MANILA, Philippines - Different urban poor groups and labor organizations staged a protest action today at the Chinese Consular Office in Makati to demand the immediate and unconditional cancellation of the Chinese financing worth $400 million for the North Luzon Railways Modernization Project and $627.811 million for Phase I Section 1 of the South Luzon Railways Modernization Project.

The protest action led by the Freedom from Debt Coalition (FDC) and Task Force Diskaril (TFD), a loose advocacy network opposed to the railways projects, assailed the Chinese loan financing of the said projects as burdensome, riddled with legal infirmities and detrimental to the interest of the Filipino people.

In a statement, FDC President Walden Bello said in a time of grueling economic crisis, payment of blatantly illegitimate debts such as the loans provided to the modernization of the Luzon railways are not only taxing to the poor but also disreputable.

“There is no dignity much more decency in honoring these debts while our people remain unprotected against the economic crisis. Instead of wasting people’s resources in paying for these loan agreements challenged as anomalous and which have not modernized in anyway our railways system, these should be allocated in increasing government spending geared towards generating sustainable employment, better housing and the distribution of more social services,” Bello said.

However, Bello said such demand should not be construed or purposely twisted as anti-modernization or anti-infrastructure development.  

“We are not against modernity and development. In fact, we will be the first to say that we totally favor a modern and efficient public transport system such as the Luzon railways. What we are against are projects claiming to be in the side of modernity yet, have only caused undue harm to the people’s interest and welfare as well as subject the people into further indebtedness,” Bello explained.

The groups said the loan agreements of both the North and South Luzon railways project are riddled with the following legal infirmities:

1. VIOLATION OF THE PHILIPPINE CONSTITUTION, which states “The President may contract or guarantee foreign loans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law.” (Article VII, Section 20)

2. VIOLATION OF REPUBLIC ACT NO. 9184 or The Government Procurement Reform Act, which states that all procurement should be done through competitive bidding. (Section 10)

3. NO CERTIFICATION OF AVAILABILITY OF PUBLIC FUNDS-PRESIDENTIAL DECREE NO. 1445 or The Government Auditing Code and EXECUTIVE ORDER NO. 292 s. 1987 or The Administrative Code of 1987, which both prohibit any government agency from entering into agreements involving the expenditure of public funds a) unless there is an appropriation therefore, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure b) unless the agency’s accounting officer shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current fiscal (calendar) year is available for expenditure on account thereof, subject to verification by the auditor concerned and c) the certificate is attached and made part of the proposed contract, with the certificate signed by the above-mentioned accounting officer and verified by the auditor concerned. The absence of any of the above documents will render the contract void. (Sections 85, 86, and 87 of P.D. 1445; Sections 46, 47, and 48, Chapter 7, Title I-B, Book V of E.O. 292, s. 1987)

4. In the case of the Northrail project’s contractor, Chinese National Machinery and Equipment Corporation Group (CNMEG) did not have a Special License issued by the Philippine Government, which is a license required of every foreign contractor who participates in a foreign-funded project in the Philippines. The lack of a license violates Republic Act No. 4566 or the Contractor’s License Law.

5. Also on the Northrail project, it has no Bill of Materials; it has incomplete specifications, which makes it impossible to know what materials are to be used in the engineering aspects of the project.

“We are not yet talking of the human rights violation, the forced displacement of affected urban poor communities and the inhumane and inhabitable relocation areas provided to relocatees as well as the massive retrenchment of Philippine National Railways (PNR) employees which would render these loan agreements more unacceptable,” Bello said.

Task Force Diskaril said it has documented cases of affected families by the North Luzon Railway Project haphazardly transferred to relocation sites that were lacking in basic electricity and water services such as in Bulacan. They also documented cases in which many of the houses provided to the families were badly built.

On the other hand, the Bagong Kapisanan ng mga Manggagawa sa PNR (BKM) also a member of TFD and the duly recognized union of PNR workers said hundreds of workers were already displaced as the modernization of the railways project was coupled with the policy of retrenchment under Executive Order 366. It said such a scheme “is a step closer to the privatization of PNR such as suffered by public utilities like water and power.” BKM maintained the railway service is a natural monopoly that must be in the hands of the public.

“Clearly, the Chinese financing covered by the loan agreements supposedly for the modernization of the North and South Luzon Railways are blatantly illegitimate and must not be honored in anyway by the government much more by the Filipino people,” Bello said.

Bello, also an internationally renowned anti-globalization activist added that China is not as innocent as it wants itself to be perceived concerning the anomalies surrounding the project. Bello said, “its total disregard for any monitoring and socio-economic impact assessment of loans it provided to our country and its lack of respect for our national laws makes it equally culpable as the Arroyo government.”  

“Thus, we demand the Chinese government to immediately cancel its financing as provided by the loan agreements of the North and south railways project. They are clearly illegitimate deals which will end up as new illegitimate debts of the Filipino people,” Bello said. -30-

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