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Why isn’t the Senate investigating the outrageous P4-B MRT deal?

Third of a three-part series

I’m referring to the contract signed by the Department of Transportation and Communications (DOTC) with a Chinese firm in June to buy 48 light-rail train cars for the decrepit Metro Rail Transit Line 3 (MRT-3) worth P3.9 billion.

It’s certainly a bit ironic: A state-owned company of a country, which President Aquino has called a bully in claiming our territory, has bagged not only a huge procurement government contract under his watch, but a strategic one involving the safety of our main metropolitan mass transit system, the MRT-3.

Maybe it’s so stupid of us as a nation, but so brazen – and arrogant that they believed they could get away with it – for the DOTC officials to have done so. Consider the facts:

The Czech Ambassador to the Philippines Joseph Rychtar alleged in April last year that the DOTC’s MRT-3 general manager Al Vitangcol 3rd asked $30 million (P1.3 billion), in bribes for the Czech firm Inekon Group to be given the contract to supply 52 new light-rail vehicles (LRVs, or the train cars) for the mass transit system. Rychtar alleged Vitangcol was extorting the money for a group that included personalities closely linked with the Liberal Party.

This occurred, he claimed, in July 2012. That was when the DOTC was still headed by Mar Roxas. It is not known whether Roxas’ transfer just a month later to the interior and local government department was related to the bribery attempt.

Let’s buy Made-in-China trains instead? MRT-3 train derailed last August. Inset below, MRT-3 general manager Vitangcol whom the Czech ambassador accused as attempting a $30 million extortion when Roxas, above, was DOTC secretary.


(The reason why Inekon, the fourth largest supplier of LRVs in the world, was keen on the contract is that it had pirated train engineers from CKD Tatra, which was the original supplier of MRT-3 trains, and therefore was confident it could build the right trains and within schedule. CKD Tatra had gone bankrupt in the early 2000s and was sold to a German engineering firm.)

A political earthquake
As an ambassador for five years (to Greece and Cyprus), I can say without a doubt that such an accusation of high-level corruption by an envoy against officials of the host government is a political earthquake. In countries complying with the rule of law and with an independent press, that would have required the host government dropping everything to get to the bottom of such serious allegations. If we only had a fiercely independent press that was not under Aquino’s influence, I’m sure this government would have already been toppled in the wake of such scandal.

What makes the ambassador’s allegation credible, that it could have involved the highest levels of this government, is that funding for the contract was made available at that time, unknown to most people, but told to the Czechs.

This was because Budget Secretary Florencio Abad had, at that time, hijacked the Congress-approved budget through his scheme that was euphemistically termed the “Disbursement Acceleration Plan.” Through the DAP, which was exposed only last year, Abad issued on the last day of the year (Dec. 28, 2011) what was called a “Notice of Cash Allotment” (NCA-BMB-A-11-0023872) to the DOTC.

The NCA informed the DOTC that P4.5 billion was already in the Land Bank of the Philippines for the department to use for the “capacity expansion of MRT3,” which meant money was available for the purchase of new trains to add to its 50 odd cars in service.

I was told that the Czech ambassador had been told that if Inekon agreed to the “arrangement” for the payment of $30 million, the contract would be awarded in a few days’ time and payment for the contract made right after that.

Sorry I have to use that worn-out cliché: Only in the Philippines. After the extortion attempt was exposed by the Manila Times’ chairman emeritus Dante Ang Sr. on June 2013, DOTC Secretary Emilio Abaya matter-of-factly vouched for his official, while presidential spokespersons muttered their overused “we-will-investigate” replies.

Suspended a year later
Vitangcol would even remain in his post, and was suspended only a year later for involvement in another allegation of corruption – one of his relatives and his friends were part of the firm that got the P600-million maintenance contract for MRT-3.

In his statement submitted in May to a committee of Congress investigating the allegations, Rychtar said: “I, as the Ambassador of the Czech Republic, confirm that an extortion attempt took place in July 2012, followed by other suspicious circumstances, which led to a questionable bidding process in March 2013.”

