North Luzon Railways
North Luzon Railways, also known as the Northrail, was a planned railway system in the Philippines that would have reconstructed the old PNR North Main Line spanning Metro Manila and Clark Freeport in Pampanga, with future extensions to Subic Bay, San Fernando, La Union, and San Jose, Nueva Ecija. It was to be undertaken by the Bases Conversion and Development Authority.
First proposed in 1994, the executive order designated the former American airbase at Clark as a premier airport, with a railway project mentioned and to be undertaken by the Spanish consortium, before backing out when the government later decided to put the project with financing through the Obuchi Fund by the Japan Bank for International Cooperation in 1999, but the problems with land acquisition led to their changes on financing with the Export–Import Bank of China in 2002. The project was approved in 2003, and before the construction began a year later, there were anomalies and corruption that made the project controversial before it was scrapped in 2011. After the project was cancelled, the construction of a railway line was repurposed as the North–South Commuter Railway, the current iteration of the development.
History
Early proposal with Spanish consortium
On April 28, 1994, President Fidel Ramos signed an executive order designating Clark Air Base, a former American airbase, as the premier international airport, with the support of the Bases Conversion and Development Authority, while the other agencies also supported the development. In September of the same year, President Ramos signed a memorandum of agreement with Juan Carlos I of Spain for the construction of a railway line from Manila to Clark. This would be known as the Manila–Clark Rapid Railway System. A joint venture agreement was entered into on June 10, 1995, between BCDA, PNR, Philippine companies DMCI Holdings and Fort Bonifacio Development Corporation, and Spanish firms with Construcciones y Auxiliar de Ferrocarriles, Entrecanales y Tavora, Cubiertas y MZOV, and Cobra Instalaciones y Servicios, S.A., as well as other investors. The agreement also established the North Luzon Railways Corporation for the purpose of constructing, operating, and managing the railroad system on August 24.In 1996, Spanish and Japanese companies such as Marubeni and Mitsui also entered the bidding process, while the project would have also been co-financed by the Overseas Economic Cooperation Fund. The NLRC then entered into an engineering, procurement, and construction contract with the Spanish Railways Corporation, and the JVA was amended to include D.M. Consunji, Inc. and/or its nominee as a party, thereby making DMCI an additional investor in February of the same year.
In letters dated April 4, 1997, D.M. Consunji, Inc. explicitly designated DMCI-PDI as its nominee in all agreements related to the railroad project. The designation meant that DMCI-PDI was to assume all rights, obligations, warranties, and commitments of that company under the JVA and MOA, and DMCI-PDI was not an original signatory to the JVA or MOA; its status as a nominee gave it a substantive connection with the agreements.
The original JVA contained an arbitration clause providing that any dispute unresolved by mutual accord should be referred to arbitration. DMCI-PDI, invoking the arbitration clause incorporated in the JVA, served a demand for arbitration on August 17, 2005. The trial court, on February 9, 2006, granted DMCI-PDI’s petition to compel arbitration, holding that the arbitration clause in the JVA extended to subsequent documents and included DMCI-PDI as an assignee or nominee. Subsequent motions for reconsideration by BCDA and Northrail were denied, with the trial court’s decision affirmed on appeal.
Later, Northrail withdrew from the Securities and Exchange Commission its application for increased authorized capital stock. Moreover, according to DMCI-PDI, BCDA applied for Official Development Assistance from the Obuchi Fund of Japan. This required Northrail to be a 100% government-owned and controlled corporation. Due to disagreements over the project's funding source, the NLRC and the Spanish Railways Corporation terminated their contract on August 14, 1998.
Under JBIC Obuchi Fund
In 1999, during the administration of Joseph Estrada, Fil-Estate Management Inc. and Japanese companies Mitsui & Co. and Nishimatsu Construction Co. Ltd. joined NLRC for undertaking the project worth. FEMI will get 25% interest in phase one while Mitsui and Nishimatsu are expected to facilitate soft financing from the Japan Export Import Bank needed for the capital-intensive project. In September of that year, the National Economic and Development Authority approved the MCRRS. The source of funding was to be the Obuchi Fund from the JBIC.As part of the JBIC requirement, the initial relocation activities were undertaken by Northrail at Caloocan in November 2000. However, in February 2001, a presidential directive was issued declaring a moratorium on demolition and relocation activities. Later, JBIC abandoned the project due to a shortage of funding caused by the government's inability to guarantee that the squatters on the railway path would be removed before granting a loan.
