The disaster of MRT 3

And why the Conceived Clark railway will fail.

July 30, 2010

Make no mistake about it. MRT is a well-conceived concept that went wrong because of politics. And this is the same reason why the conceived Clark railway connecting Clark International Airport to Manila proposed by Pangilinan's Metro Pacific Group and Company WILL always fail.

The same reason why the South Luzon Tollway Corporation, a joint venture between PNCC and Malaysian Investor MTD Capital, is aghast and disgusted how the government ignores the contracted rate of return to their investments.

and yet we are telling foreign investors to invest in our land. It's quite a contradiction in the real world so to speak.

Going back to the MRT case, which is the train you see at EDSA, it was intended by the project that its fare should start at 40 pesos.

While the rest of the transport industry periodically raise their fares as a function of rising costs and inflation, MRT’s fare went the reverse in its 10 year long history, sliding down to P12.50 for the same distance you pay for buses at EDSA.

At inflation, the fare of the MRT should be pegged at P60 pesos in 2009 according to the Department of Finance. The recommendation was ignored by the Arroyo government. Instead, the subsidy of the government for the luxury of few people went up to P5.5 billion as its obligations to its creditors every year since it started operating.

The twist of the story is the Arroyo government ordered two of its profitable banking institution, Land Bank and DBP, to buy the interest of its creditors in 2009 so that according to them the financial hemorrhage would stop, so they say, but in reality just bought time to delay its losing trend, at least until after the Arroyo's government end. What the Bank loses, the Filipino taxpayer pays. Just like what President Aquino said in his first SONA. We have to pay for their excesses.

The total project cost was $679 million which ballooned to $720 million. The Banks of the government assumed the $380 million of the foreign loan which should have went to agricultural related investments and small and medium enterprises, which is exactly the reason of the bank's existence, which in turn could have created at least 2 million jobs in the countryside according to the NSO.

The project is really so bad, or shall we say the fare that is, considering that its estimated yearly income generates only $47.4 million while its yearly expense is placed at $164.9 million as of 2009. Do the math please.

That means the government is paying subsidies amounting to $117.5 million for 500,000 Filipino people riding the MRT everyday as against the 90 million of us who never used it.

In simple mathematics, every P15 you pay for the line’s entire North Ave. to Taft Ave. leg cost the government P45 which all of us share to pay even if we don't or never cared to ride the MRT.

If the trend continues until 2025,the year when the project becomes government-owned, the total subsidies would total $1.24 billion, excluding the $200 million to double MRT capacity. But according to Aquino government's DBP, the claim against the government was at least $2.5 billion as against former figure made by Arroyo government. Tricky, yet it still spells a billion U.S. dollars.

The amount is more than enough to completely develop Clark International Airport with 40 million passengers capacity per year. And the money will still has room for the $300 million Clark-NAIA rail link provision, which according to Pangilinan will cost them only $150 million to build.

In London, the Transport for London charges £4.50 (P350) for an hour and half ride from Heathrow to Central London. Heathrow express train charges £16.50 (P1,155) for 15 minutes ride to Central London. But would a P200 fare be just for an hour and half ride from Clark to Manila as the proponent envisioned?

If the toll collection from SLEX or the fare collection of LRT/MRT is any indication of reality, then the future of Clark International Airport is bleak, investment wise.

Think about it!

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