Press Release
May 6, 2014

Sponsorship Speech of Senator Cynthia Villar
Extension of Philippine National Railways' (PNR) Corporate Life

(S.B. No. 1831 of Senator Ralph Recto)

Senate Committee on Government Corporations and Public Enterprises,
jointly with the Committee on Public Services
Senate Session Hall
May 6, 2014

Mr. President, my fellow senators.

I stand here today to sponsor Senate Bill 1831, with amendments, or 'An Act Extending The Corporate Life Of The Philippine National Railways For Twenty Five (25) Years, And Renewable for Another Twenty Five (25) Years, Further Amending For This Purpose Republic Act No. 4156, Entitled "An Act Creating the Philippine National Railways, Prescribing Its Powers, Functions And Duties, And Providing For The Necessary Funds For Its Operations", As Amended

First off, I would like to emphasize on the urgency of the passage of Senate Bill 1831 since the PNR Charter will already expire next month--on June 19, 2014 to be specific.

The mandate of PNR is actually covered by three laws:

  • The enabling law, Republic Act 4156, bestowed on PNR its 50 years of corporate life that began on June 20, 1964. The mandate of the law was for PNR to provide the public service of owning and operating a national rail service and related transportation system and it will serve as a corporation and instrumentality of the Philippine government.

  • Republic Act 6366 amended the enabling law in August 1971, and among others reiterated the role of PNR as being a part of the national government's infrastructure program.

  • The third law, P.D. 7411, was amended in 1975 which, among others, reiterated that the viability of PNR operations must be ensured by the national government to enable PNR to render the rail transport services for passengers and freight at the minimum prices possible.

We conducted consultation meetings and a Senate hearing on April 29, 2014 regarding this. I would like to point out that the persons or parties in attendance and concerned are in consensus that the PNR charter should be extended. They include the officers and employees of the PNR as well as representatives from the Department of Transportation and Communications (DOTC), Governance Commission for GOCCs (GCG), Department of Finance (DoF), Metro Manila Development Authority (MMDA), Local Government Units (LGUs), private sector groups, among other stakeholders.

DOTC, to which PNR is attached to, cited the important role of PNR in "delivering vital, safe, convenient and affordable transportation services to the Filipino people".

We also invited the National Economic Development Authority (NEDA), they were not able to attend the hearing. But NEDA Secretary Arsenio Balisacan sent a letter (aide memoire) outlining his department's comments and position on the proposed extension of the PNR charter. NEDA supports the extension and deemed it necessary due to the following reasons.

I would like to cite NEDA's reasons, since it is the country's social and economic development planning and policy coordinating body. Among the key roles of railways is to promote economic development and inclusive growth.

NEDA cites in its position paper that "Extending PNR's corporate life, thereby extending its mandate and continuing its recent development efforts to improve, modernize and expand PNR's railway services, is supportive of the Government's thrust in improving connectivity and efficiency among urban centers and regional growth hubs in the north-south direction across the country"

NEDA also pointed out that "PNR is the only Government instrumentality that has the mandate to provide and operate a nationwide railroad and transportation system" and that "not extending PNR's corporate life or charter would still compel the Government to find/create a new entity that will provide and operate railway services in the country in as much as DOTC, to which PNR is currently attached to, does not have the mandate to operate such".

More than anything, I would like to highlight Mr. President and esteemed colleagues, that PNR provides the cheapest mode of transportation to our people. Ang Metro Manila commuter Line ng PNR ang nag-ooffer ng pinakamurang form of transport sa mga commuters, sa halagang PhP0.71 (71 centavos) kada kilometrokumpara sa jeep na dalawang piso (PhP2) kada kilometro o walong piso (PhP8) para sa unang apat na kilometro (ang ating minimum fare) at PhP1.40 pesos para sa mga susunod na kilometro. Sa bus naman, ang pamasahe ay dalawang piso rin kada kilometro at sampung piso (PhP10) para sa unang limang kilometro at PhP1.85 pesos para sa mga susunod na kilometro.It is worth noting that PNR has not increased its fare matrix in the last 20 years, Mr. President and esteemed colleagues.

Ang mas mumura na lang sa pagsakay sa PNR trains ay ang pagbibisikleta at paglalakad. Kaya naman noong isang taon (2013), halos 20 milyon (19.967 million) na pasahero o 55,400 commuters daily ang kanilang naserbisyohan. At ngayong taon (2014), between 80,000 to 100,000 passengers per day,ang kanilang sineserbisyohan.

