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P10-Bn Cargo Rail Line proposed The cargo project is the first unsolicited proposal submitted for consideration to the newly installed Rodrigo Duterte Administration. Once approved, the railway line is expected to be completed within 2 years.

he Cargo Train Project proposed by MRail Inc. (MRail), a subsidiary of Electric Co. (MERALCO), is seen Tas the solution to the long standing issue of congestion in seaports and the roads leading to and from the ports which are now often clogged with cargo trucks. The proposal was first submitted to Aquino’s administration but its evaluation and approval was delayed partly due to the previous administration’s aversion to unsolicited project proposals and partly due to right of way (ROW) issues. In a bid to close more private-public-partnership (PPP) projects prior to stepping down, the Aquino administration finally gave approval on April 28, a few days away from the May 9 Presidential Election. With the election ban in place, the project was again given pause until a new government took office. With the newly installed Duterte Administration, talks between Philippine National Railways (PNR) and MRail have resumed and its approval is being fast-tracked. “[We have support from] from December 1997 until it was suspended in 2003. At that the new administration. We are just sorting out a few items time, ICTSI found that keeping the railway line operational which they want included in the project. We have indications was too expensive due to the deteriorating condition of the that in the first 100 days[ all of these will be addressed] and existing PNR tracks which prevented trains from running at a then we can have a signing, “ shared MRail President and desired speed (it still took 4 hours for the cargo to travel end- Chief Executive Officer Ferdinand Inacay in a media briefing. to-end thus reducing its economic benefits) and the cleaning of The multi-billion peso project (see Project Details of garbage thrown by squatters living near the tracks at the passing MRail's Cargo Train Project) is a revival of ICTSI’s similar cargo trains were costing the company P2 million per year. operations that carried freight to and from MICT to ICTSI- But the growing issue of congestion in Manila ports which owned LGICT in Calamba, Laguna. This cargo line service ran was further aggravated by an imposition of a truck ban on Manila

The cargo railway project is seen as a solution to the growing issue of port congestion in Manila.

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project details of mrail's cargo train project

hh The cargo train line is a 57-kilomer cargo rail system. hh A non-exclusive Track Usage Agreement (TUE) between the PNR and MRail was already signed in January 2015, which will ensure that there will be no interference in the PNR commuter service plying the Tutuban to Alabang route. hh MRail will build tracks inside the Manila International Container Terminal (MICT) inside the Manila port area to connect to the Tutuban Station in the existing PNR line. hh MRail will operate a freight train service on the existing PNR tracks that will run 24 hours daily, with a minimum of 8 round trips per day, with an average daily container transfer of 600 TEUs from the Laguna Gateway Inland Container Terminal (LGICT) to MICT, and vice versa. hh MRail plans to spend P900 million to acquire 3 cargo trains and P300 million to construct tracks to connect MICT to Tutuban Station of PNR. PNR meanwhile has set aside P300 million to build new tracks exclusive for the cargo train. hh The project will be undertaken in 3 phases: Phase 1, at a cost of P2.7 billion, will cover the cost of 8 locomotives, 120 flat wagons, and construction of depots and tracks inside the ports and will connect Manila Port to Calamba, Laguna; Phase 2 and Phase 3, will cost P7.3 billion and will connect the Manila Port to Clark and Subic. hh It will take 2 years to implement Phase 1 of the project. It will also take 24 months before the trains could be delivered. Hence, if the proponent starts in 1Q17, the freight rail service can be operational by 2018. hh Once the proposed cargo line is operational, it is expected to reduce the number of trucks on the road by at least 200 trucks per day. hh MRail, a subsidiary of Manila Electric Co. (MERALCO), has partnered with Enrique Razon, Jr.’s International Container Terminal Services, Inc. (ICTSI) for the cargo rail project.

City streets in 2014 had urged ICTSI to find a partner – MRail Corridor connecting all 4 major seaports and trading routes. – and offer to the Philippine government the proposal to revive The implementation of a container rail service is among the cargo rail line in 2015. A study conducted by the government the priority projects declared by new Transportation Secretary think-tank, Philippine Institute for Development Studies (PIDS), Arthur Tugade, which he said he will approve within his first estimated that the Manila Port congestion was costing the 100 days in office. Specifically, Secretary Tugade wants a 500 country at least P44 billion annually. The 2015 PIDS study also kilometer railway that would link Subic and Clark Freeport Zones identified the Manila Port to Laguna Corridor as the most viable to Metro Manila’s seaports and airports. Over the longer term, option for the initial cargo railway line, with a recommendation Secretary Tugade shared that he wanted all cargo to move across to extend the line to Clark and Subic and build a seamless the country via railway or roll-on/roll-off (RO-RO) shipping. multi-modal transport in the Subic-Clark-Manila-Batangas

