LRT, MRT fare hike: no other recourse but to protest

Today’s (February 4) public consultation on the LRT and MRT fare hike organized by the Light Rail Transit Authority (LRTA) and the Department of Transportation and Communications (DOTC) confirmed two important issues.

First, that the fare hike is indeed meant to pass on a bigger share of the debt burden to LRT and MRT commuters. The presentations of the technical staff of the two government agencies confirmed, in so many words, what we have been saying all along. Current fares are enough to cover the core expenses of operation and maintenance. But the onerous terms contained in the contracts created huge and even unnecessary debts for government.

Download the Powerpoint presentations of the LRTA here and the DOTC here.

Consider, for instance, the slides below which I lifted from the Powerpoint presentation of the DOTC on MRT. The first slide shows that the total income of the MRT in 2010 was P1.916 billion, of which P1.904 billion were generated from passenger fares.

However, as shown in the next slide, MRT expenses reached P8.52 billion during the same year which the DOTC said resulted in a government subsidy of P6.6 billion to bridge the shortfall in revenues (that was only P1.92 billion).

The next question is what makes up the P8.52 billion in expenses? The third slide below breaks down the P8.52 billion (the figures in the slide add up to P8.52 billion) and shows that operating costs comprise only 7.6 percent of the total and maintenance costs comprise only 13.9 percent. A huge 61.1 percent represents the Equity Rental Payment, which refers to DOTC payments for the 15 percent return on investment (ROI) that government guaranteed private investors in their Build Lease Transfer (BLT) agreement. Another 13.6 percent represents debt payments that government also guaranteed in the BLT.

The LRTA presentation on LRT 1 and 2 tells the same story about the so-called losses and subsidies that government wants to reduce by making commuters pay more. The slide below shows that the consolidated revenues of LRT 1 and 2 in 2010 was P3.089 billion but spent P2.928 billion for operation expenses. The LRTA also spent P3.556 billion for interest payments and others resulting in a net loss of P5.902 billion.

Add to these expenses the amortization of principal worth P2.341 billion and capital expenditures of P648 million, as shown in the slide below, further pushing the LRTA deficit in 2010 to P8.927 billion, which government claims is the cost of subsidy. In other words, of the P8.927 billion in so-called subsidy, P5.269 billion or more than 59 percent represents interest and principal payments for loans.

If you consider that almost 8 out of 10 LRT and MRT commuters are ordinary workers and employees and students, passing on an increasing portion of these debts, which include onerous loans, through a fare hike is a major, major injustice.

Secondly, LRTA administrator Rafael Rodriguez also confirmed that the public consultation is optional and therefore has no real bearing on the decision of Malacañang to increase the fare in LRT and MRT. This means that despite the opposition of those being consulted, students in this particular case, the LRTA and DOTC, as ordered by President Aquino, can still proceed with the fare hike anyway.

The consultation ended with the expected “We will study your concerns”, which was the gist of the closing statement made by DOTC Undersecretary for Rail Transport Glicerio Sicat. He also said that they will consider the option of lowering the increase and giving fare discounts because of the concerns raised by the students. This, however, dismissed altogether the issues of onerous debts, mass transport as public service, privatization as the driving motive behind the fare hike, and other major policy issues that were raised during the open forum.

Therefore, the commuters have no other option now but to continue and further intensify the protests until the Porsche-driving President backs down on his decision to raise the fares.


Public consultation on LRT/MRT fare hike starts today as Pangilinan offers to buy MRT for $1.1B

Servicing debts through higher user fees will cancel out the social and economic gains from LRT/MRT

One of the most basic questions that we have been asking DOTC and LRTA officials is what constitutes their estimated full cost fare of P35.77 for LRT 1, P60.75 for LRT 2 and P60.03 for MRT. Sadly, we have not been given a detailed and exact answer (the closest is the rule of thumb that 85 percent of cost in large infrastructure projects is made up of debts) in our several dialogues with them. Even the documents that have been given us do not provide the answer. Thus, we have only made assumptions on what comprises the full cost fare (for instance, read here and here) based on data made available to us by the authorities.

