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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

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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 71 INFRASTRUCTURE 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 Manila Electric Co. (MERALCO), is seen Tas the solution to the long standing issue of congestion in Metro Manila 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. Philippine ANALYST INFRASTRUCTURE June 2016 72 INFRASTRUCTURE PROJECT DETAILS OF MRAIL'S CARGO TRAIN PROJECT h The cargo train line is a 57-kilomer cargo rail system. h 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. h 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. h 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. h 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. h 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. h 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. h 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. h 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 Philippine ANALYST INFRASTRUCTURE June 2016 INFRASTRUCTURE 73 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 Caloocan City and Metro Expressway (NLEX) – South Luzon Expressway (SLEX) Manila Skyway 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 Philippines, 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. Philippine ANALYST INFRASTRUCTURE June 2016 74 INFRASTRUCTURE 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.
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