ZTE-NBN - From A to Z

President Gloria Macapagal-Arroyo (GMA) had been considered a loyal ally of the United States until July of 2004 when she “caved in” to the Iraqi hostage-takers’ demands to withdraw the Philippine government’s 51 soldiers and police officers from Iraq a month early, in exchange for the release of Filipino hostage Angelo De La Cruz.

In directing the Philippines to be the 5th country to withdraw from the US-led “Coalition of the Willing” (after Spain, Dominican Republic, Nicaragua and Honduras) in 2004, GMA incurred the wrath of the US government which retaliated by reducing US military and economic aid and limiting loan assistance from US financial institutions.

Prior to that date, the Philippines had shown its loyalty to the US by rallying the Association of Southeast Asian Nations (ASEAN) to deal as one bloc to push China out of the Spratley Islands in the South China Sea, where four ASEAN allies and China hold competing claims. The Philippines was hailed by the US for standing up to China when it successfully prodded ASEAN and China to sign a “Declaration on the Conduct of Parties in the South China Sea,” to stop China’s growing military presence in the area.

After the US punished the Philippines by imposing de facto sanctions on the Philippines and by refusing any face-to-face meetings of GMA with President George Bush, the Philippines changed course.

Barry Wain wrote in the Far Eastern Economic Review: “President Gloria Macapagal Arroyo’s hurried trip to China in late 2004 produced a major surprise. Among the raft of agreements ceremoniously signed by the two countries was one providing for their national oil companies to conduct a joint seismic study in the contentious South China Sea, a prospect that caused consternation in parts of Southeast Asia…The Philippines also made breathtaking concessions in agreeing to the area for study, including parts of its own continental shelf not even claimed by China.”

According to Philippine Star columnist Jarius Bondoc, “There might be a hint of the real reason there. For, soon after RP capitulated, China offered to lend $2 billion a year till 2010 for government projects. China wasn’t doing it out of the goodness of its heart, though. It was bursting at the seams with $2 trillion in reserves, and was to collect 4-percent interest, hardly concessional in a period of much lower rates. China was only too willing to look like it was accommodating a new ally.”

These generous Chinese loans may have helped the Philippines reach an unprecedented 7.3% growth in 2007, the highest in 30 years. But they laid the ground for the present crisis which may yet topple the Philippine government.

In 2007 alone, the Philippines signed 33 new projects for financing by the China Export-Import Bank. One of the projects was the NBN-ZTE deal which the Philippine government signed in April of 2007 where Zhong Xing Telecommunications Equipment (ZTE), the Chinese telecommunications giant, was awarded a contract worth US$ 329.5 million to set up the National Broadband Network (NBN) to improve government communications capabilities.

On August 29, 2007, Rep. Carlos Padilla, in a privileged speech in the Philippine House, charged that Philippine COMELEC Chair Benjamin Abalos was the broker of the ZTE deal. A week later, the Philippine Senate called for hearings on the ZTE-NBN deal. On September 10, 2007, Joey De Venecia, the son of then Philippine Speaker Joe De Venecia testified before the Senate and claimed that he was with Abalos in China when he heard Abalos “demand money” from ZTE officials.

Although Joey De Venecia, as the son of Speaker Joe De Venecia, was barred by Philippine law from participating in and obtaining Philippine government contracts, nonetheless, as president of Amsterdam Holdings, he submitted the losing bid for the NBN project. He told the Senate that the president’s husband, First Gentleman Mike Arroyo, had counseled him to “back off” from pursuing the NBN project and offered to compensate him for it.

On September 22, 2007, GMA announced that she was suspending the ZTE-NBN contract. On September 26, National Economic and Development Authority (NEDA) Chair Romulo Neri and COMELEC Chair Abalos appeared at a Senate hearing where Neri claimed that in a golf game earlier in the year, Abalos reportedly offered him $4-M (P200-M) for signing off on the ZTE deal. Abalos denied the charge.

On October 1, 2007, Abalos resigned his post as COMELEC chair. On October 2, GMA traveled to China to tell Chinese President Hu Jintao of her “difficult decision” to cancel the ZTE contract for the NBN project.

On January 30, 2008, the Philippine Senate issued warrants of arrest for Neri and NEDA consultant Rodolfo “Jun” Lozada, Jr. Neri went into hiding to avoid being served with the warrant while Lozada flew to Hongkong. For allowing his son to testify against the GMA and the FG, Speaker De Venecia was removed as House Speaker on February 5, 2008.

On February 5, 2008, when Lozada returned from Hongkong, a Senate team was waiting to arrest him to take him to the Senate to testify about the ZTE-NBN deal. Before he could be served with the papers, however, he was whisked away by unidentified military personnel only to be later dropped off at the La Salle Green Hills to join his family.

The day after his return, Lozada testified that Abalos and Mike Arroyo were behind the “kickbacks” in the deal charging that they stood to make about $200-M from the $329.5-M contract. He said he warned them that the overcharge was too high that it wouldn’t fly but they ignored his warnings.

On Friday, February 29, approximately 50,000 people gathered at the Ninoy Aquino monument in Makati for an Inter-Faith Rally to call for the resignation of GMA. Jose Maria Sison, leader of the Communist Party of the Philippines (CPP), on Saturday called for 100,000 Filipinos to gather in a street protest in Manila to unseat President Gloria Macapagal-Arroyo. This should be enough, he said, “to ignite the withdrawal of support from the regime by the bureaucracy and the military."

That’s the A to Z of this saga, from Angelo De La Cruz to the ZTE telecom giant, all in less than four years.