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Thu, Oct 04, 2007 - Page 10 News List

Philippines scraps US$330m contract with PRC company

AFP , MANILA

Philippine President Gloria Arroyo said yesterday she had Beijing's support after canceling a telecoms deal with China after a flurry of corruption charges.

The Philippines scrapped a US$330 million contract for a state-run Chinese firm to develop a broadband network for the Philippine government amid allegations of bribes, kickbacks and over-pricing.

Philippine election commission chief Benjamin Abalos resigned on Monday after admitting he got "golf trips" from state-run Chinese firm ZTE Corp (中興通訊), while denying he received the services of prostitutes.

Arroyo, who met Chinese President Hu Jintao (胡錦濤) in Shanghai on Tuesday, said he had expressed understanding after she explained that the deal had to be canceled.

"The president explained the difficult decision not to continue with the project," Arroyo spokesman Ignacio Bunye said. "[Hu] said our relationship is in good shape."

China is Manila's third-largest trading partner, and the fallout has cast a shadow over more than US$1 billion in Chinese loans due to be granted to the Philippines over the next year.

At a Senate hearing into the affair last week, a former cabinet secretary said Abalos had tried to bribe him to ensure the contract went to ZTE. A rival bidder also accused Abalos of influencing the deal.

There were also allegations that Arroyo's husband tried to bully a businessman bidding for the contract to "back off."

The businessman has since said he fears for his life after receiving death threats.

With the deal under investigation, the Philippines has also suspended a China-funded education project worth US$460 million as well as two farm agricultural cooperation deals.

Diplomatic sources say China is privately unhappy with the suspensions and has told the Philippines that future loans could be adversely affected.

China's official Xinhua news agency said Hu told Arroyo that China "treasures its relations with the Philippines and is ready to further step up the development of bilateral relations."

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