The full cost fare is one issue that we hope to finally get a detailed answer from the LRTA and DOTC in the public consultation on the LRT and MRT fare hike today (February 4) and tomorrow. (Bayan and other groups are participating in the consultation. You may download Bayan’s position paper, which will be submitted to the LRTA during the consultation, here.) If you’re wondering why this is so important, it’s because the crux of government’s argument for a fare hike is that they could no longer continue “subsidizing” the gap between the current fare and the supposed full cost fare.

The latest batch of documents that we were able to get from the LRTA yesterday through its corporate secretary Atty. Hernando Cabrera still does not give the answer despite our very specific request. The documents include, among others, the breakdown of subsidies that the LRTA received from the national government from 2006 up to the approved amounts for 2011. These subsidies total P12.85 billion but are for expansion projects and, I assume, not the subsidies that the LRTA and DOTC refer to when they computed the full cost fare. Or I might be wrong. And if this is the case, transport officials will have more explaining to do – why will they charge to the commuters the cost of expansion projects? Anyway, this also shall be brought up during the consultation. (See Table 1)

Another is the income statement of the LRTA from 2006 to November 2010 (the 2009 and 2010 figures are unaudited). The income statement supports our contention that what the Aquino administration wants to pass on to the commuters is the debt burden of the LRT and MRT and not simply the shortfall in the costs of maintaining and operating the trains. For instance, the total rail (from passenger fares) and non-rail (from rental, advertising, etc) revenues of the LRTA from January to November 2010 is P462 million more than what it spent for operation and maintenance (O&M). Revenues from passenger fares alone are P272 million higher than O&M. (See Table 2)

Interest payments and bank charges, on the other hand, reached P1.72 billion during the said period. Amortization, bad debts, and others added another P955.32 million to the expenses of the LRTA. These expenses offset the rail and non-rail revenues resulting in net losses for the LRTA of some P2.22 billion. But as I have repeatedly argued, these are not actually losses in the business sense but public investment. They are loans that government borrowed in order to enable the economy and the people achieve new or additional capability. Servicing these debts should be done through taxes (and if they’re onerous like in the case of MRT, should be renegotiated) and not through higher user fees which what government plans to do. Servicing these debts through higher user fees will cancel out the social and economic gains that the LRT and MRT create.

Meanwhile, it seems that the fare hike, which could reach as much as 100 percent, and the President’s offer to guarantee so-called regulatory risks for major public-private partnership (PPP) projects have succeeded in stoking investor appetite in LRT and MRT privatization. Just three days ago, news came out that the Metro Pacific Investments Corp. (MPIC) of Manny Pangilinan has already formally written Finance Secretary Cesar Purisima offering to buy government’s 71 percent stake in MRT for $1.1 billion. MPIC already controls 29 percent of MRT which it bought from Fil-Estate Corp.

Pangilinan’s bid is indeed tempting for the cash-strapped Aquino administration since the offer is reportedly enough to settle government’s outstanding debt in MRT. But it is bad news for the commuters who will ultimately shoulder this debt through even more exorbitant fares in the future.

MPIC itself reportedly said in its letter to Purisima that fares could go up to as high as P100 if government will bundle MRT and LRT 1 for privatization because the investor will have to pass on the cost of servicing the lines’ debt obligations of about $2.6 billion to the commuters.


DOTC executive report on LRT/MRT fare hike: some initial points

DOTC study confirms that the LRT/MRT fare hike is meant to bolster Noynoy's public-private partnership (PPP) scheme

The Department of Transportation and Communications (DOTC) has provided a copy of the Executive Report on LRT/MRT fare restructuring. They also sent Chapter 8 of the Mega Manila Public Transport Study of 2007 which details the profile of LRT/MRT users.

This report is supposedly the same document presented to Pres. Aquino and his Cabinet economic cluster and became the basis for the Executive’s decision to increase the fare in LRT/MRT by as much as 100 percent. It validated the main points that we have already raised on the fare hike issue. For instance, it confirmed that the fare increase is meant to attract private investors. The report said that: “The proposed LRT fare adjustment is expected to… send clear signal to private sector investors that regulatory risks will be minimized in future public-private partnership projects”.

