Beijing clears ZTE in NBN deal

BEIJING – Ranking Chinese officials have cleared telecommunications giant ZTE Corp.  of overpricing and kickbacks in the Chinese company’s $329-million national broadband network (NBN) project entered into with the Philippine government.

The investigation by Filipino senators into the NBN-ZTE scandal that led to the cancellation of the deal late last year has yet to officially close.

Government officials here said this has caused a loss of confidence on the part of Chinese investors, some of whom are reportedly planning to pull out of the Philippines.

The STAR gathered these official statements from Beijing authorities from the Ministry of Foreign Affairs and the Ministry of Commerce in their separate briefings here for the journalists participating in this year’s Association of South East Asian Nations (ASEAN)-China Joint Press Delegation.

Speaking in English before ASEAN journalists, Wu Zhengping, deputy director-general of the Department of Asian Affairs of the Ministry of Commerce, disclosed yesterday here that Beijing has discreetly looked into these allegations hurled against ZTE Corp., a privately owned company.

“We have guarantees from ZTE their activities in the Philippines have been appropriate. It did not commit  any violation of laws and rules in the Philippines,” Wu said.

The allegations of overpriced contract and kickbacks reportedly distributed to Philippine government officials and other personalities involved in the NBN-ZTE project were first revealed in media last year by Filipino businessman Jose “Joey” de Venecia III, namesake and son of former Speaker Jose de Venecia Jr.

The erstwhile speaker himself figured prominently in a much earlier controversy involving the Chinese-funded North Rail project for Luzon.

De Venecia III claimed the alleged anomalies in the NBN-ZTE contract after his own company, Amsterdam Holdings Inc. lost in the bidding of the project of the Department of Transportations and Communications.

Wu lamented that the broadband issue became a “hot topic” in the Philippines, but put a damper to this Chinese investment.

“The position of the Chinese government is to ask Chinese companies doing business in other countries to comply with rules and regulations where they are doing business,” Wu pointed out.

Wu cited Beijing central government “blacklist” companies if found engaged in any illegal activity or do not meet international export quality standards of their products.

“The position of the Chinese government is encourage Chinese companies, as long as they earn from their investments to act appropriately and make monies if they can,” he said.

“We must admit because of the broadband issue, there has been setback.”

Nonetheless, Wu noted from Ministry of Commerce statistics that Chinese investments to the Philippines have reached $25 million for the past 10 years.

But for the last 10 years, of China’s total investments that went to the 10-member ASEAN countries, Singapore got the bulk at $1.2 billion; $430 million went to Vietnam; $317 million to Indonesia; $311 million to Thailand; and $205 million to Malaysia.

Wu, who is due to be assigned to the Chinese embassy in Manila later this year, said that ZTE and its rival telecom giant Huwei of China, are the biggest investors in ASEAN.

He explained Chinese investors respond to a country’s utilization of foreign direct investments as basis of their decision what country to do business in.

The NBN-ZTE contract was sealed during President Arroyo’s visit to Boao, China in April 2006.

The President’s husband, First Gentleman Jose Miguel Arroyo, was subsequently linked to the alleged kickbacks in this contract.

Earlier this year, no less than Mrs. Arroyo was being accused of impropriety when she visited the ZTE headquarters in Shanghai during her official visit to China last year.

In his separate press briefing to ASEAN journalists last Tuesday, Assistant Foreign Minister He Yafei admitted the NBN-ZTE scandal had seriously affected efforts by both the Philippine and Chinese governments to increase trade and economic ties between the two countries, especially after Mrs. Arroyo decided to scrap this project due to this scandal while it was still being investigated by the Senate Blue Ribbon committee.

“We have our companies lose interest because they will be afraid to step up their investments but also to continue their presence in the Philippines,” He said in English.

“My government is doing all it can to encourage these various companies to stay there and if possible to increase their investments wherever they can.

“Of course, within the confines of Philippine laws. There is no doubt about it. We do not want a situation where Chinese companies are in violation of the laws and regulations in both countries, it’s not our policy.”

Despite this, He expressed satisfaction that the bilateral relations of China with the Philippines remain stable and friendly.

“There were some difficulties that we’re encountering, mainly because of domestic politics in the Philippines,” he said.

These are problems. We are hoping, we’re crossing our fingers that all of these  will be over and we would start with earnest our economic cooperation because there are projects, all of those projects have been delayed, put on hold. It’s not good.”

The Chinese Foreign Ministry official, though, did not identify these Chinese companies.

But aside from the NBN project, the ZTE Corp. has also a mining project in Diwalwal that has been stalled also due to legal problems pending in a lower court in the Philippines.

The North Rail project, on the other hand, has dragged slowly due to legal problems posed by Filipino squatter families, who were removed and were being relocated elsewhere to give way to the new rail track system.

“But we certainly want to see a cessation of the unfortunate situation,” He said.

“Nobody is to blame. I believe in the wisdom and courage of the political leaders in the Philippines and the people in the whole Philippines.”