ADB to aid PH in $3.8-B train line project

The Philippine government has tapped the Asian Development Bank (ADB) for technical support in selling to investors the country’s most expensive infrastructure project, a new train line linking Metro Manila to Luzon island’s southernmost point.

With help from the Manila-based multilateral lender, the government seeks to project a rosier image to the international community. Several times in the past, approved contracts with private firms have either been amended or cancelled due to political whims.

By early 2016, the government hopes to award a contract for the North-South Railway Project (NRSP) under the administration’s Public Private Partnership (PPP) scheme.

The project aims to revive a long haul passenger train line from Manila to Batangas City and Matnog, Bicol. This would be combined with a commuter train service between Manila and Calamba, Laguna. At $3.8 billion, the 653-kilometer NRSP would not only be the largest PPP, but the most-expensive infrastructure project in the country’s history.

“We’re entering the micro approach to assist the government to implement the project,” said Ryuichi Kaga, head of the ADB’s new PPP Office. “If the structure is not right, it won’t attract companies.”

Kaga said the ADB would hand-hold the government throughout the entire bidding process for the project, which will start within the next six weeks with the sending out of invitations to prequalify.

Throughout the process, the ADB will advise the Department of Transportation and Communications (DOTC) on how to structure the deal. Profitable segments of the project would likely be auctioned off to private investors, while unprofitable parts will be paid for with overseas development assistance (ODA) loans.

One of the biggest challenges the private sector has faced when dealing with the government in past years has been political risk, Kaga said. Put simply, projects approved by past administrations are often reviewed and in extreme cases cancelled by new administrations.

The government also has a poor history of sticking to scheduled tariff or fare adjustments promised under old contracts.

“In the Philippines’ history, once a new administration comes up, transactions with concessions given by the previous governments are reviewed and revoked. In many cases, it’s because of the bidding process,” Kaga said.

The ADB said with its help, the integrity of the eventual bidding process for NSRP would be ensured.

Once awarded by early next year, NSRP will take four years to build. The winning bidder will have 30 years to operate the train line to recover its investment.

Based on a feasibility study conducted by Canadian Pacific Consulting, commuters in Metro Manila and nearby areas will take 250,000 trips on the NSRP commuter line daily once the project is completed. This will increase to 650,000 trips a day by 2039.

The long haul service to Batangas and Matnog, meanwhile, will initially serve 16,000 people a day, with the number rising to 24,000 once the route matures.