According to the newly appointed Department of

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1 51 DOTC clarifies stance on controversial projects During the Quarterly Roundtable Discussion organized by the Wallace Business Forum, Transportation Secretary Mar Roxas clarified the government s stance on controversial projects Northrail and the Greater Maritime Access roll-on,-roll-off ports. According to the newly appointed Department of Transportation Secretary Mar Roxas, the 2 controversial projects the P30-billion Northrail and the P11.8-billion Greater Maritime Access roll-on, roll-off (Ro-Ro) ports - will not be scrapped but renegotiated to terms that are fair to all parties. Both proponents of the projects have already agreed to renegotiate the contracts. These 2 projects were among several big-ticket deals approved by the previous administration, only to be later found with questionable provisions. The Northrail was found to be too expensive, while the Ro-Ro ports were found to have bypassed the procurement process of site inspection and feasibility studies (see table for project details). In a state visit to China last month, the Aquino administration convinced top Chinese government officials to have the Northrail project renegotiated to make the terms mutually beneficial between the 2 governments. Secretary Roxas noted that the project has been plagued with cost overruns, and despite having started in 2004, only one kilometer out of the proposed 90 had been completed. In addition, the review of the Department of Transportation showed that the scope of the project had been revised from its original plans and does not make sense. According to Secretary Roxas, the original goal of the project was the construction of a high-speed rail line between Manila and provinces in Northern Luzon. However, due to allegedly nefarious reasons, the terms were revised, shortening the total length of the line. In place of plans for a high-speed line, a contract for a slower commuter railway system was approved by the previous administration. For the project to make sense, Secretary Roxas said that it must be a high-speed railway that would serve as transport link between Clark, where an international airport development is planned, and Metro Manila (see related story). For the Ro-Ro ports project, the Department of Department of Transportation would form a working group composed of representatives from its department, the Philippine Ports Authority (PPA), the Department of Finance (DOF), and the Office of the Solicitor General. According to Transportation Secretary Roxas, the working group would set the parameters of the renegotiation and, in the process, the cancellation of the onerous contract. The government declared that while the details of the contract will be negotiated, the French contractor Eiffel Matierre will be paid for whatever work has already been done. The projects have questionable provisions.

2 52 INFRASTRUCTURE PROJECT DETAILS SOURCE: DEPARTMENT OF TRANSPORTATION Project Title: Northrail Phase Project Description: This railway project has 4 phases. The first phase called, the Manila Clark Rapid Railway System (MCRS), aims to build a world class high speed railway system.the project involves the construction of a km. rail line with double track narrow gauge, between Caloocan City in Metro Manila to Clark Freeport Zone in Pampanga. Section 1 of the project is from Caloocan City to Malolos in Bulacan consisting of some kilometers, while Section 2 is from Malolos, Bulacan to Clark Freeport Zone in Pampanga consisting of kilometers. The phase II of Northrail will run from Subic Economic Freeport Zone in Olongapo City; Phase III will be from extension to Fort Bonifacio Global City; and Phase IV will also from extension to San Fernando, La Union. Implementing Agency: The implementing agency for the MCRS project will be the NorthRail Corporation under the Bases Conversion Development Authority (BCDA). The phase II and Phase III will also be under the BCDA, while phase IV will be under DOTC. Mode of Implementation: The design, construction, and contract will be undertaken by the China National Machinery and Equipment Group (CNMEG), which is now known as Sinomach. The consultancy aspect will be done by Systra-ESCA-SPI on a joint venture basis. Source of Funding: China Overseas Development Assistance (ODA) or the China EXIM bank/bdca/northrail. Project Cost: Section I, which covers from Caloocan City in Metro Manila to Malolos in Bulacan will entail project cost of $602 million or P 30 billion. Project Duration: Expected completion date for the MCRS Phase 1 project will be on July Current project status: NorthRail project Phase I registered an actual physical accomplishment of 22%, while Phase II has not yet activated. On hold until completion of renegotiation with Chinese government. Project Title: Greater Maritime Access Roll-on, Roll-off Project Project Description: It involves the construction of modular ports in 70 areas outside the following roll-on/roll-off (RORO) highways which include those of the Western Nautical Highway, Pan-Philippine Highway, Eastern and Central Nautical Highways. Modular ports are solar-powered and costs about P50 million each depending on their size, shape and cargo features. Construction of 6 ports in 2010, 26 in 2011 and 13 in 2012 in the provinces of Isabela, Aurora and Pangasinan, Quezon, Romblon, Mindoro Cavite, Palawan, Masbate, Albay, Eastern Samar, Surigao del Norte, Davao and Cotabato. Implementing Agency: the Philippine Ports Authority Mode of Implementation: The modular ports will be constructed by the French company, Eiffel Matierre. Source of Funding: The project is financed by a loan from the French Export Credit. Project Cost: P11.8-billion Project Duration: All 70 ports were expected to completed by Current project status: The government will renegotiate terms of contract with the French government and the French contractor, Eiffel Matierre. The government has agreed to pay the contractor for all the delivered parts and work it has done so far... as new