Add'l $299 million for North Rail unacceptable

Senate Minority Leader Aquilino Q. Pimentel, Jr. today branded as unacceptable the demand of the Chinese contractor for an additional $299 million funding for the first phase of the North Rail Project, a 32-kilometer stretch from Caloocan City to Malolos City.

Pimentel criticized acting North Rail Corporation president Edgardo Pamintuan for recommending to Malacanang that the China National Machinery and Equipment Corp. (CNMEC) be allowed to charge the additional amount despite the fact that the original $503 million cost of the project is widely considered overpriced.

"The North Rail Project had already been billed as the costliest railway on a per kilometer basis to be built in the country. But if the government will agree to shell out $299 million more, that will perhaps make it the costliest railway in the world - a very unflattering description for our cash-strapped government and poverty-stricken country" he said.

The minority leader cited the observation of transportation experts that what the cost of the North Rail that CNMEC is charging the Philippine government is double the asking price of Korean firms for such railway system.

"What the Chinese contractor is demanding in terms of additional funding is too onerous. They have not yet even installed any part of the railway, but they are already asking for extra funding," Pimentel said.

According to Pamintuan, the CNMEC has justified the supplemental funding to cover "extraordinary inflation, currency exchange and variation cost."

The North Railway has been redesigned so that it will now be run by electricity instead of diesel-fueled engine.

Pimentel said the shift to electricity-run trains has further validated the allegation that the Arroyo government erred in awarding the project to CNMEC without clear-cut project specifications, without any feasibility study and without the benefit of public bidding.

The North Rail Project is funded by a $400 million loan from China's Export-Import Bank and a Philippine government counterpart of $100 million. Reports said the CNMEC has already received $105 million for the project.

The much-delayed project, which was started in 2005, was further derailed when CNMEG workers abandoned the project site last February in the absence of any formal notice by the Chinese engineering firm to the Philippine government.

Pimentel asked the Palace for an explanation why it has disregarded the recommendation of Pamintuan's immediate predecessor, Arsenio Bartolome III, for the termination of the contract with the CNMEC after it unilaterally suspended the construction work on the railway project and demanded $299 million in additional cost.

Bartolome, who resigned as NRC last June sent his recommendation in a letter to President Gloria Macapagal Arroyo on April 24. He said the suspension was against the contract agreement and could be a basis for termination of the contract under the governing provisions of Republic Act 9l84 or the Government Procurement Reform Act.