BALAGTAS, Bulacan -- Chinese Ambassador Li Jinjun dispelled findings of irregularities in contracts tied to China’s $1-billion loan to the Philippine government’s NorthRail project.

Li, in a press briefing held after his inspection of the project’s relocation component here on Thursday, also described the loan amount as the biggest infrastructure financing that his country had extended throughout Asia.

"Projects funded by Chinese loans are contracted to Chinese companies," said Li through an interpreter. He said this was similar to the scheme of other countries that extended loan packages.

The University of the Philippines Law Center earlier pointed out "legal infirmities" in the contracts, citing the failure to comply with the requirement of public bidding, the lack of prior Monetary Board concurrence and the absence of a certification of appropriation and availability of funds.

Jose Cortes, president of the state-owned North Luzon Railways Corp. (NLRC), said the agency did not violate any Philippine law when it agreed to the contracts.

"These have been cleared by the Office of the Government Corporate Counsel. Because this was a loan between two governments, the lender was allowed to select the contractor," Cortes said.

He said the China National Machinery and Equipment Corp., the contractor, is government-owned.

According to Li, this was the first time that China lent a "preferential loan" to the Philippines.

"This is not common for China," he said, noting this was an expression of "special friendship" between the two countries that opened diplomatic ties in 1975.

Cortes said President Gloria Macapagal-Arroyo secured easy terms in the loan--a 3 percent interest rate, 20-year repayment period for the initial loan of $421 million, a 95-percent equity cover, and extended five-year moratorium on interest--after a negotiation with Chinese President Hu Jintao.

"It’s a very friendly arrangement," Cortes said.

Li said his government was eager to start the project soon. Project engineers are arriving on December 11 to present the project design to the NLRC.

NLRC reports said the features of the NorthRail’s first phase include the use of 19 sets of diesel multiple units trains with speed of 120 kilometers per hour. The double track rail system would run a total of 64.4 km.

Travel time between Caloocan and Malolos cities, stretching 32 km, would take 37 minutes. The stations would be located in Caloocan, Valenzuela, Marilao, Bocaue, Guiguinto and Malolos.

Dennis Jugueta, NLRC vice president for engineering, said the design would preserve three old Philippine National Railways stations in Polo, Valenzuela and in Meycauayan and Malolos because these were declared as historical sites by the National Historical Institute.

Jugueta said other stations could be preserved when the project cost allowed it.

Li said the NLRC had complied with the first condition of the project when it cleared the project site’s first 16 km of squatters.

The NLRC and the National Housing Authority, he said, carried that out with "unprecedented efficiency."

As a counterpart, the Philippine government shouldered the P6-billion relocation cost for more than 44,000 families in the Metro Manila, Bulacan and Pampanga routes of the railway.

As of Thursday, more than 18,000 families in Caloocan City, Malabon and Valenzuela and in the Bulacan towns of Meycauayan, Marilao, Bocaue, Balagtas, Guiguinto and Malolos have been moved out of the old PNR tracks, said NHA general manager Federico Laxa.

But some families from Balagtas complained that they had been disqualified to get lots in relocation sites and the NHA favored a few who lived outside of the affected areas.

Source: Philippine Daily Inquirer