(You may download the Executive Report here and the Transport Study Chapter 8 here)

Social and economic benefits

Dated October 27, 2010, the report noted that although not profitable, the LRT and MRT play a vital social and economic role. In its opening paragraph it said: “Most urban railway systems in the world are not financially viable, but are implemented for their socio-economic benefits. Our Manila Light Rail Transit (LRT) systems promote the use of high-occupancy vehicles, thereby reducing traffic congestion on the corridors served, local air pollution and greenhouse gases emissions. Besides the substantial savings in travel time cost of LRT riders, the LRT systems reduce infrastructure investment in Metro Manila road expansion”. (emphasis added)

However, these socioeconomic benefits were not factored in by the DOTC study in determining the need for a fare hike. For instance, the savings of government from less air pollution and GHG emissions (i.e. public health budget) and less pressure for road expansion (i.e. public infrastructure budget) should have been computed to get the net losses or even gains from operating the LRT/MRT. The economic value accruing from reduced traffic congestion and considerable savings in travel time cost should have also been calculated to know additional potential benefits for government such as increased tax revenues.

Farebox ratio

Instead, the study merely looked at the cost of operating the LRT/MRT system which is mainly financed through passenger fares, government subsidies, and commercial development at stations and advertisements. It said that the farebox ratios or the proportion of the fare revenues to the total operating and maintenance (O&M) expenses are “projected to fall below 1.0”. This means “greater government subsidies to cover O&M costs”, said the study. It estimated that without a fare hike, government will be forced to increase its subsidies from P13.85 billion in 2010 to P17.06 billion this year.

A farebox ratio of 1.0 means that fare revenues cover 100 percent of O&M. The study did not say the basis of its projection that the farebox ratio will fall below 1.0. But in the past four years, the farebox ratio has averaged 1.39 for LRT 1 and 1.01 for LRT 2 which means that collections from passengers cover more than 100 percent of O&M. This provides more statistical evidence to our argument that fare revenues can cover O&M but the total costs are bloated by debt.

Non-rail revenues

The study also admitted that “Compared with urban railway lines in neighboring countries, our LRT lines are not generating substantial revenues from commercial development and advertisement”. But the DOTC did not further explore the option of raising collections from tenants and commercial establishments and advertisers that use the railway infrastructure. A study by the Japan Bank for International Cooperation (JBIC) disclosed that LRT’s non-rail revenues comprise a paltry 2.6 percent of total revenues. In neighboring countries, non-rail revenues account for 20 percent.

I asked a DOTC official why increasing the non-rail revenues to at least approximate the 20 percent benchmark is not being seriously considered. He said that substantially increasing the non-rail income of LRT/MRT will require some investment from government to develop commercial spaces. Put another way, government chose the easy route by placing more burden on commuters through a fare hike.

Alternative transportation

The study said that minimum wage earners are among the most affected groups by the proposed fare increase. But it assumed that Minimum wage earners will likely shift to cheaper alternative modes such as jeepneys and regular buses”. Under the new fare structure, regular and aircon bus fares will be lower than an LRT/MRT ride unlike today where it is cheaper to take the train. This was actually used as one of the justifications for the fare hike. For government, it is unreasonable that the fare in LRT/MRT which is a more efficient mode of mass transportation is cheaper than the fare in public buses and jeepneys.

But the DOTC failed to mention that the fare in road-based public transport modes has been increasing due to unabated oil price hikes and failure of government to stop the overpricing of the oil companies. Also, following government’s logic, does it mean that every time private jeepney and bus operators asked for a fare hike because of high pump prices, the Light Rail Transit Authority (LRTA) will also have to automatically increase LRT/MRT fares?

Impact on commuters

Aside from minimum wage earners, the study said that the fare hike will also heavily affect “students who are not granted fare discounts on LRT lines”. It claimed, however, that such impact “could be eased by the grant of 15-20% fare discounts”. As for MRT users, the DOTC said that while they face the steepest fare hike, “they are expected to afford the increase in fare with their average personal monthly income of P13,560 or 1.5 times the minimum wage in Metro Manila”. But still, fare discounts and the relative capacity of commuters to afford the higher fares do not legitimize the unwarranted fare increase.

