Gov’t may bid out O & M for Mindanao railway project

By Czeriza Valencia (The Philippine Star) Updated February 27, 2017 – 12:00am http://www.philstar.com/business/2017/02/27/1676095/govt-may-bid-out-o-m-mindanao-railway-project MANILA, Philippines –  The government is considering bidding out the operations and maintenance for the proposed Mindanao Railway Project under the Public-Private Partnership (PPP) scheme, Socioeconomic Planning Secretary Ernesto Pernia said. The planned railway, which would connect key cities in Mindanao, is a priority project under the Duterte administration because of its potential to boost trade and tourism in the region. Several financing methods are being considered for the project such as the use of Official Development Assistance (ODA), loans from multilateral banks, Public-Private Partnership (PPP), even co-financing. “Maybe the maintenance and operations (of the railway can be bid out under PPP),” Pernia told reporters on the sidelines of the 50th anniversary celebration of the Asian Development Bank (ADB) last week. He said several governments remain interested in extending financing for the project. “Many are interested. Malaysia is interested. China is interested, Japan is interested. There is no problem with the source of funding,” Pernia said. In August last year, Pernia said the government received expressions of interest from four local conglomerates – San Miguel Corp., Ayala Corp., Megawide Construction Corp., and Metro Pacific Investment Corp. to build the railway. The feasibility study, which is expected to be completed within the first quarter of the year would determine the most appropriate means of financing for the project. “It (feasibility study) should be done maybe this month or the next,” he said. “It’s (project) likely to get started in terms of implementation this year because that is going to be an iconic project, a major project. It is close to the heart of the President so we need to get that started this year,” Pernia said. Once finished, the study would be presented before the technical board of the Investment Coordination Committee (ICC) where the return of investment as well as the social benefits and costs would be considered before it is brought to the Cabinet-level ICC for endorsement to the National Economic and Development Authority (NEDA) Board chaired by the President. The 2,000-kilometer railway system is deemed crucial for economic development in Mindanao as it would improve inter-island connectivity by linking major cities including Cagayan de Oro, Iligan, Zamboanga, Butuan, Surigao, Davao and General Santos. Mindanao also stands to benefit from increased trade once the railway system is completed because the island is a potential major transhipment point and center of trade in the Brunei Darussalam-Indonesia-Maysia-Philippines East ASEAN Growth Area (BIMP-EAGA) region. Enhanced interconnectivity is also seen to boost tourism and commerce in the island because of increased passenger and freight transport. The government wants to start the construction at the soonest time possible of the most viable segment of the train system as it is unlikely that the whole rail system would be completed within President Duterte’s term. NEDA sources said that according to the preliminary results of the study, some 800 kilometers in the route of the proposed railway are already seen to be economically viable. NEDA’s consideration to bid out the operations and maintenance of the proposed train system is in sync with the thrust of the Public-Private Partnership (PPP) Center to pursue hybrid PPP projects which combine traditional procurement and procurement under the BOT law. This means construction would be financed through soft loans while operations and maintenance would be under PPP.