WHEN I started with this topic, I assumed it would be a
once-and-done, but instead it turned into a four-part column that really could
have had one or two more installments. I anticipate I will be revisiting the
subject again in the near future; it has become, as they say, one of those
things.
The column was originally published in The Manila Times
on December 15, 17, 19, and 22; as a Christmas bonus, I’m reposting it here
in one long narrative. I ordinarily avoid thwarting our paywall (at least one
of our columnists, however, does it as a matter of routine, but he is a jackass
in many respects), since that essentially cuts into my own meager earnings, but
this is a worthwhile exception.
***
Part One
IF news reports from Cebu are accurate, the long-delayed
and troubled Cebu Bus Rapid Transit (BRT) project will be terminated as of
today, December 15. If that is indeed the case, it gives the World Bank a
dubious record of 0-2 when it comes funding BRT projects in the Philippines,
and will leave the country’s second city without its long-awaited public
transit solution.
The discussion here of what may in fact turn out to be an
actual scandal demanding repercussions against malpractice on someone’s part is
admittedly only a summary. It is the blotter version, if you will, of a case
that spans more than a decade, involves multiple institutions, and has
generated thousands of pages of complicated documentation. Even a summary
version will take a couple of installments to explain, so buckle up.
The project
The Cebu BRT was first proposed in 2012 and approved in
September, 2014; it was planned as a 12.6-kilometer BRT line with 17 stations
running along a north-south axis across Metro Cebu, and supported by 28.8 km of
feeder lines. Its main objectives were the same as they would be anywhere such
a transit solution is applied, that is, to reduce travel times from outlying
areas to the city center, increase the number of people using public
transportation, reduce greenhouse gas emissions attributable to road traffic,
and to improve road safety.
The price tag for the complete project, according to the
most recent publicly disclosed data from the World Bank, was some $226 million,
of which about $30 million (P1.76 billion) was to be invested by the government
of the Philippines, and approximately $54 million was to be contributed by the
Agence Française de Développement (AFD). The bulk of the funding, the part that
would do most of the heavy lifting in financing necessary construction work,
acquisition of the rolling stock, and relocating any affected inhabitants, was
in the form of two loans from the World Bank, one for $116 million through the
International Bank for Reconstruction and Development (IBRD), and one for $25
million through the Clean Technology Fund (CTF). These became effective at the
beginning of December 2014 and were to close originally at the end of June
2021, but due to a number of delays such as changes in agency personnel within
the Philippine government and the extended interruption of the Covid-19
pandemic, they have been restructured several times to extend the closing date
to September 30, 2026.
Resettlement conflict
At present, only the first package of the project, a
2.38-km stretch running from the Cebu South Bus Terminal to the Capitol, is
under construction. There are three more phases to follow, and construction of
the longest segment, dubbed Package 2, will necessitate the relocation of 54
informal settler families (or ISFs, as they are abbreviated in the voluminous
documentation for the project). A conflict between the City Council of Cebu and
national agencies, the Department of Transportation and the National Housing
Authority over carrying out this relocation may have just derailed the
remaining unbuilt phases of the BRT project.
As was reported by the Cebu papers this week, during a
meeting with World Bank officials in Cebu on November 8, acting City
Administrator Kristine Joyce Batucan was informed that if the City Council did
not approve the resettlement action plan (RAP), which has already been approved
by the World Bank, by December 15 – today, in other words – the project would
be terminated. As Batucan explained in a formal letter to the City Council on
November 25, the reason for this is because any further delay would render the
September 30, 2026 closing date of the World Bank loans “untenable,” implying
that another restructuring to extend the deadline beyond that – there have been
at least three such extensions so far – was out of the question.
For its part, the City Council acted quickly to approve
the RAP, with the significant exception of the actual relocation site, about
which they expressed a number of objections. That site had been selected by the
DoTr, with the assistance of the NHA, and had gone through a proper process as
far as they and the World Bank were concerned, even to the extent of providing
site visits by the affected ISFs to ensure that it met with their approval as
well.
The City Council, however, essentially said that if the
site selection had been under their control, they would not have chosen that
location, as the three combined property lots were all owned by a single
corporation, the purchase price was too high, and that city-owned property was
not considered. The Council also objected to the fact that the resettlement
property would be under the name of the NHA (who would be responsible for
constructing the housing for the families) and not the city government.
The counterargument to this conveyed by Atty. Batucan was
that the City Council was contractually bound to approve the RAP, according to
the terms of a Memorandum of Agreement between the city and the DoTr in
December 2016 that made the city responsible for the acquisition of a
resettlement location. As the property purchase would be funded by the World
Bank by the earmarking of part of the loan amount to the DoTr for that purpose
– with the funds to be downloaded to the city once the lot was selected – the
argument essentially boiled down to, “what objection could there possibly be,
the city isn’t paying for it anyway.”