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NLEX-SLEX Connector Road undergoes The multi-billion pesos project involves the construction, Swiss Challenge operation and maintenance of an 8-kilometer, 4-lane elevated expressway over the Philippine National Railway (PNR) Line After a delay of 6 years, the P23.2 billion North Luzon between Circumferential Road 3 in City and Metro Expressway (NLEX) – (SLEX) Manila Stage 3 that will link NLEX and SLEX (see Connector Road project is now undergoing Swiss Challenge NLEX-SLEX Connector Road Project Map). The project will have at least 2 interchanges and 2 tolling plazas. MPTDC – the next step for any unsolicited proposal submitted by the operates NLEX while San Miguel and Indonesian-based Citra private sector to the government, and the final step prior to Group operate SLEX. When MPTDC first submitted the project project award. proposal in 2010, the initial cost of the entire project was at P18 billion. The years of delay and changes in the original project Under the private-public-partnership (PPP) scheme in the design had bloated the cost to P23.2 billion - of this amount , any unsolicited proposal to develop an infrastructure P15.74 billion will be allocated for actual construction and project will have to undergo “Swiss Challenge.” A Swiss P7.46 billion will allocated to right-of-way (ROW) acquisitions. Challenge is a globally accepted procurement procedure wherein MPTDC and its parent company, Metro Pacific Investment an unsolicited bid for a project is open to other parties or competitors Corp. (MPIC) has, for the past years, expressed its frustration who will match or exceed the offer of the original proponent. over the delays faced by the NLEX-SLEX connector project. After competitive bids are submitted, the original proponent is When MPTDC first submitted the proposal in 2010, under then given the opportunity to submit a counter-proposal matching the then Macapagal-Arroyo administration, they were or exceeding the competitors’ offer. As of writing, no comparative given positive feedback and were told of a quick approval proposals were submitted to the Philippine government to counter from the National Economic Development Authority the original proponent’s, Metro Pacific Tollways Development (NEDA), but changes in leadership halted discussions. Corporation (MPTDC), offer. With no other takers for the The succeeding administration under Nonoy Aquino was less NLEX-SLEX connector road project, the award and signing accommodating to the MPIC group, and unsolicited proposals, in of the project contract is expected to happen in the 4Q16. particular. The project went “under review” during the Aquinio

nlex-slex connector road project map

No one submitted a counter-proposal, as a default, MPTDC will be awarded the project.

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The project spent 2 years “under review,” and another 3 years waiting for the government to decide whether it has to go through Swiss Challenge.

administration and it took 2 years to complete mostly because to be signed in November 2016. For their part, MPTDC shared the Department of Public Works and Highways (DPWH) and the that they will start drawing up the detailed engineering design Department of Transportation and Communications (DOTC), the already, a process that they expect to complete by the 1Q17. ROW 2 government agencies in-charge of implementing the project, acquisitions will also commence and is expected to be completed were in disagreement about several of the project details and by 3Q17. Construction of the project will be finished by June 2020. the appropriate project structure. When finally NEDA green- The concession period granted to MPTDC will run for 35 years. lighted the project in 2012, it was again halted because the The project is expected to decongest traffic in Metro government had to decide whether it will subject the project Manila by providing trucks with an alternative route and give under Swiss Challenge. The project eventually found its way to better access to Manila ports as well as the Ninoy Aquino the Department of Justice (DOJ) in 2015, which made a decision International Airport (NAIA) and Clark International Airport. that the NLEX-SLEX Connector Road Project will have to go It will reduce the travel time from SLEX to NLEX to just 15 to through Swiss Challenge as per the dictates of the private-public- 20 minutes from the current 1.5 to 2 hours, and those coming partnership (PPP) law governing unsolicited projects. NEDA from Clark via NLEX heading to Laguna will see their travel gave its approval for the amended Swiss Challenge terms of time cut to 1 hour and 40 minutes from the current 3 hours. the project in December 2015. It took another 6 months for the government to prepare all the papers to get the Swiss Challenge for the NLEX-SLEX Connector Road Project underway. With no other challenger to MPTDC’s current proposal, the DPWH is looking to start preparations on the resolution that would award the NLEX-SLEX Connector Road Project to MPTDC, after which a contract with the original proponent is expected

