Broadband deal overpriced?

CAGAYAN DE ORO CITY – Justice Secretary Raul Gonzalez said he has ordered an investigation into reports that the controversial $330-million broadband contract of the government with ZTE Corp. might be overpriced.

Gonzalez, however, said based on the initial review of the “reconstituted” contract, the government appears to be obligated to honor the deal despite serious questions on the agreement, under which the Philippines will borrow $330 million from China Eximbank to fund the setting up of a National Broadband Network (NBN) that would link all government agencies and offices.

The justice secretary, tasked by President Arroyo to go over the deal forged in Boao, Hainan last April 21 between Transportation and Communications Secretary Leandro Mendoza and ZTE vice president Yu Yong, said the contract was an executive agreement.

“This is an executive agreement, so there is sovereign guarantee. We have to honor this and there is no need for the Senate to ratify the agreement,” Gonzalez said in a chance interview here at the sidelines of the Mindanao Peace and Security Summit.

He however admitted that allegations that the deal was grossly overpriced should be looked into.

“There were many questions raised, and several claims made by the other bidders and we have to study these closely,” Gonzalez said.

He said he already has two drafts of his recommendation but he wanted to go over them again before submitting his final report to Mrs. Arroyo.

The original contract was allegedly stolen from the hotel room of a member of the Philippine delegation shortly after the agreement was signed.

Gonzalez said he was using the “reconstituted” copy of the deal as basis for his review.

He said Mrs. Arroyo wanted to make sure the contract is aboveboard as it might trigger investigations in the Senate and in the House of Representatives.

Amsterdam Holdings Inc. (AHI) and Arescom Corp., which made separate and lower proposals, earlier alleged that the deal with ZTE was overpriced by at least $100 million.

AHI, a local telecommunications firm, proposed a build-operate-transfer scheme for the project amounting to around $240 million while Arescom, a US firm, proposed only $135 million to be funded by a concessional loan.

The Management Association of the Philippines, the Bishops-Businessmen’s Conference for Human Development, the Makati Business Club, the Foundation for Economic Freedom and the Financial Executives Institute of the Philippines have already come out with a paid advertisement denouncing the contract with ZTE.

The US Embassy had also joined the protest over the deal, with Ambassador Kristie Kenney earlier urging Socio-economic Planning Secretary Romulo Neri to avoid undue haste in finalizing the contract.

AHI co-founder Jose de Venecia III said it is easy to verify the cost of such a project through industry estimates.