Philippines- The Department of Transportation (DoTr) is exploring the possibility of engaging the private sector for the Mindanao Railway Project, following China’s withdrawal as a funding source. Transportation Secretary Jaime J. Bautista recently disclosed that the government is actively reviewing the project’s feasibility study and alignment while seeking alternative funding mechanisms, including Public-Private Partnerships (PPPs). Speaking at the Transport Con 2024 event, Bautista emphasized the project’s importance, stating, “We need to do this project; that is why we are looking for other sources of funds.”
While the government is still considering official development assistance (ODA) as a funding option, Bautista noted a growing inclination toward PPP arrangements. He highlighted the private sector’s potential to expedite the project, explaining that the DoTr is currently drafting the terms of reference to facilitate private-sector participation. This move comes as the Philippines adjusts its approach after dropping China as the funding partner for three railway projects, including the Mindanao Railway, the South Long-Haul Railway, and the Subic-Clark Railway, due to prolonged delays in Beijing’s financing decisions.
The Mindanao Railway Project, which aims to connect Tagum in Davao del Norte to Digos City in Davao del Sur, represents a significant infrastructure initiative valued at USD 1.4 billion (approximately). The railway is expected to transport 122,000 passengers daily and cut travel time between Tagum and Digos from three hours to one. However, the government’s shift toward PPP highlights the complexities of securing adequate funding for such large-scale infrastructure projects.
Experts have weighed in on the implications of adopting a PPP model for the Mindanao Railway. Public investment analyst Terry L. Ridon, convenor of the think tank InfraWatch PH, stressed that projects of this scale are primarily development-oriented, focusing on regional economic growth and poverty reduction. Ridon cautioned that such objectives often lack the commercial appeal needed to attract private investors. “In order for the government to have actual proponents, it should first make the commercial case as to why the private sector should take on the Mindanao railway project,” he said.
Nigel Paul C. Villarete, senior adviser on PPP at Libra Konsult, Inc., underscored the need for the government to evaluate the private sector’s appetite for the project. Villarete emphasized that private investors prioritize financial returns, suggesting that the project’s profitability and economic viability will determine its success under a PPP framework. For a project of this magnitude, he recommended offering it as a solicited proposal to mitigate delays, particularly in acquiring the extensive right-of-way (RoW) needed along the railway’s route. RoW acquisition is often a critical bottleneck for infrastructure projects and requires significant government intervention.
Former Transportation Science Society of the Philippines President Rene S. Santiago added that while PPP is a viable option for railway projects, particularly for operations and maintenance, the fundamental challenges of the Mindanao Railway remain unresolved. Santiago argued that the railway’s economic and financial viability is limited, necessitating substantial subsidies for both construction and operations to make it attractive to private partners.
The government is also revising the Mindanao Railway’s feasibility study to incorporate modern and environmentally friendly features, signaling its commitment to creating a sustainable transport solution. Bautista acknowledged the importance of building investor confidence, stating, “We are not in a hurry; investors need to know that their investments will be profitable and have a reasonable rate of return.”
With its first phase covering a 102-kilometer stretch, the Mindanao Railway is poised to transform transportation in the region, enhancing connectivity and spurring economic activity. However, the project’s success will depend on the government’s ability to navigate funding challenges and strike a balance between developmental goals and the commercial interests of potential private partners.
