DOTC eyes borrowings to buy out MRT-3 partners

MANILA, Philippines – The Department of Transportation and Communications (DOTC) is considering borrowing to finance the complete government takeover of the Metro Rail Transit line 3 (MRT-3) after the P54-billion allocation for the acquisition of the mass transit system was not included in the P2.6-trillion national budget signed by President Aquino last Dec. 23.

DOTC Undersecretary Jose Perpetuo Lotilla said the government is considering borrowings from foreign sources or local banks to pursue the equity value buy out (EVBO) of the private shareholders of MRT-3 as mandated by President Aquino.

“If we have to borrow, we need approvals. If you borrow as a government entity, normal process is, there has to be a Monetary Board approval. There has to be a decision first that we’ll go this way then we’ll get the approvals,” Lotilla said.

Lotilla said the DOTC is discussing all possible options with various agencies including the Department of Finance (DOF), the Department of Budget and Management (DBM), the Bangko Sentral ng Pilipinas (BSP), among others and would make the final recommendation to the Office of the President.

“We have this road block because we don’t have the money. So we have to ask if we can do it this way because we don’t have appropriation,” Lotilla said.

In March 2013, President Aquino issued EO 167 directing the DOTC and the DOF to implement the EVBO in order to put an end to the ongoing arbitration case between the DOTC and Metro Rail Transit Corp. (MRTC) in Singapore.

“The EO is specific on how to do the EVBO. If you change the mode, you will have to clear it with the OP,” Lotila said.

Earlier, Transportation Secretary Joseph Emilio Abaya said there are other options to push through with the EVBO to allow the government to take over the mass transit system along EDSA as directed by President Aquino even if it was not included in the 2015 General Appropriations Act (GAA).

“We’re not left with just one option, there are other options. There’s an EO, which is basically a directive from the President to execute this,” Abaya said.

The buyout would terminate the concession agreement, transfer full ownership of the mass transit system along EDSA to the government. The government pays billions of pesos in equity rental payments to MRTC annually.

Government financial institutions led by the Land Bank of the Philippines and the Development Bank of the Philippines hold an 80-percent economic interest in Metro Rail Transit Corp. (MRTC). Private shareholders led by MRT Holdings II Inc. have a 100-percent stake in MRTC.

The government has spent a total of P147 billion for the EDSA rail line. This includes P85 billion in rental payments to MRTC, P32 billion in loans incurred by the company that are state-guaranteed, P20 billion in MRTC taxes and P10 billion in maintenance fees.

According to Abaya, the government wants to buy out all the private shareholders so as not to disrupt through a temporary restraining order (TRO) from the courts the planned expansion and improvement projects for the mass transit system along EDSA.

Once the buyout is complete, the DOTC would bid out an operations and maintenance (O&M) contract for the mass transit system to tap private sector efficiency and customer service orientation for operational needs. –Lawrence Agcaoili (The Philippine Star)