ABS-CBN News Channel reported that China owned contractor working on the USD 503 million Northrail project in Philippines has threatened to pull out of the project over the nonpayment of cost overruns worth USD 299 million and other breaches of the original agreement.

As per ABS-CBN News Channel, the China National Machinery and Equipment Corp Group sent a demand letter on June 3rd to North Luzon Railways Corporation saying that it would terminate the contract within 30 days to 60 days if Northrail fails to take steps to comply with the terms of the contract and remedy several breaches of the original agreement.

Among the breaches of contract mentioned in the June 3 letter obtained by ANC were
1. Failure to provide contractor access to the site and the necessary right of way;
2. Failure to remove all residents living along the right of way and to dismantle and remove all obstacles including trees, shelter and building facilities;
3. Failure to provide land to contractor for temporary use;
4. Failure to approve the design document and technical specifications;
5. Failure to make payments to the contractor;
6. Failure to provide the diagram of existing underground networks pertaining to the electricity, gas, water and sewerage facilities in the working area;
7. Failure to compensate the contractor for extra costs;
8. Failure to adjust the contract price.

The Northrail project started in 2004 after the Arroyo administration entered into a deal with the Chinese government to build a railway connecting Manila to Northern Luzon. Phase 1 of the Northrail project would begin in Caloocan and stretch out to Clark, Pampanga.

The USD 503 million project cost is to be funded by the Chinese government through a loan, with the provision that the project would be handled by a Chinese contractor.