The overall ridership of LRT/MRT is characterized by a high level of low-income and vulnerable groups that makes the fare hike anti-people. The Mega Manila Public Transport Study says that 68.1 percent of LRT/MRT users during weekdays earn below P10,000 monthly and a significant 15.3 percent earn nothing at all. Ordinary employees/workers comprise 48.8 percent of LRT/MRT ridership during weekdays while students account for 31.5 percent. Unemployed workers account for 9.5 percent. (See Charts)


MRT commuters face 222 percent increase in debt servicing thru fare hike

The long and short of the MRT/LRT fare hike is that Noynoy wants the commuters to directly shoulder an even larger portion of the debt burden

In the past two weeks, I have talked to some officials of the Department of Transportation and Communications (DOTC) on the issue of the impending fare hike in the LRT and MRT. I have also asked for documents including the rail study that the department conducted which was used as the basis for the fare hike. They have yet to provide the documents although they have repeatedly assured me they will do so soon in the spirit of transparency.

(Download Bagong Alyansang Makabayan’s “Five reasons why we oppose the LRT/MRT fare hike” here and discussion guide here.)

But while I have not yet seen the documents explaining the details behind the fare hike, I have confirmed at least one important fact thru my conversations with the DOTC officials. This is the issue of debt, which I argued in a previous post is the biggest reason behind the so-called losses of government in the MRT operation. The long and short of the fare hike is that the Aquino administration wants the 1.2 million daily commuters of the MRT and LRT, of whom  7 out of 10 earn less than P10,000 a month said one study, to directly shoulder an even larger portion of the said infrastructures’ debt burden.

The rule of thumb for large infrastructure projects like the LRT/MRT is that 85 percent of the total cost represents debt, said one DOTC official. This means that 85 percent of what government claims is the actual cost of an MRT ride, which is about P60, accounts for the debts incurred by the private consortium that built the infrastructure.  Without the debt, the cost of a train ride in MRT will turn out to be just P9, even higher than its current minimum fare of P10.

In other words, the present revenues of the MRT as well as of the LRT 1 and 2 could not only easily cover their operation and maintenance costs but even pay for an already significant portion of the debts. If the provisionally approved new rates will be implemented, commuters will be shouldering a higher portion of the MRT/LRT debt servicing. At present, each commuter already shells out an average of P3.30 to as much as P8.83 per train ride for debt payments. With the fare hike, the average amounts will grow by 54 percent (in LRT 1) to a staggering 222 percent (in MRT)! (See Table below)

But why is the issue of debt important? Isn’t it reasonable for the commuters to shoulder the cost of building the infrastructure which was funded by foreign debt?

In the case of the MRT, the original proponents were private corporations that formed a consortium – the Metro Rail Transit Corp. (MRTC). I have already pointed out how these investors made a killing on the MRT due to their interlocking interests with the foreign and local banks that financed the project. They also borrowed in near commercial rates, which a DOTC official I spoke to said could have been avoided if the government was the proponent since it can avail of soft loans. Payments for these onerous debts are being shouldered by the commuters and taxpayers.

The issue of debt also disproves the claim of the Aquino administration that there is a need for a fare hike because government is losing money. Such claim misleads the people into believing that MRT/LRT commuters pay below the actual cost of operating and maintaining the rail systems. As I showed earlier, they are paying even more than the cost of operation and maintenance. Government is losing money due to onerous contractual and debt obligations.

Furthermore, it is not unusual for state agencies managing public infrastructure like the Light Rail Transit Authority (LRTA), which operates LRT 1 and 2, to be in the red because their performance is measured not in narrow financial terms but through the net social and economic benefits they bring. The new capability that results from public infrastructure such as improved mobility of the economy’s workforce, for instance, far outweighs what government deems as its “losses”. These losses are actually not losses in the business sense but public investment that go into achieving economic efficiency and improving the overall living condition of the people.

