Case filed vs DOTC chief : NBN deal

[explorer]

Case filed vs DOTC chief over broadband deal

By Volt Contreras
Inquirer
Last updated 03:16am (Mla time) 08/29/2007

MANILA, Philippines -- Saying the public was misled about the National Broadband Network (NBN) project, an opposition congressman Tuesday lodged a criminal complaint against Transportation Secretary Leandro Mendoza and several others who sealed the $329-million deal with a Chinese firm without public bidding.

Nueva Vizcaya Rep. Carlos Padilla (NP) accused Mendoza and two assistant secretaries of the Department of Transportation and Communications of “giving undue advantage” to ZTE Corp., China’s third largest telecommunications firm, which bagged the NBN project aimed at linking government agencies nationwide through a common electronic backbone.

Padilla said the DOTC officials “discriminated against and deliberately refused to act on the proposal” presented by Amsterdam Holdings Inc. (AHI), a company partially owned by Jose de Venecia III, a son and namesake of the House Speaker.

“The project cost of over $329 million that will be shouldered by Philippine taxpayers in the ZTE contract is iniquitous compared with the $240-million project cost proposed by AHI,” Padilla said in a complaint filed Tuesday with the Office of the Ombudsman.

Covered by the election period during which no government contract should be signed, Mendoza and Yu Yong, ZTE vice president, inked the deal on April 21 in ceremonies witnessed by President Gloria Macapagal-Arroyo.

On the same day, Trade Secretary Peter Favila signed with Chinese authorities a $460-million deal to build a satellite-based backbone for the Cyber Education Project (CEP) on behalf of the Department of Education.

Both agreements were sealed in Boao, China.

Senate probe

For his part, Sen. Edgardo Angara said the Senate would investigate the “indecent haste” in allocating P26.4 billion for the CEP.

“Before embarking on a P26.4 billion worth of project, I think we should first ask why no First World country has adopted this. No studies have been made regarding the effectiveness of TV-based instruction in basic education,” Angara said in a statement.
Aside from citing Mendoza, Padilla’s complaint named Assistant Secretaries Lorenzo Formoso and Elmer Soneja as respondents.

Soneja was included in the criminal complaint in his capacity as chair of the DOTC bids and awards committee for information and communications technology (BAC-ICT).

The respondents included four top ZTE executives led by its chair, Hou Weigui, vice president Yu, Manila office chief representative George Zhu Ying, and executive director Fan Yan.

Padilla also alerted anti-graft investigators about several “John Does” or “public officers and private individuals who conspired with the respondents to defraud the government by entering into an illegal contract with ZTE Corp.”

All aspects suspicious

The lawmaker asked the Ombudsman to prosecute Mendoza and the others for violation of the anti-graft law and the Government Procurement Reform Act.

“The officials I have charged are liable for misleading the public and executing this anomalous contract and should be punished accordingly,” Padilla said in a statement.

“There was no bidding done for this project, and under the law all telecommunications projects of the national government have to be bid out.”

“All aspects of this contract are suspicious because they actually tried to hide it from the public. Even the Department of Justice ended up looking silly when it came out with an opinion that the contract was legal even though it had not even received a copy from the DOTC,” Padilla said.

The DOTC would rather have the country incurring a $329-million loan from China for the NBN, “even though Malacañang and DOTC records would show that there were several private companies volunteering to undertake the project at no cost to our government,” he said.

Timeline

The congressman gave the following narration in support of the charges:

• In September 2006, ZTE submitted an “unsolicited proposal” to the Commission on Information and Communications Technology (CICT). The proposal called for a government-to-government loan to fund the construction of the NBN.

When completed, the project is to be turned over to the DOTC for its operation and maintenance, according to the ZTE proposal.

• Around the same period, AHI “also expressed intention to undertake the development of the NBN without any fund appropriation and guarantee from the national government.” It proposed a system it then dubbed as the “Orion Network.”

• On Oct. 17, 2006, then Secretary Romulo Neri of the National Economic and Development Authority (NEDA) wrote AHI a letter conveying his support for the Orion Network. Padilla attached a copy of Neri’s letter to the complaint.

• About a month later, a meeting between President Macapagal-Arroyo and the NEDA Cabinet cluster “discussed the necessity for a privately funded government broadband network.”

The officials in that meeting also “expressed their unanimous view that the government connectivity and (info-tech) infrastructure should be developed at no cost, and with savings, to the national government.”

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AHI’s unsolicited proposal

• On Dec. 5, 2006, AHI formally submitted to the DOTC its own unsolicited proposal for the NBN. The submitted materials included a feasibility study and identified AHI’s partner in the project as Huawei, said to be the largest telecom equipment supplier in China and the second largest in the world.

• By Jan. 2 this year, the AHI proposal had reached the CICT for initial review and endorsement.

• On Jan. 4, the company also submitted to the DOTC a draft memorandum of agreement spelling out the respective obligations of the AHI and the government.

