PHILIPPINES: THE DEPARTMENT of Transportation and Communication has directed the Light Rail Transit Authority to scrap or at least defer the P9-billion capacity expansion of LRT Line 1 for lack of funds.

Unless the railway agency can find other sources of financing to address the budget gap, the project should be deferred, according to a senior transport official,

Transport Secretary Leandro Mendoza wrote the LRTA board last week to inform the agency that the government has no budget to finance the Line 1 capacity expansion project, according to Transport Assistant Secretary Roberto Castañares.

The official said the LRTA could use the proceeds of a 12-million euro loan from Belgium to finance the repair of 22 broken trains. The P9 billion in fund needed for the expansion would be spent mainly for the acquisition of 12 units of four-car trains.

But the World Bank, through investment arm International Finance Corp., is also pushing for the $150-million Line 1 upgrade to be funded by the Japan Bank for International Cooperation, according to LRTA.

The government earlier scrapped coast guard and airport projects also under JBIC financing. The Japanese financing agency had committed to lend 18 billion yen (roughly P9 billion) mainly to increase the Line 1's passenger capacity from 27,000 per hour per direction to 40,000 passengers per hour per direction.

"We would like to advise the LRTA board and management that the timely completion of the capacity expansion program is one of the major conditions in and part of the government's obligations under the proposed public-private partnership with SNC-Lavalin for the project," Sanjay Grewal, IFC program manager for advisory services in Asia said in a letter to the LRTA board.

The IFC is the government's consultant in the extension of the LRT Monumento-Baclaran line to Cavite.

Grewal said the "proper operation of an extended integrated line requires the existing line's capacity and performance to be consistent with the project design."

"We respectfully request the LRTA and the Philippine government to reach an early resolution of this matter," he added.

Castañares said the LRTA might have to defer the Line 1 capacity expansion until the government's finances improved. He said that of LRTA's 91 trains, only 66 were running. With 22 trains stalled, he said the railway agency had been incurring losses.

Mendoza said that of the P3.1 billion budget for foreign-assisted projects next year, the transport department could only provide a P25-million budget cover for the Line 1 expansion.

Castañares explained that under revised budget and finance department's guidelines, projects financed by official development assistance must be fully covered budgetarily for the duration of the project.

"Implementing agencies are now required to include in its multi-year program the entire loan amount including the counterpart portion before a project is implemented," explained the transport official.

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