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Arroyo cites graft in suspension of broadband deal

A worker installs cables for local telecom company Globe in suburban Quezon City south of Manila yesterday. After a week of allegations in the media and ahead of a Senate inquiry into supposed government incompetence and corruption, Philippine President Gloria Arroyo has suspended a controversial US$330 million national broadband project with China. PHOTO: AFP

Philippine President Gloria Macapagal Arroyo has ordered the suspension of a national broadband deal and a cyber education project with China amid allegations of graft, officials said yesterday.

The suspension followed allegations of bribery and overpricing in the US$330 million project won by China's Zhong Xing Telecommunication Equipment Corp (ZTE, 中興通訊) to establish a national broadband network for the government, Philippines Trade Secretary Peter Favila said.

Favila said Arroyo ordered the "indefinite suspension" of the projects because of the controversy that prompted a Senate investigation into the ZTE deal.

He declined to elaborate on the decision, citing Arroyo's "executive privilege."

Howard Xue, ZTE's global marketing director, denied allegations his company bribed Philippines 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.

The cyber education project, which aims to provide educational services over the Internet to 90 percent of the country's public elementary and high schools, was partly funded with a loan from China. Critics questioned the relevance and cost of the US$465.5 million effort.

Jose de Venecia III, founder of losing bidder Amsterdam Holdings, told a Philippines Senate investigation that the head of the Commission on Elections, Benjamin Abalos, had received bribes to push the ZTE deal.

De Venecia also said that Abalos offered him US$10 million to withdraw.

Abalos has denied the allegations.

De Venecia said that he had been told to "back off" by Arroyo's husband, Mike Arroyo.

A lawyer for Mike Arroyo, Jesus Santos, said he only reminded de Venecia -- the son of the speaker of the House -- that as a relative of a government official he should not get involved in government transactions.

Amsterdam Holdings insisted it should have won the contract because it offered to build the broadband network at no cost to the government, unlike the ZTE deal that required the government to secure a US$330 million loan from China.

The broadband deal and the cyber education project were among a package of Chinese investment projects worth US$904.4 million obtained by Philippines officials during a visit to China in April.
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