In my last post, I concluded that the condominium boom in Metro Manila should not be viewed as a sign of a healthy Philippine economy. Massive human congestion has resulted to serious scarcity and high cost of land leaving developers no choice but to build vertically.

Metro Manila has become what it is today because of the over-concentration of businesses plus recreational, cultural, and institutional facilities therein – elements that are barely present in many parts of the countryside.

An ideal economy is one wherein most if not all citizens see and feel economic gains (in varying degrees) wherever they may be. It’s a gargantuan task but I think it can be done; definitely not in this lifetime, but I do believe, slowly, it can be done.

One of the strategies to achieving this was clearly outlined by the National Economic Development Authority (NEDA) in 2004.

…spur economic growth for Bicol and Mindanao… development of the Southern Luzon Corridor as a strategy to decongest Metro Manila, and provide new opportunities for growth in the countryside… The Plan has in fact identified as one of its priority activities, the rehabilitation of the existing rail link to Bicol…Key roads and roll-on and roll-off (RORO) port facilities have been lined up for Mindanao… to provide access to product markets… PNR’s South Line will extend up to Matnog, Sorsogon, being the take off point to the Visayas and Mindanao.

Yes, for me, a major factor that will stimulate economic growth in the countryside is a modern, fast and reliable railroad system that will not only cater to commuters but will also transport cargoes (freight trains) over long distances.

PNR has already rehabilitated the so-called Southrail Line – from Tutaban in Divisoria up to the Bicol Region. However, the rehabilitation was poorly done. There appeared to be no resolute effort to really modernize the project. Most of the coaches or trains are second hand that were donated by Japan. Travel time from Manila to Bicol is ten hours, the same time it takes when taking a bus : (

By the way, our railroad system is also originally planned to extend North all the way to San Fernando in La Union.

How can a modern railroad system stimulate economic development in the countryside and decongest Metro Manila?

By opening up and increasing demand for real estate markets that were once unattractive for those living in Metro Manila.

A 2006 Dutch study (this is a PDF file) noted that:

… households are willing to pay more for housing near railway stations due to lower transportation cost and reduced travel time. As workplaces become more accessible, so do leisure areas…

Another study (this is another PDF file)noted that:

… the price of real estate is highest in city centers and decreases with every unit of distance from the city center. Thus, when some areas are pulled closer to the city center through an improvement in transportation, land values in these areas increase…

As households increase in these once unattractive locations (because of their distance to Metro Manila), commerce will follow thereby increasing demand for properties in these locations. As people increase, more commercial establishments, conveniences and, therefore, job opportunities will be generated that will further increase demand for properties.

Eventually, these areas will become the new urban centers that will become the source of livelihood and recreational facilities for people living farther along the line. Having been pulled closer to the new city center, demand for real estate in these locations that are farther along the line will increase. Population will increase that will lead to new commerce and so on and so forth. The cycle shall be replicated as you go farther and farther along the line. Again, this process will take decades to be truly felt. That’s why we have to start now!

And this is beneficial for real estate developers who shall then have greater options on where to build their succeeding projects instead of just focusing on Metro Manila.

And those developers who have already built their projects nearby will find the value of their properties enhanced.

Other economic benefits of a modern railroad system

PNR trains currently cater solely to commuters. For me, trains transporting cargo is as important as trains moving people. In the US, freight trains provide the following benefits:

From the food on our tables to the cars we drive to the shoes on our children’s feet, freight railroads carry the things America depends on. America’s railroads account for 43 percent of intercity freight volume — more than any other mode of transportation — and provide the most efficient and affordable freight service in the world. Every year, America’s freight railroads save consumers billions of dollars while reducing energy consumption and pollution, lowering greenhouse gas emissions, cutting highway gridlock, and reducing the high costs of
highway construction and maintenance. In addition, America’s freight railroads generate nearly $265 billion in total annual economic activity and sustain 1.2 million jobs.

Obviously, our country will never attain the same figures given the size of our economy, but we shall to a certain extent.

But given the sorry state by which our railroad system was rehabilitated, none of these shall take place. That’s why it’s important to leave its rehabilitation and modernization to the private sector – to a company with the motivation, vision, ability, willingness, clout and financial muscle to do so.

And that company is none other than… Ayala Corporation.

I will tell you why in my next post.

Thank you so much

image of freight train courtesy of popularmechanics.com