Press Release
November 18, 2007

SPEAKER DE VENECIA URGED TO COOPERATE WITH SENATE INQUIRY INTO NORTH RAIL PROJECT

Senate Minority Leader Aquilino "Nene" Q. Pimentel, Jr. (PDP-Laban) today urged Speaker Jose de Venecia, Jr. to cooperate with the Senate inquiry into the $603 million North Rail Project and to stop being evasive about the anomalies that attended the deal of which he was "godfather" or principal broker.

Pimentel said the Senate has no quarrel with De Venecia about the economic benefits that the country will get out of the rehabilitation of the North Rail, but he should explain why the government agreed to terms in the contract with China that were not only financially onerous to the Philippines but also violative of the country's laws.

He said the NRP contract is grossly overpriced and is as worse as, if nor far worse, than the $329 million national broadband-ZTE contract that has been denounced by businessman Jose de Venecia III, the Speaker's son.

Pimentel said the controversy over the NRP could not be solved by the Speaker's self-serving insistence that the railway deal, which he negotiated with China in 2005, is aboveboard which does not dovetail with authoritative studies that the contract was flawed and unfair to the Philippines.

"Speaker De Venecia should not investigate himself on his role in the North Rail deal. Nothing will come out of it. I suggest that he cooperate with the Senate investigation, submit documents and witnesses for concrete results," he said.

In 2004, the Arroyo government entered into an agreement with China for the rehabilitation and modernization of the idle North Rail, to complement the transportation network between Metro Manila and Northern Luzon.

The government borrowed $400 million from China's Export-Import Bank for the first phase of the project - the 32-kilometer line from Caloocan City to Malolos City. The government agreed to provide $103 million counterpart for the railway project.

Pimentel said Speaker De Venecia should explain the agreement's provision designating the China National Machinery and Equipment Corporation (CNMEC) as the firm that will undertake the project.

He said this constitutes a clear breach of the Government Procurement Reform Act which stipulates that projects like this should go through competitive public bidding to enable the government to obtain the most advantageous terms and to avoid overpricing and other malpractices.

Pimentel cited a study of the UP Law Center which stated that the NRP contract was a "commercial transaction" between a Philippine Government Corporation (North Rail Corp.) and a state-owned Chinese company (CNMEC).

Disregarding the claim of the Arroyo administration, the UP study said the loan agreement and the contract "were neither in the nature of treaties nor executive agreements" since they were not agreements between states.

Sen. Pimentel advised De Venecia to shed light on the following questions related to the NRP:

1. Why did the government accept a contract that was grossly overpriced? A comparative study showed that the NRP will cost $15.72 million per kilometer. On the other hand, a South Korean company has offered to rehabilitate the 34-km. Southrail project from Caloocan to Alabang in Muntinlupa City for only $50 million or $1.47 million per km.

2. Why has the construction of the NRP been inordinately delayed? Is it true that the project lacks detailed engineering studies and strategic direction?

3. Is it true that the government is paying $400,000 or for every month of delay in the railway project?

4. Is it true that $125 million has already been advanced by the Philippine government for NRP and yet the project seems to be "going nowhere?"

5. Is it true that the contractor, CNMEC, has no experience in railway construction and is a trading company "focusing on construction machinery, electricity pumps."

6. Why did the Philippine government agree to a term in the loan agreement with China's Eximbank placing under China's laws and jurisdiction any suit or judgment that might arise from the deal, in effect waiving the country's immunity from suits over its sovereign and patrimonial assets.

Under the agreement, disputes between the contractor and the Philippine government will be lodged with the Hong Kong International Arbitration Center, which is contrary to the Procurement Reform Act requiring all disputes should be submitted for arbitration in the Philippines.

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