Ownership structure keeps MRT 3 derailed

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Part One

Politicians have a way of muddling problems confronting the nation such that they themselves often end up unable to provide doable and lasting solutions.

The most glaring of these pressing problems is that of the country’s light rail line system that traverses the stretch of Edsa. The grandstanding, bickering and publicity stunts of this administration’s officials will not result in saving the Metro Rail Transit (MRT) Line 3 from sinking deeper into a political quicksand.

It’s a total mess out there. Just recently and for the second time, commuters found themselves traveling with one of the coaches’ doors wide open. This was just days after a coach got detached, which forced passengers to walk under the scorching heat to the train’s nearest station. The worst MRT accident was in August 2014, when the train overshot the tracks at the Taft Avenue Station. Several commuters and pedestrians were injured, and at least nine people were brought to the nearest hospitals.

Every day, riders have to endure long lines, excruciatingly hot travel, dilapidated elevators and escalators, overpowering stench wafting from unkept toilets. Obviously, the situation is unacceptable. The country’s light rail system was meant to ease traffic and bring travelers another choice of commuting convenience, not take them on a hellish ride.

So why is it that MRT 3 is in such a disarray, while MRT Lines 1 and 2 are just doing just fine?

I’ll go straight to the point: The government, through the Department of Transportation (DOTr) runs the system that it doesn’t own, while paying MRT Corp. (MRTC) fail-safe, prearranged monthly fees.

MRTC, not the government, is supposed to be accountable for the maintenance and procurement of new trains. Let me make it clearer. Aside from ensuring regular and efficient upkeep of the system, MRTC as the owner is obliged to forecast growth in passenger volume and do proactive measures to meet passenger demand.

MRT 3 has already been operating beyond capacity since 2004. Why has the problem not been addressed yet? Chalk it up to politicking, the blame game and handwashing.

The MRT 3 was designed as a build-lease-transfer project (BLT). The private-sector exponent was a complex and perplexing mist of corporate entities. Let me just zero in on the MRTC (the signatory to the MRT agreement), which, in turn, is owned by Robert Sobrepeña and his MRT Holdings of the Fil-Estate Group of Cos. and Manuel Agustines of the Ramcar Group of Cos. In the BLT covenant, the private component is tasked to design, build and hand back the system to the government. The government runs the system and pays MRTC monthly rentals.

Unfortunately, the Agustineses and Sobrepeñas were hit by financial troubles. To get themselves out of their respective financial ruts, they brought in the Ayala Group to put up another company, MRT 3 Funding Corp. (MRTFC). The new entity issued asset-backed bonds (guaranteed rental payments), which were then sold to private corporations.

By 2007, during former President Gloria Macapagal-Arroyo’s administration, the government encountered difficulties meeting its monthly rentals. It then bought the bonds issued by the MRTFC, through the Development Bank of the Philippines and the Land Bank of the Philippines,  in order to dodge default. But merely possessing these bonds does not give the government ownership of MRT 3. These bonds only signify the revenue from rental payments, but not the ownership of MRT 3 itself.

The spirit of the private-public partnership scheme is for the government to avoid giving sovereign financial pledge to private companies if and when the project fails financially. Why the Arroyo administration fell for this arrangement boggles the mind. Not only did it agree for such a guarantee, but also gave the private component “an after-tax, after-debt-service, after-expense return on their investments of 15 percent per year!” Add that to the passenger fare subsidy that cost the government P5.7 billion back in 2009 alone, and you have a financial crisis that has been derailing the country’s MRT 3 operations for years now.

To be continued

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