Saturday, August 11, 2007 Broadband deal has no loan pact yet: justice chief
JUSTICE Secretary Raul Gonzalez Sr. said government has to first obtain a loan agreement with the Export-Import (Exim) Bank of China before the US$329 million broadband infrastructure may be implemented.
"What is wrong with the broadband deal is that the loan agreement, which is mandatory in this transaction, is not there. Walang (There is no) loan agreement. It is the loan agreement that will make this into a deal that will satisfy the requirement of it being an executive international agreement," he told reporters.
Gonzalez said the government may reconstitute lost documents pertaining to the construction of the National Broadband Network (NBN), which will inter-connect all local government units down to the barangays and government agencies.
He said negotiators for the project must have failed to take into consideration that the infrastructure could not be implemented without the loan agreement.
Once a loan agreement has been granted by Eximbank, Gonzalez the exchanges of notes between former presidential chief of staff Michael Defensor and Chinese Ambassador Li Jinjun would then become an executive agreement, which will no longer require bidding.
Without the loan agreement, the broadband project has to undergo the process of build-operate-transfer (BOT), in which the rules on bidding will apply, he added.
In his legal opinion last July 31, Gonzalez upheld the validity of the contract amid calls by certain groups to have the deal reviewed.
Gonzalez said the proposed NBN project may be considered an executive agreement by virtue of a memorandum of understanding (MOU) signed between the Philippine Government represented by Trade Secretary Peter Favila, and the Chinese government firm ZTE Corporation.
Under Section 4 of Republic Act (RA) 9184 or the Government Procurement Reform Act, "any treaty or international or executive agreement affecting procurement to which the Philippine Government is a signatory shall be observed," among them infrastructure projects, goods and consulting services, regardless of source of funds, whether local or foreign, by all branches and instrumentalities of government, its departments, offices and agencies, including government-owned and controlled corporations and local government units.
"Clearly therefore, executive agreements involving infrastructure projects to be funded by a foreign lending institution do not fall within the scope of RA 9184, which mandates that all procurement activities must be made through public bidding," said Gonzalez, adding that the loan agreement is considered an integral part of the executive agreement with China.
He further said based on the exchange of correspondence between Li and Defensor, the Chinese Government has designated ZTE Corporation as the project's prime contractor, being an established telecommunications company in China.
Moreover, Li also confirmed that the NBN project will be funded by the Chinese Government through the China Exim Bank.
Thus, since the NBN project will be funded by a foreign lending institution, specifically the China Exim Bank, the guidelines of the bank on procurement shall be followed unless the loan agreement with the bank is silent as to the governing guidelines, in which case RA 9184 may apply, Gonzalez said.
Earlier, the transportation and communications department revealed that the original NBN contract with ZTE for $329 million was lost in Hainan the night after it was signed last April 20 in the presence of President Gloria Macapagal-Arroyo.
Transportation and Communications Assistant Secretary Lorenzo Formoso, who was one of the two Filipino signatories of the contract (the other was Transportation and Communications Secretary Leandro Mendoza), disclosed the loss of the contact, which would facilitate connection among local government units.
It is estimated that it will save the government P3.4 billion yearly in telephone bills. Since its signing last April, the transportation and communications office has not disclosed the details of the contact. Two American companies are protesting the awarding of the contact to ZTE without bidding.
Arescom claims ZTE's cost of US$365 million is more than double the US$135 million it is offering. Amsterdam Holdings Inc. (AHI) also said it filed an unsolicited proposal in December 2006 for a BOT scheme for US$240 million.
Funding under the contact with ZTE would come from a 15-year loan from a Chinese state-owned bank with a five-year grace period.
The implementation of the deal however was opposed by Iloilo Vice Governor Rolex Suplico before the Supreme Court (SC) on the ground that it supposedly violated certain provisions of the 1987 Constitution and existing laws involving government policies on public transparency, accountability and self-reliance.
In his petition, Suplico sought the SC's issuance of as temporary restraining order and/or permanent injunction, to stop the government from "entering into indebtedness, disbursing funds for, and implementing deal without competitive, transparent and public bidding." (ECV/Sunnex)
