Costs of rail projects increase

Further to yesterday's news regarding the additional funds needed for the Northrail, Business Mirror reports today that other rail-based projects have also jacked up their costs. Normally, the opposition would see this as an additional burden to the people which clearly smacks of corruption. The government and the proponents of the project would naturally deny anything irregular with the need for additional funds, but to dismiss the possibility of corruption altogether would be far from realistic.

Nevertheless, the plans look beautiful on paper, and these projects should be railroaded, not necessarily at all costs though, if that means money is no object.

$280M more sought for Phase 1 of Northrail due to design change

The North Luzon Railways Corp. (NLRC) is requesting for an additional $280 million for the Northrail Phase 1 project due to a change in its project design.

The proposal was recently submitted to the National Economic and Development Authority’s (Neda) Infrastructure Committee (InfraCom), the interagency committee in charge of advising President Arroyo on infrastructure development, including railways, highways and airports.

Neda said the revision in its project design involved changing the narrow-gauge tracks, which were initially approved by the Neda Investment Coordination Committee (ICC) to sturdier standard or double-gauge tracks.

Neda Deputy Director General Rolando Tungpalan said the NLRC cost-increase proposal will have to go through an evaluation of the InfraCom and then go through the ICC process starting with the ICC Technical Board until the proposal obtains Neda Board approval.

However, Tungpalan said, in line with the plans of the government to speed up all infrastructure projects and programs, the Neda will also hasten its evaluation and approval of the NLRC’s request for additional funding.

The additional cost will be added to the initially approved cost of $503 million.

The China Export Import Bank will finance $421 million of the total project cost, while the remaining $82 million will be shouldered by the national government.

Phase 1 Section I of the Northrail project runs from Caloocan to Malolos, Bulacan. The contractor for the project is the China National Machinery and Equipment Group.

The NLRC stated on its web site (www.northrail.com.ph) that it aims to end 2008 with a project accomplishment rate of 61.87 percent, mostly comprised of civil works.

It also aims to acquire additional right-of-way (ROW) and relocate affected utilities by December 2008. The NLRC expects to complete the civil works for the project by August 2009.

Earlier, the Neda said seven infrastructure projects have posted cost overruns of more than P2.27 billion in the first half of 2008.

These projects include the Metro Iligan Regional Infrastructure Development Project, Rural Road Network Development Project III, Central Mindanao Road Project, Urgent Bridge Construction Project for Rural Development, and Iloilo Flood Control II.

Further, the Philippine National Railways (PNR) and Light Rail Transit Authority (LRTA) submitted cost overrun reports that showed that the Northrail-Southrail Linkage Project Phase I or the commuter- train part of the entire Northrail project will post a cost overrun of P648.12 million and the LRT Line I Capacity Expansion Project Phase II will post a P1.622-billion-worth cost increase.

The reasons include increase in prices of labor, materials and equipment/price adjustment/price escalation, changes in scope or variation orders/supplemental agreements, high bids, value-added tax and other taxes, foreign-exchange movement, increase in consulting-service costs, administrative costs, and increase in ROW or land acquisition and resettlement costs as well as price adjustments.

The 32-kilometer Northrail-Southrail linkage Phase 1 will run from Caloocan to Alabang and service 16 stations along the route. The PNR estimated that the average travel time from end-to-end is 30 to 35 minutes, while 21 new diesel railcars are expected to accommodate 187,000 passengers daily.

Phase 1 will cost $50.42 million, and around 70 percent, or $35 million, will be funded through a concessional loan from the Economic Development Cooperation Fund of Korea.

The balance will be in the form of export credit from the Korean Export-Import Bank.

The LRTA said, on the other hand, that the LRT Line I capacity expansion project Phase II will aim to extend its services to an additional 40,000 passengers per hour per direction (pphpd) from the already expanded capacity (Phase I) of 27,000 pphpd.

The agency said the project is intended to cope with the present and expected increase in volume of passengers using LRT Line 1 and the additional passenger demand to be generated under an integrated MRT Line 1, 2 and 3 system.

The project costs P11 billion, and is 85-percent financed by the Japan Bank of International Cooperation.

Northrail project needs more funds - GMANews.tv

MANILA, Philippines - Citing change in project design, the North Luzon Railways Corp. has requested to increase the fund allocation for the Northrail Phase 1 project, which will run from Caloocan City to Malolos, Bulacan.

