Tuesday, 3 July 2007

Ermita orders Mendoza to explain ZTE deal to Cabinet

The Philippine Star
Original report at the Philippine Star

Malacañang directed Transportation Secretary Leandro Mendoza Monday to brief the Cabinet on the $329.5 million broadband contract with a top Chinese telecommunications firm, as anomalies unraveled in the deal whose signing was witnessed in China by President Arroyo herself.

Executive Secretary Eduardo Ermita pointed out that there might be a fallout from the negative development in the government’s contract with ZTE Corp. that the Palace should be prepared for.

ZTE is the second largest telecommunications firm in China.

He, however, stressed there should be no prejudgment in the meantime regarding the supply contract signed by Mendoza and ZTE vice-president Yu Yong last April 21 in Boao, Hainan during Mrs. Arroyo’s visit.

“This particular contract is under the Secretary of the DOTC. Precisely, we are requesting that we be briefed by Secretary Mendoza so that we will know our position because he is the one in charge of this,” Ermita told reporters.

“Let’s just say that we need to be clarified ourselves,” he said.

Press Secretary Ignacio Bunye said the matter has not been discussed in the Cabinet since criticisms of the contract emerged, particularly from losing proponents Amsterdam Holdings Inc. (AHI) and the US-based Arescom.

The contract calls for the setting up of a National Broadband Network (NBN) to link all government agencies and offices. The project aims to speed up communications and coordination among government offices, and is expected to result in billions in savings in taxpayers’ money.

Critics of the ZTE deal said the contract was overpriced since other the other companies’ offers were less expensive. AHI has offered to build a similar network for $242 million while Arescom Inc. is offering $135 million.

The losing proponents also complained that the deal did not go through a bidding while the US Embassy also expressed concern over the apparent lack of transparency in forging the contract.

Mendoza however earlier maintained that the contract was aboveboard and that it was a government-to-government agreement that required no bidding.

It was also learned over the weekend that the contract apparently violated a Palace policy to undertake such contracts through a build-operate-transfer agreement so that the government would not have to spend a single centavo.

Under the deal however, the project would be funded through a 20-year “concessional” loan from China.

A ranking Palace official who declined to be named said the deal could still change since the Chinese government still has to [sic] option to reject the terms of the agreement.

“But if the China Eximbank accepts the terms of the agreement, then it is a government-to-government agreement that needs no bidding,” the official said.

Still optimistic

Reacting to the controversy, ZTE Corp. said it remained optimistic that deal would push through.

ZTE officials, who asked not to be named, told The STAR of their being “surprised” by the negative turn of events.

“We believe it’ll push through despite this controversy and it’s a priority program. It has been signed. Definitely, the information being floated against ZTE is not right,” an official from ZTE’s Manila office said.

“Our high management in China is surprised our company is projected like this,” he said.

Another ZTE official said a sour-graping competitor may be spreading disinformation against the firm.

“It’s ZTE’s reputation that has been damaged by these attacks. There’s really too much misinformation. We suspect the details are provided by our competitor but the information are wrong,” the official said.

He said “ZTE’s practice is always on top on international regulations.”

The National Economic and Development Authority (NEDA) board said in a meeting on Nov. 21 last year that all government agencies and offices needed to be linked through a privately funded broadband network.

In the meeting, President Arroyo reportedly said that she did not want the government to spend for a project that could be funded by a private proponent.

Meanwhile, calls for the rescinding of the government’s broadband contract with ZTE mounted.

Catanduanes Rep. Joseph Santiago said Mrs. Arroyo should follow the advice of the business community and scrap the controversial contract with Chinese telecommunications firm ZTE Corp.

“This is definitely the right thing to do – for the government to find ways to persuade the Chinese government, which controls ZTE, that a mutually agreed dissolution of the contract has become imperative,” Santiago, former chief of the National Telecommunications Commission, said.

Several business groups recently put out an advertisement in newspapers calling for the cancellation of the “highly questionable” contract. With Jess Diaz

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