Market report: Philippines business opportunities in rail transport

• Main Authors: Embassy of Switzerland in the Philippines, Lamberte, Albert E.
• Format: text
• Published: Animo Repository 2022
• Subjects: Transportation and Mobility Management
• Online Access: https://animorepository.dlsu.edu.ph/faculty_research/12366
• Institution: De La Salle University

The economy of the Philippines is one of the most dynamic economies in the Southeast Asian Region. The growth is due to increases in urban areas, rising middle class, and relatively younger population. However, the improvements and developments of the public transportation sector have not been able to cope with increasing urbanization, particularly the mass transport system is still severely lacking in key urban cities and economic zones such as Metro Manila. Transportation woes continue in the nation’s capital as road traffic congestion has worsen due to dismal improvements in other public transport sectors especially in railways. Moreover, the archipelagic geography of the Philippines posed major challenges to have cities and provinces from Luzon, Visayas, and Mindanao interconnected. The Philippines has had a railway system during Spanish time, when the La Compaña de Tranvias de Filipinas introduced a commuter line that ran throughout the city of Manila. By 1902, the country had two steam railroads that connected Manila to the province of Rizal and another one that connected the province of Dagupan to Manila. By 1911, the Cebu and the Panay Line in the Visayas region were operational. The country’s railway system was considered to be highly developed and sophisticated by then. However, most of the railways during and after World War II were destroyed, which led to the deterioration of the railway tracks and the closure of most of the railway lines. From 1,140kms, the Philippine National Railway’s (PNR) network was reduced to 446 kms. Railway tracks were being stolen for the value of its metal and that many of its stations were left as it is. The railway sector was the least of the priorities of the administrations after World War II. The administrations, particularly the Marcos administration, wanted the country to focus more on automotive.Generally, the share of infrastructure spending on Philippine GDP is below 6 per cent and that most expenditures are on improvements of existing roads as well as building new road networks. The relatively small budget for public infrastructure has led to increasing traffic congestion and difficulty in transporting goods and services in the country. This further resulted to higher transportation costs as well as lost productivity by workers who are dependent on the existing mass transportation systems. Currently, travel time takes 53% longer than it would during uncongested conditions in Metro Manila, and that the country loses PhP 2.4 billion per day due to poor traffic conditions. Moreover, the country’s mass public transportation was rated below average by the Asian Green City Index (ACGI). The railway systems also only saw very minor improvements after World War II, with majority of improvements seen in lines operating in Metro Manila and Southern Luzon. There have been improvements in the railway sector with the introduction of the LRT-1, LRT-2, and MRT-3 lines, reactivating the PNR Tutuban-Alabang line and the South Line, as well as the enactment of various government policies and legislation. Yet these efforts were not able to address the railway sector being able to cope with the rapid increase in urbanization. Problems such as (1) accessibility, (2) inefficiency, (3) poor operation and maintenance, (4) speed of trains and accidents, (5) safety and security, (6) affordability of advanced systems, (7) sense of heritage, (8) policy and governance, (9) intermodal integration, (10) issues in energy and electricity, and (11) right-of-way (ROW) are prevalent in the railway sector in the Philippines. These resulted in overcapacity, accidents, and other untoward incidents that have affected the public’s usage of the current railway lines. The dependence of the riding public on the railway system is increasing as the traffic in key urban areas have worsened over the years. The Philippine Development Plan (PDP) and the current administration’s “Build, Build, Build” program have made substantial investments in improving the mass transportation systems, particularly the railway systems. There are six railway projects that the Department of Transportation (DOTr) has lined up for implementation from 2017 and beyond. However, most of the railway projects in the PDP are situated in the island of Luzon. The Mindanao Railway is the only planned railway project that is outsize Luzon, which means that the region of Visayas is left behind despite having the previous Cebu and Panay lines. Additionally, only one segment (i.e., Tagum-Davao-Digos line) of the Mindanao Railway is undergoing project design and implementation. The current state of the railway sector in the Philippines presents many opportunities for investment. The establishment of the Philippine Railway Institute (PRI) creates opportunities for Swiss firms to help train and improve the quality of human capital needs for operation and maintenance of the railway systems in the country. Another opportunity is for Swiss companies to invest in the completion of the other lines in the Mindanao Railway as well as the creation of lines across the Visayas region and the eastern regions in Luzon. These opportunities will help improve the inter-island and intra-island connectivity, thus can potentially reduce transportation costs and can further improve economic performance.