By placing additional burden on commuters to settle the debts of the MRT/LRT, government is abandoning its obligation to provide the infrastructure needs of the people and the economy. The Aquino administration tries to conceal this dereliction of duty by peddling the twisted logic that it is unfair for Mindanao taxpayers to subsidize the MRT/LRT users in Metro Manila.

The Filipino people are paying for the debts of the MRT/LRT in the same way that we are paying for the debts incurred to build infrastructure in Mindanao and elsewhere in the country. If Aquino is sensitive to the needs and interests of the people, he should be lessening, not intensifying, this burden. One way is to renegotiate with creditors – an option that even some technical people in the DOTC recognize as legitimate, particularly in the case of MRT – to reduce the impact on government’s scant resources. The country has so many odious debts dating back from the Marcos dictatorship up to the Arroyo government (for instance, read here) that a leader with strong political will and genuine concern for the people would work hard to abrogate.

There is neither need nor urgency to increase the fares in MRT/LRT. If Aquino’s economic managers will insist that there is because of the precarious fiscal situation, then instead of unjustly burdening the people, they should advise the President to stop bailing out transnational corporations (TNCs) like what he did in the case of the Pagbilao coal-fired power plant which saved Japanese giants Tokyo Electric Power Co. and Marubeni Corp. from paying P6 billion in taxes.  Or they can tell the Chief Executive to stop giving investors more state guarantees, which will be taken from the people’s money, such as the regulatory risk insurance Aquino promised to prospective participants in his public-private partnership (PPP) scheme.


LRT/MRT new fare matrix

Activists warn commuters of an impending 50 to 100 percent hike in MRT fare as they continue to gather signatures against the increases which government plans to implement by March 1

(For the new fare matrix officially approved by the DOTC, see this article – “LRT/MRT fare hike and the Aquino admin’s irrational, baseless claims”)

Determining how much exactly the fares will increase as “provisionally” approved by the LRTA could be a little tricky. A Newsbreak article simplified the adjustments, which government hopes to implement starting March 1, by using averages for the three light rail systems – LRT 1, LRT 2, and MRT.

The second column in the table below shows the average distance that a commuter usually travels (based on data from the DOTC). The proposed fare, in the fourth column, is the new P11-boarding fee approved by the LRTA plus the average trip length (with a proposed rate of P1 for every kilometer).

This simplified presentation, however, does not show the full and actual impact of the fare hike which can only be appreciated on a per station basis using the new fare matrix approved by the LRTA. Based on this new fare matrix, a train ride (single journey ticket) from LRT 1’s Baclaran station to Roosevelt will be 50 percent more expensive (from P20 to P30) while the fare from Baclaran to Tayuman will double (from P15 to P30). A train ride from LRT 2’s Recto station to Santolan will be 67 percent more expensive (P15 to P25) while the fare from Recto to Anonas will jump by 79 percent (P14 to P25).

No new fare matrix has been released yet for MRT although transportation officials said they will also apply the P15 (minimum) – P30 (maximum) fare structure used in LRT 1 and 2. This means that a train ride from MRT’s North Avenue station to Quezon Avenue will increase by 50 percent (P10 to P15) while the fare from North Avenue to Taft Avenue will double (P15 to P30). (Update: The fare matrix for MRT released by the DOTC shows that the maximum fare would be P25 from the current P15. The highest increase would be felt by commuters riding from North Avenue to Ortigas wherein the fare will increase from the current P11 to P20, or an 82 percent hike. See Table below for details.)

Based on the matrix, the biggest increase in real terms will be P15. So a worker or a student who regularly uses the train must shell out P30 more every day or P780 more every month (26 working days a month) to afford the train ride. The lowest increase is P3 which translate to a monthly increase of P156 in transportation cost for the regular train commuter.

(See Tables)

The new fare rates will also make an LRT train ride more expensive than the average fare for ordinary and aircon buses contrary to claims by Malacanang. (See Table)


New year, more hope?

Increases in toll rates, fares in MRT/LRT and other public transport, prices of food, etc. greet Filipinos in 2011 (Photo from Reyes)

As a people, Filipinos are said to be optimistic even amid the direst economic situation. In fact, 93 percent of the population are hopeful of the new year, according to the latest survey of the Social Weather Stations (SWS). The survey results came amid unchanged data on job scarcity and poverty and unabated rise in cost of living.

