Gov’t eyes commercial dev’t of Metro subway stations to help pay off JICA loan

March 25, 2018

The government will initiate the country’s first-ever underground commercial development by leasing retail spaces around the stations of the would-be Metro Manila Subway  to generate revenues that will help pay off the loan  extended by Japan for this multibillion-dollar mass transport project, Finance Secretary Carlos Dominguez III said.

Dominguez said this retail concept will be similar to Japan’s underground shopping experience in which shops and restaurants thrive around subway stations.

The Japan International Cooperation Agency (JICA) has extended a 104.53 billion yen loan (approximately P51 billion or US$934.75 million) to the Philippines, representing the first tranche of the total loan financing requirement for the construction of the first phase of the Metro Manila Subway Project.

Dominguez and JICA chief representative Yoshio Wada, on behalf their respective governments, signed the loan agreement last March 16.

“Yes, absolutely. In fact, we're planning to have retail spaces just like in Japan,” Dominguez said in response to a recent media query on the possible commercial development of the area around the subway.

“And definitely, we will be utilizing that so we are going to be putting value to the underground area in Manila. And the revenues will definitely contribute to paying off this loan,” Dominguez added.  “Although I must say the loan is really almost too good to believe because it's 40 years with a 12-year grace period. Something that, you know, this is very generous package from the JICA."

The loan agreement for the first tranche carries an interest rate of 0.10 percent per annum for non-consulting services (which involves civil works, depot, railroad, electromechanical works, power supply) and 0.01 percent per annum for consulting services, payable in 40 years inclusive of a 12-year grace period under the Special Terms for Economic Partnership of JICA.

According to the Department of Transportation (DOTr), the project’s chief implementor, it has made a deliberate effort to position subway stations beside or near state property to maximize the investment returns for the government.

DOTr Undersecretary for Railways Timothy John Batan cited, for instance, the proposed North Avenue station that will be contiguous to the Veterans Memorial Medical Center, the Katipunan station that will be built on Camp Aguinaldo property, a station at the Bonifacio Global City that will be beside a property of the Bases Conversion and Development Authority, and a station near the Air Force field at the Villamor Air Base.

"One of the instructions of Secretary Tugade when we were finalizing the location of the subway project is to bring the stations as close as possible, if not on, government property. This is in connection with a strategy that we have been following of trying to capture value from this investment,” Batan said at a recent press briefing.

Batan said the government would not only be “investing a lot of money on building the project,” but also making sure “that investment will create value as a consequence.”

“As much as possible, we've selected station locations that would maximize the return of that value to the government coffers,” he said.

On concerns regarding right-of-way, which often delays the implementation of big-ticket infrastructure projects, Batan said that obviously, this would not be a major issue because subway technology involves mostly subterranean construction.

As for the land required for the at-grade station stops, Batan said the DOTr has been working on identifying these as early as November last year.

“The acquisition process is in full swing, we have committed to substantially deliver the right of way for the first three stations and the depot in the third quarter of this year. And as of this day, we are on track with that program of delivering right of way,” Batan said.

Utilizing cutting-edge Japanese tunneling technology, the construction of the first phase of the Metro Manila Subway will stretch from Mindanao Avenue in Quezon City to the Food Terminal Inc. (FTI) area in Taguig City, and will continue all the way to the Ninoy Aquino International Airport (NAIA).

It will involve the construction of an underground railway spanning about 30 kilometers with 14 stations that is expected to be completed by 2025.

The DOTr has targeted the partial operation of the subway with the opening of at least three Quezon City stations—along Mindanao-Quirino Highway, Tandang Sora and North Avenue—by 2022.

According to the Department of Finance, the total project cost for the first phase of the subway project is estimated at 788.89 billion yen, which is around P356.96 billion or approximately $7.055 billion.

Of this total project cost, 73 percent (573.73 billion yen) will be funded by JICA through  a time-sliced loan arrangement comprising three to four tranches, while the remaining 27 percent, which is about 215.16 billion yen or around P97.35 billion, will be shouldered by the Philippine government. DMS