Senate Minority Leader Aquilino Q. Pimentel, Jr. (PDP-Laban) today said the multi-billion peso North-Rail Project is faltering because the Arroyo government awarded the flagship project to a Chinese contractor despite the absence of public bidding and non-compliance with other government rules.

He said the failure to conduct public bidding, which is a clear violation of the Government Procurement Reform Act, deprived the government of the opportunity to bargain for terms and conditions that are advantageous to the government and to ensure that they conform to project rules and requirements.

 
Senator Pimentel expressed dismay over the revelation of Trade and Industry Secretary Peter Favila that the contractor, China National Machineries and Equipment Group (CNMEG) is asking the government an additional $290-million funding for the first phase of the NRP, the 32-kilometer stretch from Caloocan to Malolos, despite the fact that the actual construction of the railways has not yet started about four years after the project was started.

The CNMEG was awarded the project without the benefit of public bidding in violation of the Government Procurement Law.He said it would be difficult to justify the huge supplemental funding being asked by the CNMEG on top of the original $503-million funding for the project in the light allegations that the project was overpriced. The NRP was financed by a $400-million loan from China’s Export-Import Bank and $103-million from the government as counterpart fund.

 
Senator Pimentel challenged the Arroyo government to inform Congress and the public about the real status of the project in view of conflicting statements emanating from the executive branch.

 
He noted that Edgardo Pamintuan, the newly-appointed president of the North Rail Corporation at first reported that the CNMEG had pulled out from the project. Later, he said Mr. Pamintuan issued a statement that the contractor had only suspended work on the project, with some 150 Chinese workers having returned to China.

A provision in the contract which says that disputes over the project will be governed by Chinese courts instead of Philippine courts or courts of neutral countries.“The executive branch seems confused about the status of the North-Rail Project. But one thing is sure, the fate of the railway project is now in limbo, with work at a standstill because the Chinese contractor is asking for additional funding. Will the Arroyo the government grant this request?” the minority leader said.

 
Senator Pimentel has proposed the resumption of the Senate inquiry into the North-Rail Project to ascertain what is really happening with it.

 
He said the troubles hounding the NRP could be traced to the serious infirmities in the agreement on the project between the Philippines and China, which gave (the Chinese) Eximbank the authority to choose and designate the contractor for the project without any public bidding.

 
Mr. Pimentel also assailed the administration for lack of transparency when it sough Chinese financing for the railway project. He recalled that after the loan agreement was signed on Feb. 26, 2004, in Beijing, the Senate expressed reservation over the project in view of the findings by the UP College of Law that the agreement suffered from serious infirmities and government officials who had a hand in the deal could be held liable for the mistakes.

The Philippine government relinquished effective control of the proceeds of the $400-million loans from China’s Export-Import Bank by allowing the bank to directly remit the payments to the Chinese contractor without the need of turning over the money to the government.Among the flaws in the NRP deal cited by the UP CollegeLaw were the following: 1. The CNMEG was awarded the project without the benefit of public bidding in violation of the Government Procurement Law; 2. A provision in the contract which says that disputes over the project will be governed by Chinese courts instead of Philippine courts or courts of neutral countries; 3. The Philippine government relinquished effective control of the proceeds of the $400-million loans from China’s Export-Import Bank by allowing the bank to directly remit the payments to the Chinese contractor without the need of turning over the money to the government.

 
Senator Pimentel decried the fact that when the Senate called on Malacañang to put the NRP project on hold unless these infirmities were corrected, the Palace insisted that the railways project was “above board.”

 
He also pointed out that with the first phase of the North Rail Project on a standstill, the second phase (Malolos to Clark Special Economic Zone), remains indefinitely frozen despite the fact that is funded by another $500-million from China’s Eximbank.

 
Meanwhile, he said the government continues to pay interest charges for the two NRP loans to the tune of one-million pesos a day. # # #

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