According to PNR itself: "Permanent discontinuance of the commuter rails service in Metro Manila and of the anticipated rail service revival to Bicol will displace passengers who come from "the lowest earning C and D economic bracket" of our country's population.

Moreover, as an archipelagic country, we require efficient and safe transport networks--both in land and on the sea. We need a seamless transport system to connect our main islands of Luzon, Visayas and Mindanao, plus the 7,100 more islands we have as well as to transport passengers and goods via freight movement.

Of course, a crucial component of this transportation system and requirement of the country is one of our basic modes of transport--by rail. Thus, the role of the Philippine National Railways of PNR, in this context, is crucial.

The Medium Term Development Plan 2011-2016 recognizes the need to address the Philippines' infrastructure backlog and cites as a priority the creation of an integrated and multimodal national transport and logistics system. For road transport, working towards a more efficient transport network will mean connecting underserved rural areas with markets in expanded logistics chains.

Internal logistics activity in the Philippines is considered to be relatively small compared to nearby Association of Southeast Asian Nations (ASEAN), and the government sees this as an opportunity to spur the growth of MSMEs (Micro, Small and Medium Enterprises) by linking them to global supply chains through better transportation and logistics infrastructure.

Presently, PNR operates a commuter lines from Tutuban to Sta. Rosa, Laguna(covering 23 stations over a stretch of 50 kilometers) and from Naga to Sipocot (with route length of 35 kilometers). The long-distance service to Legaspi, Bicol has been suspended in October 2012, because of damages to bridges due to typhoons. But according to PNR, they plan to resume the service by September 2014 with a test run by next month.

A seamlessly linked transport system, particularly railway, is important. Rail connectivity index is a reliable indicator or barometer of a developed economy. Route kilometers per million population are a reliable indicator of rail connectivity. Developed economies have a high rail connectivity index. How do we compare in terms of route kilometers per million population? USA,747.4; Japan, 157.5; Malaysia, 87.6; India, 55.2; China, 45.5; and the Philippines, 5.5.

Sa atin, we discovered na umikli pa ang route kilometers ng PNR. The Philippines has a total of 300,000 route kilometers. In its heyday during the 1970s, so to speak, PNR is running on 1,100 route kilometers (from La Union to Legaspi). Now, it is down to only 85 route kilometers (from Tutuban to Sta. Rosa and from Naga to Sipocot).

As Senator Ralph Recto pointed out in our public hearing, "the most problematic factor for doing business in the Philippines is inadequate supply of infrastructure". In a survey, 21 percent of respondents cited it. The other factors were corruption, 17.8 percent; inefficient government bureaucracy, 16.9 percent; and tax regulation, only 8.6 percent. So it is a big factor in economic competitiveness of our country.

An efficient transport network is a vital In particular and is part of the Medium-Term Philippine Development Plan 2011 - 2016. Chapter 5 of which, on Accelerating Infrastructure Development observes the need to have the following developed:

  • A comprehensive long-term National Transport Policy, which will guide the restructuring of the transport sector into a well-coordinated and integrated multimodal transport system.

  • An integrated multimodal logistics system. As an example, the Subic-Clark-Manila-Batangas (SCMB) Corridor is envisioned to become a seamless intermodal logistics corridor (ship to rail transport or rail to truck transport). The viability of establishing an efficient long-distance, high speed mass rail transit system, integrated with the mass transit commuter rail system in Metro Manila shall be explored. The feasibility of freight - rail services for all strategic logistics corridor will also be considered.

It cannot be overemphasized that railways directly contribute to economic growth as demand for transport is directly and positively correlated to growth of gross domestic product or GDP. In developing economies, the elasticity of transport to GDP is 1.25. Meaning, a GDP growth of 9 percent would translate into increase in demand for transport to 11 percent. So, in the Philippines, if we are increasing by about 6 percent, the demand for transport should be about 8.5 percent. How much of this growth is captured by railways, however, depends on the capacity and quality of the railway infrastructure and services.