transport chief unveils 5-year plan The Department of Transportation has unveiled a P585- billion 5-year plan that centers on major infrastructure projects that, according to newly appointed Transportation Secretary Roxas, will adhere to President Aquino s 5Rs Right project, Right quality, Right people, Right cost, and Right on time. In October, the Department of Transportation unveiled an ambitious 5-year plan highlighting major infrastructure projects worth at least P565 billion. Among the major projects were the 5 projects listed under the priority public-private partnership (PPP) program launched by the Aquino administration last November the 11.7 kilometer (km) extension of the Light Rail Transit (LRT) Line 1 from Baclaran to Cavite; the LRT Line 2 Santolan, Pasig to Masinag, Antipolo extension rail projects; and the establishment of international airports in Puerto Princesa, Laguindingan, and Panglao, Bohol. According to Transportation Secretary Mar Roxas, these projects will be built by the government with their own budget or through overseas development assistance (ODA) financing before the projects operations and management (O&M) contracts are offered to the private sector. This is a turn-around from initial plans wherein the government intended to offer the various projects under the build-operate-transfer (BOT) scheme. Other major projects in the transport plan include the re-configured Northrail project; the establishment of an international airport in Misamis Oriental; the development of ports in Davao; the roll-on, roll-off (Ro-Ro) projects linking China with either the Subic port or the Batangas port; and the proposed 16 km. Cebu Bus Rapid Transit (BRT) (see table). Apart from the greenfield projects in its 5-year transport plan, the Department of Transportation expects to spend P6- billion for the improvement of Metro Manila s existing train lines the Metro Rail Transit Line 3 (MRT-3) and the LRT-1. The rehabilitation of MRT-3 andlrt-1 will form part of the Aquino administration s P72-billion fiscal pump-priming aimed at shielding the local economy from the European financial crunch. The government plans to acquire new light rail vehicles (LRV) or coaches for the MRT while also trying to resolve the breakdown and service interruption problems of the rail, New plan veers from original vision under PPP.

3 53 PROJECT NAME DESCRIPTION ESTIMATED COSTS STATUS LRT-1 Cavite Extension LRT-2 Masinag Extension Puerto Princesa Airport Laguindingan Airport New Bohol (Panglao) Airport NAIA Upgrade Clark Airport 11.7 km extension, covering 8 stations from Baclaran to Bacoor, Cavite, adding an additional 200,000 passengers/day, leading to a total of 700,000 users/day 4 km extension, covering 2 stations from Santolan, Pasig to Masinag, Antipolo, serving an additional 150,000 users, resulting in about 380,000 total users/day, with the aim of decongesting the traffic along Marcos Highway. Upgrade the present domestic airport in order to accommodate international flights, lengthen runway; add a new terminal. New international airport for Northern Mindanao to be completed by 4Q 2012, replacing 2 domestic airports with terrain and weather restrictions; thereby improving safety, air passenger and cargo traffic capacity, while likewise enhancing accessibility and promoting tourism. Construct a new international airport to replace Tagbilaran Airport Involves the conduct of airport systems assessment; required rehabilitation and upgrading works for the full operation of Terminal 3 and operational improvement of Terminals 1 and 2. Conversion of Clark into the main airport for the Greater Capital Region. To be able to accommodate expected passenger growth from the existing 30 million to 50 million P79-billion, with P48.24 billion for the superstructure and P30.7 billion for the rolling stock. P12-billion, with P9-billion for the superstructure and P3-billion for rolling stock. P4.2-billion; P2.4-airside facilities; P1.8-billion terminal P7.8-billion with P5.5-billion for civil works and P2.3-billion for Air Navigation. Land Acquisition and other ancillary costs. Total cost: P8-billion, P4-billion airside facilities, P3-billion terminal, P1-billion contingencies and consultancy. NAIA Terminal 1:P 9-million NAIA Terminal 2: P1.16-billion P12.4-billion Mactan/Cebu Main Airport Construct new passenger terminal building to accommodate growing passenger demand a separate domestic and international terminal to add 5.4 million (phase 1 and 2) P10.15-billion Kalibo Airport Upgrade Involves an expanded new Kalibo airport terminal building P3-billion Updating of old feasibility study ongoing. Feasibility study to be completed by October 2011; Right of way acquired; For NEDA-ICC submission this October/ November. Feasibility study to be completed within first week of October 2011 by project team; Transaction structuring has stared; Tech Advisor to be obtained by November Negotiation with Korean Eximbank for Non-Korean Air Navigation Equipment. Government currently looking for transaction adviser. Feasibility study to be completed by JICA, Possible expansion of Tagbilaran Airport under review, target date to coincide with feasibility study submission. Upgrading options being prepared Feasibility study being completed by Koica Feasibility study done, for preparation of NEDA-ICC submission To complete feasibility study by November 2011 Tacloban Airport Construct new passenger terminal P1-billion To obtain consultant for feasibility preparation Upgrade of various airports Improvement and upgrade of various airports nationwide P8.4-billion (2011 and 2012) On-going LRT -1 O&M NAIA-Clark Express Rail Link (reconfigured Northrail Project) South Line Modernization MRT Line 3 maintenance MRT Line 3 Additional LRVs Cebu Bus Rapid Transit (BRT) Central Ro-Ro Spine Davao Sasa Port New Cebu Port Municipal ports Privatization of LRT-1 operation, including revenue/market risk to private sector Involves the development, operation and maintenance of a newly constructed High Speed Northrail, 100km long from Makati Central Business District to Clark