Northrail up for abolition

The government has deactivated the state-run North Luzon Railways Corp. (Northrail) as the rail project that was supposed to be built and financed by China fell apart due to alleged corruption.

The Governance Commission for Government Owned or Controlled Corporations (GCG) in Memorandum Order No. 2019-5 said it had “determined that it is in the best interest of the state to deactivate Northrail in the interim, pending its formal abolition.”

As such, the GCG said “all positions in Northrail are considered abolished … the board of directors of Northrail is authorized to retain a skeletal transition team to undertake residual tasks, such as maintenance of records and assistance in the settlement of legal issues and pending obligations with respect to Northrail’s contracts and other outstanding accounts.”

According to the GCG, Northrail was “not producing the desired outcomes, no longer achieving the objectives and purposes for which it was designed and created, and not cost efficient and does not generate the level of social, physical and economic returns vis-à-vis the resource inputs.”

The order to deactivate Northrail was signed by GCG Chair Samuel G. Dagpin Jr., Commissioners Michael P. Cloribel and Marites C. Doral, as well as ex-officio members Finance Secretary Carlos G. Dominguez III and Budget Officer in Charge Janet B. Abuel.

The GCG order was issued in May and later on signed by Dominguez in June, even as the document was made public only this month.

Since Northrail was already deactivated, it “formally ceases to be a going concern and shall have no power or competence to enter into any contract or transactions, which seeks to pursue its ordinary course of business,” the GCG said.

As mandated under Republic Act No. 10149 or the GOCC Governance Act of 2011, Northrail was “deemed under evaluation for formal abolition,” the GCG added.

Moving forward, Northrail was tasked to coordinate with the Department of Transportation (DOTr) to transfer the right-of-way (ROW) and real properties it had maintained.

Also, Northrail’s board was ordered to preserve the corporation’s assets to protect the government’s interests in them.

“As regards the interest earned from the loan proceeds in the amount of P216.34 million as of Dec. 31, 2017, the retention of the same, or a portion thereof, as funds for the implementation of Northrail’s deactivation until its formal abolition shall be subject to the determination of the Department of Finance (DOF),” the GCG said.

“Northrail shall coordinate with the DOTr and BCDA (the Bases Conversion and Development Authority] to explore the possibility of transfer to and reemployment of affected Northrail personnel in the DOTr and BCDA, and their attached agencies and corporations, subject to compliance with established qualification standards set by the receiving agencies,” the GCG added.

Northrail had been formed and organized by the BCDA “as a wholly owned pre-operating subsidiary to revive the abandoned rail service north of Metro Manila,” the GCG noted.

A flagship project of the Arroyo administration, the 80-kilometer Northrail was envisioned 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.

The railway project had been hounded by allegations of overpricing, as its cost climbed from an initial $503 million to about $2 billion.

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

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