By Felicito C. Payumo
April 1, 2008
There is no doubt that infrastructures, such as the Subic-Clark-Tarlac Expressway (SCTEX) and the Port and Airport facilities in Subic and Clark will catalyze development in Central Luzon. The synergy that will be created between the two economic zones and the industrial parks along the corridor is a classic case of the whole being more than the sum of its parts. And a major side benefit that is yet to be felt will be the decongestion of Metro Manila of the cargo vehicles that crawl to the South Harbor and NAIA from Northern Luzon, and the reduction of delivery costs resulting from faster turn around of vehicles to Subic and Clark without having to contend with the truck ban and risk of a hijack.
Roads should unite, not divide.
But are there no lessons we can learn from the SCTEX construction? Yes, as in any development, there will be sectors that will be affected adversely if the planners do not address their concerns. Who are they?
In the case of the SCTEX, it is the farmers whose lands have been divided by the fenced road. It is a misconception that owners of lands that have been traversed by a highway necessarily benefit. On the contrary, they lose if the highway is fenced. "Perhuisio, sa halip na benepisyo", they complain. For how do they cross to the other side of the road if the interchanges and exits are far from his land? And where cross drainages are inadequate, the road embankment serves to impound rain water thus, flooding the fields. To alleviate the situation, farmers have thus insisted that small-diameter concrete pipe culverts be replaced by box culverts with sufficient clearance that can serve as passageways for farmers’ animals and implements. And when an engineer’s hydrographic study conflicts with a farmer’s knowledge of local flooding, the engineer should heed the farmer’s advice. This should be borne in mind in future road constructions.
BOT vs ODA
The general rule is for the Government to favor the Build-Operate-Transfer (BOT) scheme for infrastructures development whenever feasible. But not all projects such as a missionary road can be undertaken by a private sector group that would avail of commercial financing. For such projects, the Government secures an Official Development Assistance (ODA). ODAs can be either grants or loans; they can come from Multilateral sources which include the World Bank-IBRD or the Asian Development Bank, or from Bilateral sources such as the donor or lending countries. Our biggest source of Bilateral assistance has been the Japan Bank for International Cooperation (JBIC), and lately, China, which extended the loan for the infamous NBN-ZTE project. JBIC, on the other hand, was lender for many Philippine projects which obtained the bulk of the Obuchi Funds.
Untied or Tied Loans
Loans can be either untied or tied meaning, the total cost of the goods procured from the lender country shall be no less than a minimum percentage, usually 30% of the total amount of contracts, except consulting services. That is why for projects funded by the concessionary Special Yen Loan Package of JBIC, only Japanese nationals can bid. What is concessionary? It means terms with interest rates ranging from 0.3% to 0.95 % p.a. and maturity period from 15 to 40 years inclusive of a grace period of 5 to 10 years. The Subic Port and SCTEX got a 0.95% interest rate and a maturity period of 40 years. The grace period is 10 years, which means no amortization will have to be paid while they build up volume for 10 years. No commercial loans can match such concessions.
But can’t the bidders collude if they are all Japanese? Of course, they can. But so can the Government Agency protect itself by insuring there is real competition. In the case of the Subic Port Project which was completed on schedule, the winning bid was P1.776 billion or 25.3% less than the Agency estimate despite the fact that the bidders were all Japanese. And there was a difference of P363 million between the winning bid and the second lowest. Had any collusion happened the winner would have secured the contract at higher but within the allowable 25% above Agency estimate. And should we prefer untied loans, the Government can also secure long term loans of 15 up to 40 years maturity and interest rate at 7 % or below from JBIC and the World Bank. The projects are open to contractors of all nationalities.
April 1, 2008
There is no doubt that infrastructures, such as the Subic-Clark-Tarlac Expressway (SCTEX) and the Port and Airport facilities in Subic and Clark will catalyze development in Central Luzon. The synergy that will be created between the two economic zones and the industrial parks along the corridor is a classic case of the whole being more than the sum of its parts. And a major side benefit that is yet to be felt will be the decongestion of Metro Manila of the cargo vehicles that crawl to the South Harbor and NAIA from Northern Luzon, and the reduction of delivery costs resulting from faster turn around of vehicles to Subic and Clark without having to contend with the truck ban and risk of a hijack.
Roads should unite, not divide.
But are there no lessons we can learn from the SCTEX construction? Yes, as in any development, there will be sectors that will be affected adversely if the planners do not address their concerns. Who are they?
In the case of the SCTEX, it is the farmers whose lands have been divided by the fenced road. It is a misconception that owners of lands that have been traversed by a highway necessarily benefit. On the contrary, they lose if the highway is fenced. "Perhuisio, sa halip na benepisyo", they complain. For how do they cross to the other side of the road if the interchanges and exits are far from his land? And where cross drainages are inadequate, the road embankment serves to impound rain water thus, flooding the fields. To alleviate the situation, farmers have thus insisted that small-diameter concrete pipe culverts be replaced by box culverts with sufficient clearance that can serve as passageways for farmers’ animals and implements. And when an engineer’s hydrographic study conflicts with a farmer’s knowledge of local flooding, the engineer should heed the farmer’s advice. This should be borne in mind in future road constructions.
