Philippines suspends Chinese-funded projects in wake of scandal

By Carlos H. Conde
International Herald Tribune
Published: September 25, 2007

MANILA: The fallout from a corruption scandal involving a $329 million telecommunications contract between the Philippines and China is widening.

This week, President Gloria Macapagal-Arroyo, whose dealings with Beijing have come under intense scrutiny, decided to suspend the implementation of more than $4 billion worth of various projects that were to be financed by Chinese money.

The suspension of the projects, including a major one to develop farmland, follows an uproar over whether government officials accepted kickbacks for awarding the lucrative telecommunications contract to ZTE, a Chinese firm, rather than to a Philippine rival. Arroyo, under increasing pressure to clear up the case, already had put that project on hold last week.

The additional suspensions, officials said, would enable the government to review the agreements and contracts signed by Manila and Beijing and several Chinese companies, this time making sure that they do not violate Philippine laws and guidelines and that other stakeholders, like business, farmers and nonprofit groups, are involved in the process.

On Tuesday, Arroyo said the decision to defer the projects was announced after the Chinese “indicated that they will try to understand our predicament.” She also announced the creation of the China Projects Oversight Panel that would oversee the implementation of Chinese-funded projects.
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The biggest project put on hold was a $3.8 billion investment by a Chinese company, Jilin Fu Hua, to develop 1.2 million hectares, or nearly 3 million acres, in the Philippines for the production of hybrid corn, rice and sorghum for export to China.

The suspension was due in part to the “strong objections” raised by Catholic bishops and farmers groups to the Jilin Fu Hua deal in the wake of the ZTE controversy.

“We won’t lose anything by conducting consultations,” Arthur Yap, the agriculture secretary, told reporters on Monday.

“It would be in the best interest of all the parties to temporarily suspend the implementation and go into deeper consultation with all possible stakeholders to come up with an acceptable mechanism.”

Dealings with China heated up last week when allegations during a Senate hearing suggested that the president’s husband, Jose Miguel, and the head of the elections commission, Benjamin Abalos, tried to intercede on behalf of ZTE. A businessman who lost in the bidding alleged during the hearings that Abalos, a key ally of the president, received payoffs from ZTE – a charge Abalos and the company have vehemently denied.

Arroyo also cited the “political noise” created by the ZTE controversy in deciding to suspend a $400 million “cyber-education” project, which would provide Internet access to schools around the country.

The project was to be financed by Chinese loans, and critics said the deal, like the one with ZTE, was also overpriced, especially considering that many Filipino schoolchildren do not have enough books or classrooms.

Many people here are concerned that negotiations for these projects were not transparent enough. Also, the Jilin Fu Hua project might violate the Constitution, which forbids foreigners from owning land in the Philippines, farmers groups say.

“Nobody knows what the guidelines were in getting these loans,” said Milo Tanchuling, secretary general of the Freedom From Debt Coalition, a nonprofit that tracks the Philippines’s indebtedness. He said that his group and several others had sought clarification from the Philippine government “but we were only given safe answers.”

Critics of the government have been urging Arroyo to cancel altogether these contracts and agreements with China.

In a letter to the Chinese embassy in Manila on Monday, the Peasants Movement of the Philippines urged Beijing to rescind at least 18 agricultural agreements which, according to them, “were made without public consultations and lumped into a package of midnight deals.”

The Chinese embassy in Manila did not reply to requests for comment on Manila’s suspension of the projects.

Donald Dee, chairman of the Philippine Chamber of Commerce and Industry, cautioned the government about canceling these contracts.

“A cancellation would be very insulting to the Chinese and we don’t want that to happen,” he said in an interview.

What the suspension does, however, is afford Manila the chance to review these projects. “We have to make sure that this is in accordance with acceptable processes,” Dee said.

About Carlos H. Conde

Researcher at Human Rights Watch (@condeHRW @hrw_ph). Former journalist (NYT, IHT, among others).
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