A Presentation for the American Chamber of CommerceBy Rene Santiago, Managing Director, Bellwether Advisotry Inc.

29 February 2012

Railways Philippines 2012

Outline of Presentation Introduction

• Why the interest on rail• Historical context

Intra-urban Rail lines• Lines 1 and 2 and proposed Extensions• MRT 3 and upgrade• MRT 7• Others (BRT, Monorail, Cebu MTS)

Inter-urban rail lines• PNR Main Line South (existing• PNR Commuter South• Northrail • Panay Railway• Mindanao Railway

Conclusions and Q&As

Electric Tramway, 65kms in 1905 and 85 kms by 1925

Ridership: 35,000 per day in 1906, and 126,000 in 1920:

MERALCO: an American company w/50-year franchise, owned and operated the electric tram, up to 1945.

Closure of rail after WW2, gave rise to jeepneys

Like other cities in many countries, the emergence of automobiles in the 1920s led to the decline of railways, and/or government takeover

1 - Introduction

Rail in Manila’s history

Antecedents of PNR General plan for Railways in Luzon

prepared in 1876, with the Ferrocaril de Manila-Dagupan opened in 1892

Built via a concession granted to Manila Railway Company Ltd (a British firm), w/guaranteed 8% ROI

At its peak,1,140 kms operational line; managed by a SOE that was a model of corporate efficiency

�

Source: Iwata, Shizuo, “Development of Public Transport in Metro Manila, Philippines”, 1993.

Tutuban Station

Dagupan Station

1 - Introduction

Why the interests on rail?USA not a global rail supplier/exporter (except, perhaps in

locomotives)

Philippines railway sector is "small fish in a big ocean" 50-km urban rail lines, less than 10% of daily trips in MManila 422-km Main Line South (Bicol); 2 trips/day on Mnl-Naga (today)

Special emphasis on High-speed Rail in "Arangkada Forum“

Very few countries can justify HSR USA still in the throes of heated debates; Acela Express nearest to HSR

Nostalgia, for the grand railroads of yesteryears?

1 - Introduction

• 1972 Study -proposed a system of expressway and railway network (ala Tokyo), including 135.1 km of subway

• 1977 MMETROPLAN study, recommended street-level tram car along Rizal and Taft Avenue

• 1979 - Decision to build LRT Line 1, 15-km, fully-elevated

• 1984 - Partial operation of Line 1• 1985 - Metrorail Network Study, proposed

LRT Lines 2, 3 and 4• 1989 - Failure of BOT bidding for Line 2• 2001-02 – Opening of Lines 3 and 2

Premised on the belief that a large metropolitan area can only be sustained by rail, and that urban transit is the business of government

2 – Intra-Urban Rail

Rebirth of Rail in Manila

3 – Intra-Urban Rail

Metro Manila Rail5.4-km North Loop was completed in 2010; but interface with MRT-3 still unfinished

LRT1-SEP (12-km)2002: construction was supposed to start (SNC-Lavalin contract)2006: PPP implementation per IFC study, aborted2009: Unsolicited proposal via JVA2010: DOTC study to merge with MRT-3 & bid out O&M2011: Service contract for OM&R2012: ???

MRT-7 (22-km)Contract signed in 2009;Oct 2010 expiry extended;Concession flipped 2x;Currently in holding pattern

LRT-2 East (4-km)3 F/S since 2006, could’ve been tendered in 2008;JICA F/S in 2011, per DOTC request;On-going study (again!)

MRT-3 (17-km)•Frequent system breakdown, due to overloading;•MPIC proposal to takeover, double capacity, & upgrade system in limbo

Flavor of the Month for LRT-1 SEP3 – Intra-Urban Rail

Project Cost ~Php59 Billion

•June 2012 tender, via so-called “Hybrid” PPP

•CW to be funded & built by private investor

•Rolling Stock & Satellite depot via ODA (hence, gov’t)

•30-year Concession, Fares adjustable with CPI

•Winning bidder takes over line management, from start

Other Mass Transit Projects3 – Intra-Urban Rail

No study (pre-fs or FS) yet; Maybe, 2026

Unsolicited proposal (B-O-O) of Ayala Land for a BRT System on Ayala Avenuepresented to DoTC in Oct 2011; no response BRT System for MetroCebu and Davao City2009 study and proposal, backed by IBRD

Decline of inter-urban railways3 – Provincial/Inter-Urban Rail

Main Line North closed in 1984

Main Line South (448-km from Mnl-Naga)Operations ceased in 2006 due to typhoon-induced damageRe-opened in 2011, 2 trips/dayRehab plan ~Php29 billion

Manila-Clark (Northrail)•10% accomplishment from 2006-2010•Works suspended since 2010•Impasse with Sinomach, likely to follow the T-3 fiasco

“Zombie” Railway Projects3 – Provincial/Inter-Urban Rail

Reviving a 1985 ‘carcass’

The Mindanao Railway fantasy

Concluding RemarksExpect no acceleration in project

implementation• But, miracles do happen (rarely)

Absence of a coherent and sustained rail policy• LRTA and PNR are financially bankrupt; financial re-

structuring plans unacted, for more than 10 years already• Toxic environment for rail to flourish and thrive (e.g.,

amateurs at the helm, low fares, poor maintenance, etc.)High Interests on rail from ODA & Private

Sector• Lending portfolio of ADB (strategy 2020) for urban transport

to scale up by 5x in 5 years• Big players (SMC, Ayala, MPIC, foreign investors, etc) on-the-

prowl for opportunities [Texan saying:“Big Hats, No Cattles”]

4 – Conclusions

Thank You!

renesan@thebellwether.net