Page 2 of 2 Disconnect in Philippines
over China deal By David Llorito
that will be," Formosa said. "Plus
they are going to enter a very competitive field
and still give us a 25% discount. That doesn't add
up."
Formoso said AHI proposed to set up a
mobile-telecom network, which the government
doesn't need because its coverage would be limited
to urban areas. "They are profit-driven, so they
want to concentrate on urban centers - which is
not the right thing to do
when
you are in a missionary environment like the
government," he said.
He also dismissed
Arescom's proposal for allegedly using "obsolete
technology", because it would include the use of
expensive satellite-based technology. The ZTE
proposal, Formosa asserted, is "superior" because
of its greater coverage and advanced technology,
which according to the plan will connect through
fiber optics more than 25,000 government offices
from the national level down to the local level.
Conflicting signals Critics
contend that Formosa's DOTC favored ZTE's bid from
the outset, which is why the government allowed
the company exclusively to modify its originally
tendered proposal.
"The ZTE offer when
they submitted in September 2006 was very modest,"
said O'Santos. "What was signed was totally
different. It's vastly improved. It's actually a
lot closer to our proposal. I have no beef with
that. But they never allowed us the same courtesy
that they gave ZTE to make adjustments to the
proposals."
According to Emmanuel de Dios
and Raul Fabella, economics professors with the
University of the Philippines, the DOTC was able
to favor ZTE over other proposals because the
government did not specify its minimum
technological requirements and commitments if the
project were implemented via BOT. As a result,
they said, government officials were able to fob
off one proposal against another by merely citing
one or the other technical details.
Sharper criticism of the $830 million
projects is that they contradict current
government privatization policy and will duplicate
broadband services already on offer by private
companies.
"The private sector has
provided not one but two such backbones: the
PLDT's [Philippine Long Distance Telephone Co's]
loop-type fiber-optic backbone, which anchors the
signal coverage of the entire country, and the
Telecphil fishbone-type fiber-optic backbone,
which is owned and employed by a consortium of
telcos," said de Dios and Fabella in a recent
paper critical of the ZTE deal.
"All
smaller local telcos are hooked up to either of
these two backbones. Even the local area networks
of large government agencies are already currently
connected to either of these backbones, for
national and global connectivity," the academics
wrote.
Top officials of the National
Economic and Development Authority, which serves
as the secretariat of the Investment Coordinating
Committee that gave final approval on the
national-broadband-network project, claim that the
new network will "bridge the digital divide"
between urban and rural populations.
Other
government officials, however, have sent
contradictory messages. Formoso said the network
is in reality an "intranet" project, which will be
used solely by government agencies and local
government units, including about 50% of the
country's barangays, the lowest unit of
government in the Philippines.
Formosa
estimates that the new broadband network will save
the government close to P4 billion pesos ($89
million) a year on telecommunication services,
including Internet, land-line and cellular-phone
calls by government officials. At the same time,
he also admitted that government will continue to
rely on private telecom companies for certain
cellular as well as bulk Internet services.
Arroyo has said more conservatively that
the savings will be closer to P1 billion per year,
as government agencies will still need to
subscribe to private telecoms for communications
outside the intra-government network, including
when making calls to private companies and state
agencies not covered by the to-be-built broadband
network.
Those estimates may be overly
optimistic, however. Calculations by economists
with the University of the Philippines revealed
that the government could even incur a financial
loss over the life of the system. De Dios and
Fabella contend that the government's projected
savings of P27.75 billion over the project's
15-year life span is less than the P31 billion the
system would cost over the same period. "The
numbers ... simply fail to add up," the two
independent economists concluded.
In
retrospect, Arroyo initially opposed financing the
new broadband network through Chinese
concessionary loans and at first preferred a BOT
scheme where private companies would shoulder the
investment risk. Her unexplained about-turn in
April, the alleged loss of the signed contracts in
China, and the emerging hard questions about the
network's economic benefits, fairly or unfairly,
have generated widespread speculation about
possible high-level corruption.
So far the
government is undaunted by the allegations. "It's
so easy to say [corruption], but could you prove
it?" asked Formoso.
Yet time will tell:
the new opposition-dominated Senate has promised
to investigate the controversial deal, meaning
Arroyo's post-mid-term-election headaches have
already begun.
David Llorito is
a researcher at the BusinessMirror, a Manila-based
daily newspaper. He has more than a decade of
experience in socioeconomic research, policy
analysis and business-economy journalism in the
Philippines.
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