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Private-sector efficiency

/ 12:14 AM February 24, 2015

The Metro Rail Transit 3 plying Edsa has become a symbol of how a public transport system should not be run. Inefficiency and neglect have led to its present decaying condition, to the detriment of the riding public.

It is not that no private investor is willing to take up the facility and rehabilitate it. As early as 2011, the group of businessman Manuel V. Pangilinan entered into a partnership deal with the private corporation that owns MRT3 with the aim of investing some $600 million to improve the services of the train system. The plan was to expand the system’s capacity by adding more coaches to each train and allow it to carry more cars at faster intervals. The expansion sought to double the capacity of the line to 700,000 passengers a day from the current rate of 350,000. However, the Department of Transportation and Communication rejected the plan and instead proposed a reverse privatization where the government would initiate a P54-billion takeover of MRT3. However, this fell through after the Senate rejected the budget for the takeover.


Pangilinan’s Metro Pacific Investments Corp. (MPIC) has again renewed its offer to take over the MRT3, formally submitting two weeks ago to the DOTC a revised proposal to expand, rehabilitate and operate the busy line. Transportation Secretary Joseph Abaya admitted that his department received MPIC’s new offer, which was initially revived in December 2014, after the Senate rejected the DOTC’s takeover plan.

But MPIC’s new offer must hurdle a major obstacle: the Aquino administration’s bias against unsolicited proposals. Abaya said that while a decision to accept or reject the new offer would follow once a complete review is finished, he reiterated the administration’s view on unsolicited deals: “Honestly, we have seen that we are much better off with open, transparent and competitive bidding.”


This is not always the case, however. It’s worth mentioning the key features of the revised MPIC proposal, such as spending $524 million (P23 billion) partly to expand and rehabilitate MRT3, which is operating beyond its designed capacity. MPIC is also seeking the extension of the build-lease-transfer term of the rail line’s private-sector owner, Metro Rail Transit Corp., by 15 years to 2040. MPIC earlier pointed out that the acceptance of its proposal meant that the DOTC would no longer need to subsidize the money-losing MRT3. Part of MPIC’s original offer also includes increasing the fares, which the DOTC cited as among the reasons for rejecting the proposal in 2011. And yet the government itself raised fares last Jan. 4.

While it is widely believed that public bidding provides the government with the best value, it does not mean that unsolicited proposals cannot do the same. Take the case of the Bases Conversion and Development Authority, which recently awarded to Manila North Tollways Corp. the contract for the management, operation and maintenance of the 94-kilometer Subic-Clark-Tarlac Expressway. This was after the BCDA failed to secure bids from other companies to challenge the MNTC offer. Under the terms for what is referred to as a price challenge, the contract would be awarded to MNTC if the government does not receive any better counteroffer. “We have observed all the transparency required for this deal and worked hard to preserve the integrity of the process… This just proves that the latest improved offer of MNTC is the best in the market,” Arnel D. Casanova, BCDA president and chief executive officer, was quoted as saying after the award to MNTC.

Why can’t the same scheme be adopted for MRT3? Since 2004, the Edsa train system has been operating at overcapacity. Currently, the line serves nearly 550,000 passengers a day, even reaching at one point the daily passenger mark of 650,000 when it has a rated capacity of only 350,000 passengers a day.

Awarding the operations and maintenance contract for MRT3 sooner rather than later would allow the use of private-sector efficiency while the government keeps its regulatory powers for passenger protection, including the decision on any fare adjustment. Each day of delay is another day of risk to the tens of thousands of commuters who have to depend on an inefficient train system.

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TAGS: editorial, efficiency, Metro Rail Transit 3, mrt3, private sector, public transport system
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