As a representative of the City
Council explained, however, the city was being put on the spot, and though it
was not explicitly stated, the blame for that is directed squarely at the World
Bank. Since the 2016 MOA with DoTr does indeed make the city responsible for
the acquisition of the resettlement location, the council explained, it would
be exposed to any risk arising from that selection. If the city had control
over the site selection, then it would have to accept the risk, but the view of
the City Council is that World Bank is essentially forcing a “take it or leave
it” solution on the city.
Part Two
BETWEEN April 1, 2020 and July 1, 2020, a period during
which most of the nation was under lockdown due to the rampaging Covid-19
pandemic, the Department of Transportation, Metro Manila Development Authority,
and Department of Public Works and Highways took advantage of the near-total
absence of road traffic along Edsa to cobble together the nation’s first true
Bus Rapid Transit (BRT) line, running the entire length of Metro Manila’s main
thoroughfare from Monumento in the north to the Parañaque Integrated Terminal
Exchange (PITX) in the south. It was a rough job, and probably not anyone’s
idea of a model BRT line, but it worked, and it was particularly impressive
considering that it only took the government about six weeks to put together,
at a relatively modest initial price tag of about P97.5 million.
The Edsa Carousel, as the line is known, has been by any
measure an outstanding success. It has undergone constant improvement since it
first began operating, and is a vital part of Metro Manila’s public transport
infrastructure. In 2022, for example, it had an average daily ridership of just
under 390,000 passengers, and carried more than 80.8 million for the entire
year. Since the line has by now been brought up to a condition that the DoTr
deems attractive to potential investors, the government is actively seeking
bidders to operate it as a public-private partnership (PPP) project.
Compared to the Edsa Carousel project, the World Bank-funded
Cebu BRT project is a puzzling example of how not to do a BRT. Among the
various modes of high-volume, dedicated line-type transit systems, BRTs are the
easiest, requiring the least amount of infrastructure construction, cost, and
development time. It should be easy. As transportation expert Robert Siy noted
in a recent interview I had with him (which will be airing on my new show, Newsmakers,
on The Manila Times’ streaming channel during the second week of January),
a BRT is low-hanging fruit; something highly visible and functional that a
government can develop quickly, even while other more complicated
infrastructure projects such as light rail are being developed.
Originally, the various stakeholders in the Cebu BRT project
thought it would be easy, too. The World Bank approved the two loans that made
up the bulk of the project’s financing – totaling $141 million between them –
in December, 2014, with development getting underway in early 2015, and a
target operational date of early 2017. Now, more than seven years behind
schedule, with most of the project at risk of being terminated by the World
Bank – which would be the second BRT project scrubbed by the lender, after the
Quezon Avenue BRT project was dropped due to government inaction in 2022 at the
government’s request – the only thing that anyone has to show for a decade’s
worth of work is a partly-completed stretch of about two kilometers, which
itself is at risk of being dumped due to squabbling between the provincial and
city governments of Cebu.
This nothing has come at considerable cost to the government
as well. Loans from multilateral development banks and bilateral development
partners carry commitment and other fees, even before the repayment schedule
and interest kicks in. By my rough and intentionally low-balled estimate, using
the documentation and data available from the World Bank and the Agence
Française de Développement (AFD), as well as other sources including the
National Economic Development Authority (NEDA), the government so far has spent
at least P207.8 million in fees related to the financing for the Cebu BRT
project.
Again, the comparison is worth highlighting: In six weeks,
with an initial investment of P97.5 million, the government managed to put up a
28-kilometer, 14-stop (since expanded to 23) BRT line on the busiest road in
the entire country. In 10 years, at the cost to the government of no less than
P207.8 million, or more than twice what the Edsa Carousel initially cost, the
World Bank-backed Cebu BRT project has, according to the World Bank’s most
recently disclosed Implementation Status and Results Report (ISR, dated June
28, 2024), completed zero kilometers of BRT bus lanes, and zero BRT bus depots
(stations).
Looking at the project broadly, it is clear that all of the
major stakeholders – the national government, the local government in Cebu, and
the World Bank – all share the blame for this endeavor having gone so badly off
the rails. Where it has gone wrong, from the World Bank’s point of view, can be
gleaned from the aforementioned ISR reports, which are prepared quarterly, and
reports called “Restructuring Papers,” which are prepared as background and
rationale for changes in loan terms, in this case, extending the validity, or
repayment start date, of the loans. Those extensions have happened four times
since the project was approved in late 2014. In the next installment of this
series, I will summarize those issues that have resulted in delays necessitating
World Bank’s extension of the loans. Some of them, such as delays attributable
to Covid-19 lockdowns, are not really anyone’s fault; others, however, could
have been handled much better.