• On Jan. 8, AHI made a formal presentation of the Orion Network to the DOTC at the Edsa Shangri-La Hotel in Mandaluyong City. Exactly a month later, AHI’s Richard Pratte e-mailed the DOTC to answer the latter’s additional questions.

ZTE proposal

• On Feb. 26, Soneja asked AHI and ZTE to submit the “final version” of their respective proposals.

On the same day, ZTE submitted the “same proposal” it previously furnished the CICT but subject to revisions to integrate the Department of Education’s Cyber Education Project. AHI, meanwhile, “deemed its earlier submissions as final.”

• On Feb. 28, a technical working group (TWG) completed its evaluation of the two rival proposals, factoring in the CyberEd project.

• On March 6, the DOTC’s bids and awards committee adopted the TWG’s recommendations and forwarded these to the NEDA.

• On March 18, AHI wrote to the DOTC “requesting compliance with the rules on unsolicited proposals under Republic Act No. 6957 (Build-Operate-Transfer Law) and its implementing rules and regulations.

Incomplete

• On March 26, the DOTC, through respondent Soneja, informed AHI that its proposal was “found incomplete” and that “the period to evaluate the proposal has not yet commenced.”

At this point, Padilla remarked in the complaint, “Soneja made this representation despite the fact that AHI’s proposal was already previously evaluated by the CICT and TWG as of Feb. 28.”

“It would seem at this point that Soneja knew more about the approval of the ZTE-NBN deal with the government that he found excuses to reject the AHI’s proposal.”

• On April 3, AHI wrote the DOTC “taking exception to the finding that its proposal was incomplete” and noting that the agency “never informed (the company) of any deficiency or additional requirement.”

• Seven days later, Soneja wrote AHI reiterating DOTC’s findings that its proposal was incomplete and that its deficiencies have actually been relayed to the firm in previous meetings and consultations.

US ambassador

• On April 20, US Ambassador Kristie Kenney wrote Neri “expressing the US government’s interest in the NBN” and asking the Philippine government to “take time to carefully review and consider the multiple expressions of interest that have been submitted, including those involving American companies.”

“Kenney also manifested that in all government projects, there should be competition and transparency,” the congressman said in his complaint.

Shocking

On the same day, however, Mendoza and Formoso were already in Hainan, China, to sign the NBN contract as “awarded” to ZTE.

“What is more shocking is that the signed contract with ZTE was supposedly lost by commercial attaché Emmanuel Ang the night after it was signed. Respondent Mendoza now refuses to disclose the other details of that agreement, which is plainly disadvantageous to the government,” Padilla said.

[explorer]

Broadband deal not needed -- UP study
‘Gov’t has no core competence for project’

By Tony Bergonia
Inquirer
Last updated 02:18am (Mla time) 08/06/2007

MANILA, Philippines -- The strongest argument against an $800-million plan to build two government-owned information technology (IT) backbones to create a Cyber Corridor is that there is no need for them, according to two professors at the University of the Philippines School of Economics (UPSE).

One of the projects is the $329-million national broadband network (NBN), while the other is the $460-million plan to build a satellite-based IT backbone for the Cyber Education Program (CEP).

Economics professors Raul V. Fabella, dean of the UPSE, and Emmanuel S. de Dios listed many reasons the government should not pursue the two projects at the risk of betraying the public interest. The biggest reason cited in the study: The government does not need to own one broadband backbone, much less two.

“The only backbone that the government needs today is a moral one,” Fabella and De Dios said in a paper titled “Lacking a backbone: The controversy over the National Broadband Network and Cyber-education projects,” which was released on Aug. 2.

The paper said one reason the two projects were likely to end up being just a waste of funds was that it was not in the government’s “core competence” to own, maintain and use an IT infrastructure separate from two that already exist -- one owned by Philippine Long Distance Telephone Co. (PLDT) and another owned jointly by PLDT’s competitors.

“From the 1990s … until recently, the government seems to have adhered to the concept of ‘core competence,’” the paper said.

It was a strategy that saw canteens, air transportation and power generation being run by private firms, instead of government agencies.

It was a strategy, the paper said, which resulted from lessons the government learned when it threw away hundreds of billions of pesos by generating and distributing electricity through National Power Corp.

“This strategy has clearly yielded more success,” said the paper.

“But the loan-powered versions of the NBN and the CEP require the government to abandon this painfully won strategy and resurrect the zombie of a government-run communications system,” it said.

Details of the $329-million NBN project that went to Chinese firm ZTE remain hazy, although the Department of Justice has ruled that the contract for it is legal.

Transportation Secretary Leandro Mendoza and Yu Yong, ZTE vice president, signed the contract on April 21, in ceremonies witnessed by President Gloria Macapagal-Arroyo shortly before the Philippine copy of the contract was stolen.

On the same day, Trade Secretary Peter Favila signed with Chinese authorities a $460-million deal to build a satellite-based backbone for the CEP on behalf of the Department of Education.