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STATUS OF BIG TICKET INFRASTRUCTURE PROJECTS IN THE PIPELINE AS OF JUNE 2016

IMPLEMENTING FUNDING CIVIL WORKS PROJECT TITLE PROJECT COST STATUS / ISSUES AGENCY SOURCE TIMEFRAME

ROADS/BRIDGES

Camarines Sur Expressway DPWH PPP TBD P2.25 billion On-going revision of project plan Laguna Lakeshore DPWH PPP TBD P122.8 billion Failed Bidding Expressway Dike Undergoing a Swiss Chalenge NLEx-SLEx Connector DPWH PPP 2016-2022 P23.2 billion Road DPWH finalizing agreements with TRB regarding interconnection for MMSS3 and NLEX. TRB issued Notice to Proceed of the Project on June 27 and received by CITI on June 28 Status of Final Engineering Design Drawings and Parcellary Plans: Southeast Metro Manila • Section 1A: Approved by TRB; Section 1B: DPWH PPP 2016-2019 TBD Expressway (C6) Submittal to TRB June 30 and under process for approval • Section 2: For submittal to TRB for approval 1st week of July 2016 • Section 3, 4, 5 & 6: Review by the Independent Consultant is 90% complete RAILWAYS

Metro Pacific Investments Corp. Chairman Manuel Pangilinan said the company was open to reviving MRT-3 Rehabilitation DOTr PPP TBD TBD its proposal for the improvement of the MRT-3 with the new administration

For Submission of PQ documents on 9 September LRT Line 6 DOTr PPP TBD P65.1 billion 2016 AIRPORTS DOTr currently reviewing the project Six firms identified as project prospects to pre- Davao International qualify and bid DOTr PPP TBD P40.6 billion Airport Upgrade Submission of qualification documents postponed to August 10-17 as requested by prospective bidders UTILITIES

Davao Sasa Port DOTr, PPA PPP TBD P18.99 billion DOTr currently reviewing the project Modernization PSALM approved another auction 850-MW Sucat Thermal DOE PPP TBD TBD Power Plant Privatization of the decommissioned Sucat plant is scheduled in September 2016

OTHER PROJECTS

Civil Registry System Bidding process starts Information Technology PSA PPP TBD P1.6 billion Project Phase 2

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STATUS OF ON-GOING BIG TICKET INFRASTRUCTURE PROJECTS AS OF JUNE 2016

IMPLEMENTING FUNDING CIVIL WORKS PROJECT TITLE PROJECT COST STATUS / ISSUES AGENCY SOURCE TIMEFRAME

ROADS/BRIDGES

Overall progress for all sections is calculated at Metro Manila Skyway TRB PPP 2015-2018 P37.43 billion 12.157% Stage 3

Segment 8.2: Segment 8.2: Detailed Engineering Design (DED) was completed and 2017-2019 P 15.4 billion submitted to TRB for approval NLEx Harbor Link DPWH PPP (Segments Segment 10: 8.2 and 10) Segment 10: 2014-2017 Project accomplishment rate is at 29% DPWH Legal Service recommended TRB to immediately execute the Draft Memorandum SLEx Expressway Toll 2016 - 2017 TRB PPP P13.1 billion of Agreement between DPWH and TRB for DPWH to Road 4 (1st section) provide personnel and funding assistance for the acquisition of the ROW of the toll road project Section 1: Substantially completed

Section 2: 95.78 % completed (lots), 19.48 % completed (improvements), 100 % completed (trees) TPLEx DPWH PPP 2010-2017 P24.4 billion Section 3: Construction is ongoing; Urdaneta City to Binalonan substantially completed AIRPORTS Mactan-Cebu International Airport Passenger Terminal DOTr PPP 2016-2018 P17.5 billion Project accomplishment rate is at 23.25% Building RAILWAYS Ongoing soft renovation and upgrades of LRT 1 Cavite DOTr PPP 2016 - 2021 P64.9 billion LRT Line 1’s existing system and other pre- Extension construction activities

ACRONYMS DOE Department of Energy DOTr Department of Transportation DPWH Department of Public Works and Highways LRT Light Rail Transit MMSS3 Metro Manila Skyway Stage 3 MRT Metro Rail Transit MW Megawatt NAIA Ninoy Aquino International Airport ROW Right of Way PPA Philippine Ports Authority PQ Pre-qualification PSALM Power Sector Assets and Liabilities Management Corp. SLEX South Luzon Expressway TBD To be determined TRB Toll Regulatory Board

Philippine ANALYST INFRASTRUCTURE June 2016