Malacañang as expected was quick to interpret the survey results as another unmistakable indicator of the people’s trust in the Aquino administration, which a presidential spokesperson called “an engine of hope”. However, it must be pointed out that the first new year of a new administration is usually greeted with high optimism.

For instance, the December 2002 SWS survey showed an all-time high of 95 percent in hopefulness among Filipinos. The ouster of the Estrada administration through People Power 11 months before provided the context of such unprecedented national optimism. It is also noteworthy that Filipino optimism remains high even amid the most uncertain periods. In December 2008, for example, 92 percent of the population were still hopeful amid the massive retrenchment and economic dislocation triggered by the worst global recession since the 1930s.

Thus, when the Arroyo administration, which turned out to be more corrupt, oppressive, and anti-people than the one it replaced was at last over, the people could only have high expectations that things will now start to get better.

Exposing the “reformist” presidency

To be sure, the willingness of President Aquino, unlike his predecessor, to negotiate peace with Asia’s longest-running insurgency is something to look forward to this year. And certainly we have reason to be optimistic that if unrelenting political pressure is applied such as what happened in the case of the Morong 43, the Aquino administration may just address the injustices committed by the past regime.

But Aquino knows that the hopeful perception of Filipinos will quickly dissipate once promises of reforms are not met and the economic situation remains dismal.  This means new economic policies that reverse or correct the failed policies of the past must be put in place very soon. Unfortunately, reforms in this area leave a lot to be desired.

To illustrate, there were three policy issues that stood out in the first six months of the Aquino presidency which exposed the sort of programs and priorities of the new administration and whose impact may before long dampen Filipinos’ high optimism. These were the enactment of the P1.645-trillion 2011 national budget, Malacañang’s promotion of public-private partnership (PPP), and Aquino’s stand on the Hacienda Luisita agrarian dispute.

Debt-funded dole-out

Operating in a tight fiscal space, Aquino chose to fund a P21-billion dole-out program, in lieu of long-term and comprehensive social services, in his first national budget. Called Pantawid Pamilyang Pilipino Program (4Ps), the local version of the conditional cash transfer (CCT) scheme being promoted and bankrolled by World Bank and Asian Development Bank (ADB) loans in many countries (the 4Ps itself is being funded by $870 million worth of debt from the World Bank and the ADB), the program is expected to quickly benefit a portion of the poor and thus bolster grassroots support for the administration.

But at the same time, Aquino has increased payments for public debts by a whopping P81 billion, which easily comprised 78 percent of the total budget increase and 22 percent of his spending program (together with principal amortization, debt payments will eat up 39 percent of what Aquino is ready to spend this year). He also vetoed the proposal of Congress to cap government borrowings at 55 percent of the GDP thus assuring the continued depletion of public resources due to automatic debt servicing while substantially trimming the budget for state colleges and universities as well as public hospitals and specialty hospitals nationwide.

Think tank IBON Foundation has earlier estimated that payments for the CCT loans could reach around $1 billion, an amount which at current exchange rates is more than double of the total CCT funding and could have been used to build more schools and hospitals or hire more teachers and health workers.

PPP – protecting private profits

As his centerpiece economic program, Aquino has aggressively promoted PPPs to supposedly address the national infrastructure needs, spur development, and create jobs without adding pressure to the government’s fiscal woes (the 2010 budget gap is expected to hit P325 billion).

He organized a PPP summit last November where he announced that investors participating in his PPP projects will be protected from regulatory risks on top of having easier access to bank loans and speedier processing and the usual benefits such as guaranteed profit rates. Regulatory risk insurance requires government to compensate investors whose profits will be affected by intervention from regulatory bodies, Congress, or the courts. Aside from undermining the mandates of these independent bodies, the regulatory risk insurance will also likely be funded by foreign loans that will further aggravate the already heavy public debt burden.