Both agreements were sealed in Boao, China.

More harm than good

While there was no question of the benefits of a broadband connection for the public schools and government offices, the government’s two biggest IT projects are likely to do more harm than good to public funds, and to the people, the paper said.

“It is essential to note that original government plans at no point envisioned a separate backbone to be financed, owned and operated by, and dedicated to the needs of the government,” it said.

“It was completely unexpected, therefore, … when this apparent resolve and consistency crumbled and the government reversed its direction.”

Not only did the government reverse itself, but the cost of the projects also ballooned from P5.1 billion to P19 billion for the NBN and from P5.2 billion to P24.6 billion for the CEP, according to the paper.

“The government has now incredibly ended up batting not just for one, but for two publicly owned government broadband backbones!” it said. “How has this happened?”

Defenders of the NBN said the project was like a gift being handed on a silver platter by the Chinese government to the Philippines so they couldn’t understand what all the fuss was about.

China’s motives

But the paper said a closer look at Chinese generosity would unmask the real motives for China’s eagerness to lend $329 million to the Philippines for the NBN.

“China’s newly discovered generosity is … neither strange nor totally unexpected,” it said. “That country is, after all, sitting on some $1.33 trillion of foreign exchange reserves.”

Generosity is easy to come by if one’s vault was starting to burst open with cash.

China, the paper said, was using loans “as a tool to simultaneously unload” its excess cash and to achieve another goal -- entice indebted countries to import Chinese products to keep Chinese workers employed.

The excess cash won’t have to sleep anymore in Chinese government vaults but, in the case of the NBN contract, earn three percent annual interest as a result of the sovereign guarantee that assures payment whether or not the Philippine government benefits from the project.

ZTE also has IT projects in Liberia, Algeria, Ghana and Lesotho. The projects were all funded by loans from the Chinese government.

“But though one may justifiably raise eyebrows at the Chinese … it should really cause no surprise that they should be conscious of their country’s interests and seek to promote these avidly,” said Fabella’s and De Dios’ paper.

Trap of donor nations

“Instead, what should be surprising is if the Philippines and its leaders were sufficiently unaware of, or oblivious to, their country’s own interests to be caught in the trap of donor countries,” it said.

The paper said that while it was clear that hundreds of billions of pesos would pour into the NBN and CEP, their benefits in terms of pesos and centavos were not very clear. It said the government also appeared not to know exactly what it wanted to do with broadband technology, except to connect to the Internet as many government offices and public schools as possible.

No feasibility study

This, the paper said, was obvious from the start -- there was no feasibility study made on the NBN project, in particular, because no lender wanted to finance it.

“To begin with, if the government seriously believed the NBN backbone was a vital project, then it ought first to have completed the preliminary work … of identifying the magnitude and urgency of the need, the technology and equipment required to fill it, and a ballpark figure for its cost,” the paper said.

“Since it did not set its own minimum conditions beforehand … the government effectively allowed bidders and loan pushers to write their own terms,” it said.

The paper did not identify who these bidders and loan pushers were, but the NBN project came about after telecommunications firm Amsterdam Holdings Inc. (AHI) sent an unsolicited proposal to build a broadband network with the government as its main, but not exclusive, client.

Shortly after AHI sent the proposal, US firm Arescom and ZTE came in with their own.

The AHI proposal apparently was driven by Ms Arroyo’s 2006 State of the Nation Address in which she identified the Cyber Corridor as one of her priority projects.

But to do this, the President needed full support from Congress, a goal that was then, and probably is now, not difficult to meet because the House of Representatives was under Ms Arroyo’s ally, Speaker Jose de Venecia Jr., whose son Jose III owns AHI.

Fabella and De Dios said the absence of a feasibility study led to confusion on the part of officials who were pushing for the NBN and the CEP, and those who had been vacillating.

“No common basis can … be laid for a comparison of options, since deliverable features will always vary with costs,” they said.

“This situation is as absurd as calling for a bid to supply government with ‘fruits in general,’” they added.

Turnaround artists

With government not knowing exactly what it wanted, “the technical upper hand is abdicated … to project proponents such as turnaround artists in unsolicited bids and ODA [official development assistance] merchants.”

The paper said the Philippine government should have learned its lessons from past, and ongoing, foreign-funded projects like the Light Rail Transit 1, Metro Rail Transit 2, MRT 3, the NorthRail and Terminal 3 of the Ninoy Aquino International Airport (NAIA).

It said the absence of choices, as required by lenders and uncontested by debtors, “was why the rail gauges of the LRT 1, MRT 2 and MRT 3 are all different, and why the nonfunctional NAIA 3 is irrationally still in the heart of the metropolis.”

“The situation is pathetic in one sense since it vividly illustrates the adage about beggars not being choosers,” said the paper.

It said the fundamental IT problem that the government had to address was to find the “last-mile connectivity” to link government and public school computers -- from as far north as Batanes to as far south as Tawi-Tawi -- to the Internet.