Part Three
WITH any project that it is financing, the World Bank
periodically, usually on a quarterly basis, conducts an assessment of the
project’s progress. The results of this assessment are presented in what is
called an Implementation Status Report (ISR), which is eventually publicly
disclosed. The most recent disclosed version of the ISR for the troubled Cebu
BRT project is dated June 28, 2024, and provides a number of clues as to why
the project has gone sideways and is now very likely to be cancelled altogether.
The project was originally approved by the World Bank in
September 2014, with project construction slated to begin in 2015 and a target
operation date in 2017. The loans for the project, two from the World Bank via
the International Bank for Reconstruction and Development (IBRD) and the Clean
Technology Fund (CTF), and one from the Agence Française de Développement (AFD),
had original validity dates (i.e., would become payable) in mid-2021, but due
to numerous delays have been extended four times: In June 2021, June 2023,
September 2023, and January 2024. It is not inconceivable that the loans could
be restructured again to extend their validity dates, but it was implied by the
World Bank’s recent ultimatum to the City Government of Cebu to approve the project’s
resettlement plan by December 15 or risk project termination that this is not
going to happen, and that the current validity date of September 30, 2026 is
the last one that will be set.
According to the June 28 ISR, under a section with the
heading “Implementation Status and Key Decisions,” the team who prepared the
report summarized the progress to that point: “The project restructuring has
been completed in January 2024 (i.e., the loan extension described above), with
an extension of the project closing date to September 2026, and a reallocation of
loan proceeds. The amendment letters for the IBRD and AFD loans have
subsequently been signed. The Civil Works Package 1 achieved a physical progress
of 64 percent, and is on track to be substantially completed by August 2024.
Procurement of a contractor for Civil Works Packages 2 and 3 is in progress,
and with works planned to commence in October 2024. Resettlement Action Plan
for the Civil Works Package 2 has also been approved by the World Bank and
disclosed.”
Civil Works Package 1 refers to the relatively short (about
2.4 kilometers) first phase of the BRT line, which has hit a snag in recent
weeks with the objection of Cebu Governor Gwen Garcia to the location of the
bus stop in front of the provincial capitol building. This is another,
completely unexpected chapter in the Cebu BRT’s long tale of woe, and more on
that later. Civil Works Package 2, which comprises the longest section of the
planned BRT route, is the one where the possibly fatal problem has arisen, due
to the impasse between the City Council of Cebu on one side, and the World Bank
and the Department of Transportation (DoTr) on the other. That was detailed in
Part 1 of this series, but there will be more on that later as well.
The bigger question of why a lavishly funded, high-priority
public transport infrastructure project that should have taken at most two
years to complete has been so delayed that after a decade, only a portion of
the smallest part of it has been partially constructed, is obviously one that
needs to be answered. For the World Bank’s perspective on why there have been
many delays, the most recent Restructuring Paper from January 2024 provides
some insights. This detailed report, which I have heard from World Bank
veterans takes several weeks of tedious work to prepare, is essentially the
argument for making a change to a loan’s terms, in this case, extending the
validity period.
In that restructuring paper, the World Bank team summarized
the delays that the Cebu BRT project had encountered up to that point. Somewhat
oddly, most of the pertinent information is contained in footnotes to the
summary narrative, and these explain that, “The Project faced substantial
delays in the initial years due to changes in leadership at the national and
local levels following elections in June 2016, which put project implementation
on hold for an extended period (during which cancellation was debated), and the
consequent delays in procurement and mobilization of key consultants.”
The report goes on to say that, “Even after implementation
resumed in September 2018, the project once again faced delays as the Covid-19
pandemic and the quarantine protocols limited deployment of international and
local consultants in the field and slowed down the activities of government
staff involved in the project,” which was obviously something that was largely
beyond anyone’s control at that time.
It continues, “After [the] first [loan] restructuring in
June 2021, the project made some progress in ensuring appropriate deliverables
from key consultants but this momentum was soon lost.” In a footnote to that
statement, the report clarifies that, “This loss of momentum was due to inter
alia frequent staff turnover in the DoTr and delays in filling critical
positions at the project leadership level and the absence of regular
allocations from the annual budget of the [government of the Philippines],
which, in turn, delayed the procurement of and/or payments to the key
consultants. Furthermore, the initial round of procurement for Civil Works
Package 1 (CW1) failed due to non-responsive bids, and the contract with the
DED (Detailed Engineering Design) consultant was suspended for a prolonged
period.” The report does not provide details about why that contract was
suspended, but notes that “variation orders” for the contracts for the DED
consultant and detailed engineering design-construction supervision consultant
were approved in January 2024.
Despite all the headaches, the restructuring paper concluded
that, “The Project continues to remain relevant. If [the loan extension is] approved,”
which it was shortly after this report was submitted, “the cumulative extension
for the project will be 63 months, for a total project implementation period of
12 years.”
