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Arroyo steps in to limit deal fallout

Philippine President Gloria Macapagal Arroyo walks past honor guards as she departs for China at the Centennial airport in Pasay City south of Manila, Philippines, yesterday. President Arroyo left the country for a two-day visit to China amid controversy over a US$329 million broadband project to be funded by a Chinese government loan. PHOTO: EPA

Philippine President Gloria Arroyo flew to Shanghai yesterday to mend damage from a scandal involving a suspended US$330 million business deal with a Chinese firm, an official said.

The Philippine government has suspended the project with state-owned Chinese firm ZTE Corp to set up a broadband network after allegations of bribery and corruption.

"We cannot evade the fact that the scandal hurt China," said Cerge Remonde, the head of the president's management staff.

"That's why the president is going there, to ensure that the damage created by the national broadband network scandal is repaired," Remonde said.

BRIBE

A Philippine businessman who bid for the project told legislators he was offered US$10 million to drop the bid to clear the way for ZTE. He later said he had received death threats after his testimony.

A former Philippine government official has also said he was offered a bribe to help the Chinese company win the government broadband contract.

In the midst of the scandal the Philippines also suspended an education project funded by China worth US$460 million and two major farming initiatives intended to provide agricultural products for the Asian giant.

SHADOW

Beijing publicly said the ZTE controversy would not affect trade ties, but the fallout has cast a shadow over US$1.4 billion in Chinese loans due to be extended to the Philippines over the next 12 months.

Diplomatic sources have said that China is privately unhappy with the suspensions and has warned that future loans could be adversely affected.

Arroyo's chief aide Eduardo Ermita said it was likely she and Chinese President Hu Jintao (胡錦濤) would discuss the ZTE issue as a Philippine Senate investigation into the scandal continues.

Arroyo's government relies heavily on cheap loans from China for many of the major infrastructure projects it has planned for the country.

Arroyo has created a committee to review all government projects with China to ensure transparency.
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