AS massive railway and subway projects with funding and technologies from Japan or China are being offered, we need to scrutinize them and learn lessons from past dismal experiences with Metro Rail Transit (MRT) and Light Rail Transit (LRT), to which we are still shouldering the onerous financial burden from foreign-exchange (forex) risks.
Beware hook, line and sinker. Our government economic managers must conduct due diligence and not be duped into swallowing hook, line and sinker the sweeteners and baits from glib-tongued foreign brokers in collusion with local gullible counterparts, at least in the past administration, who were more after making fast-bucks than achieving effective performance.
The P3.8 billion worth of some 48 rail coaches from Dalian, China already delivered partially turned out unusable for many reasons. They do not match MRT 3’s electronic signal systems. Moreover, MRT 3 rails can carry a maximum of 48,000 kilograms (kg), but the Dalian trains weigh heavier at 49,000 kg per coach, which can subject all passengers to danger. Our policy-makers must learn from what Spanish philosopher-poet George Santayana said, “Those who do not learn from history are doomed to repeat it.”
Chained to a “debt sentence?” Indeed, we must learn from history, says Francis Yuseco, a former investment banker, who claims forex risks are huge if we get locked-in into these long-term foreign-funded projects.
When LRT 1 was clinched in 1981, (Forex was P7.80 per dollar), the government had to raise only P15.60 per dollar of debt based on the rule-of-thumb operating costs double the foreign exchange rate. With current forex at P51.77 per dollar, the government has to raise P103.54 for every dollar of debt, or 1,227.43 percent more in effective costs than the original forex rate.
For foreign-funded projects built in 1994 when forex was at P24 per dollar, the effective costs are 331.41 percent more than its original cost on a per dollar basis. For projects transacted in 1996 when forex was at P26 per dollar, effective costs today are 298.23 percent more than in 1996.
We only pay mostly interests, and not yet mainly principal loans, we have thus been chained to a debt sentence. Perhaps, we may have already overpaid these loans, and are still paying them indefinitely due to continuous peso devaluation, resulting partly from the fact we import more than we produce and export. Foreign funders are lucky they are protected by automatic debt appropriations and by sovereign guarantees.
Caution and cushion on technology dumping. At stake now are some P1.235 trillion worth of railway projects, which includes the P450 billion in Mindanao Railways, the P175-billion Luzon North Line, the P175-billion Luzon South Line Project and the P355-billion Japan-funded Mega Manila Subway.
On the financing side, perhaps, it is wise to incorporate some forex cushion or insurance. On the technology side, we must update ourselves with trends and take caution, lest we end up as a dumping ground of old technologies.
Citing records, Yuseco reveals “railways globally are losing ventures. Germany spends €17 billion a year in railway subsidies; Switzerland, €4.3 billion; France, €13.2 billion; China, $130 billion; Italy, €7.2 billion; Spain, €5.1 billion; the United Kingdom, €4.5 billion; Japan, $300 billion; and the Philippines, P21 billion a year. Only Hong Kong is earning, not from railways, but from real estate and commercial operations.
While magnetic-levitation (mag-lev) railways may be the transportation of the future being of capable of shortening travel potentially from Manila to Legaspi City to 30 minutes given China’s mag-lev breakthroughs, regular railways have reached their levels of obsolescence and inefficiency. Perhaps, railway-makers are being helped by their governments to market or dump their old technologies elsewhere, just like Japan’s subway offer, which is packaged with sweeteners like a 0.1 percent per annum payable in 40 years, with a grace period of 12 years, but passing on the burden by bloating the price to P355.6 billion, from an original cost of P227 billion.
Bus trains edging out railways. Bus trains are increasingly becoming the transport of choice in many countries and are now established in 189 countries, many replacing their railways being costlier as you need a complex of power systems, coaches, electronic signal system and railway tracks. In contrast, bus trains are 20 percent of railway costs without the rail tracks, power generators, etc.
Even China’s Xiamen converted its LRT into bus trains, popularly called Bus Rapid Transit (BRT), which are articulated or jointed buses that look like trains. Even our own Department of Science and Technology has designed its BRT version. China has also stopped its three-subway rail projects because of mounting debts.
It has also developed recently an innovative railless road train and wants to banner it as the first railless road train in the world, but Yuseco claims that as early as 1989, he developed his PhilTrak concept long-before BRT became popular.
A Filipino started it all? It got approved during the Ramos administration, but was effectively rejected during the Estrada administration. He is, therefore, one of the pioneers of BRT, although Brazil developed independently its own version about the same time. Yuseco claims his concept triggered the popularization of BRT for two reasons. For one, World Bank, in its April 10, 1990, memorandum written by World Bank transport expert Gerhard Menckhoff, who met and praised Yuseco’s innovation, disseminated the idea to all World Bank offices worldwide.
Second, American Bus Association President Georg Wynn on August 31, 1999, cited US Federal Transit Administrator Gordon Linton declaration to “reinvent bus service in the US, with the features and characteristics identical” to Yuseco’s PhilTrak PRT, but baptizing it with the catchy but awkwardly phrased BRT, when it should be phrased as RBT, or a bus transit that is rapid.
Apart from onerous financial conditions, we get dependent on the importation after sales parts numbering over 2,000 costly moving parts. Foreign suppliers are, indeed, loco (insidiously crazy) to sell us down the drain, and we may be crazier (more loko) when we shoot ourselves.
E-mail: mikealunan@yahoo.com