The Philippines and Japan signed on Friday the 104.53 billion yen loan agreement for the construction of the first phase of the Metro Manila Subway Project, which aims to ease traffic congestion, meet fast-rising transportation demand, and reduce air pollution in the country’s premier urban center.

On behalf of their respective governments, Finance Secretary Carlos Dominguez III and Yoshio Wada, the chief representative of the Japan International Cooperation Agency (JICA), signed the loan accord and formally exchanged documents on the construction of the Philippines’ first-ever subway, which is one of the flagship infrastructure projects of the Duterte administration under its “Build, Build, Build” program.

This 104.53 billion yen loan (approximately $934.75 million) represents the first tranche of the total loan financing requirement of 573.73 billion yen (approximately $5.31 billion or P259.6 billion) pledged by JICA for the 1st phase of the subway project, which is the biggest amount it has ever committed to any country.

“I would like to thank the Japan International Cooperation Agency (JICA) for its support in making this subway project a reality,” Dominguez said after today’s signing of the loan agreement at the Department of Finance (DOF) main office in Manila.

“The timely completion of this subway project will crown the aggressive infrastructure program this administration has initiated,” he said. “It will likewise crown the achievements of the economic diplomacy the Duterte administration has undertaken.”

Wada, for his part said: “I’d like to commend our partners for this project focusing on this important infrastructure that can be the basis for a competitive Philippine economy. It is a game-changing initiative in many ways.”

Utilizing cutting-edge Japanese tunneling technology, the construction of the first phase of the Metro Manila Subway will stretch from Mindanao Avenue in Quezon City to the Food Terminal Inc. (FTI) area in Taguig City, and will continue to the Ninoy Aquino International Airport (NAIA).

It will involve the construction of an underground railway spanning about 30 kilometers with 14 stations that is expected to be completed by 2025.

The Department of Transportation (DOTr), the chief implementor of the project, has targeted the partial operation of the subway with the opening of at least three stations—Mindanao-Quirino Highway, Tandang Sora and North Avenue—by 2022.

Witnessing the signing of the loan accord were Secretary Benjamin Diokno of the Department of Budget and Management (DBM), Japanese Ambassador to the Philippines Koji Haneda, outgoing JICA chief representative Susumu Ito, Finance Attache Noboru Kageyama of the Embassy of Japan, Undersecretary Timothy John Batan of the DOTr and Executive Director Emilio Fernandez of the Department of Foreign Affairs (DFA).

Batan said during the signing of the agreement that the project “is one of the Duterte administration’s boldest response to the traffic crisis that affects the 26 million residents of our nation’s capital on a day-to-day basis.”

According to the DOF, the total project cost for the first phase of the subway project is estimated at 788.89 billion yen, which is around P356.96 billion or approximately $7.055 billion.

Of this total project cost, 73 percent (573.73 billion yen) will be funded by JICA through a time-sliced loan arrangement comprising three to four tranches, while the remaining 27 percent, which is about 215.16 billion yen or around P97.35 billion, will be shouldered by the Philippine government.

The loan agreement for the first tranche carries an interest rate of 0.10 percent per annum for non-consulting services (which involves civil works, depot, railroad, electromechanical works, power supply) and 0.01 percent per annum for consulting services, payable in 40 years inclusive of a 12-year grace period under the Special Terms for Economic Partnership of JICA.

For the remaining three to four tranches of the total loan, JICA will release the funds based on the project requirements and will be subject to further discussions between JICA and DOTr.

The preparation of the detailed engineering design and bidding documents for the project started in November 2017, finance by a grant from JICA.

In January 2018, the DOTr and JICA also signed a grant-financed technical cooperation agreement for the establishment of the Philippine Railway Institute, which is intended to support capacity building for the operation and maintenance of both current and new railway systems.

The subway system has been part of the joint NEDA-JICA Roadmap for Transport Infrastructure Development of Metro Manila and its Surrounding Areas, but because of its cost, Dominguez said the government considered this component of the infrastructure plan “a dream.”

“With the generous support of Japan and the fiscal space we enjoy thanks to the tax reform program, what was once considered a dream has now become a reality,” Dominguez said.

Underscoring the importance of the project, Dominguez said the government “commits to working on this project 25/8,” rather than “24/7” to ensure the project gets done at the soonest possible time.

Construction of the underground railway for the first phase of the subway project will require digging a tunnel 31.2 meters to 5o meters deep to accommodate eight-car trains that would be able to load 2,242 passengers. The entire rolling stock consists of 152 cars or a total of 19 trains.

The first phase also includes the installation of electro-mechanical systems as well as building a 28.8 hectare depot area and the Philippine Railway Institute in Barangay Ugong, Valenzuela City.

In line with the “fast and sure” principle adopted by the two countries, the Philippine government processed the loan approvals for the subway project within a short period of six months, from the approval by the NEDA Board on Sept. 12, 2017 up to the signing of the Loan Agreement today (March 16).

Two weeks ago, Dominguez and Ito signed the 9.399-billion yen (approximately US$89 million or ₱4.25 billion) loan agreement for the construction of the third phase of the Arterial Road Bypass Project that is designed to ease traffic congestion in Bulacan and spur economic growth in the province’s rural areas.

The Arterial Road Bypass, also known as the Plaridel Bypass is a 24.61-kilometer arterial road that will link the North Luzon Expressway (NLEX) in Balagtas, Bulacan with the Philippine-Japan Friendship Highway, also called Maharlika Highway, in San Rafael, Bulacan. It will bypass the town proper of Plaridel and the urban areas of Pulilan, Baliuag, and San Rafael (all in Bulacan) along the existing Maharlika Highway.

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