But it said that simply building a backbone to serve as an invisible technological highway would not serve the purpose.

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No links to final users

“In short, even as information highways might connect various islands, provinces, cities and indeed the world, there are few, or no links, connecting them to final users,” said the paper.

“It is as if expressways had been built but not the municipal or barangay roads that would connect people to such high speed lanes,” it said. “A related problem is, of course, few people own the ‘vehicles’ (read computers and peripherals) needed to travel such roads.”

What needs to be done, the paper said, is just for signals carried by fiber optics or wireless technology to reach the farthest of government computers.

“There is no need to reinvent the wheel,” it said.

If the government wants to save on costs, the paper added, it simply could use its leverage as a “bulk buyer” to obtain lower rates from private telecommunications firms.

“For this, one does not need an NBN,” the paper said.

Proponents of the NBN had said during Cabinet meetings the project would save the government as much as 50 percent in telecommunications spending.

It was to be the NBN’s single biggest selling point, but nowhere in letters or transcripts of meetings discussing the project was it made clear how much in savings were to be realized from the project. Not one of its proponents had certain answers.

Why then pursue the project?

The paper said one reason could be “poor ethos” taking its toll.

“Just as a slave can get used to his chains and actually fear freedom, it is said that poor countries cannot afford to be rich,” said the paper. “That is, poor countries are too engrossed in the ‘poor ethos’ and find it difficult to escape from it.”

“Their short-term horizons prevent them from discerning the large future payoffs of postponing consumption. Thus, they tend to splurge today … poor nations are poor because they cannot handle affluence,” the paper said.

Irrational shopping binge

“If a credit line prompts an irrational shopping binge, that is a sure sign of the poor ethos in action. That person is destined for bankruptcy,” Fabella and De Dios said.

Another reason that could be driving the Arroyo administration into pursuing these two costly projects, according to the paper, was its newfound confidence in fiscal reforms and the increase in revenue that these brought.

“But more revenues make sense only if additional resources are spent judiciously and effectively,” said the paper.

“Unfortunately, many in the political establishment have taken these promising numbers as a license for them to take what they believe is their well-deserved share,” it said.

[explorer]

No go for broadband deal--Palace adviser
Apostol: Where's copy of contract?

By Michael Lim Ubac, Riza T. Olchondra, Jeannette Andrade
Inquirer, Last updated 00:24am (Mla time) 08/07/2007

THE CONTROVERSY over the $329-million national broadband network (NBN)
contract that went to ZTE Corp. of China was reduced Monday to a paper chase.

President Gloria Macapagal-Arroyo's legal adviser, Sergio Apostol, said the project could not be implemented because the contract was nonexistent.

"How can we implement? There are no papers. Show me the contract," Apostol said when asked about the status of the ZTE contract.

The Philippine government's copy of the contract was stolen shortly after Transportation Secretary Leandro Mendoza and Yu Yong, ZTE vice president, signed it on April 21 in the presence of Arroyo.

Also stolen was the Philippine copy of the $460-million contract to build a satellite-based backbone for the Department of Education's Cyber Education Program (CEP).

Both the NBN and CEP contracts were signed in Boao, China, on the same day. The projects were to be financed by a concessional loan from China.

Two professors at the University of the Philippines' School of Economics said there was no need for the NBN and CEP deals.

Economics professors Raul V. Fabella and Emmanuel S. de Dios said the two projects were likely to end up being a waste of funds partly because it was not in the government's "core competence" to own, maintain and use an information technology infrastructure separate from two existing ones owned by private telecommunication firms.

Moral backbone

They said government should address "last-mile connectivity" to government agencies and public school computers instead of building another network.

"The only backbone that the government needs today is a moral one," Fabella and De Dios said in a paper titled "Lacking a backbone: The controversy over the National Broadband Network and Cyber-education projects."

Apostol said before Malacañang would answer the criticisms heaped on the project, there should be proof that the contract ever existed.

Details of the NBN project remain hazy at this time although the Department of Justice has ruled that the contract is legal.

In broad strokes, the NBN will exclusively cater to the telecommunication needs of the national government and local government agencies. It is also aimed at reducing the telecommunications spending of the government.

Budget Secretary Rolando Andaya Jr. said the NBN project, to be funded through a loan by China's Eximbank, carried a sovereign guarantee, which means that the government will have to pay for every yuan spent for the project.

Andaya, however, said the ZTE deal was not covered by the Government Procurement Act, which requires a transparent bidding process.

"There are exceptions under that law, and if it's a government-to-government (contract), then there's no need for it to go through that," he said.

Contract didn't reach Palace

But Apostol pointed out that legally speaking, the contract was nonexistent because there were no documents to speak of.

"Somebody has stolen it--(all) two copies. So there's no contract. We don't know what kind of contract it is," the President's legal adviser said.

He noted that the ZTE contract did not pass through his office for scrutiny.

