Thursday, February 10, 2011

MVP Offers to Buy MRT for $1.1B


Local infrastructure giant Metro Pacific Investments Corp. (MPIC), headed by Manuel V. Pangilinan, has offered to buy the government’s stake in the Metro Rail Transit (MRT) 3 train line traversing EDSA for $1.1 billion. The acquisition will give the group 100% ownership of the company that holds the right to operate and manage the train line until 2025.

MPIC said it planned to spend $300 million to increase the MRT’s capacity to 700,000 passengers, a day from the current 350,000 a day, in two to three years.

What's in it for the government to accept the proposal? Plain-vanilla cash. First, the proceeds of the sale will be used to settle the government’s outstanding debt to MRT Corp. bond holders, resulting in interest savings. Second, the government stands to save $150 million in annual subsidies if it accepted the proposal.

What's in it for MVP? Like MPIC's other investments in utilities and transportation (Maynilad, Manila North Tollways, and Meralco), MRT has the potential of becoming a fat cash cow, with a service demand for which is bound to go nowhere but up, and whose price can be easily controlled, especially by one who knows how to push the right regulatory buttons. MVP doesn't even have to completely fix the bureaucratic and operational mess left by the previous owners, as in the case of Maynilad and Meralco, to turn a handsome profit.

What's in it for us? Well, as tax payers we would all indirectly benefit when the government finally stops hemorrhaging money from that orifice. Directly, as commuters, we should expect to enjoy better service resulting from both an anticipated change in management and increase in capacity. Unfortunately, these benefits, like all good things in life, come at a high price, with the up to 100% fare increase just around the corner.

The bottom line is that the privatization of the MRT is something that should happen, and happen soon, regardless of the who the "white knight" is. One of the keys to economic development is a well-planned and efficient transportation system, an unmistakable trait of the more developed economies in the region (Hong Kong, Singapore, Taiwan, etc..). Ultimately, it should be the government's responsibility to deliver such a system, but when the government is as stupid, greedy, and inutile as ours, we have no other recourse but to turn to private enterprises. Yeah, we may have to pay more for what is universally considered a basic social service, but in my opinion 30 pesos is a small price to pay for being able to avoid facing this at the beginning of each day.

Image courtesy of Hap
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