating was granted by the United States and the Philippines likely averted a situation threatening the jobs of thousands of seafarers working in European ships.

On the other hand, it was a rough year for Metro Manila commuters due to various glitches and accidents at the busy Metro Rail Transit Line 3 (MRT-3) and stakeholders at the Manila Port area, where congestion issues hurt their business and likely the broader economy.

The Aquino administration’s cornerstone public-private partnership (PPP), which recorded further gains in 2014, was not spared from controversy.

The Cavite Laguna Expressway (Calax) project, one of the largest PPPs thus far, was pushed back almost a year when President Aquino ordered a rebid after San Miguel Corp. was disqualified because of a typographical error.

Government officials, meanwhile, are looking forward to what can be achieved in the remaining year and a half left in President Aquino’s term.

For Transportation Secretary Joseph Abaya, that also means improving congested railway systems including ending operational problems facing the MRT-3 that runs along busy Edsa in Metro Manila.

“We are confident we can address all these glitches, whatever we have in 2015 will hopefully smoothen operations,” Abaya said in a recent interview.

He was referring to about P9.7 billion in “improvement” projects ordered by the Department of Transportation and Communications.

These range from fixing broken escalators to the plan’s major component: the acquisition of 48 new train coaches. The trains will be delivered starting September next year and would increase capacity by over 60 percent once the order is complete.

Nevertheless, MRT-3, which has become the face of infrastructure neglect in the country even though it serves a relatively small slice of the total population, has recently drawn the spotlight anew following news that a long-delayed but unpopular fare hike would push through on Jan. 4, 2015.

The move, implemented for MRT-3 as well as the Light Rail Transit Lines 1 and 2, would cut annual subsidies from P12 billion to P10 billion, with savings to be pumped into social infrastructure projects across the country.

But what Abaya described as a “tough decision that had to be made” is again the subject of intense criticism, with some groups threatening to run to the Supreme Court to stop the increase.

Anger, mainly directed at the DOTC, swelled following an Aug. 13 “derailing” accident in Taft station that injured almost 40 people. It was later determined that human error caused the accident.

“We delayed [the rate increase] implementation one last time until after the Christmas season. While 2015 will see increased fares, it will also see marked improvements in our LRT and MRT services,” Abaya said.

He noted this would continue despite the railway line’s complex ownership structure and a possible setback to the government’s plan to “buy out” its private sector shareholders after the Senate rejected this in the 2015 budget.

Another major issue that hit the country was the port congestion in Manila.

Some government quarters blamed the situation on the Manila daytime truck ban that started in February and ended September this year although some brokers using the port said the situation was already worsening before this.

The overall result, however, had serious implications on the Philippine economy, given the importance of Manila’s port as a trade destination.

Its effects even extended to port operations in other areas like Singapore, Hong Kong and Kaohsiung (Taiwan).

Last September, President Aquino made a public apology while acknowledging that “there is impact of this congestion on the growth of our economy.”

Yard utilization, whose optimal level is around 80 percent, jumped to about 100 percent in the weeks after the Manila Truck Ban was implemented, while daily throughput fell, according to the Philippine Ports Authority.

Malacañang furthermore took the step of approving financial incentives to lure shipper to the underutilized Batangas port in a bid to lessen congestion in Manila. Conditions have eased with these reforms although full decongestion was unlikely before early 2015, the Philippine Ports Authority had noted.

By contrast, the Philippine aviation sector received a boost in 2014.

This came as the US Federal Aviation Administration restored the country’s Category 1 safety rating after six years.

The move, due to reforms undertaken by the Civil Aviation Authority of the Philippines, allows Philippine Airlines (PAL) to expand operations in lucrative US market and paves the way for the entry of Cebu Pacific.

PAL, for example, is reviving flights to New York in March 2015 and has since switched to newer planes—a move barred prior to receiving the Category 1 upgrade. In a separate move, the European Union allowed Cebu Pacific to operate within its jurisdiction, after allowing the same for PAL in 2013.

Back home, the DOTC launched “full airline operations” at the Terminal 3 of the Ninoy Aquino International Airport, following a decade of legal entanglements with its builder—an issue that has yet to be resolved.

This enabled the Manila International Airport Authority (Miaa) to start the transfer of the five biggest airlines from Naia 1 to Naia 3, substantially decongesting the former by 3.5 million passengers per year, and restoring it to its design capacity of 4.5 million annual passengers.

Meanwhile, the Naia Terminal 1 “rehab project” will be 95 percent complete by the end of February 2015, “with some finishing works not affecting passenger areas to be completed by May.”

For maritime, Abaya said the country has so far avoided a blacklist from EU maritime safety agency.

This was after the European Maritime Safety Agency (Emsa), previously uncovered deficiencies on the part of the Maritime Industry Authority when it came to ensuring compliance with so-called Standards of Training, Certification and Watchkeeping.

A follow-on inspection was held last October. At stake are 14,500 Filipino officers serving abroad that may be affected by the EU’s decision, according to the country’s Maritime Industry Authority.

“We are almost out of the woods,” Abaya said. “They [EU inspectors] were just here and there were no adverse findings—they were happy with the progress and they appreciate we are in the right direction.”

As noted, it was a good year for new transport infrastructure projects.

The DOTC and the Department of Public Works and Highways successfully awarded major deals.

These include the P17.5-billion Mactan Cebu International Airport, the P65-billion Light Rail Transit Line 1 project, despite issues raised over a railway common station in Quezon City, and an automatic fare collection system for all three railway lines in Metro Manila, and the P15.2 billion Naia Expressway project.

The Department of Finance has also released incentives for the MRT-7 project, which SMC has committed to build.

The conglomerate is also behind the Skyway Stage 3 project, which will link the North Luzon Expressway and South Luzon Expressway via elevated toll road by April 2017. A second elevated connector road proposal of Metro Pacific Investments Corp., however, has yet to begin due to confusion within various government agencies on how to implement the project.

So far the government has awarded eight PPP deals although much work still needs to be done, considering its pipeline of over 50 projects valued at $20 billion.

Controversy also hit the PPP program in the second half of 2014 when the DPWH bids and awards committee disqualified SMC for a typo error in its bid security for the P35.4-billion Calax auction last June.

The issue became complication because SMC’s offer, although unknown at the time of disqualification, turned out to be the highest at P20.1 billion, or P8.4 billion higher than that of qualified frontrunner Ayala Corp. and Aboitiz Land.

President Aquino, months after SMC sought his appeal, reversed the disqualification and set into motion the process of rebid, which would likely be completed in the first half of 2015, delaying the project by roughly one year.

As eyes turn to how bidders will respond to the next round of auctions, including Calax with a P20 billion floor price, and major railway and airport deals, the PPP Center said it was hoping to secure the approval of lawmakers to amend certain provisions of the Build Operate Transfer Law.

With less than two years left in President Aquino’s term, PPP Center executive director Cosette Canilao said revisions would help institutionalize reforms and lessons learned for PPPs—which would help the program survive through future administrations.