Suspended Philippine telecom deal could damage China ties

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AFP

MANILA — The Philippine government’s decision to suspend a major telecoms deal with China has weighed on ties with the economic giant and could sour investor confidence, analysts and officials said Monday. President Gloria Arroyo at the weekend ordered the suspension of a US$330 million national broadband project with China’s state-run ZTE Corp. amid allegations of corruption and government incompetence.

“It seems like there is a big crack in the wall between Chinese and Philippine relations due to the ZTE deal,” said Astro del Castillo, a director of the Association of Securities Analysts of the Philippines.

“Our relations will somehow be affected considering this is supposedly a major and serious contract,” he said.

Philippine senator Mar Roxas said in a statement that he recommended canceling the deal altogether.

“It’s not transparent, thus possibly overpriced, overdesigned,” he said, adding he felt Manila’s ties with China were strong enough to withstand the controversy.

Economist Bing Icamina from AYC Consultants said confidence might be affected, although he argued China still had surplus cash to invest.

“The concern now is dealing with the government on a contract basis, given this experience,” he said. “Essentially, you have to be careful when dealing with government agencies.”

Castillo said the government should punish those found guilty of corruption over the deal, adding “good governance and transparency” were essential to attracting foreign investment.

“If there is no level playing field, you will see an immediate loss of confidence,” he said.

The broadband project was to have set up a national network for the exclusive use of the government and all its agencies.

But allegations of bribery and kickbacks amounting to millions of dollars were made during a Senate inquiry into the project last week.

At the center of the scandal is the country’s election commissioner, Benjamin Abalos, who acted as a go-between for the Philippines and ZTE officials.

Abalos has admitted he was given “golf holidays” in China by ZTE but denied he was offered the services of prostitutes. However, it remains unclear why Abalos was involved in the deal in the first place.

President Gloria Arroyo’s husband, businessman and lawyer Jose Miguel Arroyo, has been implicated too. One of the unsuccessful bidders, Joey de Venecia, claimed he was offered US$10 million to pull out of the race.

De Venecia is the son of the speaker of the House of Representatives, Jose de Venecia, who has distanced himself from the controversy.