"It did not pass through Malacañang because it was lost. How can it pass through me when the documents were gone? I haven't seen the contract," he said.

Never impartial

Apostol described Fabella and De Dios as "never impartial." He said the UP professors "have not even seen the contract, (yet) they made conclusions already."

The Department of Transportation and Communication (DOTC) disagreed with Fabella and De Dios' claim that the country does not need another broadband network.

"This is one of the few cases in which outsourcing does not make sense," said Lorenzo Formoso, assistant secretary for telecommunications.

"Using existing telco services is costing us almost P4 billion a year. If we make last-mile connections by buying more airtime from them, we will have to budget this again. In contrast, if government has its own network, the savings will actually pay for the loan," Formoso said.

Savings

DOTC data show that government can save P2.51 billion from the NBN project set to be undertaken by ZTE. At present, the cost of all telecommunications for government is P3.5 billion.

With the loan-backed contract, government is set to pay P990 million in annual amortization, giving the government P2.51 billion in savings that can be used for other purposes, according to the DOTC.

But the savings would exclude those for mobile communications because the NBN does not have a mobile component.

The DOTC said the offer of Amsterdam Holdings Inc. (AHI), the company that submitted an unsolicited to build a broadband network, and that of another bidder, US-based Arescom, would be more expensive than that of ZTE's.

This is because AHI is offering a $240-million satellite-based network with 87 stations but the government must buy its own Voice over Internet Protocol or VoIP service.

Arescom has offered a bid-price of $135 million but can only provide 21 base stations. "So, in reality, they are more expensive," Formoso said.

House probe

In the House of Representatives, the chair of the committee on information and communication technology wants to grill executives of the National Economic and Development Authority, DOTC and Commission on Information and Communications Technology on the NBN deal.

Catanduanes Rep. Joseph Santiago said representatives of ZTE, AHI and Arescom, along with Fabella and De Dios, would also be invited to the public hearing.

The Alliance of Concerned Teachers (ACT) asked the government to sober up on its "Cyber Education" program, calling it a white elephant that has nothing to do with cutting-edge technology.

ACT chair Antonio Tinio said the money to fund the project could be better spent on building classrooms, subsidizing the education of children who cannot afford to go to school, hiring more teachers, and producing quality teachers.

Simply broadcasting

"The project is very expensive with little or no proven benefits to the students. It is simply broadcasting a 20-minute lecture to selected schools via satellite. If that is the only thing the Department of Education (DepEd) wants to do, it might as well tape the lectures, place them in compact disks and distribute them to the schools for viewing,"
Tinio said.

The project aims to set up television production and satellite broadcasting facilities at DepEd's central office and satellite-based facilities in 26,618 schools nationwide, each of which will be provided with a multimedia classroom equipped with four television sets, two desktop computers and a printer.

Fifteen- to 20-minute lectures conducted by education experts in all subjects for all grade or year levels will be aired live via satellite to all schools on 12 television channels.

Tinio said the project would not provide students with computer-based learning as the name connotes

[niky]

No big surprise that people are starting to question it. The whole deal stank from the beginning... and noted economists were starting to draw parallels between the deal and Marcos Era economics...

Simply put, the government should not be in business. This is the problem we see in places like Venezuela... or, wait... we've seen this in the Philippines... when the government, under Marcos, nationalized certain businesses... they degraded... with privatization, things have finally started picking up for them.

It would be more in the government's interest to invest in local telecommunications firms to boost connectivity, rather than to "reinvent the wheel" (as opined above) and create its own network. This would also allow it to leverage lower prices and rates out of these firms, who are constrained by the lack of lines and the need to deal with PLDT.

[explorer]

Murphy’s deal

Inquirer (EDITORIAL)
Last updated 01:52am (Mla time) 08/30/2007

With the ZTE deal, everything that can go wrong has gone wrong. Is it any wonder, if the lurid reports ultimately prove accurate, that a Commission on Elections (Comelec) official was actually involved in the deal?

The Comelec should have nothing to do with the ambitious but fatally flawed plan to construct a National Broadband Network -- unless, that is, previous participation in another ambitious but fatally flawed computerization contract (think Mega Pacific) was a prerequisite. But, if the reports are accurate, the hiring of the election official to lobby for the contract was a masterstroke of cynicism: during an election period, the influence of election commissioners is second to none.

As it is, the entire NBN scandal has all the hallmarks of a Comelec project under the chairmanship of Benjamin Abalos.

Like the infamous claim of Maguindanao election supervisor Lintang Bedol, the scandal involves stolen documents. To be sure, the ZTE deal wasn’t the only such contract stolen in Boao, China, last April, hours after it was signed in the presence of President Gloria Macapagal-Arroyo. At least five other contracts were filched, too. But like Bedol, officials of the Department of Transportation and Communication waited an inordinately long time to report the alleged theft.

