Gov’t to deactivate NorthRail GOCC

Budget Secretary Benjamin E. Diokno. FILE PHOTO

The Governance Commission for Government-Owned or -Controlled Corporations (GCG) has recommended for deactivation the state-run firm that was formed to oversee the controversial NorthRail project.

Budget Secretary Benjamin E. Diokno, an ex-officio member of the GCG, told reporters recently that deactivating the North Luzon Railways Corp. meant that the GOCC will no longer be provided a budget, hence cannot operate anymore.

“It was not yet abolished; I think you need a law to repeal it,” Diokno said.

A flagship project of the Arroyo administration, the 80-kilometer railroad was to link Caloocan City with an international airport in the former Clark Airfield in Pampanga.

When he took over in 2010, former president Benigno Aquino III ordered a review of the contract between NorthRail and the China National Machinery and Equipment Corp. Group (CNMEG) to build the railway.

This has been hounded by allegations of overprice, its cost rising from an initial $503 million to about $2 billion, according to reports.

A 2005 study by the UP Law Center showed that the NorthRail contract had been improperly packaged as an executive agreement to evade public bidding.

In 2007, the Monetary Board approved a $500-million long-term loan from ChinaEximbank that would finance the first section of Phase I of the project.

The completion of the first phase of the project, a 42-kilometer train line that will connect Caloocan City to Malolos City in Bulacan province, was earlier moved to 2013.

In 2012, the Supreme Court ruled that CNMEG-NorthRail agreement was not an executive agreement, and that CNMEG was not immune from suit.

It remanded to the Makati regional trial court for further hearing a case questioning the validity of the contract, and the loan agreement.