Rail services sector also provide significant employment opportunities to Filipinos. In 2010, 51.8% of the total estimated 36.0 million employed persons were employed in the Services Sector. Around 15% of the employed persons in the Services Sector were engaged in Transportation, Communication and Storage sector. This includes the rail sector workers who are mainly involved in train operations, engineering operations and other support services. In fact, dissolution of the PNR would result in unemployment for its almost 2,000 employees.

Railways promote economic development on a more balanced basis, and hence promote inclusive growth. However, railways require huge investments and are usually subsidized by government. The government subsidy to PNR amounted to PhP653 million last year (2013). Based from data supplied by PNR, the subsidy granted to it is less than the subsidy granted to the Light Rail Transport Authority or LRTA on a per passenger basis. Thus, last year, the government subsidy of PhP653 million to PNR translated to PhP32.70per PNR passenger less than the P36.40 subsidy per LRTA passenger.

The subsidy to PNR is deemed justified because as cited earlier, it is the cheapest mode of transport for passengers and the benefits are dispersed to a wide geographic area covered by its route.

I would also like to highlight, Mr. President and esteemed colleagues, that railways are superior to other modes of mass transportation in terms of minimal impact on environment and efficiency of land use. In congested nations with large urban populations, like here in the Philippines, the effort to match road capacity with exponential growth of vehicular traffic will always be a challenge. Railways use less land than the road sector, less polluting,and can generate high capacity at that.

PNR trains will play a key role in decongesting the traffic in Metro Manila and in other areas. Just this March, in fact, PNR launched a Special Coach service, which according to DOTC, is part of its efforts towards easing the present traffic situation in Manila, Makati, Pasay, and other affected areas especially in the southern part of the metropolis. Instead of taking private vehicles, motorists will now have a more efficient alternative.

I also appreciate the role of railway systems in bringing growth and development to our less-developed areas in far-flung provinces. Regional connectivity should also be a primary goal or consideration for us.

We can learn a thing or two from India, which operates one of the largest rail operations in the world. Their rail lines are run to serve the backward and less developed regions. It is undertaken based on socio economic considerations--which are national and cultural integration, national development and inclusive growth.

With the proposed extension of the charter of the PNR, there are also issues and concerns about their finances that need to be assessed, discussed and revised, if necessary. For instance, the need for additional capitalization was brought up during the hearing.

And admittedly numerous reforms need to be implemented in the PNR in order to rehabilitate and modernize its operations.

DOTC, the supervising body of PNR, is currently considering the implementation of the Integrated Luzon Railway Project (ILRP). Phase one of which will run from Malolos, Bulacan to Calamba, Laguna. Due to the sheer size of the ILRP, DOTC is exploring the option of funding some portions of the ILRP through public-private-partnership (PPP) agreement and a portion (the North-South Commuter Railway) through a Japanese official development assistance (ODA) loans. Decision on the funding options/sources is will pending with the Department of Finance (DoF).

In a paper submitted to the committee, the PNR commits to undertake the following:

  • Improve the efficiency of its existing Metro Manila Commuter Line and expand the line northward to Malolos,

  • Automate the present fare collection system,

  • Revive the mainline south to Bicol and extend the south line onwards to Sorsogon,

  • Introduce freight service for goods via the existing at-grade PNR tracks,

  • Improve the utilization of PNR real estate assets,

  • Implement the highest standards of governance in its financial and management operations.

Those reform commitments will hopefully reduce the yearly subsidy provided by the government for PNR's operations.

NEDA, for its part, has also communicated to the committee measures that PNR should consider to improve its operations and increase its contribution to national economic development. Some of which are among the commitments cited by PNR already. The others include:

  • Conduct a full-blown study for the overall PNR railway modernization plan...looking into the viability of extending the existing PNR lines to routes that are possible sources of increased ridership.

  • Determine most advantageous or appropriate rail transit technology for the PNR lines.

  • Utilization of improved ticketing, safety, and security systems,

  • Settle all its obligations to positively contribute to the national economy,

  • Continue efforts in venturing into other means of increasing its revenues to help cover outstanding obligations, and

  • To better manage its operations.

In fact, Mr. President and esteemed colleagues, given the scenario we have now when we had to wait 50 long years to review and assess PNR, the committee deems it proper to renew the charter for another 25 years only, renewable for another 25 years, instead of 50 years.

At this point Mr. President and esteemed colleagues, given the short timeframe until June 19, 2014 when the PNR charter expires. I seek the urgent passage of this bill. Thank you.

News Latest News Feed