The scandal also features clueless government officials, in the mold of Abalos himself. The President’s chief lawyer, Sergio Apostol, announced that there was, in fact, no contract. Transportation and Communication Secretary Leandro Mendoza, whose department will manage the network, kept a studied if embarrassed silence. And the Department of Justice ruled that the contract between ZTE and the Philippine government was valid -- without, however, actually seeing a copy of the contract.

Like the Maguindanao vote recount, the scandal is marked by a thorough lack of transparency. The contract for the network mysteriously ballooned in the course of a few months, ending as a $330-million project. In the process, the competitive and in fact superior bids of two other companies were virtually ignored.

Above all, and like Abalos’ oft-repeated claims of his commitment to clean and honest elections, the scandal involves a betrayal of the project’s very objective. Instead of an infusion of foreign capital to produce a functioning network, we will get the opposite: an unnecessary and expensive piece of government infrastructure, paid for by Filipino taxpayers.

Last March, officials of ZTE, described in news releases then as China’s largest listed telecommunications equipment provider, pledged (together with officials of another Chinese company) to invest heavily in the Philippines. “Officials of Pioneer Metals Group of Companies based in China and Hong Kong and ZTE Corp. ... told President Macapagal-Arroyo in separate calls in Malacañang of their intentions to invest here….”

This notion of investment, however, has been stood on its head. A few days ago, the Philippine government took out a loan from China’s Import-Export Bank, including a $400-million allocation for the National Broadband Network. What does this mean? It means ZTE is not in fact investing in the Philippines; it has bamboozled the Philippine government into taking out a loan from the Chinese government to fund ZTE’s “investment.”

Surely this “investment” is not what the President and her economic officials had in mind, when they discussed the need for a “privately funded government broadband network” in November 2006, and resolved that “the government connectivity and infrastructure should be developed at no cost, and with savings, to the national government.”

For these or similar reasons, Rep. Carlos Padilla of Nueva Vizcaya has filed graft charges against Mendoza, two of his assistant secretaries, and at least four officials of ZTE, for violating anti-graft and government procurement laws. “The officials I have charged are liable for misleading the public and executing this anomalous contract and should be punished accordingly,” Padilla said.

Let’s hope Murphy’s Law, at work in this controversial deal at every stage, does not extend to the prosecution of Padilla’s case.

[explorer]

Trader to testify against Abalos
Chinese firm says raps vs broadband deal baseless

By Juliet Labog-Javellana, Riza T. Olchondra, Beverly T. Natividad
Inquirer, Last updated 02:04am (Mla time) 09/04/2007

MANILA, Philippines -- A businessman is willing to testify in any investigation that Commission on Elections Chair Benjamin Abalos Sr. offered a rival firm of China’s ZTE Corp. $10 million to withdraw from the national broadband network (NBN) project.

“I’m willing to testify before the Ombudsman, the Supreme Court or any congressional investigation. There is nothing to hide,” the businessman told the Inquirer.

But the businessman declined to be named in the meantime, saying he did not want to be cited in contempt by the high court, which has been asked to nullify the ZTE contract.

The businessman said Abalos had attempted to bribe Jose “Joey” de Venecia III, cofounder of Amsterdam Holdings Inc. (AHI) and son of Speaker Jose de Venecia Jr.

Abalos refused to comment on the allegation that he tried to bribe De Venecia so AHI would withdraw its bid for the NBN project.

“I think I have said enough. How can I comment on something I don’t know?” Abalos said on the phone.

AHI and US-based Arescom had protested the ZTE contract, which was signed during President Gloria Macapagal-Arroyo’s trip to Boao, China, on April 21.

The NBN is envisioned to establish a seamless connectivity of landline, cellular and Internet services among all national government agencies and offices.

The House of Representatives is set to investigate the ZTE deal after Rep. Carlos Padilla claimed that Abalos helped ZTE bag the $329-million NBN deal, which he said was overpriced.

Padilla also claimed that the Department of Transportation and Communications (DOTC) “discriminated against and deliberately refused to act on the proposal” of AHI.

ZTE on Monday said it did not enjoy undue advantage over AHI and Arescom in winning the NBN contract.

“Since March of this year, ZTE’s participation in the proposed NBN project has been subjected to malicious and unjustified attacks by other parties. We have been quiet because we know these are all baseless accusations,” ZTE said in a statement.

“The time has come, however, to let the public know the truth. There was complete transparency in the proposal, evaluation and approval of ZTE’s application for the Philippines’ NBN contract,” the Chinese company said.

ZTE remained mum on allegations that it bribed Philippine government officials to bag the contract.

Last hurrah

The businessman said De Venecia was having breakfast with Abalos and some of his friends at the Wack Wack Golf and Country Club in Mandaluyong City sometime in December last year when the Comelec chair invited the Speaker’s son to his private office at the golf club, of which Abalos is president.

The businessman said this was what Abalos told De Venecia:

“Joey, this is my last hurrah. I have nothing to do after I retire. I really want this contract. I’m willing to give you $10 million.” Abalos is due to retire in February 2008.