Development through Chinese loan during the 2000s and termination
The Northrail project was included in the 8-Point Agenda of Gloria Macapagal Arroyo. Thus, on September 14, 2002, a Memorandum of Understanding was signed between Northrail and the China National Machinery and Equipment Group. The feasibility study of the Northrail project was updated to incorporate the presidential instruction that the new alignment would be from Caloocan to Malolos, among others.Four months later, the Canadian Rail and Aviation Corp., a construction company based in Canada, indicated interest in leading the consortium that would carry out the construction of MCRRS, a significant railway project that would connect Clark and Metro Manila. Canadian National Railway and Bombardier Transportation and Services would also be part of the consortium. In April, several Chinese investors indicated interest in using the build-transfer scheme to finance the construction of the 100-kilometer, railway. The North Luzon presidential assistant, undersecretary Renato Diaz, informed reporters that the NLRC is currently reviewing bids from Chinese firms interested in carrying out the project under the BT plan.
On August 5, 2003, the NEDA-ICC approved the Northrail Project Phase 1, Section 1 with the CNMEG proposal as a financing facility. At the same month, a memorandum. of Understanding was signed between the Department of Finance and the Export-Import Bank of China for the utilization of for the construction of the railway.
On February 26, 2004, the Chinese and Philippine governments signed in Manila the loan agreement. The groundbreaking of the project took place on April 5. Two years later, the board of the NEDA approved that the project's Phase 1, Section 2 would cost to be funded through a Chinese concessional loan. The Senate voiced concerns about alleged corruption in the project, which sparked controversy before construction could begin. Citing irregularities in the bidding procedure and the Buyer Credit Loan Agreement with Exim China, a study commissioned by Senator Franklin Drilon from the University of the Philippines suggested that the railway's construction be canceled.
Preliminary construction started in early November 2006, despite the controversy. Earlier in October, Arroyo said in an interview with radio station DZRH that she expects the project, to be completed in 2009. She also said that residents who were living near the railways of the project had been relocated, paving the way for construction to begin at the site. However, it wasn't until February 26, 2007, that Northrail gave CNMEG a "notice to proceed." The Supreme Court declared on May 15 that the loan agreement should have been subject to competitive bidding since it was a commercial transaction rather than a government-to-government one. In October of that year, civil and design work began. SYSTRA was appointed as a consultant for the project.
Though this was later retracted, it was reported that CNMEG demobilized from the project on July 1, 2008, because of disagreements over engineering and construction standards. It was quickly renegotiated with the Chinese government because of the construction delays. After the Chinese and Filipino parties to the venture ultimately worked out their differences, construction started again in January 2009. Despite this, Vice President Noli de Castro acknowledged that the railway project would not be completed during President Arroyo's administration. However, De Castro stated that regardless of project delays, the Housing and Urban Development Coordinating Council, which he chairs, will proceed with the relocation of settlers along the former Philippine National Railways railroad tracks up to Pampanga.
However, because of ongoing legal problems and claims of corruption and overpricing, the project was put on hold in March 2010. The following year, President Benigno Aquino III's administration cancelled Northrail. China is reportedly willing to restructure the project, and the government indicated interest in restarting it in September of that year. The Supreme Court gave a lower court permission to hear the case for contract voiding in March 2012. The Department of Finance was supposed to pay Exim China in four installments starting in September, rather than the the government owed in that year. The Philippine government was still required to repay the associated loans, but the Chinese and Philippine governments decided to "disengage" from the project in August of that year. The five-year dispute was settled out-of-court with Sinomach on November 6, 2017, by DOTr, BCDA, and NLRC. It spared the government hundreds of millions of pesos in legal fees and arbitration costs, as well as ₱5 billion in possible claims payments to Sinomach.
In May 2019, the Governance Commission for GOCCs issued an order deactivating NLRC. NLRC was officially disbanded on October 19, 2023, during Bongbong Marcos' administration. The BCDA was tasked with serving as NLRC's administrator and liquidator and paying off its debts.
Route
According to studies from the 1990s, the MCRRS project was supposed to develop in four phases. Phase 1, spanning, was set to connect Fort Bonifacio, including a proposed intermodal station in Bonifacio Global City, to the Clark Freeport and Special Economic Zone. Phase 2 aimed to extend the line to Subic Bay. Phase 3 planned for a extension to San Fernando, La Union. Phase 4 proposed an additional extension from San Fernando to Laoag and an additional spur line to San Jose, Nueva Ecija. The proposal subsequently included in the Metro Manila Urban Transportation Integration Study, leading to an extension towards General Trias, Cavite.At the time of project funding by the JBIC, the first phase's proposal would span between Caloocan and Calumpit, Bulacan. Another study about the integration of Metro Manila's railway network by JICA in 2001 proposed the through-operation of both railways in two options, such as this project, which would have run from Tayuman to Marilao, was. The first section of Phase 1 of the 2000s Chinese proposal covered the railway that connected Caloocan and Malolos. The second section has a length of of double narrow-gauged rail track between Malolos and Clark Field in Pampanga, President Arroyo's home province.