Press Release
November 20, 2007

PIMENTEL SEEKS SENATE INQUIRY INTO
$503 MILLION NORTH RAIL PROJECT

Senate Minority Leader Aquilino "Nene" Q. Pimentel, Jr. (PDP-Laban) today formally asked for a Senate inquiry, in aid of legislation, into the alleged onerous terms and conditions imposed on the Philippine government in the contract to build the North Rail system funded by the Chinese government.

Pimentel filed Resolution 210 urging the Senate to direct the appropriate Senate committee to undertake the probe and to recommend measures to ensure compliance with the government's procurement process.

Official documents show that the government borrowed $400 million from China's Export-Import Bank to finance the rehabilitation and modernization of the first phase of the NRP, the 32-kilometer stretch from Caloocan City to Malolos City. The government has provided a $103 million counterpart for the project.

On Feb. 26, 2004, then Finance Secretary Juanita Amatong signed a 'Buyer Credit Loan Agreement' with China's Eximbank, after it was cleared by Asst. Government Corporate Counsel Efren Gonzales and approved by then National Economic and Development Authority Director General Romulo Neri.

Pimentel cited reports that the amount of $125.75 million (P6.5 billion) has already been advanced out of the $503 million funding, and yet the project, scheduled to be completed in May this year, appears to be heading nowhere.

The loan was allegedly contracted without the approval of the Monetary Board as required by section 20, Article VII of the 1987 Constitution.

"The contract for the project is not only overpriced, but is also ridden with onerous conditions especially in case of default in the payment of the loan," Pimentel said.

In another onerous provision of the loan agreement, the Philippine government will waive its immunity from suit over its sovereign and patrimonial assets, placing under China's laws and jurisdiction any suit or judgment that might arise from the contract and granted Eximbank unilateral authority to determine payment schedules and the right to impose penalties for any delay in the project.

Pimentel also questioned why the loan agreement between the Philippines and Eximbank designated the China National Machinery and Equipment Corp. as the contractor for the North Rail project in flagrant violation of the Government Procurement Reform Act (Republic Act 9184) requiring that projects like this should be subjected to competitive public bidding.

He said the Senate inquiry should also determine whether there was prior appropriation of public funds and certification of availability of funds by proper authorities before the railway project was awarded and implemented.

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