The businessman said the bribe would come from the overprice of the ZTE deal.

AHI and Arescom offers

The businessman said De Venecia turned down the offer, insisting that his firm’s offer was better because it does not require a sovereign guarantee.

AHI offered $240 million, and Arescom, $130 million.

The businessman said ZTE had proposed $262 million for the project, including $130 million for the cost of the actual equipment.

Upon Abalos’ suggestion, the ZTE contract was upgraded to $329 million, according to the source.

The NBN project is one of the target beneficiaries of the $1.8-billion loan agreement between the Philippines and China.

The Philippine government and the Chinese Export-Import Bank signed the deal without fanfare on Aug. 25 on the sidelines of the ASEAN Economic Ministers meeting at the Shangri-La Hotel in Makati.

In response to Abalos’ concern about being jobless after his retirement, De Venecia offered him a seat on the AHI board or even to be its chair emeritus, according to the source.

After De Venecia turned down Abalos’ offer, the Comelec chair asked the former to see him again in his Wack Wack office to convince him to give way, according to the source.

Trip to Shenzen

Apart from the six meetings in Wack Wack, Abalos invited De Venecia to join him in Shenzen, China, to meet with ZTE officials.

De Venecia agreed, and met with Abalos and the ZTE officials in a hotel in Shenzen on Dec. 27 last year.

The source said Abalos presented De Venecia as “my partner and the son of the Speaker.”

De Venecia flew separately with Abalos, who went to Shenzen two days ahead.

Most powerful man

At the hotel meeting, the businessman said Abalos bragged before De Venecia and the ZTE officials that he could secure the contract because of his powers as chair of the Comelec.

“I’ll be the most powerful man in the Philippines starting Jan. 15 because I’m the Comelec chair,” the businessman quoted Abalos as saying.

The Comelec chair meant to say that no politician could challenge his decisions during the campaign period for the 2007 midterm elections.

Asked why De Venecia agreed to the Wack Wack and Shenzen meetings with Abalos, the businessman said it was in deference to the Comelec chair’s position.

First proponent

In the ZTE statement, sales director Zhang Shumin said the company was the first proponent of the NBN project, contrary to allegations by competitors.

He said ZTE submitted its original proposal to the CICT (Commission on Information and Telecommunications), the original shepherd of the NBN project, in April 2006.

AHI claims to have started pitching its idea for NBN around this time before submitting a formal proposal in December 2006.

“It (ZTE proposal) went through a six-month evaluation from CICT, NEDA [National Economic and Development Authority] had the proposal for six months as well, and for four months the papers were with the DOTC for evaluation and comparison to the other proposals which incidentally, were late in submission,” Shumin said.

Most comprehensive

For his part, Howard Xue, ZTE global marketing director, said the company offered the most comprehensive and responsive proposal to help meet the Philippine government’s ICT infrastructure requirements.

Zue said the ZTE proposal would cover first- to sixth-class cities and municipalities all the way down to the barangay level.

To bridge the digital divide and promote e-governance, the Philippine government needs network availability in remote areas with enterprise-quality communication, according to Xue.

“This can never be achieved unless it builds and operates the system itself, because private telecom operators do not provide the required services to the (poorest) fifth- and sixth-class municipalities, and only partially to fourth-class municipalities since it is commercially unprofitable to operate in such areas,” he said.

Xue said ZTE’s proposed NBN network would cater exclusively to the government, completely integrating all government communication infrastructures.

“Clearly, our NBN has no intention of taking away the business from existing private telcos unlike the proposals of other companies,” he said.

Xue was alluding to AHI’s proposal to offer commercial telecom services while exclusively servicing the government’s telecom needs.

AHI’s proposal to fuse all landline, cellular and Internet needs of the national and local offices covers first- and second-class municipalities.

Arescom proposed connectivity up to the third-class municipalities using voice over Internet technology.

[chua_riwap]

Kung totoo itong report ni Lacson, garapalan na ito! Sandamakmak na pera ang kickback dito.

Grabe! Kahit $5M pa lang yung paunang bayad, nasa almost P250M na yan. Mayaman na yung mga Comelec officials.



Senator Reveals Division of Kickbacks in NBN Deal

Opposition leader Sen. Panfilo Lacson on Tuesday revealed that three people in the government asked for millions of dollars in kickbacks for the P329-million national broadband network (NBN) deal with China's ZTE Corp.

Lacson referred to the three people as "a Commission on Elections official" the "big one and little one." The senator said the COMELEC official was supposed to get $55 million in kickbacks and $75 million for the "big one" and the "little one."

He said that officials of ZTE Corp., the Chinese firm awarded the broadband project, were also asked to allot $68 million for the administration's campaign kitty in the last May elections.

Lacson, quoting a source privy to the deal, said the kickbacks have not been fully distributed to the three officials. He said that according to his source, at least one group had received $5 million.