BOT vs ODA
The general rule is for the Government to favor the Build-Operate-Transfer (BOT) scheme for infrastructures development whenever feasible. But not all projects such as a missionary road can be undertaken by a private sector group that would avail of commercial financing. For such projects, the Government secures an Official Development Assistance (ODA). ODAs can be either grants or loans; they can come from Multilateral sources which include the World Bank-IBRD or the Asian Development Bank, or from Bilateral sources such as the donor or lending countries. Our biggest source of Bilateral assistance has been the Japan Bank for International Cooperation (JBIC), and lately, China, which extended the loan for the infamous NBN-ZTE project. JBIC, on the other hand, was lender for many Philippine projects which obtained the bulk of the Obuchi Funds.
Untied or Tied Loans
Loans can be either untied or tied meaning, the total cost of the goods procured from the lender country shall be no less than a minimum percentage, usually 30% of the total amount of contracts, except consulting services. That is why for projects funded by the concessionary Special Yen Loan Package of JBIC, only Japanese nationals can bid. What is concessionary? It means terms with interest rates ranging from 0.3% to 0.95 % p.a. and maturity period from 15 to 40 years inclusive of a grace period of 5 to 10 years. The Subic Port and SCTEX got a 0.95% interest rate and a maturity period of 40 years. The grace period is 10 years, which means no amortization will have to be paid while they build up volume for 10 years. No commercial loans can match such concessions.
But can’t the bidders collude if they are all Japanese? Of course, they can. But so can the Government Agency protect itself by insuring there is real competition. In the case of the Subic Port Project which was completed on schedule, the winning bid was P1.776 billion or 25.3% less than the Agency estimate despite the fact that the bidders were all Japanese. And there was a difference of P363 million between the winning bid and the second lowest. Had any collusion happened the winner would have secured the contract at higher but within the allowable 25% above Agency estimate. And should we prefer untied loans, the Government can also secure long term loans of 15 up to 40 years maturity and interest rate at 7 % or below from JBIC and the World Bank. The projects are open to contractors of all nationalities.
But in the case of the NBN deal, there was no competition to ZTE Corporation that was designated by the Chinese Government to implement the Government to Government (G to G) contract. Hence, whatever concessionary terms that were extended by the Chinese Government could easily have been negated by the high price, absent any competition to ZTE. How much higher than the Government Agency estimate was the $329 million price? No one knows, simply because there was no Government estimate. That explains the furor over the deal.
The Tarlac- La Union Extension
This brings us to the question of how to fund the expressway extension to La Union. A newspaper reported that a consortium of Filipino contractors- Private Infra Development Corporation- has been awarded the project but would only construct a two-lane tollway. The consultant’s traffic study could only justify constructing two lanes under a BTO ( a variant of the BOT) scheme because financing was under commercial terms. On the other hand, JBIC could be persuaded to extend a concessionary loan to be able to build four lanes. After all, if it financed the SCTEX, there is no reason why it would not do the same for the Tarlac- La Union Extension where there is mainstream north- south traffic.
To the motoring public, a two- lane toll way is not only odd. It is also dangerous. Assuming the grade of the toll way would be just as good as the SCTEX, the motorists would tend to overspeed when overtaking. The question of safety is at issue.
Is there no way out of the dilemma? Someone suggested that instead of doing two lanes, the proponents construct four lanes but only up to Carmen, Pangasinan, with the Government undertaking the Carmen to Rosario, La Union section under JBIC funding. Or, as has been advocated, it is about time Government create a long term, small denominated, secured infrastructure bond market for OFWs. If Government can mobilize even just 5 percent of the $14 billion overseas remittance, that would mean $ 750 million yearly for infrastructures development. The OFWs are able to help in nation building while given an alternative vehicle for their investments.
Mr .F. C. Payumo was a three-term Congressman of the First District of Bataan and a former Chairman/Administrator of Subic Bay Metropolitan Authority.
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The Tarlac- La Union Extension
This brings us to the question of how to fund the expressway extension to La Union. A newspaper reported that a consortium of Filipino contractors- Private Infra Development Corporation- has been awarded the project but would only construct a two-lane tollway. The consultant’s traffic study could only justify constructing two lanes under a BTO ( a variant of the BOT) scheme because financing was under commercial terms. On the other hand, JBIC could be persuaded to extend a concessionary loan to be able to build four lanes. After all, if it financed the SCTEX, there is no reason why it would not do the same for the Tarlac- La Union Extension where there is mainstream north- south traffic.
To the motoring public, a two- lane toll way is not only odd. It is also dangerous. Assuming the grade of the toll way would be just as good as the SCTEX, the motorists would tend to overspeed when overtaking. The question of safety is at issue.
Is there no way out of the dilemma? Someone suggested that instead of doing two lanes, the proponents construct four lanes but only up to Carmen, Pangasinan, with the Government undertaking the Carmen to Rosario, La Union section under JBIC funding. Or, as has been advocated, it is about time Government create a long term, small denominated, secured infrastructure bond market for OFWs. If Government can mobilize even just 5 percent of the $14 billion overseas remittance, that would mean $ 750 million yearly for infrastructures development. The OFWs are able to help in nation building while given an alternative vehicle for their investments.
Mr .F. C. Payumo was a three-term Congressman of the First District of Bataan and a former Chairman/Administrator of Subic Bay Metropolitan Authority.
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