In addition, the 300-percent increase in toll rates implemented starting this month by the South Luzon Expressway’s (SLEX) Malaysian operator as well as rate hikes in the North Luzon Expressway (NLEX) and the Subic-Clark-Tarlac Expressway (SCTEX), and the impending 100-percent increase in metro rail transit (MRT) fares all show how PPP projects directly burden the ordinary folk. There are demands for Aquino to exercise his executive power to stop these increases but doing so will undermine his PPP program and turn off the investors.

Hacienda Luisita and lack of land reform

But perhaps the biggest challenge to Aquino’s claim as a reformist President is in the area of genuine agrarian reform, specifically the just resolution of the longstanding unrest in his family-controlled Hacienda Luisita. He has refused to implement the 2005 decision of the Presidential Agrarian Reform Council (PARC) rescinding the stock distribution option (SDO) deal between his family and the hacienda farmers and farm workers.

Aquino, who justified the 2004 massacre of seven protesting Hacienda Luisita farm workers when he was still Tarlac congressman, continues to defend the SDO even as peasant groups, civil society organizations, and the Catholic church have all demanded that the control and ownership of Luisita lands be effectively transferred to farmers as a legal and moral imperative. Despite his obvious presidential authority to intervene in favor of the farmers, Aquino opted for a hands-off policy when his relatives again duped the farmers last August through a questionable compromise deal intended to keep the SDO scheme.

Independent estimates say that 75 percent of the Filipino poor live in the countryside while official data show that poverty incidence is highest among farmers (44 percent) and fishers (49 percent). Instead of championing genuine agrarian reform, Aquino has trumpeted the narrow and deceptive line of “Kung walang corrupt, walang mahirap”, concealing the fact that a great majority of Filipinos are poor because of a backward rural economy that is still heavily dominated by landlord families like Aquino’s.

Challenges and hopes

More challenging times await the people in 2011. Aside from the increases in toll rates; MRT/LRT, bus/jeepney/taxi fares; and food prices, oil prices are anticipated to again skyrocket as global prices threaten to breach the $100-mark anew. Officials have warned of possible water shortage and rotating brownouts similar to last year’s amid onerous utility rates even as Aquino vows to privatize more water and energy resources under his PPP initiative.

The fiscal deficit does not show any sign of abating despite the P500-million surplus posted in December and the high-profile campaign of revenue agencies to go after tax evaders and smugglers. This stokes fear that new and higher taxes as long demanded by foreign creditors led by the IMF-World Bank will come sooner than later.

Aquino plans to pursue poverty alleviation not within the framework of long-term development but within the context of a supposedly brand new counterinsurgency campaign called Oplan Bayanihan. The CCT dole-outs and foreign development aid will be used for this purpose. This distorts the concept of development work and the inalienable human right to decent living since addressing the structural roots of poverty, such as the lack of genuine agrarian reform, is sidelined in favor of short-term dole-outs and projects.

The victory of the Morong 43 notwithstanding, the systematic violation of human rights perpetrated by the state’s security forces continue under Aquino. Just last January 2, a local leader of the Kilusang Magbubukid ng Pilipinas (KMP) in Nueva Ecija was gunned down, bringing to 23 the total number of victims of extrajudicial killings under the new administration.

Still there is always a reason to be optimistic. But certainly, the people’s strongest hope lies not in the purportedly reformist disposition of the Aquino administration but in exercising their inherent right to demand that the government adhere to their aspirations of peace with social justice and long-term development anchored on wealth redistribution and the utmost respect for human rights. #

Consumer issues, Privatization

MRT fare hike: subsidies for transnational banks and big comprador profits

MRT fare hike, privatization - ito ba ang daang matuwid ni Noynoy? (Photo from

In his first SONA, Aquino identified the case of the metro rail transit (MRT) as among the questionable and disadvantageous projects of the Arroyo administration:

“The government tried again to buy the people’s love. The operator was forced to keep the rates low. In effect, the guarantee given to the operator that he will still be able to recoup his investment was not fulfilled. Because of this, Land Bank and the Development Bank of the Philippines were ordered to purchase the MRT. The money of the people was used in exchange for an operation that was losing money”. (Read full SONA text here)

As if on cue, the Department of Transportation and Communication (DOTC) consequently announced that MRT commuters must brace for a fare hike due to rising operation and maintenance cost as well as government subsidies. (Read here)

