A Radical's Nut

In his first SONA, Aquino identified the case of the metro rail transit (MRT) as among the questionable and disadvantageous projects of the Arroyo administration:

“The government tried again to buy the people’s love. The operator was forced to keep the rates low. In effect, the guarantee given to the operator that he will still be able to recoup his investment was not fulfilled. Because of this, Land Bank and the Development Bank of the Philippines were ordered to purchase the MRT. The money of the people was used in exchange for an operation that was losing money”. (Read full SONA text here)

As if on cue, the Department of Transportation and Communication (DOTC) consequently announced that MRT commuters must brace for a fare hike due to rising operation and maintenance cost as well as government subsidies. (Read here)

(A very similar case is the National Power Corp. [Napocor]. The Department of Energy [DOE] disclosed after the SONA that power rates will increase to recover so-called stranded debts of the state power firm. Read salient points and issues here)

Aquino’s transportation officials justified the planned fare hike by pointing out that all Filipino taxpayers are unfairly subsidizing Metro Manila residents who are the regular commuters of the MRT. They claimed that the real cost of transporting a passenger from North Avenue to Taft Avenue can reach as much as P60. But actual maximum fare, in the last seven years, has remained at only P15. (Read here)

But the truth is taxpayers subsidize not the actual transportation cost of the ordinary worker, office employee or student who regularly uses the MRT. Profits are being squeezed from taxpayers and commuters for guaranteed debt payments and profits of the transnational banks and big comprador firms that undertook the MRT project through Public-Private Partnership (PPP) – yes, the same type of development initiative that Aquino said his administration will pursue.

Taxpayers are subsidizing the debts incurred by the private consortium that built the MRT – the Metro Rail Transit Corp. (MRTC).  Aside from guaranteeing debt payments, the national government also guaranteed a 15 percent return on investment per annum for MRTC under their 25-year build-lease-transfer (BLT) agreement in 1997 with the DOTC.

Thus the so-called “subsidies” go the Export-Import Bank of Japan, Sumitomo Bank, and other Japanese and Czech banks, as well as some local banks like the Bank of Philippine Islands (BPI). What made the deal more financially onerous was that the banks that provided the loan of US$462.5 million in 1998 and the private firms that constructed the MRT have the same owners.

MRTC included the Ayala Land Inc., owned by the Ayala family which also controls the BPI. MRTC also entered into an Engineering, Construction, and Procurement (EPC) Contract with the Sumitomo Corporation, owned by the same Japanese investors that control Sumitomo Bank.

Foreign lenders (Japan provided US$278.5 million while the Czech Republic, $88.4 million) also apparently “tied” their loans for the MRT, thus further maximizing profits for their exported capital (i.e. we pay for the principal plus interest for services and goods that come from the same country). Japanese Sumitomo Corporation used, as principal subcontractors, Japanese TNC Mitsubishi Heavy Industries for the civil works, track works, and electro-mechanical work, and Czech Republic-based CKD Dopravini for the manufacturing, testing, and commissioning of the rail vehicles.

In fact, the BLT was so financially burdensome that government started missing paying debts on time. Consequently, the government through the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) initiated an $800-million buyout of the MRTC to acquire 76-percent equity last year. The move was meant to terminate the guaranteed 15 percent return, that was supposed to last until 2025 (end of the BLT deal), by providing a lump-sum payment.

But in the end, Filipinos through our taxes will still shoulder this lump-sum payment. If the MRT fares will be increased, taxpayers will be paying for this exorbitantly priced PPP project twice over.

Meanwhile, aside from cashing in on the guaranteed profits and the lump-sum payment, MRTC firms have been raking additional profits from other investments made more lucrative by the MRT. The Ayalas, for instance, have built the TriNoma Mall in 2007, which is directly linked to MRT’s North Avenue station. The MRT also made the Ayala Center commercial complex in Makati City more accessible and thus more profitable.

Fil-Estate, which is also part of the MRTC consortium, on the other hand, had as early 2000 secured a P1.4-billion investment from the Bank of America to develop high-rise real estate projects along the MRT system.

Worse, the MRT fare hike is apparently just a prelude to its privatization (as usual to make it attractive to investors). Aquino’s officials said they are already talking to prospective buyers. And they plan to privatize not only the MRT along Edsa but the entire railway system in the country. (Read here)

And consider how a privatized and deregulated power industry has resulted in skyrocketing electricity costs – a major input in MRT/railway operation. If you want to just take the bus or jeepney because you can no longer afford a train ride, you will still have to contend with increasing fares because the oil industry is deregulated.

Hindi naman tumataas ang sahod mo. O swerte ka nga kung may trabaho. Ito na ba ang matuwid na daan ni Noynoy?