MOTORISTS taking the North Luzon Expressway (Nlex) and Subic-Clark-Tarlac Expressway (SCTEx) in the north and the Cavite Expressway (Cavitex) in the south experience smooth and comfortable rides as a result of regular maintenance work and road improvements done by the toll operators. They take these measures for granted and forget that the maintenance and upkeep of the expressways are done at big expense for the operators to ensure seamless travel on the road at all times.
The Manila North Tollways Corp. (MNTC) operates both Nlex and SCTEx, while Cavitex Infrastructure Corp. (CIC) handles Cavitex. Both firms have been investing billions of pesos on road improvements along the expressway, but no toll-rate adjustments were acted upon by the Toll Regulatory Board (TRB) in the previous administration.
The two tollway operators claim that their foregone revenues had reached almost P3.9 billion by the end of the Aquino administration, and now accrued to a whopping P5 billion combined.
Tollway operators have to constantly maintain, upgrade and expand the roads they operate and the only way for them to recover their investments is through toll collections, which should be regularly adjusted to help them cope with rising costs.
In fact, the Supreme Court has supported a “reasonable” rate of return for operators via periodic adjustments.
“While the interests of the public are ideally to be accorded primacy in considering government contracts, the reality on the ground is that the tollway projects may not at all be possible or would be difficult to realize without the involvement of the investing private sector, which expects its usual share of profit,” the Supreme Court said.
With this SC declaration in mind, the MNTC filed early this year an arbitration case before the United Nations Commission on International Trade Law in Geneva, Switzerland, to compel the Aquino administration to compensate it for P3 billion in foregone revenues over its inaction on toll-hike petitions for the 84-kilometer Nlex and the 14-kilometer Cavitex.
This compensation amount, which is inclusive of the value-added tax plus interest, is intended to cover MNTC’s foregone revenues from January 2013 to December 2015 only. It does not include yet an additional P111.8 million for every month of delay in compensation starting in January 2016.
In May MNTC President and Chief Executive Rodrigo Franco said he was open to an out-of-court settlement on the arbitration case involving the firm’s P3-billion compensation claim.
However the MNTC’s claim is settled, the government should honor the provisions of the contract it entered into with this toll operator.
The longer the government delays the resolution of the MNTC case, the bigger its financial obligations get every day.
According to Transportation Undersecretary for Toll Roads Noel Eli Kintanar, the government is now working to resolve these cases. “The arbitrations are in motion. These matters will be taken up under the framework of the existing concession agreements,” he said.
The speedy resolution of this arbitration row is urgent because the government’s continued refusal to comply with the rules of its concession agreements with MNTC and CIC gives it a bad name in the investment community.
The TRB’s refusal to grant the toll increases sends the wrong signals to prospective investors who see favorable prospects for the Philippine economy and support the Duterte administration’s business-friendly 10-point socio-economic agenda.
In his inaugural speech on June 30, President Duterte said: “I order all department secretaries and heads of agencies to refrain from changing and bending the rules of government contracts, transactions and projects already approved and awaiting implementation. Changing the rules when the game is ongoing is wrong.”
The MNTC and CIC have the moral high ground to push their long-overdue toll-fee adjustments for two reasons. One, the periodic rate adjustments are provided for in the concession agreements that the national government signed with these toll-road operators. And, two, TRB’s failure to consider the adjustments are unfair to these O&M contractors, and underlines the kind of policy inconsistency or regulatory risks that keep investors from putting their money in big-ticket infrastructure projects in the country.
E-mail: ernhil@yahoo.com.