Comparative analysis of dev’t loans from Japan and China

“Analyzing our loan agreement, it appears that the agreement with Japan is more of a debt trap unlike those incurred by us with China”

The rehabilitation of the long-forgotten Philippine National Railways (PNR), now dubbed as the country’s only long haul, will start to reclaim its historic operation in Calamba, ending up in Daraga town in Albay.

The trip will be much faster with the passengers seated in air-conditioned coaches with attendant crews providing them all the comfort and amenities given to ordinary express train or airline companies.

The revival of the country’s Bicol Express came with a bit of nostalgia.

The “Tren,” as we fondly call them, finally stopped operating in 2014 after a long neglect that began chugging along its tracks. The Bicol Express was very much dilapidated yet Filipinos remained loyal to the iron horse that provided them the cheapest means of transport for a century.

Thanks to China’s recollection of history, for even if we see that country as fast modernizing, it holds on to things that would identify them with their past, which reason why many of them opted to preserve the train that once upon a time allowed them to see for themselves the mileage they achieved in their lifetime.

Today, we are about to restart history not by buying the old coal-fired train but something that would provide punctuality, comfort, safety and convenience.

There is a sense of rebellion among the Chinese because many suspect that the fading of the train was triggered by the car manufacturers demand for people to use gasoline.

China now is supplying us with various locomotives. China’s joint venture has qualified for a P141.79-billion contract for the design and construction of a 380-kilometer railway in the Bicol Region.

Accordingly, we entered into joint venture with China Railway Group Ltd., China Railway Number 3 Engineering Co. Ltd., and China Railway Engineering Consulting Group Consortium Ltd.

The contract covers the first package of the PNR’s South Long-Haul Project, or the PNR Bicol, from the village of Banlic in Calamba to Daraga in Albay.

The entire PNR Bicol project is a 560-kilometer long-haul rail line connecting Metro Manila tand the Bicol Peninsula at the southern tip of Luzon.

The partial operability of the project is from San Pablo, Laguna to Pagbilao, Quezon. It is expected to start operations in the second quarter of next year.

The project is expected to fully operate by 2025. The other railway projects funded by China’s official development assistance are the P81.69-billion Mindanao Railway Project Phase 1 and the P50.03-billion Subic Clark Railway.

The Philippines’ Department of Transportation (DOTr) has awarded a $2.8 billion contract to a Chinese consortium to build the first phase of the 565-km Bicol rail on the country’s main island of Luzon.

Philippine National Railways is planning to build the link between Metro Manila and the southeastern tip of Luzon.

According to the department, the first phase will cover four provinces and 39 cities and municipalities. This will include the construction of 23 stations, 230 bridges, 10 passenger tunnels and a 70-hectare depot at San Pablo in Laguna.

The first phase is due to be finished in the third quarter of 2025. The entire line will be complete in 2027. This PNR Bicol passenger train will run at a speed of up to 160km/h and freight trains at a speed of up to 100km/h.

PNR Bicol, also known as the South Long Haul project, is expected to reduce travel time between Manila and Legazpi City in Albay from the present 14-18 hours to just six hours using regular commuter trains, and 4 hours 30 minutes using express trains. Chinese ambassador to the Philippines Huang Xilian called the signing “another milestone for China–Philippines cooperation and friendship.”

Chinese loans are also being sought for the Mindanao Railway project and the Subic Clark Railway.

Both Japan and China have pledged to help the Philippines build new railways, and Filipino officials are hoping for a speedy implementation of the projects.

Beijing also pledged to bankroll the construction of a $947.64 billion-cargo train connecting Subic to Clark.

On the other hand, the Japan developmental loan is also involved in the construction of railway.

But theirs is a subway project, which is a 33-km underground railway that will connect Valenzuela City to Pasay City in the Ninoy Aquino International Airport to benefit some 519,000 passengers a day.

The subway offered by Japan will reduce travel time between Quezon City and NAIAII from one hour and 10 minutes to just 35 minutes.

The project is being constructed under the Official Development Assistance program of Japan International Cooperation Agency, which will finance 76 percent of the project via a P370.8-billion loan package.