The NLRC has proposed to the Infrastructure Committee of the National Economic and Development Authority for an additional $280 million for the China-funded project from the original budget of $503 million.

The Infracom is in charge of advising the President on infrastructure development including railways, highways, and airports.

NEDA officials said the revision in Northrail's project design involved changing the narrow-gauge tracks which were initially approved by the NEDA Investment Coordination Committee (ICC) to sturdier standard or double-gauge tracks.

Rolando Tungpalan, NEDA deputy director general, said the cost increase proposal will undergo review by the Infracom and then go through ICC process starting with the ICC Technical Board until it gets approval from the NEDA Board, which is chaired by President Gloria Macapagal-Arroyo.

However, Tungpalan said that in line with the plans of the government to fasttrack all infrastructure projects and programs, the NEDA will also fasttrack its evaluation and approval of the NLRC's request for additional funding.

Of the original total amount of the project, the China Export Import Bank will finance $421 million of the total project cost while the remaining $82 million will be shouldered by the national government.

The contractor for the project is the China National Machinery and Equipment Group

The NLRC said that it aims to end 2008 with a project accomplishment rate of 61.87 percent, mostly comprised of Civil Works.

It is also seeking to get additional Right-of-Way (ROW) and relocate affected utilities by next month. The NLRC is targeting to complete the civil works for the project by August 2009.

MRT-3 acquisition in peril

BusinessWorld reported today that the government's buyout of the MRT-3 faces possible delays when the Development Bank of the Philippines and Land Bank of the Philippines expressed doubts about the purchase and sought an exit strategy. The government intends to buyout the MRTC from its build-operate-transfer contract, which is set to expire in 2025.

At a cost ranging between PhP11 and PhP14, the MRT-3 probably has the lowest cost in any urban rail-based mass transport in the whole world. This is unconfirmed, of course, but the possible exaggeration is far more real when one considers the estimated cost per person for a single trip: it is a lot more than PhP60.

When the MRT-3 first operated in 1998, it charged upwards of PhP20 for even the shortest trip. But the government decided to subsidize the costs of its operation: at least PhP45 for each single commuter. 

Although Pedestrian Pinoy has earlier expressed the opinion that public infrastructure should strike a balance between profit and service, to operate a facility, even one that provides great service to the people, at a huge loss of the scale of MRT-3 (imagine an average loss of PhP18,000,000 every day), is not sound policy. As a result, the MRT-3's maintenance has suffered greatly, and the acquisition of new trains has been derailed. Service should be done in a manner that does no further harm, nor gives no further inconvenience, to the public that should benefit, and not suffer.

Striking a balance between service and profit

In an article published in the Inquirer today, it was reported that a small mass of people from Bagong Barrio, Caloocan City, protested the DOTC's decision to reduce the number of stations of the LRT-1's North extension from 4 to 3. Although the 5.71km elevated line originally planned to have stations at Bagong Barrio, Balintawak, Roosevelt, and North Avenue (where it will connect seamlessly with the MRT-3), the DOTC decided to retain only 3. The initial plans were revised apparently because of the high costs of building a station (approximately P800 million), and studies showing that pedestrian traffic is considerably higher in Balintawak, Roosevelt and North Avenue, which will be retained.

The protesting residents of Caloocan City complained that they will not benefit from the LRT's extension because the stations are too far from where they live. However, LRTA administrator Mel Robles defended the revision of the plan saying that "studies show that Roosevelt and Balintawak would have the highest ridership. We are in the business of moving people. Where there is high density, we will go there."

While Pedestrian Pinoy agrees with the LRTA's position that any public infrastructure should be based on careful study, and not on the whims of politicians nor the tug and pull of politics, Mr. Robles's statement that the LRT would build stations only "where it is most profitable" is disconcerting at the least.

Crucial public infrastructure should focus on service, and not profit. This again is one of the problems posed by private investment in public works: companies are really more interested in the business aspect of the project, rather than providing a service to the public. There really should be a balance between making life better for the people, and earning from infrastructure. Surely, profit should not be ignored, since ultimately, in a middle-income country like ours, big projects are sometimes funded by official development assistance from other countries (i.e., debts), or are only possible through the participation of the private sector through various schemes (build-operate-and-transfer, build-own-and-operate, build-lease-and-transfer, etc.). Debts have to be paid and private corporations have to be assured that they will not lose money.

Regardless of what drives the development and construction of public infrastructure, the government should not lose sight of the primary goal: that its decisions and actions should be a service to the people.