Uniffors


Gung Ho or Gone Hu?

Posted in Manuel Buencamino by uniffors on the October 18th, 2007

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Gung-Ho or Gone-Hu?

OVER the weekend one of the country’s leading dailies carried a story that added an interesting angle to that $465.5-million cyber education project that Gloria Arroyo suddenly found to be a very attractive substitute for the aborted $330-million ZTE broadband network deal.

A memorandum of agreement for the CEP signed by Trade Secretary Peter Favila and Dr. Kang Ke Jung, a representative of a Chinese company called Tsinghua Tongfang Nuctech Company (Nuctech) in Boao, China, in April, caught the attention of ACT (Alliance of Concerned Teachers), a teachers’ organization opposed to Mrs. Arroyo’s new pet project.

The teachers could not understand why Mrs. Arroyo readily accepted China’s designation of a company that was not known for education or the use of satellites for delivering classroom lectures through television.

Nuctech specializes in manufacturing x-ray equipment for container vans, a technology more useful for customs inspections than long-distance classroom education.

Jesli Lapus, the education secretary, said there was nothing anomalous about the agreement or the choice of Nuctech.

“Tsinghua Holdings of Tsinghua University owns at least 100 subsidiary companies involved in technology, including Tsinghua Tongfang Nuctech. The bottom line is Tsinghua University, the undisputed leader in open and distance learning, is the Chinese government’s designated contractor for the project, subject, of course, to pertinent Philippine laws,” he insisted.

But there’s a wrinkle in Lapus’ explanation. The president of Nuctech is Hu Haifeng, the son of President Hu Jintao of China.

A closer look at the cancelled ZTE deal will show why Gloria Arroyo prefers tied loans with China to similar arrangements with the US or with private corporations that offer to build, operate, and transfer (BOT) at no cost and no financial risk to the government.

US companies like Arescom submit above-the-table bids because the US has tough laws on American companies that engage in bribery and kickbacks to foreign governments. That makes American proposals very unattractive to Mrs. Arroyo’s administration.

BOT bidders like Amsterdam Holdings cannot dole out unlimited bribes and kickbacks because they have a profit margin to worry about. Amsterdam Holdings backed out of a partnership with Abalos because the company could not afford to carry the $100-million-plus overprice that certain parties wanted included in their BOT bid.

So that leaves China, a one-party state where the government holds a majority stake in big companies like ZTE and Nuctech, and where the only ones who can ask questions are the people who should be asked questions.

Government-owned companies in China are like our government-owned corporations—party faithful and retired cops and soldiers run them. Consequently, tied loans guaranteed by foreign governments are good for the communist party bigwigs.

That’s why Hu Jintao offered billions of dollars to Gloria Arroyo on condition that she reverse her policy to develop the country’s infrastructure through BOT projects and sign-no-bid contracts with companies he picked. Simply put, Hu names the company, and Gloria names her price.

It’s clear why ZTE got the deal and why the original contract price of around $160 million ballooned to $330 million. It’s just as obvious why Gloria Arroyo and Hu Jintao are so excited about the cyber-education deal: “Everybody make more money, everybody more happy.”

Except the Filipino people, who will pay out the billions that will put a smile on the face of Gloria Arroyo and her newfound Chinese cohort.

Buencamino writes political commentary for Action for Economic Reforms (www.aer.ph)

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