He added: “I wish to inform you… that the Czech company Inekon Group was, of course, not blacklisted officially by the DOTC, but we did receive the informal information that our proposal would not be entertained, which was manifested by the fact that our letters to DOTC (asking about how to participate in the bidding) were unanswered.”

The bidding the Czech ambassador was referring to actually was done on June 11, 2013, which, unlike most government biddings, was not open to media. DOTC spokesman Michael Sagcal would only reveal the results of the bidding after it has taken place:

“Two Chinese companies participated in the bidding, Dalian Locomotive & Rolling Stock Co. CNR Group and CSR Zhuzhou Electric Locomotive Co. Ltd.”

“CSR Zhuzhou was declared ineligible by the DOTC’s Bids and Awards Committee due to its failure to submit a certificate of reciprocity and to comply with a technical requirement. As a result, its financial proposal was no longer opened,” the spokesman said.

What a charade.

The “CNR” in the CNR Group, of which Dalian Locomotive and Rolling Stock Company is a member firm, stands for China North Railway, while the CSR in CSR Group Zhuzhou Electric Locomotive Co. Ltd is an acronym for China South Railway.

If their names seem the same except for the “North” and “South” adjectives, it is because both were formed in the 2000 and 2002 period out of the mammoth “China National Railway Locomotive & Rolling Stock Industry Corporation,” the monopoly in train service in the country. As with the original mother company, the two firms are both state-owned enterprises supervised by the State Council of the People’s Republic of China, and likely under a single commissar.

In short, the two bidders were two firms owned by the same entity, China, and the DOTC claims there was a proper bidding?

Given our quarrel with China, shouldn’t we be realistic and worry that if our relations get worse with that superpower, it may decide to chuck unilaterally that deal, give some convoluted excuse for doing so, then watch the MRT-3 collapse with its decrepit trains, and gloat at the resulting political chaos here? Have the DOTC officials compromised our national security?

LRV manufacturers
There has been a boom in light-rail mass transit systems in the world because of environmental concerns and the US’ recent rush to adopt the technology. Hence, there are more than a dozen LRV manufacturers today. The four firms that have the biggest shares are Germany’s Siemens (which bought CKD Tatra, the company that manufactured the first MRT-3 trains), the Japanese Kinki Sharyo, the American United Streetcar, and the Czech Inekon. Other LRV manufacturers are the Canadian Bombardier Transportation, the Austrian Lohner-Werke, the Swiss Stadler Rail, the German Duewag, and CAF USA.

None of these firms, if we are to believe the DOTC, were interested in supplying MRT-3 with their LRVs? Only the Chinese Dalian, which hasn’t manufactured the kind of LRVs needed by MRT-3, showed an interest?

And why this Chinese firm, which on its website itself says that the MRT-3 deal is the first contract it has obtained to build such type of LRVs? It even noted that the LRVs will operate in extreme conditions, “close to the equator, where the monthly maximum temperatures are above 30 degrees, the air humidity and salt content high, and with a complex weather with typhoons and rainstorms.”

And when will the Chinese deliver its 48 trains? “The first train is scheduled for delivery in 18 months,” its website reported in June. That means we will see a prototype only at the end of next year. Delivery of the trains is likely to happen after Aquino steps down from office and bunkers down in Hacienda Luisita.

Why aren’t we outraged that the DOTC, manned by Aquino’s officials, are taking us for fools?

DOTC officials are accused by a reputable Czech firm Inekon of trying to extort money for the contract to supply MRT-3’s new trains. The DOTC undertakes, less than a year later, a bidding Inekon did not, or could not participate in. A Chinese firm with no experience in LRV manufacturing “wins” in a bidding participated in by its sister company.

And there is nothing fishy in that?

What we should all be livid over is this:

If the Czech envoy’s accusations are proven right, that means Aquino’s officials had delayed the procurement of new trains—which would have made MRT-3 safer and reliable, and reduced commuters’ waiting time—in order to make money for themselves and more likely for the Liberal Party, and I would suspect also for this President. That’s the worst kind of corruption. Even our national security has been compromised.