Subway Dreams Derailed: The Collapse of the $3.5 Billion Philippine Subway Project

The Philippine’s ambitious $3.5 billion Makati City Subway project, once hailed as a solution to Metro Manila’s crippling traffic congestion, has been officially scrapped by its primary contractor, Philippine Infradev Holdings Inc. The project’s cancellation, announced in 2025, marks a significant blow to urban infrastructure development in Southeast Asia and underscores the risks of territorial disputes, legal complexities, and geopolitical dependencies in large-scale public-private partnerships (PPPs).

Ask Aime: What impact does the cancellation of the Philippine's Makati City Subway project have on the global infrastructure sector?

The Project’s Ambitions and Its Downfall

Launched in 2018 with a target completion date of 2025, the 11-kilometer subway was designed to carry up to 500,000 daily commuters, slashing traffic by 270,000 vehicles. Key stations were planned for landmarks like Ayala Triangle and Makati City Hall, while a depot in Barangay Cembo and connections to the MRT-3 and Pasig River Ferry System were central to its integration into the region’s transit network.

The project’s collapse stemmed from a 2021 Supreme Court (SC) ruling that transferred 10 barangays and critical land parcels from Makati to neighboring Taguig City. This decision invalidated the original route, as the disputed areas housed essential infrastructure like the depot and stations at the University of Makati and Ospital ng Makati. Despite Infradev’s attempt to resolve the issue via arbitration with the Singapore International Arbitration Centre in 2023, the SC’s final ruling in September 2023 confirmed the territorial shift, rendering the project economically and operationally unviable.

The Chinese partner’s stock performance reflects the geopolitical risks of such projects. greenland Holdings, a major stakeholder, saw its stock decline by 38% between 2021 and 2023—a period coinciding with escalating legal disputes and delays in the subway project. This highlights how territorial and legal battles can impact multinational firms’ valuations, even in seemingly stable markets.

Broader Implications for Investors

The subway’s cancellation raises critical questions for investors in Southeast Asian infrastructure:
1. Legal Due Diligence: Territorial disputes, particularly in densely populated urban areas with overlapping administrative boundaries, can derail projects despite robust initial feasibility studies.
2. Geopolitical Dependencies: Reliance on foreign firms (e.g., Chinese state-backed contractors) introduces risks tied to diplomatic tensions and domestic regulatory shifts.
3. Economic Consequences: The $3.5 billion write-off—equivalent to 0.15% of the Philippines’ 2023 GDP—underscores the financial stakes in infrastructure failures.

Stakeholder Reactions and Aftermath

Infradev’s decision to cancel the project followed years of stalled negotiations and arbitration costs. The Chinese partners, including Jiangsu Provincial Construction Group and China Harbour Engineering Company, faced reputational damage and potential financial losses from the collapsed venture. Meanwhile, Makati City lost a key tool for reducing congestion, leaving its central business district’s traffic woes unresolved.

The cancellation also signals a shift in investor confidence toward PPPs in the Philippines. While the broader market grew by 14% during this period, infrastructure-focused stocks lagged, reflecting heightened caution around regulatory and legal risks in such projects.

Lessons for Future Infrastructure Projects

The Makati subway’s fate offers critical lessons:
- Preemptive Legal Safeguards: Contracts must include clauses to address territorial disputes or jurisdictional shifts, with mechanisms for cost adjustments or termination.
- Diversified Partnerships: Overreliance on a single foreign entity increases vulnerability. Future projects should seek partnerships with multiple global and local firms to spread risk.
- Community Engagement: Including affected communities (e.g., residents of the relocated barangays) in planning could mitigate disputes and build political support.

Conclusion

The $3.5 billion subway project’s collapse serves as a stark reminder of the fragility of large-scale infrastructure initiatives in jurisdictions with complex legal and territorial landscapes. With territorial disputes costing the project its financial viability and Chinese partners facing reputational and financial fallout, investors must prioritize rigorous legal due diligence and diversified partnerships. The Philippine government’s urban development ambitions now face a critical crossroads: learn from this failure or risk repeating it in future projects. As Southeast Asia’s infrastructure pipeline expands—projected to reach $6.7 trillion by 2030—investors must weigh ambition against the realities of governance, geography, and geopolitical risk. The Makati subway’s fate is a cautionary tale, but also a roadmap for resilience in an increasingly complex investment environment.