PH and Japan exchange notes for rehab and maintenance of MRT-3

The Philippines and Japan has exchanged Note Verbales for the rehabilitation and maintenance of the Metro Rail Transit (MRT) 3.

“We are wasting no time. This year, we will make significant improvements to MRT-3, and that is our commitment to the Filipino commuters,” Department of Transportation (DOTr) OIC Undersecretary for Railways TJ Batan announced on January 9, 2017.

The first part of the strategy for fixing the railway consists of promoting accountability with the termination of the contract of Busan Universal Rail, Inc. (BURI). The second, ensures continued service delivery by establishing the MTT and purchasing needed spare parts; the third covers contracting a rehabilitation and maintenance service provider together with an Official Development Assistance (ODA) partner and the fourth is putting in place a longterm, single-point-of-responsibility, operator and maintenance provider for MRT-3.

Particularly, the rehabilitation and maintenance arrangement involves obtaining ODA financing under Japan International Cooperation Agency's (JICA) Special Terms for Economic Partnership (STEP). In Japan's other ODA projects with the Philippines, terms include 0.1% interest per annum, 40 years payment period, and 12 years grace period for the principal.

The next step is for JICA to conduct a Feasibility Study, which will refine the project's scope of works, in January to February, after which relevant government approvals will be obtained.

Signing of the loan agreement and procurement of the rehabilitation and maintenance provider will then follow in March to April, and mobilization of the Japanese provider is expected within the 2nd quarter.

The procurement of a Japan-nominated rehabilitation and maintenance provider will be done pursuant to JICA's procurement guidelines. Given the urgent need to restore MRT-3's reliability and capacity, Japan has given assurances that it will nominate a provider that is highly qualified, and has a robust and reliable track record.

In November, 2017, the DOTr terminated its contract with Busan Universal Rail, Inc. (BURI) as the MRT-3’s maintenance provider, citing BURI’s failure to perform its maintenance obligations and procure spare parts. The termination was intended to promote accountability and ensure that taxpayers’ money is not being spent on a nonperforming service provider.

The Japan ODA for the MRT-3 Rehabilitation and Maintenance Project is Part 3 of DOTr’s 4-part strategy for fixing MRT-3.