Be careful with ‘review’ of LRTA contract
Credit to Author: Ben Kritz| Date: Mon, 20 Jan 2020 16:16:15 +0000
AFTER hurling threats — most of them richly deserved — at the owners of Metro Manila’s two water concessionaires at the end of last year, President Rodrigo Duterte has turned his sights on the consortium behind the Light Rail Manila Corp. (LRMC), the operator of the Light Rail Transit Line 1 (LRT-1). The President should be careful not to let his ire at the parties involved, Ayala Corp. and the Metro Pacific Investments Corp., compromise an objective review of their concession.
In addition to operating the existing LRT-1, the Ayala/MPIC group also won the contract to build and operate the P64.9-billion LRT-1 extension to Cavite.
There are two separate themes happening in all of this. The first is the government’s review of all existing concession contracts, which was an objective that was announced long before the controversy over the water concessions exploded at the end of last year.
That is the sort of thing that makes contractors and potential investors nervous, but there is really nothing wrong with it; no contract should include terms that prohibit its being studied at some later point, as long as any desired changes to its terms are handled fairly.
The second is President Duterte’s personal pique at rich people, particularly those who have earned a substantial part of their wealth as a result of doing business with the government.
Ayala and MPIC (one of whose shareholders in Sen. Francis Pangilinan, a Liberal Party stalwart and an opposition burr under President Duterte’s saddle) have made fantastic amounts of money from government contracts, including the grossly defective concessions for Manila Water Co. Inc. (Ayala) and Maynilad Water Services Inc. (MPIC). In comments at a function last Friday, President Duterte characterized the LRT-1 extension contract, and by implication the concession for the existing LRT-1 as “the biggest rip-off of all,” and said that the P64.9-billion deal had never been shown to the Filipino people.
The latter accusation is not quite true; although it is not readily available, the LRT-1 extension concession agreement is accessible to anyone keenly interested enough to read it. The key points of it are available on the PPP Center website. Whether or not the deal is really the “biggest rip-off of all” is debatable. For one thing, the investment LRMC will be collecting returns on is not P64.9 billion, but P45.07 billion; P19.83 billion of the project cost is coming from official development assistance. None of that means that the contract cannot or should not be reviewed, but it should be done so objectively, without the presumption that it is “onerous.”
Another significant factor that mitigates the presumption of irregularity is the decidedly better operation and performance of the LRT-1 compared with its government-owned and -operated counterpart, the Metro Rail Transit Line 3 (MRT-3). Although the MRT-3 is slowly undergoing a comprehensive rehabilitation, using it is still a nightmarish experience, from dirty, understaffed stations in poor repair to extremely overcrowded trains to the poor condition of the line itself, which limits trains to very low speeds. The LRT-1 is comparatively better maintained and better managed overall, and includes some touches that indicate LRMC is at least trying to run a consumer-friendly business. For instance, during crowded rush hour periods, so-called “skip trains” are regularly dispatched to sweep up passengers at stations farther up the line, rather than letting trains fill to capacity at the first station. The LRT-1 management also routinely posts summaries of its key performance indicators for the enlightenment of any customer who wishes to pass the time by reading them.
In short, whatever the nature of the operating contract, the LRT-1 generally meets customer expectations, which is a strong indication that the contract may not be “onerous.”
By contrast, the service performance of the two water concessionaires, operating on contracts that each had at least a dozen onerous provisions, according to a Justice Department review, has left a lot to be desired.
The best possible outcome to all of this, for the sake of the public, the government and potential investors, would be a transparent review of any contract the administration wishes to question. If there are undesirable provisions found, then explain clearly why they are, and what legally acceptable steps may be taken to correct them. If the contracts are fair, as one suspects the contracts concerning the LRT-1 may be, whatever the President’s personal dislike for the people involved, then the government should explain that clearly as well.
ben.kritz@manilatimes.net
Twitter: @benkritz