News Release

July 25, 2013

The Bagong Alyansang Makabayan today warned that the looming fare increase in the MRT 3 will only go to debt servicing and not to improvements in the train services. It said that the financial statements from the MRT 3 revealed several items that would require further scrutiny because they comprise the bulk of the expenses of the train line.

Bayan, citing the 2011 and 2012 financial statements of the MRT, said the Build Lease Transfer loan amortization  expenses reached P10.05 billion in 2011 and P6.75 billion in 2012. The biggest item in the loan amortization expenses was the Equity Rental Payments to private firms which built the train line. In 2011, the equity rental fee amounted to P4.68 billion while in 2012, equity rental fee was at P3.66 billion.

“Before any talk of a fare increase, government must first answer why we are continuously paying for questionable debt borne out of an onerous contract with the private developers of MRT. We must ask why we pay for the guaranteed profits of these companies. Raising fares and passing on the debt burden to the people doesn’t solve anything. It only legitimizes the onerous deals entered into by previous governments,” said Bayan secretary general Renato M. Reyes, Jr.

“While Aquino talked about onerous contracts in his SONA, here is one contract staring him in the face yet he chooses not to address it. Government subsidy to the train line is going to the private investors who were given guaranteed profits. Aquino now wants to pass on this obligation to the public via a hefty P5.00 – 7.00 fare hike this year. He justifies the increase through the fallacy that people in Mindanao are subsidizing commuters in Metro Manila, pitting the people against each other. The truth is, people from Luzon, Visayas and Mindanao are being made to pay these onerous debts, one way or another,” Reyes added.

Bayan also questioned the item “maintenance fee” and “price escalation for maintenance fee” which it said was increasing between 2011 and 2012 yet it was during this period that many train accidents or disruptions in service were recorded.

In 2011, the maintenance fee was P1.05 billion while the escalation fee reached P331 million. In 2012, maintenance fee was P582 million while the price escalation for maintenance fee P413 million.

The maintenance company is tied to the original financiers in the MRT line, as in the case of Sumitomo Corporation which handled maintenance until they were replaced when their contract expired in October 2012. PH Trams-CB&T won a 6-month maintenance contract that year and was extended to June 19 this year.

According to Bayan, the original proponents of the MRT 3 were private local and Japanese corporations which formed the consortium Metro Rail Transit Corp. (MRTC). These investors made a killing on the MRT because government guaranteed payments to the banks that financed the project including the Export-Import Bank of Japan, Sumitomo Bank, and other Japanese and Czech banks as well some local financial institutions like the Bank of the Philippine Islands (BPI).

Bayan said that the deal was made more financially onerous because the owners of these banks that provided a loan of $462.5 million in 1998 and the private firms that constructed the MRT have the same investors. MRTC included the Ayala Land Inc., owned by the Ayala family which also controls the BPI. MRTC also entered into an Engineering, Construction, and Procurement (EPC) Contract with the Sumitomo Corporation, owned by the same Japanese investors that control Sumitomo Bank. On top of the guaranteed debt payments, government also guaranteed that the MRTC will get 15 percent return on investment (ROI) per annum.

In fact, this deal was so burdensome that the previous administration in 2009 had to buyout 76 percent of MRTC for $800 million lump-sum payment in order to terminate the guaranteed ROI.

“The DOTC has said in its letter to Bayan dated July 2 that public consultations will be held regarding the fare hike. We have not received any notice of hearing. We have not received any documents that seek to explain the fare hike. Perhaps the fare hike hearing is only for show, for compliance, because the President already made his stand known on the fare hike. It is good as done,” Reyes added. ###