China ODA projects for rebidding?

Trade and Industry Secretary Peter Favila, chairman of the oversight committee responsible for coordinating with China on various Chinese assisted projects was quoted by media last week saying “we have to rebid these projects because I myself has lost track of it.” Chinese assisted projects here have been put on hold following controversies that hounded the ZTE broadband and the NorthRail projects.

Favila was reported to have said that government is now reviewing the possibility of resubmitting these projects for financing under the $2-billion China official development assistance (ODA) facility. Once there is agreement on the list of projects, Favila reportedly promised a rebidding for the selected projects to ensure full transparency.

Of the $2 billion said to be available for ODA funding by China, the long delayed NorthRail project accounts for $ 1.2 billion. Other projects being considered are over 400 water works projects in the country’s various municipalities.

Knowledgeable Chinese sources told me that the Chinese government has grown wary of being involved in big ticket ODA financed projects here as a result of the scandal that tarnished China’s image in the aborted ZTE broadband project. The just as controversial NorthRail project, which was approved even before the ZTE controversy erupted, has yet to lay a single inch of track, six years after a memorandum of understanding was signed between NorthRail and China National Machinery and Equipment Group (CNMEG) on Sept. 14, 2002.

China has emerged as an aggressive source for ODA funds. But Chinese funded projects were suspended as allegations of corruption surrounded projects directly negotiated with President Arroyo. The resulting scandal dragged China’s international image through the mud. My China source told me Beijing was surprised at the turn of events and disappointed with the inability of President Arroyo to carry through the projects and defend China’s reputation as a donor.

I suppose China was simply not used to dealing with a country with vibrant democratic institutions. It surprised them that the word of our President is not enough to commit the country. Congress and media can undo what they thought were binding agreements. The noisy media coverage of the Senate hearings was something China is not particularly used to.

This is why Secretary Favila should not be too hopeful China will quickly agree to resume the previously approved ODA projects. I was told by my source that a top level Chinese Foreign Ministry official responsible for China’s international image is visiting Manila soon to see what China should do before they get back to business with their ODA packages.

The official will give recommendations on the steps to take to prevent a repetition of all the bad publicity that tarnished China’s image in connection with the scandalous ZTE project. As I had previously written here, the need for maximum transparency in any deals with the Arroyo administration must be emphasized to Beijing. They have to make sure the processes prescribed by Philippine laws, cumbersome as these rules are, are followed. Short cuts like what happened in the past will work against the reputation of China. They should also stay clear of influence peddlers, even the really well connected ones.

Most likely, they have to start from square one on the NorthRail project. This may well be a blessing for the country because with steel prices at record low these days, the contract price could be lowered significantly. The specifications should also be subjected to public hearings so that the best ideas of the private sector can be incorporated into the final invitation to bid.

I don’t think a simple or pro forma rebidding is enough to protect China’s image. China will just get into more serious problems with local public opinion if it agrees with any proposal from the Arroyo administration to just pick up from where they left off. The ZTE nightmare will just be revived, specially with the 2010 elections looming in the horizon. Those opposed to the North Rail project or to Ate Glue will likely file court challenges that will only delay an already over delayed project. None of these will be good for China’s image.

China must realize that as surveys show, a majority of Filipinos have very little trust for the Arroyo administration and almost anything it touches raises questions related to corruption and other improprieties. China’s big dilemma is how to work with the Philippine government without being seen as being in an unholy business relationship with individuals within the Arroyo administration.

Or maybe China should just dribble the ball for the next year and half and wait for the new administration to do business with. The delay is not good for an urgent project we badly need but if the project can be publicly accepted without the corruption tag, waiting for one and half years may be worth it.

Petron

The San Miguel takeover of Petron is good for the domestic oil company. For one thing, San Miguel is not only a respected name in local business it also has operations that complements Petron’s. That is a whole lot better than being owned by a foreign portfolio management company with no real skills in running Petron’s complicated operation.

Then again, the news generated rumors that San Miguel is actually bailing out you-know-who because you-know-who lost a lot of money in the Wall Street financial crash. The general story I have been hearing is that Ashmore invested you-know-who’s money in Petron but must now liquefy in the light of what happened in Wall Street.

I guess, it doesn’t really matter whether these rumors are true or not. All I know is that shortly after Ashmore invested in Petron, Ramon Ang told me he is interested in acquiring Petron for the same reason that John Gokongwei told me and a small group of columnists that he is also interested in Petron. San Miguel and the Gokongwei Group saw the same synergies in owning a controlling interest in Petron.

Outside of the highly technical refinery operations, Petron’s business is essentially logistical in nature — making sure its products are available all over the country. That’s not too different from making sure beer, soft drinks and canned food products are made available at the sari sari store level from Batanes to Sulu.

When we had lunch just before the Christmas holidays, Ramon Ang was excited about the Petron acquisition. The engineer in him will find the refinery operations very interesting and challenging. The finance side of running an oil company and the logistics side of running bulk plants and gasoline stations is not that unfamiliar to the San Miguel management team.

Mr. Ang was also talking about having San Miguel products made more easily available in the network of Petron service stations. That sounded like Mr. John who was thinking of putting Mini stop convenience stores in Petron stations. If Mr. Ang did in fact bail out the Ashmore investor, he was more than happy to do it for a very good business reason. And Mr. John’s strong interest in Petron proves the validity of Mr. Ang’s business sense in acquiring Petron.

Bad roads

I received this e-mail from Deo Durante of Naga City.

I find reading your column interesting, fearless and packed with informative views. Allow me to share with you my problem with our graft ridden system of government here in Bicol.

This concerns the rehabilitation of the Maharlika Highway in Ragay and Del Gallego towns all in the province of Camarines Sur, which is taking too long to complete and substandard at that. This section has become accident prone because it is pockmarked by dangerous cracks. The bad condition of the road has also increased the already long travel time of from eight to 10 hours from Naga City to Metro Manila.

Your column “Transparency needed for Malampaya royalty use” reminded me of how the national government is wasting hundreds of millions of pesos every year to rehab a road here in Bicol whose usefulness only lasts for a short period of time. I suspect that these poorly rehabilitated roads are being used as regular milking cows of some DPWH officials and their favored contractors.

My heartfelt thank you for hearing me out.

Doesn’t matter

Here’s something from Dr. Ernie E.

A tourist goes on his first overseas trip. Upon arriving, he is visibly puzzled filling his visa application.

The border official looks over his shoulder, and sees the tourist trying to write, ‘Twice a week’ into the small space labeled, ‘SEX’.

The official explains, “No, no, no. That is not what we mean by this question. We want to know either ‘Male’ or ‘Female’.”

“Doesn’t matter,” the tourist answers.

Boo Chanco’s e-mail address is [email protected]