For pushing through with its planned privatization of the country’s light rail transit system, IBON today said that the Aquino administration has not learned from the mistakes of its predecessors. The independent think-tank issued the statement as the Department of Transportation and Communications (DOTC) officially ends today the submission period for pre-qualification documents for groups interested to bid in the privatization of the LRT Line 1.
IBON pointed out that the Aquino administration should have taken its cue from the anomalous and onerous public-private partnership (PPP) deal involving the MRT where the private foreign and local businesses involved in the project made a killing through guaranteed debt payments and guaranteed profits of 15% return on investment (ROI) per annum. The group noted that the long-delayed plan of the DOTC to increase the fares in MRT would be unnecessary without the onerous terms in the build-lease-transfer (BLT) contract that governed its construction and operation.
In 2010, for instance, the DOTC spent Php8.52 billion for the MRT, of which almost Php5.30 billion went to the guaranteed profits of the private proponents; Php1.18 billion for maintenance costs; Php1.16 billion for guaranteed debt payments; and the remaining Php880 million for other expenses. But actual revenues in 2010 was only Php1.92 billion, of which Php1.90 billion came from passenger fares and the rest from non-rail revenues such as from advertisements, rent of commercial space, etc. Thus, the DOTC is short of Php 6.60 billion which the government finances through additional borrowings (or the so-called “subsidies”). But without the guaranteed profits and debt payments– which make up 76% of DOTC’s MRT obligations in 2010, fares could cover the cost of maintenance and personnel expenses.
Unfortunately, the Aquino administration is still heading to the same direction with its planned Php60-billion LRT 1 privatization project, according to IBON. It remains to be seen if Pres. Aquino will provide the same MRT guarantees to the winning bidder in LRT 1 but it is very likely that some form of scheme to assure private profits will be provided by the government. Already, Pres. Aquino is adamantly pushing for substantial increases in LRT and MRT fares in an obvious effort to make them more attractive to private investors, the group noted.
The experience of power and water privatization, in the Philippines and elsewhere, clearly show that privatization does not alleviate government’s fiscal woes and create unnecessary burden for consumers due to skyrocketing and increasingly prohibitive user fees. Moreover, the economic benefits of mass transportation system in general and of the light rail system in particular, are recognized even by the government. According to the DOTC itself, although not profitable the LRT and MRT play a vital social and economic role. It is thus ironic, if not totally illogical, that the Aquino administration will push with the privatization of the LRT 1. According to IBON, the MRT case itself should have taught government of the pitfalls of PPP. Sadly, Pres. Aquino has chosen to ignore these bitter lessons at the expense of public welfare. (end)