POSTSCRIPT / August 12, 2010 / Thursday


Philippine STAR Columnist

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MRT riders also pay for cost of corruption

BALANCING ACT: The plan to raise the fare in the light rail transit lines in Metro Manila is a tough balancing act for the Aquino administration seeking to cut losses without overburdening an estimated 750,000 daily commuters.

It is a choice between not raising the fare by continuing to subsidize expenses running into billions and raising the fare to cut government subsidy but possibly incurring the ire of commuters.

One sensitive question is why all taxpayers throughout the country must contribute to the subsidized operations when they do not use the light rail lines at all.

The mass transport rail system in Metro Manila need not turn a profit, but to what extent and in what manner should it be subsidized to keep fares from being too burdensome to commuters and taxpayers?

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GOV’T TAKEOVER: Affected by the plan are the Light Rail Transit Line-1 (LRT-1) from Baclaran in Parañaque to Monumento in Caloocan; LRT-2 whose 11 stations cover the stretch from Claro M. Recto Ave. in Manila to Santolan in Pasig; and the 17-kilometer Metro Rail Transit Line 3 (MRT-3) from Taft Ave. in Pasay to North Ave. in Quezon City.

Not yet included in the computations is the fourth line being completed on EDSA between the MRT-3 North Ave. terminal and the LRT-1 station in Caloocan. There is a proposed line from the Tala area in Novaliches to the MRT-3 North Ave. terminal.

The government runs LRT-1 and LRT-2 through the Light Rail Transit Authority, while MRT-3 has been taken over by the government through the Land Bank and the Development Bank of the Philippines from a private consortium led by the Sobrepeña family.

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HIKE INEVITABLE: Transportation Secretary Jose de Jesus has said that the government is spending more than P5 billion a year for MRT-3’s operations and maintenance, making a fare increase necessary.

Usage data in 2009 show MRT-3 with 138.54 million riders, LRT-1 with 113.57 million, and LRT-2 with 48.57 million. Each day, close to 500,000 passengers take MRT-3 and LRT-1, while about 250,000 use LRT-2.

The fare on MRT-3 is P11 to P14, depending on the distance. It is P10 to P15 on LRT-1, and P12 to P14 on LRT-2.

The proposed fare increase on MRT-3 is from P14 to P20 or P25, which is still less than the P45 government subsidy for each passenger. The fare hike proposed for the LRT lines is still being computed.

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COSTLY CORRUPTION: The sad thing about the light rail operations is that taxpayers could be subsidizing not only government advances but also the high cost of corruption.

The private investors who built and operated the MRT-3 had to recover their expenses — plus the 15-percent profit they were guaranteed to make.

The problem was that the expenses included the high cost of negotiating and acquiring the contract from the top authority and nursing it down through the bureaucracy. Any investor will have to input these hidden extra expenses into his computations.

The fare would be much lower in build-operate-transfer (BOT) projects if these abnormal expenses were minimized or, in the words of the former NEDA Secretary Romulo Neri, if only approving officials moderated their greed.

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JUICY DEAL: Pero nandiyan na yan. The Arroyo administration that inherited the high cost of graft will have to look for the golden key, which it is now doing.

It has been reported that the MRT investors raised something like P22 billion, including loans of around $660 million guaranteed by the government. The guarantee drew in taxpayers without their being aware of it or consenting to it.

That is one problem with so-called “sovereign guarantee.” The private businessman signs the loan papers, but the government guarantees that if the borrower cannot pay, the government (taxpayers) will.

In addition to the sovereign guarantee, the investors were guaranteed a whopping 15-percent profit. This means that whatever happens, these capitalists will walk away with 15 percent more than their investment.

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SURE PROFIT: The net effect was that whatever the investors did or did not do, they were to rake in a 15-percent profit.

If operations failed to raise enough profits, the government (taxpayers) came in to pay the difference. What a neat way of doing business!

The investors did not have to pay for right of way on EDSA. They got bonuses from the leap in the commercial value of their stations, advertising revenues from the MRT structures and the collateral boon to supermalls built at busy terminals.

An investor need not have any track record in the operation of light rail systems. All he needed is “laway,” meaning the right connect and right approach to the approving authority.

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EMPTY BAG: At the right time after making a pile, the investor could divest and leave the problem to the government. That was exactly what happened – with the guarantor (taxpayers) left holding the almost empty bag.

When then President Erap Estrada, who inherited the project, learned that the fare was being subsidized and that the investors were collecting a guaranteed profit, he figured that since the government was paying the difference anyway why not lower the fare?

Another point was that not enough passengers were then using the MRT. The populist president’s lowering the fare saw a dramatic jump in the number of riders, rationalizing somewhat the ratio of operating expenses to revenue.

But nagging questions remain: How long will this abnormal situation continue? For how long can the government (meaning taxpayers, even those outside Metro Manila) continue to absorb the losses?

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(First published in the Philippine STAR of August 12, 2010)

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