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Monday, December 8, 2014

The DOTC wanted the MRT3 buyout through the 54 billion pesos of 2015 budget, but is confused on what to do about MRT3? Or worse, purposely confusing the public for some ulterior motive we can only imagine to happen?

The P54 billion DOTC wants would not buy out the original private owners as DOTC officials are publicly claiming. That large sum of money will only redeem MRT bonds now being held by GFIs. In other words, they would just move money from one government pocket to the other, something they are already doing now with the lease payments.

In the past months, Secretary of DOTC Jun Abaya had so many announcements for this buyout. He even declared the greatest confidence in completing this buyout when the 2015 budget’s released. The two biggest MRT-3 investors are Land Bank of the Philippines (LBP) and Development Bank of the Philippines (DBP), which have majority representation in the MRTC board, including the board chairman. He placed the value of the two banks’ exposure at $619.1 million, plus a “return” of $312 million for a total of $931.1 million. He valued “non-DBP/LBP investments” at $95.8 million. His funding request also included $143 million for taxes and $2 million for legal fees.

The Senate through Escudero said, senators do not believe that the buyout plan, if it pushes through, would solve the problems plaguing the MRT-3. The P53.9 billion would just go to two state banks holding 80 percent of bonds sold by MRT Corp. (MRTC), the owner of the EDSA rail line, and none to its maintenance and private investors. The P6 billion they kept in the budget “is for payment of taxes under the BOT (build-operate-transfer) contract (with investors), which is one of the components of the MRT buyout plan.”

Senator Chiz Escudero informed congressmen of the Senate’s decision to scrap funding for the planned government takeover of the rail system during the bicameral conference committee on the 2015 budget. The conference committee will convene again to agree on the proposed changes in the 2015 budget and possibly vote on the measure.

A buyout would also not stop lawsuits against the government and the net effect of the Senate decision to deny funding for the buyout plan is that such takeover would not push through. The plan will be derailed because the government will not have the necessary funds for it. The P54 billion be appropriated to jumpstart the Metro Manila subway project as recommended by the Japan International Cooperation Agency.

The senators could not just block the government’s solution to MRT-3 woes without offering alternatives and as long as such problems persist, the safety of the more than 600,000 MRT-3 commuters daily would be in peril.

Transportation and Communications (DOTC) Secretary Joseph Emilio Abaya has been saying that buying out the owners of MRT3 to the tune of P54 billion is necessary to start the rehabilitation of the system. He called that process Equity Value Buyout or EVBO which is provided for in the contract. First of all, the EVBO is a remedy available only to MRTC and would require DOTC to be in breach of agreements and go into default. A default on the part of government would affect the country’s credit rating and should not be resorted to lightly.

DOTC Secretary Joseph Emilio Abaya on the Senate’s scrapping of the buyout fund? He would face the Senate and the MRT Holdings to facilitate his goals for this MRT3 buyout. Given more reasons why they needed the 54 billion pesos is not enough to uplift the MRT3-EDSA train development and operations. It will only be paid to the two banks but cannot be for the whole improvement.

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