The remaining 24 percent, amounting to P117.7 billion, will be paid for by the Philippine government.

Building the metro are Japan’s Shimizu, Fujita and Takenaka, and Philippine firm EEI. Meanwhile, the Philippines and Japan early this year signed a P51.3-billion loan agreement for the construction of the Philippines’ first subway to decongest the traffic-choked Metro Manila.

Sumitomo-Mitsubishi Heavy Industries – which has started inspecting the MRT3 will return as maintenance provider of the overcrowded rail system.

The ceremony was for the subway’s P17.7-billion Contract (Package 104), which covers the construction of the Ortigas and Shaw stations that was given to the consortium of Megawide Construction Corp., Tokyu Construction Co. Ltd., and Tobishima Corp.

CP 102, which was won by Nishimatsu-DMCI Joint Venture, includes the construction of the Quezon Avenue and East Avenue stations.

CP 103, which is set to be awarded to Sumitomo Mitsui Construction Corp., covers the works for the Anonas and Katipunan stations.

DOT announced that the P488.8-billion Metro Manila Subway Project (MMSP) has reached a 30.55 percent completion as of February.

The Tunnel Boring Machine (TBM) launching shaft will make the so-called “Project of the Century” safer, faster, and more efficient.

The project is expected to be partially operational by the end of the year, and fully completed by the year 2027.

Once finished, the transportation project will be 34-kilometers long with a 30-hectare depot, which will contain the Philippine Railways Institute (PRI) in Valenzuela City.

The MMSP was initially estimated to cost roughly P350 billion, but total cost increased to P488.48 billion.

To fund the construction of the project, Japan and the Philippines signed a P112.06-billion (¥253.307-billion) loan assistance for the construction of the MMSP’s second tranche. The deal comes after the previous P47.58-billion (¥104.53 billion) loan signed last March 2018.

It has a repayment period of 40 years and a grace period of 13 years.

Expected operability date is slated for completion in 2025.

The expected base fare for each subway ride is set at P22 with an additional P2 per kilometer per distance traveled, based on the DOTr’s feasibility study.

Tokyo’s infrastructure investment in the Philippines stood at $33.54 billion. On the other hand, Beijing-backed projects in the Philippines totaled $3.18 billion.

Congestion cost would be about $70m a day, a cost that is expected to rise to more than $100m by 2035 if mass transit systems are not put in place.

What many of our people do not realize is the magic to contractors’ offer to sell the project.

The 34-km loop will cost the government a total of Pesos 488.47 billion, financed through JICA, that once fully operational, will carry up to 519,000 passengers a day. That would give shorter time to commuters by about 35 minutes.

Unlike the long haul of PNR’s Bicol Express which reaches up to nine hours to commute.

The rehabilitation made by China will be lessened to just 5 hours trip, something that commuters would very much appreciate.

The subway plans to erect 18 stations along the loop with one instance of the subway submerging the Pasig River.

The construction alone of numerous bridges is costly as many of them have long been rusted and need replacement for being unserviceable to the railway.

The construction of these bridges and setting up 23 stations with rest rooms including the boring of up to 10 tunnels and a huge depot surely would entail huge expenditures comparable to the construction of the subway project.

The mere fact that subway commuters will use the subway in going to and from the office will cost them much per trip daily back and forth for a mere 33-km distance trip.

The Metro Manila Subway Project (Phase 1), which has a total project cost of P356.96 billion, is the biggest single project.

Susumu Ito, chief representative of JICA, made the estimate, which is substantially higher than the P2.4 billion daily cost to the economy, given by a 2014 study. Metro Manila’s population is about 13 million. If nothing is done, it will increase and will become P5.4 billion a day traffic cost in 2035, but can be reduced to P3 billion traffic cost a day.

Analyzing our loan agreement, it appears that the agreement with Japan is more of a debt trap unlike those incurred by us with China.

Examine the period for which we have to service our loan, the travel time reduced and the additional cost to each passenger vis-à-vis the length of the trip.

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