ZTE, Cyber Ed deals with China suspended

By Lira Dalangin-Fernandez, Veronica Uy
Agence France-Presse, INQUIRER.net, Associated Press, Reuters

The controversial $329-million national broadband network (NBN) deal with the Chinese company, ZTE Corp., has been “indefinitely” suspended, Trade Secretary Peter Favila said Saturday.

In a broadcast interview with reporters, Favila said the suspension was on the instructions of President Gloria Macapagal-Arroyo, who personally called him. He said the review of the deal that has been marked by scandals of bribes and kickbacks will be discussed “quietly and appropriately” between himself and his Chinese counterpart.

“Utos ng Pangulong Arroyo (It was the President’s instruction),” he said without explaining why the deal to set up a network for exclusive use of the government was suspended.

Favila also announced a similar government action on the $460-million Cyber Education Project, another China-funded loan project which seeks to connect 90 percent of all public schools nationwide.

The announcement came after a week of allegations in the media and before a Senate inquiry of supposed government incompetence, corruption, and the involvement of Arroyo’s husband, businessman and lawyer Jose Miguel Arroyo, in the deal.

Howard Xue, ZTE's global marketing director, has denied allegations his company bribed Philippine officials to win the contract. ZTE "proposed the best price, financing and technical proposal ... There is absolutely no need to bribe anybody to get the project," he said.

“I think this is the best thing to do now,” Favila said in an emergency press conference he called at the Edsa Shangri-La Hotel. He said the Chinese agreed to the suspension Friday night.

"Minister Bo Xilai said his government understands and respects the decision of President Arroyo and will continue to support her and her programs," presidential spokesman, Ignacio Bunye, said in a statement on Saturday.

Favila said Arroyo did not give her reasons for the suspension, commenting “that is her executive privilege.”

But Presidential Management Staff chief Cerge Remonde said the President bowed to “public opinion” when she decided to suspend the deal.

Remonde said the deal has generated much controversy and that suspending it is one way of putting a rest to it.

The President’s decision came even after Palace officials claimed that they have successfully defended the deal and that they have shown the public that it was above-board at the Senate hearing on Thursday.

Remonde did not reply when asked if the President considered the pending cases before the Supreme Court and the Ombudsman in making the decision to suspend the project.

Acting Justice Secretary Agnes Devanadera, who was in the same forum as Favila when the suspension of the deal was announced, said the deferment does not mean that the deal was anomalous.

Devanadera said Transportation Secretary Leandro Mendoza had done his homework. “He looked into the background of the nominated contractor,” she said, adding that “due diligence” was practiced.

In reaction, House Speaker Jose De Venecia Jr. said over DZMM he was “happy” over the temporary suspension.

“Masaya ako (I am happy) because I have been calling that the deal be reviewed, suspended, and eventually cancelled in its present form,” De Venecia said, adding that he hopes that the deal will be converted into a form, as in a build-operate-transfer (BOT), that would not cost the country a single centavo.

The House Speaker, who claims to be the “father of the BOT law,” said he supports his son’s formula for the NBN project.

The House Speaker’s son and namesake had told the Senate inquiry into the NBN deal that the agreement had been pushed by election chief Benjamin Abalos.

Jose De Venecia III, who has his own proposal on the NBN project, had also told the Senate that the President’s spouse told him to “back off” from the government project.

The Supreme Court earlier this month issued a temporary restraining order preventing the government from going ahead with the project.

Analysts have said a split between Arroyo and Speaker de Venecia could open the way for an impeachment motion in the lower house of Congress against the president, who has failed to shake allegations she cheated in the 2004 elections.