DOTr explains why it rejected Sobrepeña-MRTC proposal on MRT3 rehab

The Department of Transportation on Wednesday explained why it preferred to pursue funding from Japan International Cooperation Agency to rehabilitate the Metro Rail Transit Line 3 over the proposal of Sobrepeña-led MRT Holdings II and the Metro Rail Transit Corp.

The MRTC proposal, which was twice rejected in August and October 2017, “does not appear to have been based on any system inspection of MRT3,” the department said.

“It is a mystery how a proposal to rehabilitate a complex railway system could have been developed without a comprehensive system inspection,” it said.

In a separate statement, MRTC chairman Robert John Sobrepeña said the company’s proposal is the “most beneficial, most cost-effective” proposal that can be implemented for the immediate convenience and safety of the riding public.

“It is still a mystery to us why the DOTr has refused this option which is the fastest and most financially sound solution to the MRT-3 problem. The MRTC proposal will rehabilitate the trains within 26 months and can start immediately for the cost of only $150 million on a private sector-funded basis or at no cost to government,” Sobrepeña said.

“The DOTr’s G2G (government-to-government) proposal, based on newspaper reports, will still need NEDA-approval so it is uncertain when rehabilitation can start and how long rehabilitation would take, and would cost more than $300 million of taxpayers’ money,” he said.

MRTC is the private sector builder of the MRT3, with contractor Sumitomo Corp., under a Build-Lease Transfer agreement signed with Department of Transportation and Communication in 1997 and took effect in 1999. The agreement is valid for 25 years.

Japan ODA

The DOTr is currently pursuing official development assistance from the Japan through JICA and with the help of railway experts from the Asian Development Bank and Australia Aid.

“The Japan ODA loan for the project has an interest rate of 0.1 percent per annum, repayment period of 40 years, and grace period of 12 years [compared with] MRTC’s loans, which Filipino taxpayers fully paid in 2010, had a repayment period of 10 years and interest rates of 2.8 percent, 7.52 percent, and 9 percent,” the DOTr said.

The department also lambasted Sobrepeña’s MRTC over the funds it used in constructing the mass rail transit system.

“To pay for MRT3’s construction, MRTC used P10 billion of its own money, and borrowed P25.6 billion from various lenders, payable over 10 years, at interest rates of 2.8 percent, 7.52 percent, and 9 percent,” the department claimed.

The DOTr noted that Filipino taxpayers have been paying, and will continue to pay MRTC a 15 percent return on the P10 billion that it used in MRT3.

“Over 25 years, Filipino taxpayers will pay MRTC a total of P126.4 billion for its P10-billion equity. As of early-2018, Filipino taxpayers have already paid MRTC close to P73.7 billion, and will continue to pay MRTC more than P52.7 billion up to 2025,” it said.

MRTC’s proposal also involves extending “onerous” terms of the Build-Lease-Transfer Agreement beyond 2025 and into 2040, the department claimed.

“The DOTr maintains that it is borrowing from Japan to finally, and once and for all, fix MRT3 with a comprehensive, single point of responsibility solution, delivered by a highly-qualified and highly-experienced provider, backed by the government of one of the leading railway powerhouse countries in the world.”

Not an offer from Sumitomo

Despite the rejections, Sobrepeña said that MRTC’s proposal is still available, “should the DOTr keep an open mind to such an option.”

But the government cited other reasons why it rejected his offer.

“The Sobrepeña-MRTC Option was proposed by Mr. Sobrepeña through MRTH II and MRTC, private companies involved in the earlier construction and maintenance of MRT-3.”

MRT-3 is the only railway project of MRTH II and MRTC, which are currently controlled by Mr. Sobrepeña through an elaborate scheme of legal arrangements, according to the DOTr.

It noted that other companies controlled by Sobrepeña include the failed College Assurance Plan scheme and the controversy-ridden Camp John Hay Development Corp.

“It appears that CJHDC still refuses to pay billions in debt intended for the Armed Forces, through the Bases Conversion and Development Authority,” the department said.

“To correct some erroneous claims, the DOTr clarifies that the Sobrepeña-MRTC proposal is not an offer from Sumitomo,” it said. —VDS, GMA News