Philippines: PIMENTEL SEEKS SENATE INQUIRY INTO $503 MILLION NORTH RAIL PROJECT

Senate Minority Leader Aquilino “Nene” Q. Pimentel,
Jr. (PDP-Laban) today formally asked for a Senate
inquiry, in aid of legislation, into the alleged
onerous terms and conditions imposed on the Philippine
government in the contract to build the North Rail
system funded by the Chinese government.

Pimentel filed Resolution 210 urging the Senate to
direct the appropriate Senate committee to undertake
the probe and to recommend measures to ensure
compliance with the government’s procurement process.

Official documents show that the government borrowed
$400 million from China’s Export-Import Bank to
finance the rehabilitation and modernization of the
first phase of the NRP, the 32-kilometer stretch from
Caloocan City to Malolos City. The government has
provided a $103 million counterpart for the project.

On Feb. 26, 2004, then Finance Secretary Juanita
Amatong signed a ‘Buyer Credit Loan Agreement’ with
China’s Eximbank, after it was cleared by Asst.
Government Corporate Counsel Efren Gonzales and
approved by then National Economic and Development
Authority Director General Romulo Neri.

Pimentel cited reports that the amount of $125.75
million (P6.5 billion) has already been advanced out
of the $503 million funding, and yet the project,
scheduled to be completed in May this year, appears to
be heading nowhere.

The loan was allegedly contracted without the approval
of the Monetary Board as required by section 20,
Article VII of the 1987 Constitution.

“The contract for the project is not only overpriced,
but is also ridden with onerous conditions especially
in case of default in the payment of the loan,”
Pimentel said.

In another onerous provision of the loan agreement,
the Philippine government will waive its immunity from
suit over its sovereign and patrimonial assets,
placing under China’s laws and jurisdiction any suit
or judgment that might arise from the contract and
granted Eximbank unilateral authority to determine
payment schedules and the right to impose penalties
for any delay in the project.

Pimentel also questioned why the loan agreement
between the Philippines and Eximbank designated the
China National Machinery and Equipment Corp. as the
contractor for the North Rail project in flagrant
violation of the Government Procurement Reform Act
(Republic Act 9184) requiring that projects like this
should be subjected to competitive public bidding.

He said the Senate inquiry should also determine
whether there was prior appropriation of public funds
and certification of availability of funds by proper
authorities before the railway project was awarded and
implemented.
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