Vigilance against Parex and its possible successors

Robert Y. Siy

ON March 18, 2024, San Miguel Corp.’s (SMC) Ramon Ang announced that the company would no longer be pursuing the Pasig River Expressway (Parex) project, a six-lane elevated expressway that was to be constructed above the river along nearly its entire length. Ang said the decision was in response to many negative public comments.

If he and SMC are sincere, they need to cancel the agreement regarding Parex with the Toll Regulatory Board (TRB), contained in a document called the Supplemental Toll Operation Agreement (STOA). Leaving the STOA alive and intact could allow SMC to resurrect the Parex at any time in the future. And even if the STOA is canceled, continued vigilance is needed.

Upon close examination of other SMC tollway projects, it appears that another tollway is being redesigned to traverse some of the same sections of the Pasig River that SMC and Ang claim to no longer be pursuing. An example is the Southeast Metro Manila Expressway (Semme), a proposed toll road also known as Skyway 4, which will run across eastern Metro Manila and western Rizal along C6 from Arca South in Taguig all the way to the Batasan/Payatas area.

After Parex was severely criticized, the Semme was realigned by SMC so that it would include a 6.3-kilometer section of the Parex. In realigning Semme, SMC may be resurrecting the Parex under another project name. May we request SMC to confirm that no part of the Semme alignment will be on the Pasig River or will follow the Parex alignment? The public has a right to know.

It also appears highly irregular that a tollway operator can introduce a major realignment of an expressway project such as the Semme — several kilometers long, costing several billion pesos and with major impacts on an important waterway — without any scrutiny or prior clearance of the government’s Investment Coordination Committee (ICC) or the Environmental Management Bureau of the Department of Environment and Natural Resources. If massive infrastructure projects can easily slip through under TRB’s auspices and proceed without anyone reviewing or evaluating, there is a serious flaw and weakness in the government’s investment screening process.

In previous columns, I have argued that the STOAs of the TRB are not only “loopholes” that enable huge infrastructure projects to bypass the normal due diligence procedures of the government; these could also be considered anticompetitive practices in violation of existing laws.

Today, STOAs are being granted as extensions to the Manila North Expressway (NLEx), Manila South Expressway (SLEx) and Metro Manila Expressway — many decades after the original franchise covering these early tollways was granted to Philippine National Construction Corp. (PNCC) and already long after the expiration of the PNCC franchise in May 2007. Single STOAs are even being granted for tollway extensions of several hundred kilometers (e.g., the 417-km SLEx-Toll Road 5 [Lucena-Matnog] project, which is again considered merely an extension of the SLEx concession).

Although the stated intention of the STOA is to grant an “extension, linkage or stretch” to an existing tollway, the effect is the same as issuing a new concession. These proposed tollway extensions require only a rudimentary financial and technical report to be submitted to the TRB for the STOA application to be processed.

Unlike all other major public sector or public-private partnership (PPP) projects that go through the rigorous evaluation of the ICC and the NEDA Board, tollway projects associated with STOAs are approved and implemented without preparation of a comprehensive feasibility study that includes social, economic and environmental analysis. This is a serious anomaly that needs to be corrected.

There is also the likelihood that STOAs could be regarded as anticompetitive. A STOA enables tollway operators to “place a claim” on all lucrative opportunities for tollway development that emanate from the original PNCC tollways (e.g., NLEx, SLEx) or from any of their subsequent extensions. By giving a few operators a convenient and “low-effort” way to extend their tollways without limit in all directions, the effect of the STOA is to curtail competition. It could also be interpreted as giving existing tollway operators an undue advantage.

One negative outcome is that it deprives the government of the opportunity to subject such projects to competitive selection, which can attract better designs, better pricing and better environmental practices. The biggest losers are the Filipino people.

Accordingly, the TRB’s uncontrolled use of STOAs is likely a violation of Sections 11 and 19, Article XII of the Constitution that favor free and open competition. A STOA could also be considered as inconsistent with Section 1, Rule 3 of the “Rules and Regulations to Implement the Provisions of Republic Act No. 10667 (Philippine Competition Act),” which states: “(c) Agreements … which have the object or effect of substantially preventing, restricting or lessening competition shall also be prohibited.”

At a time when the government is trying very hard to attract interest in PPP opportunities, the issuance of STOAs that stifle competition and bypass normal PPP procedures delivers a different message to potential investors.

Projects like the Parex can appear (and reappear) at any time because of lax controls within the TRB and performance objectives that reward the agency for any and all kinds of tollways. A reform of the TRB and its procedures is urgently needed so that tollway projects and extensions are subject to the careful review and scrutiny of the ICC and the NEDA Board.

The use of STOAs should be disallowed. Vigilance inside and outside of the government is needed so that problematic projects like the Parex have no chance of proceeding.

Robert Y. Siy is a development economist, city and regional planner, and public transport advocate. He is a co-convenor of the Move As One Coalition. He can be reached at [email protected] or followed on Twitter at @RobertRsiy.