(A very similar case is the National Power Corp. [Napocor]. The Department of Energy [DOE] disclosed after the SONA that power rates will increase to recover so-called stranded debts of the state power firm. Read salient points and issues here)

Aquino’s transportation officials justified the planned fare hike by pointing out that all Filipino taxpayers are unfairly subsidizing Metro Manila residents who are the regular commuters of the MRT. They claimed that the real cost of transporting a passenger from North Avenue to Taft Avenue can reach as much as P60. But actual maximum fare, in the last seven years, has remained at only P15. (Read here)

But the truth is taxpayers subsidize not the actual transportation cost of the ordinary worker, office employee or student who regularly uses the MRT. Profits are being squeezed from taxpayers and commuters for guaranteed debt payments and profits of the transnational banks and big comprador firms that undertook the MRT project through Public-Private Partnership (PPP) – yes, the same type of development initiative that Aquino said his administration will pursue.

Taxpayers are subsidizing the debts incurred by the private consortium that built the MRT – the Metro Rail Transit Corp. (MRTC).  Aside from guaranteeing debt payments, the national government also guaranteed a 15 percent return on investment per annum for MRTC under their 25-year build-lease-transfer (BLT) agreement in 1997 with the DOTC.

Thus the so-called “subsidies” go the Export-Import Bank of Japan, Sumitomo Bank, and other Japanese and Czech banks, as well as some local banks like the Bank of Philippine Islands (BPI). What made the deal more financially onerous was that the banks that provided the loan of US$462.5 million in 1998 and the private firms that constructed the MRT have the same owners.

MRTC included the Ayala Land Inc., owned by the Ayala family which also controls the BPI. MRTC also entered into an Engineering, Construction, and Procurement (EPC) Contract with the Sumitomo Corporation, owned by the same Japanese investors that control Sumitomo Bank.

Foreign lenders (Japan provided US$278.5 million while the Czech Republic, $88.4 million) also apparently “tied” their loans for the MRT, thus further maximizing profits for their exported capital (i.e. we pay for the principal plus interest for services and goods that come from the same country). Japanese Sumitomo Corporation used, as principal subcontractors, Japanese TNC Mitsubishi Heavy Industries for the civil works, track works, and electro-mechanical work, and Czech Republic-based CKD Dopravini for the manufacturing, testing, and commissioning of the rail vehicles.

In fact, the BLT was so financially burdensome that government started missing paying debts on time. Consequently, the government through the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP) initiated an $800-million buyout of the MRTC to acquire 76-percent equity last year. The move was meant to terminate the guaranteed 15 percent return, that was supposed to last until 2025 (end of the BLT deal), by providing a lump-sum payment.

But in the end, Filipinos through our taxes will still shoulder this lump-sum payment. If the MRT fares will be increased, taxpayers will be paying for this exorbitantly priced PPP project twice over.

Meanwhile, aside from cashing in on the guaranteed profits and the lump-sum payment, MRTC firms have been raking additional profits from other investments made more lucrative by the MRT. The Ayalas, for instance, have built the TriNoma Mall in 2007, which is directly linked to MRT’s North Avenue station. The MRT also made the Ayala Center commercial complex in Makati City more accessible and thus more profitable.

Fil-Estate, which is also part of the MRTC consortium, on the other hand, had as early 2000 secured a P1.4-billion investment from the Bank of America to develop high-rise real estate projects along the MRT system.

Worse, the MRT fare hike is apparently just a prelude to its privatization (as usual to make it attractive to investors). Aquino’s officials said they are already talking to prospective buyers. And they plan to privatize not only the MRT along Edsa but the entire railway system in the country. (Read here)

And consider how a privatized and deregulated power industry has resulted in skyrocketing electricity costs – a major input in MRT/railway operation. If you want to just take the bus or jeepney because you can no longer afford a train ride, you will still have to contend with increasing fares because the oil industry is deregulated.

Hindi naman tumataas ang sahod mo. O swerte ka nga kung may trabaho. Ito na ba ang matuwid na daan ni Noynoy?