On Feb. 26, 2004, Finance Secretary Juanita Amatong entered into a Buyer Credit Loan Agreement with the Export-Import Bank of China, which granted the Philippine government a US$400-million loan facility to finance the construction of the North Rail Project.

The project aims to provide mass transport services between Metro Manila and Central and Northern Luzon and is a major component of the administration’s Strong Republic Mass Transport System.

Critics, however, alleged that the agreement is grossly disadvantageous to the government. The total cost of $503 million for a 32.2-kilometer length of rail line, they pointed out, meant that the average cost of the project is nearly $16 million (around P900 million) per kilometer, exclusive of the costs for clearing, relocation, and resettlement of informal dwellers occupying the railroad right of way. The interest rate on the loan of 3 percent per annum is also much higher than the rate on other loan packages that the Philippines could have availed itself of.

Critics also scored the fact that under the agreement, the China National Machinery and Equipment Corporation (Group), a Chinese corporation, was designated as the prime contractor for the project without public bidding. This, critics claim, violates Philippine laws on public bidding. Malacañang for its part claimed that the negotiated procurement was justified because this was part of an executive agreement between China and the Philippines.

The North Rail issue was eventually included in the list of charges the opposition included in the impeachment complaint filed against President Arroyo in 2005. After the House junked the complaint, the Senate continued hearing the issue. A number of senators led by then Senate President Franklin Drilon called for the scrapping of the project based on a technical study by the University of the Philippines.

Hearings were stalled after Malacañang issued Executive Order 464, which required Cabinet members to seek presidential clearance before they could testify in congressional hearings. A Senate investigating panel later established that the flagship transportation project was full of irregularities. Sen. Rodolfo Biazon, chairman of the Senate committee on housing and urban development, the committee conducting the investigations, was one of the signatories of the report.

After the Supreme Court struck down this EO 464 provision in early 2006, opposition senators vowed to revive the issue.

Source of this information is Newsbreak.