PH to bring North Rail case to int'l arbitration court

By Christina Mendez, The Philippine Star

Posted at Oct 02 2012 10:08 AM | Updated as of Oct 03 2012 01:33 AM

MANILA, Philippines - Transportation Secretary Joseph Abaya disclosed yesterday that the Philippines would submit the controversial North Rail project to an international arbitration court to determine the settlement with the People’s Republic of China.

He said that the arbitration court could establish the exact amount that the government should pay for the aborted railway project under the past Arroyo administration.

Abaya told reporters at the Liberal Party-led coalition’s proclamation of senatorial bets at Club Filipino in San Juan yesterday that the arbitration process is needed to be able to determine the amount that needs settlement and compromise.

“We expect that we’ll be going on arbitration, it’s a legal procedure on how to settle and compromise. We are allotting funds for the arbitration process. We expect it to wind down. We pay our obligations and start anew,” Abaya told The STAR.

Abaya said he was briefed on the issue as he assumes the Department of Transportation and Communications (DOTC) portfolio.

“Based on the briefing that I have had, not in-depth, I think North Rail is winding down. So like Secretary (Manuel) Roxas said, the Chinese called on the loans so we have to pay,” Abaya said.

Abaya was referring to the meeting between Interior Secretary Roxas and Chinese Vice President Xi Jinping and Foreign Affairs Minister Fu Ying, where the Chinese government demanded payment of the North Rail loan.

“I am not sure of the venue, it should specifically state in the contract. At least, we are doing away with it, it’s a bit difficult because if you hear all the stories, the irregularities and the inconsistencies in policies, I think we are better off winding down and planning anew,” Abaya added.

Despite the Aquino government’s move to pay the North Rail loans, Abaya said it does not mean that the administration will not pursue the filing of charges against those who were engaged in graft and corruption related to the project.

In the LP event yesterday, President Aquino had pinpointed the North Rail project as one of the scams during the past Arroyo administration.

Abaya said under the present administration, the railway project would undergo a new bidding process since there is a need to pursue a modern railway system to connect Metro Manila to nearby provinces.

“There is a need for us to build that. If you are talking about Clark, then there is a need for a high-speed rail. I don’t know if it’s going to need the same alignment. I think it should because we’ve already spent on it,” Abaya said.

Sen. Franklin Drilon said the government is setting aside enough funds in the 2013 budget to pay for the part of the loan spent by the government.

Drilon said the government would have to “pay $180 million over the next two years for services and goods allegedly already delivered.”

Drilon explained that the North Rail contract has a provision that says “all the loans will be due and demandable if they invoke the cross default provision.”

The 80-kilometer North Rail project was supposed to link the northern part of Metro Manila with the Diosdado Macapagal International Airport in Clark, Pampanga. It was suspended in March 2010 pending review of the contract with China National Machinery Industry Corp. (Sinomach).

Reports said the Supreme Court eventually ruled that the project was contrary to law, as it did not undergo proper bidding process.

Meanwhile, the Freedom from Debt Coalition (FDC) urged the Senate to summon Roxas and officials of the Department of Finance and the North Luzon Railways Corp. (NLRC) to explain in full the details of the renegotiation with Chinese officials on the irregular North Rail project.

Roxas and Finance Secretary Cesar Purisima announced that the loan from China would be paid in two years after negotiations with the Chinese government.

Budget Secretary Florencio Abad said “it’s a question of equity” as there had been some work already done.

“Even if you nullify contract but there is work already done, then you have to compensate them at least for work already done. Of course you can’t pay for everything. So I think that’s just the idea,” Abad explained.

As for FDC’s request for a Senate inquiry, Abad expressed doubt it would happen.

“The question is will the Senate entertain it? Anybody can file a resolution or write a letter but the question is will the Senate (entertain it)? It just might need a clarification. They should have written the DOF and maybe get an explanation. That would have been faster,” Abad said.

FDC opposed the planned payment of some $184 million to the Export-Import Bank of China, which according to news reports is a portion of the $500-million worth of official development assistance loan to the halted construction of the North Rail.

FDC president Ricardo Reyes said that since the project’s original and amended contracts are void ab initio, according to a July 14, 2011 opinion of the Office of the Government Corporate Counsel, the Philippine government has no obligation to pay Export-Import Bank of China. – With Aurea Calica, Rhodina Villanueva