Freeport, Pampanga; to achieve a 45 minutes travel time. Upgrade and modernization of the 478-km PNR Main Line South from Calamba to Legaspi City, Albay Privatization of MRT-3 operation including revenue/market risk to private sector Acquisition of 51 LRVs to expand the ridership capacity to 700,000/day Involves a 16-km BRT line in Cebu City from Bulacao to Talamban; will achieve a capacity of approximately 270,000 pax/day Involves the construction and operation of an integrated transportation system combining RoRo ferry port network and services with new toll roads linking Manila-Panay-Negros- Cebu-Bohol-Northern Mindanao. The project is expected to reduce overall travel time of passengers. Rehabilitates existing Davao Sasa Port to accommodate more passengers and cargo Project aims to develop a new container and multi-purpose terminal at the new site in Consolaciojn/Mactan North to expand port capacity in handling container traffic Improvement, expansion of various municipal ports nationwide P5.1-billion P108-billion P30-billion P7.5-billion (over 3 years) P3.4-billion P5.2-billion P49.3-billion P5-billion P10.2-billion P7.646-billion Preparing for NEDA-ICC submission To renegotiate Northrail project; JICA has agreed to finance feasibility study Korean Eximbank agreed to provide feasibility study consultant to determine viability. Reviewing project for appropriate structure Obtaining DBM budget approval Feasibility being conducted by the World Bank Interagency task force has been formed; kick-off meeting scheduled in October. Looking for engineering consultant to determine rehabilitation of wharf. Japan METI to complete updating the feasibility study by 1Q2012 Ongoing

4 54 INFRASTRUCTURE NAIA will hit its physical capacity limit by end or announced Secretary Roxas. The MRT has a design capacity of 350,000 passengers a day, but it regularly operates with a ridership of 488,000 passengers daily. That is why there s a breakdown almost every day, noted Secretary Roxas. To resolve the situation, the Department of Transportation is reviewing a previous proposal to use idle LRT trains to augment the MRT s current capacity. In addition, the spending for preventive maintenance of trains and improvement of station facilities will be increased. Collectively, the MRT and LRT lines ferry around 1 million people daily... and prepares transfer of int l airport to Clark The Transportation Secretary Mar Roxas has signified that the eventual transfer of international airport operations to Clark is among the top priorities of the Transportation department. We are moving the international airport from NAIA to Clark, declared Transportation Secretary Mar Roxas after noting that the NAIA airport terminal facilities Terminals 1, 2, 3 and 4 will hit its physical capacity limit this year or in Note that for Terminal 3, which has not yet officially opened, in 2010, it already served 10 million passengers, 1.5 million international and 8.1 million domestic, which is the design rated capacity of the terminal, said Secretary Roxas. The plan to relocate the country s premier international airport from NAIA to Clark, some 90 kilometer up north, will be patterned after Hong Kong s Kai Tak Airport, but would be contingent on the success of the Northrail project and the privatization of the existing Ninoy Aquino International Airport (NAIA) properties. When Hong Kong s Kai Tak Airport was replaced by its current international gateway in Chep Lap Kok, the Hong Kong government sold Kai Tak Airport to the private sector to pay for the transfer of operations. The Department of Transportation expects to generate as much as $2.5-billion from the privatization of NAIA. All of these are just plans, and indicative, and will not happen overnight or within 1 to 3 years, Secretary Roxas said. It should be noted, however, that the Department of Transportation did not say whether the privatization will include all the NAIA terminals, or only a number of terminals. According to the Transportation Secretary, the initial plan to further expand the NAIA complex by buying out adjacent lands is no longer an option. The Transportation Chief defended the relocation plan, saying that expanding the 440-hectare NAIA will be more expensive and time-consuming than moving the commercial flights operation to the under-utilized Clark Airport, which is roughly covering 2,000 hectares of the Clark Freeport Zone. Secretary Roxas further added that general aviation, which involves operation of private and corporate hangers and aviation schools will also be moved to Sangley in Cavite as part of the long-term plan to decongest NAIA. Meanwhile, the Transportation Secretary expects that the full operation of NAIA Terminal 3 (NAIA-3) will happen very soon following the Pasay Regional Trial Court s decision for the government to pay as just compensation, $ million (P 7.63-billion), for NAIA-3. Under the court ruling, the Philippine government will put in an escrow account in the Land Bank and the Development Bank of the Philippines the balance of P4.63-billion (P7.63-billion minus the initial payment of P3 billion to Piatco in 2006). Piatco will receive payment upon the deliver of a clean deed of conveyance transferring NAIA-3 to the Philippine government. The deed should include a warranty from Piatco that the structures and facilities of the terminal are free from liens and encumbrances. But while NAIA-3 is expected by the government to be in full operation soon, the Transportation Secretary has clarified that international flights would not be transferred to Terminal 3. For the government, there is no point in transferring international flights to the new(er) Terminal 3 because the rated capacities [Terminal 1 and Terminal 3] are almost the same and we cannot afford disruptions in operations, said Secretary Roxas. The government is also wary of keeping 2 international airport terminals, If the [passenger] growth is very high, we may keep the 2 airports, but if the growth is just what s projected, we may have only Clark and sell [NAIA] to pay for the transfer, Secretary Roxas shared.

