MANILA - Images of a portion of the Philippines' oldest light rail transit (LRT) line ablaze in the middle of the night were exactly what private sector bidders for a US$1.4 billion (S$1.74 billion) rehabilitation of the country's rail system had feared.
The fire last week, caused by a short circuit that ignited power cables lining the tracks, was the second on Manila's elevated rail system in two months and one of many mishaps in its 29-year life - telltale signs that South-east Asia's first LRT network is in dire need of an upgrade.
The reliability of the decrepit rail system, without a government warranty on its performance and potential stiff penalties for operational delays, is one of the reasons for last month's failed tender for LRT 1's expansion and upgrade, the biggest in a series of public- private partnership (PPP) deals worth at least US$4 billion Manila is offering to investors to further boost growth in one of Asia's fastest-growing economies.
Of the four groups pre-qualified to bid, three backed out at the last minute: DMCI Holdings Inc with Japanese partner Marubeni Corp, SMC Infrastructure of San Miguel Corp, and Malaysian-Korean MTD-Samsung C&T consortium. That left Metro Pacific Investments Corp as the lone bidder submitting a conditional bid without partner Ayala Corp.
"There is no record at all of extensive rehabilitation, maintenance, or infrastructure testing in its years of operation. That is a significant risk," said a senior official at one of the conglomerates who asked for anonymity because of the sensitivity of the issue. "(If) a segment of that old system falls apart and the accident leads to a catastrophic result, it will be the concessionaire who will be blamed," he said, adding there were steep financial risks via penalties and unrealised profits for each day the rail system is not operational.
The country's top conglomerates and some of the region's big capitalists had initially jumped at the opportunity to fix what the latest Global Competitiveness Report of the World Economic Forum says is the top problem in doing business in the Philippines - inadequate infrastructure.
But delays and problems with PPP projects three years after the programme was launched are clouding prospects of an infrastructure boost to sustain economic growth at 7 per cent or higher and bring down the country's jobless rate, which at 7.3 per cent is the highest in South-east Asia.
Underinvestment, including in infrastructure, along with the government's failure to transform protectionist policies and liberalise more sectors, have contributed to the country's high unemployment and underemployment rate, the World Bank said in a report on jobs in the Philippines last month.