Part Four
THE past few days have provided a few answers about the
ill-starred Cebu Bus Rapid Transit (BRT) Project, but have left the country,
and especially the people of Cebu, with many lingering questions.
On Wednesday, Dec. 18, President Ferdinand R. Marcos Jr.
announced that the Department of Transportation (DoTr) had signed an Expression
of Interest with the International Finance Corporation (IFC) of the World Bank
Group to engage the IFC as a transaction advisor for the development of a
public-private partnership (PPP) project, which would comprise the supply of
the buses and the operations and maintenance (O&M) services for the Cebu
BRT. The PPP will cover the entire 35-kilometer project, including the 17-km
main line, 22 stations, 62 bus stops, four terminals, a depot, and 18
additional kilometers of feeder lines connecting the north and south ends of
the line. In an information sheet provided to reporters as background to the
President’s remarks – he was discussing several major infrastructure projects
at the time – the projected operation date for the entire project is in
mid-2027, with a PPP contractor expected to be onboarded sometime in the second
quarter of 2026.
Obviously, this was a complete reversal of the news from not
even a week earlier, wherein it was reported that the City of Cebu had been
warned by the World Bank that it must approve the plan to relocate 54 informal
settler families that will be displaced by the second phase of the project by
Dec. 15, or risk termination of the project. As previously discussed, the City
Council had balked at approving the DoTr-selected relocation site, although the
rest of the plan was agreeable, and had insisted that the resettlement property
acquisition and other business be handled by DoTr and the World Bank without
holding the city responsible for it. This position was actually contrary to a
2016 agreement that the city had signed with the DoTr – and which the World Bank,
at least according to Cebu’s acting City Administrator, had specifically cited
in its warning to the city – that made the city government responsible for
acquiring any needed resettlement locations.
Lack of awareness?
So, what happened in five or six days to claw the Cebu BRT
project back from “on the verge of being cancelled” to President Marcos himself
announcing it as a live, flagship infrastructure project of the national
government?
My first impression was that since the signing that was
announced was a mere “expression of interest” (something that didn’t even
warrant a mention on either the IFC or World Bank websites) and not an actual
contract for transaction advisory services, the announcement may have simply
been some high-level wishful thinking, or an attempt to rhetorically salvage a
failing endeavor. That, however, is not the case, because at the same time the
president was making the announcement, the City Council in Cebu was approving a
resolution authorizing the purchase of some dozen or so property lots – the
same ones presently occupied by the families to be resettled – for the
right-of-way for the project.
Nor it is even possible that the work necessary to produce
the “expression of interest” could have happened in the short time between the
World Bank team’s delivery of the “approve it or lose it” message to the City
of Cebu on or about Nov. 8, and the announcement this past Wednesday. These
things take weeks or months to develop, so an obvious conclusion that can be
drawn is that someone in the World Bank did not know what the people in the IFC
office were doing, even though they are under the same umbrella, so to speak.
That is just a supposition; with neither the World Bank or IFC country offices
offering any explanation so far, we can only guess.
As far as the people in Cebu are concerned, a colleague of
mine whom I contacted candidly observed, “Honestly, I wonder if anyone knows
what is going on.” The most noticeable visible development in the project so
far has been the dismantling of a mostly completed bus stop along the avenue
that separates the Cebu Provincial Capitol from Fuente Osmeña Park, at the
demand of Cebu Gov. Gwen Garcia. At first everyone thought it was Gov. Garcia
just being her usual dramatic, style-conscious self, but as it turned out, she
was properly enforcing the law protecting the integrity of heritage sites. Good
on her; but it certainly seems like another rather important thing that the
World Bank team, the project design lead, and construction supervisor should
have known about.
Lingering questions
Undoubtedly, this is not the end of this story, because
there are nagging questions that may take months or years to answer. With a PPP
planned for the actual rolling stock and the operation of the Cebu BRT, what
will become of the three large-scale loans the government took? All of them
have components that are now covered by the presumed PPP project, so those
loans will almost certainly need to be restructured again.
As for the World Bank, there probably should be some frank
soul-searching about how it manages projects, at least in this country. This is
not the first time that a World Bank endeavor has landed in the briar patch (I
can think of two others just off the top of my head), with outcomes that
benefit no one, least of all its own credibility.
And badly needed as
it is, there is certainly a great many questions about cost in money and time
to create the Cebu BRT is justifiable. If everything goes according to plan
from here on out, the project will have taken 13 years to complete, at a cost
of about P28.8 billion, or roughly P822 million per kilometer for just the
infrastructure part of it. That seems excessive; whether or not it actually is
will be up to the judgement of the people of Metro Cebu who will have to use
it.
(Image: Some of the Cebu BRT construction work; image credit: Philippine News Agency)
