Anomalous $593-million Dollars loan from China for Northrail project to be returned

THE PHILIPPINES has committed to return some $593 million in loan from China for a railway project that was dropped due to anomalies in the procurement process, a Cabinet official said.

"In the middle of the Panatag (Scarborough) shoal controversy, China suddenly called off its ODA (overseas development assistance) that they lent us for the Northrail project," Local Government Secretary Manuel "Mar" A. Roxas II said yesterday after meeting with Chinese Vice-President Xi Jinping and Foreign Affairs Minister Fu Ying last week.

"We have the money and we can pay this (loan). According to Secretary (Cesar) Purisima of the Finance (department), they have started negotiations to pay this in installment over the next two years," he explained.

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

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

The high-speed railway was to have linked Manila with a northern province and eventually with the former U.S. Clark Air Base, which President Benigno Aquino III's administration plans to convert into the country's main airport. The U.S. abandoned Clark after it was damaged by the 1991 eruption of Mount Pinatubo.

The long-delayed railway was one of a number of planned infrastructure projects that Aquino ordered reviewed when he took power in 2010 to ensure they were not tainted by corruption. The Supreme Court ruled earlier this year that a lower court could hear allegations that the railway project was illegal because it was awarded without competitive bidding.

The Philippines has drawn more than $180 million from a $400 loan China agreed to provide for the project, according to Roxas' office.

Roxas said Aquino's administration wants to continue the project if the contract can be renegotiated to conform with Philippine laws. But he said Chinese officials demanded earlier this year that the loan be repaid because the project has stalled.

"All procurement by the government must comply with the procurement law. So this contract is not effective anymore," he said.

Mr. Roxas said this means the Philippines would have to drop the contract with the Chinese firm.

Amid the controversy, Mr. Roxas said the Northrail project will push through.

"The North Rail Corp. would have to reassess the needs. As for the government, our plan for a high-speed rail connection in Clark will continue. Whether it will be on the PNR (Philippine National Railway) alignment or some other alignment, that's another decision," he said.

At the same briefing, Mr. Roxas said the Philippines and China vowed to continue improving ties amid "irritants" in its already tensed relations over competing claims in the disputed West Philippine Sea (South China Sea).

"As I conveyed to Vice-President Xi, talk-talk is better than no talk," he said.

"So, the fact that we are talking at the highest levels, the fact that messages are reliably conveyed, I think, is a good step, is a good foundational step so that the DFA and the other negotiators can build upon whatever foundations or whatever fundamentals may have been established in this meeting," Mr. Roxas said.

The Secretary was sent as special envoy to the China-ASEAN (Association of Southeast Asian Nations) expo held last week where he also met with high ranking Chinese officials.

Meanwhile, the Commission on Audit (CoA) vowed to finish its audit report on the anomalous Northrail project in two to three months.

CoA Chairman Maria Gracia Pulido-Tan told the Senate finance committee hearing yesterday that audit highlights have already been released to the Northrail Corp., but the entire project has never been audited "from the very beginning" since it started in 2003.

Ms. Tan said the commission's audit on the project began last year and they have finished the audit highlights yesterday.

She said the commission is waiting for the "agency to comment on the findings" before they release the full report.

Build and Technology Transfer

Roxas went to China prepared, as he said he has asked the Chinese counterparts to comply to certain provisions compelling the State Grid Corporation of China to transfer technology to the National Grid Corporation of the Philippines as part of the contract when it bought a significant stake in the NGCP.

"As per contract in the National Grid, there ought to have been technology transfer. Apart from the technology transfer, the contract also stipulates that they train our men on how to handle the controls of our electric grid. It would be awkward on our part to see foreigners in control of the grid — would there be black-outs or not? What if  there would be roll or shortage in supply, it is us who would be affected. Who would be at the receiving end of the sufferings.

It is upright that Filipinos take control of the grid and in the same manner that decisions would be confined among us", stated Roxas, who went on to say that the "SGCC's stake at the NGCP doesn't make them (China) immune from compliance on contract provisions, so they should do what has been stated in the contract".

China-Philippines  Panantag Scarborough Shoal Standoff

But despite meeting top-level Chinese leaders, Roxas  failed to secure the much needed access for the local banana exports, which have been subjected to what Filipino exporters described as an extremely stringent procedure seen to keep Philippine fruit exports out of China.

Roxas apparently made sure this issue on the trade embargo on local banana exports would be discussed.

He however claimed that the Chinese government appears firm on its claim of phyto-sanitary issues as basis of the restriction on the local banana products, which were prevented entry since summer this year.

Roxas said that amid the insinuations by his Chinese counterparts that had phyto-sanitary issues as the compelling factor on the restriction, China has reportedly maintained an open option seen to keep the Philippines as among the countries from where China gets to import goods.

"They said that this was part of their SPS or sanitary-phyto-sanitary protections for their domestic industry. Nonetheless, there was some mention of their continuing to be open to importing Philippine bananas. There was no talk at all about volumes, timetables, or such," averred the 'special envoy'

Local banana exporters posted more than a billion dollars in loses after China declined entry of cargo vessels that had local banana exports on board. Roughly 300 shiploads of bananas were rotten, spoiled and wasted, resulting from what many consider as the consequences that Philippines got amid a stand-off at the Panatag Shoal.

Sen.Antonio Trillanes, who served as Aquino's back channel in China on the issues with China over the disputed territorial waters, claimed to have eased the situation to the point of there being  no Chinese ships within the Philippine claimed shoal but stays in international waters, as well as claiming that the banana exports to China have resumed.

Apparently, none of what he claimed had basis.

Meanwhile, the designation of Roxas as special presidential envoy to China could only be because of the perception that  Aquino no longer sees Senator  Trillanes as an effective backchannel negotiator over the disputed Scarborough Shoal.

Sen. Francis "Chiz" Escudero yesterday echoed the assessment earlier made by  Sen. Miriam Defensor-Santiago after Trillanes himself blew his cover.

"The revelation came from Trillanes himself. Whoever engages in backdoor (talks) will no longer be rendered effective if that person is now on the front door and same can be said for whoever is acting as the backchannel if he's now the front channel. That's probably the reason President Aquino named Roxas as special envoy to China," he said.

Roxas' entry into the picture will not in any way put Trillanes in a bad light since the latter's supposed role in resolving the tension with China may have already been over and done with, Escudero said.

Escudero, former chairman of the Senate committee on national defense and security, likewise shared Senate President Juan Ponce Enrile's contention that no state secret was divulged the latter's public disclosure of so-called "Brady notes" or the report supposedly prepared by Philippine Ambassador to China Sonia Brady to Foreign Affairs Secretary Albert del Rosario.

"I don't see any national security component in the Brady notes. These are Brady's notes on an opinion of one senator related to her.  I cannot categorize to anyone that whatever I say constitutes national security especially in that kind of manner of conversation, on subjects that do not entail national security of the country.

When asked about his categorical statement whether there were state secrets that were put out in the open, Escudero expressed belief that there were none.

"The problem there is that we do not have any law regarding any (state) secret, confidential (information)," he said.

While there are documents from the Departments of National Defense (DND) and Interior and Local Government (DILG) that are labelled confidential, there's no enabling law that provides punitive action for whoever will mishandle such information.

"What is confidential, what is secret? What is top secret? What is secure, the level of clearances? There is no law on this that outlines what such documents are," he said.

It's a different matter on issues concerning information disclosed in an executive session as the Rules of the Senate explicitly provides that whatever transpired in the proceedings cannot be divulged by anyone, otherwise, a penalty will be imposed based on the ethics and rules of the upper chamber, the senator claimed. Angie M. Rosales

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