A ‘confused’ deal

ON the cover page of the document signed by Transportation and Communications Secretary Leandro Mendoza on behalf of the Philippine government in Baoa in the Chinese province of Hainan last April 21, 2007, the title reads: “Contract for the Supply of Equipment and Services for the National Broadband Network Project.”

The term “contract,” in fact, appears numerous times in the document. So much so that Mendoza, when quizzed by senators at yesterday’s hearing about the nature of the document he signed, had to accede that it was indeed a supply contract, but with a qualifier. “It’s a conditional contract under an executive agreement.”

Download a copy of the reconstituted ZTE supply contract submitted to the Senate.

Mendoza went on to say that unlike other foreign financial institutions, the Export-Import Bank of China that will extend a concessional loan to the government to bankroll the project requires a conditional supply contract ahead of an executive agreement. Despite being contrary to legally mandated procedures, such a requirement becomes a convenient justification for a lot of things. Because it’s part of an executive agreement, the contract is exempt from public bidding mandated by the procurement law. It is also exempt from the ban on projects during the election campaign period.

But has an executive agreement already been signed? The first page of the supply contract says so, in fact, as one of the premises that led to its signing by Mendoza and Yu Yong, vice president of Zhong Xing Telecommunications Equipment Limited (ZTE) in Hainan last April 21. The third to the last page of the contract also sets the executive agreement ratified by both governments on the basis of a letter of Chinese Ambassador Li Jinjun to then Presidential Chief of Staff Michael Defensor as a precondition to its effectivity.

Cabinet officials, however, admitted the senators that there is as yet no executive agreement, much more a loan agreement. Budget Secretary Rolando Andaya Jr. acknowledged as much when he said, “The contract signed by Secretary Mendoza is unenforceable at this time until there is a loan agreement.”

Makes you wonder why it had to be hastily signed in the first place.