The senator declined to name the people who received kickbacks from the Chinese firm but said they are all government officials.

He also revealed that the NBN project was originally awarded to ZTE Corp. with a $130 million contract price. He said ZTE Corp.'s bid was the lowest compared to the offers made by other firms.

However, he said ZTE Corp. officials were forced to jack up the price because of the pressure coming from the corrupt government officials.

He dubbed the ZTE deal as "the great grandfather of all scams" for allegedly being worth almost three times the cost of` the project.

“For insatiable government officials, 100 percent overprice is just too much for the taxpayer. Here is a scam that costs 300 percent more than it is actually worth,” he said.

Meanwhile, Senate President Manuel Villar Jr. said he had already asked lawyers of the Senate to study the possibility of investigating the NBN deal, which involves COMELEC Chairman Benjamin Abalos Sr.

Villar said he made the order as House members had signified their intentions to file an impeachment complaint against Abalos.

Akbayan Rep. Ana Theresia “Risa” Hontiveros-Baraquel said the opposition still lacks documentary evidence to impeach Abalos. She said that aside from the ZTE deal, opposition congressmen will also gather evidence of Abalos's repeated electoral offenses.

She said the opposition may tap businessman Jose P. de Venecia III, cofounder of Amsterdam Holdings Inc. and son of Speaker Jose de Venecia Jr., to provide evidence against Abalos.

She said opposition members of the House will try to collect evidence for Abalos's impeachment case in two to four weeks.

Nueva Vizcaya Rep. Carlos Padilla has accused Abalos of helping ZTE bag the NBN deal by offering bribes to senior government officials. He said the country's top election official also offered $10 million to AHI to withdraw from the project.

Abalos has denied the accusations.

Padilla questioned the contract's approval without a public bidding and the move of the Philippine and Chinese governments to enter into a loan agreement to finance the broadband network.

The $329-million NBN contract with ZTE Corp. is one of the target beneficiaries of a $1.8-billion loan agreement between the Philippines and China. The project aims to provide broadband services to all government agencies nationwide by 2010.

AHI and US-based Arescom have protested the ZTE contract for being grossly overpriced. AHI offered $240 million for the NBN project while Arescom offered $130 million.

AHI officials said they are willing to disclose the details of the company's involvement in the NBN project before the courts or in an investigation by the House of Representatives.

"On Aug. 3, 2007, AHI formally asked [Department of Transportation and Communication] for a copy of its contract with ZTE. It has been more than a month since our written request, and quite a few months since we made informal overtures with DOTC officials to obtain a copy of the contract. To date, DOTC has not even acknowledged receipt of our request, much less provided us a copy," AHI spokeswoman Marinelle B. O'Santos said in a statement.

She added: "AHI has been seeking redress for a number of months now. It has been a lonely and uphill battle from the start - until now. AHI is heartened and encouraged by the serious interest shown by the public, particularly the media, in getting to the bottom of the controversial National Broadband Network."

[explorer]

More multimillion-dollar deals in NBN project--Lacson

By Veronica Uy
INQUIRER.net
Last updated 10:56pm (Mla time) 09/04/2007
NOTE: Reposts to correct figures

MANILA, Philippines -- An official of the Commission on Elections will get $55 million while “Big One and Little One” will get $75 million in kickbacks from the controversial China loan agreement with ZTE Corp., Senator Panfilo Lacson said Tuesday.

“The interesting question is how much would go to whom? Inside info has it that $55 million will go to a Comelec official, $68 million was supposed to bankroll the May 14, 2007 mid-term elections, $75 million to the Big One and the Little One, and the overprice balance, to some equally corrupt DoTC [Department of Transportation and Communication] officials and the rest of the 'usual boys,'” Lacson said when asked to comment on the alleged gag order by Malacañang on the ZTE deal.

Lacson neither named his source nor the people he was referring to.

Chairman Benjamin Abalos of the Commission on Elections has been implicated as broker in the deal, but has denied his involvement.

Lacson also criticized the loan agreement for the national broadband network for being worth almost three times the cost of` the project.

“For insatiable government officials, 100 percent overprice is just too much for the taxpayer. Here is a scam that costs 300 percent [from $130 million to $330 million] more than it is actually worth,” he said.

Lacson slammed the administration for the scams it has been involved in.

“If the PEA-Amari anomaly was the mother of all scams and the Diosdado Macapagal Boulevard scam was the grandmother, the ZTE deal is probably the great grandmother. With ZTE, Jocjoc [Jocelyn] Bolante now looks more like a cell phone snatcher,” he said.

Lacson said he joined the Filipino people in the belief that this administration was the most corrupt.

“At the rate that Malacañang under GMA is breaking all scam records, it is just a matter of time when it will come up with another record breaker. No wonder Filipinos are almost unanimous in judging her administration as that -- most corrupt,” he said.

“The Palace slip is clearly showing, and probably showing it all in ordering a gag on Cabinet officials regarding ZTE deal,” he said.