5 55 STATUS OF BIG TICKET INFRASTRUCTURE PROJECTS AS OF OCTOBER 2011 PROJECT TITLE IMPLEMENTING AGENCY FUNDING SOURCE CIVIL WORKS TIMEFRAME PROJECT COST STATUS / ISSUES Northrail Project (renamed NAIA-Clark Express Rail Link) DOTC ODA / NG 5 years P108 billion Reconfigured from 80-km rail project from Caloocan to Mabalacat, Pampanga to 90 to 100-km high-speed railway to run until Clark Airport. Chinese gov t has expressed willingness to continue to finance reconfigured project. Implementation to be fast-tracked as project is one of 7 priority projects of the DOTC. JICA to undertake feasibility studies. Clark Airport Development Project DOTC PPP -- $ 2 Billion GMA Modular Ro-Ro Port Project DOTC ODA / NG 4 years P15 Billion CIAC board has passed resolution authorizing BCDA to undertake construction and development of the airport. BCDA exploring possibility of securing JICA grant for feasibility study on the airport, estimated to cost P50 million. DOTC Sec. Roxas has announced that project would be cancelled, contractor Eiffel Matiere S.A. to be compensated for work done. Meanwhile, Eiffel has agreed to renegotiate the contract. Technical working group composed of Philippine Ports Authority, Department of Finance, Office of the Solicitor General, and DOTC to be formed to set parameters of renegotiations. Caticlan Airport Development DOTC / CAAP PPP P2.5 Billion Renovated terminal inaugurated in June Project encountering opposition due to CAAP requirement to reduce the slope of adjacent hill for runway upgrading. Critics argue that flattening the hill would have an adverse effect on Boracay s ecosystem. North Harbor Terminal 1 Development PPA BOT 6 years (Phase 1) P14.5 Billion Detailed development design submitted by MNHPI approved by PPA. Completion date for Terminal 1 passenger building extended from April 2013 to November 2013, yet MNHPI still committed to deliver by Construction expected to start by November or December Subic Bay Port Development Project SBMA ODA $215 Million Port Development Project completed. Presently undergoing expansion. Privatization component underway with ICTSI securing 25-year operations and maintenance of New Container Terminal 2. Expansion component for oil depots and grain terminal also on-going. Tarlac-Pangasinan-La Union Road Project DPWH PS-BOT P19 Billion Construction of Phase I on-going, started in April 2010 and eyed for completion by 2H2012; Tarlac-Gerona segment to be completed by April Expansion of Iloilo Airport DOTC / CAAP NG P698 Million 5-year development plan to reconfigure airport from domestic to international operations slated for implementation by Initial works estimated to cost P164 million. Balog-Balog Irrigation Multi- Purpose Project NIA LGU (Phase 1) PPP (Phase 2) (Phase 1) 5 years (Phase 2) P18.5 Billion Completion of Phase 1 expected by year-end; dam component of Phase 2 eyed for construction by 2 nd or 3 rd quarter of Mal-Mar Multi-Purpose Irrigation Project NIA NG (Phase II) P9.3 Billion Subject of a House Resolution calling for congressional inquiry; legislators question 2012 allocation for the project, when Phase 1 has yet to be completed and DA could not account for P405Mn allocation made in Meanwhile, DA is waiting for approval of P4.7Bn loan from JICA for Phase 2. NIA has reportedly started working on Phase 2 using P200Mn in available gov t funds.