DOJ finds ZTE deal legal, valid

Justice Secretary Raul Gonzalez has declared legal the $329.5-million national broadband contract between the government and a Chinese firm.

In an opinion dated July 26 that was released yesterday, Gonzalez affirmed the government’s stand that the contract with the ZTE Corp. is an executive agreement, and that no public bidding is required.

He also affirmed the participation in the project of the China Exim Bank as the foreign lending institution.

Gonzalez said he based his legal opinion on the memorandum of understanding between the government, represented by Trade and Industry Secretary Peter Favila, and ZTE International, and the exchange of notes between then presidential chief of staff Michael Defensor and Chinese Minister of Commerce Bo Xi Lai and Chinese Ambassador Li Jinjun.

“Clearly, therefore, executive agreements involving infrastructure projects to be funded by a foreign lending institution do not fall within the scope of R.A. 9184, which mandates that all procurement activities must be made through public bidding,” he said.

Gonzalez issued the legal opinion upon the request of Transportation and Communications Secretary Leandro Mendoza.

Mendoza said the project was awarded to ZTE without any bidding because it was a government-to-government deal on a supply contract.

‘Contract caused Neri to lose job’

Meanwhile, Iloilo Vice Gov. Rolex Suplico said yesterday Romulo Neri was taken out of the National Economic and Development Authority (NEDA) and assigned to the Commission on Higher Education (CHED) after he opposed the national broadband contract with China.

“He was taken out of the loop on the NBN project because he now shares a different view on its viability and regularity,” he said.

Suplico said Neri was “demoted” because he recommended to President Arroyo that the contract be implemented by the private sector and at no cost to the government.

“He was demoted for giving the right advice to the President,” he said.

Suplico said Neri’s appointment to CHED is a “demotion” because it is “a mere agency of government,” which makes his reassignment questionable as this does not fall within his field of expertise.

“It’s a flimsy excuse and in truth, it was a demotion designed to keep him out of the decision-making process on the escalating controversy hounding the NBN project,” he said.

“Neri is an economist, and CHED is nowhere within his realm of expertise. Unless the government now plans to also sell our state universities, then he has no business being with CHED,” Suplico added.

He said Neri would have wanted a build-operate-transfer scheme in implementing the national broadband project.

“But apparently, he was forced to endorse the proposal that the project would be carried out by ZTE by way of an alleged government-to-government agreement and not through BOT scheme as agreed upon in his meeting with the President,” he said.

“Neri had no choice but to toe the line. There’s nothing much he could do but to endorse it, as he was apparently kept in the dark until the final stages of the ZTE agreement had been drawn up.”

Under the agreement, ZTE will build the broadband network using funds that the Philippine government would borrow from the Chinese government, and turn over its operations later to the foreign government upon its completion.

The deal also contained a sovereign guarantee clause that requires the government to refund ZTE in case of financial losses. — with Delon Porcalla