ZTE contract reconstituted

PHILIPPINE NEWS SERVICE — THE original copy of the contract between the government and ZTE Corp. for the $329-million national broadband project, which was stolen shortly after it was signed in China, has been fully reconstituted.

According to Transportation and Communications Secretary Leandro Mendoza, the contract was reconstituted by printing the “control” copy stored in the computers of both the government and ZTE, a publicly-listed Chinese telecoms company.

“The basis of the reconstitution was the control copy of the ZTE and the government. That was in the computer, and it’s just a matter of reproducing it,” Mendoza said in response to questioning by Minority Leader Aquilino Pimentel Jr. at a joint hearing on the broadband controversy of the Senate Blue Ribbon Committee, committee on trade and commerce and committee on national defense Thursday.

Mendoza said the copy of the supply agreement was stolen in a hotel while it was in the possession of commercial attaché Emmanuel Ang.

The loss of the document was discovered hours after the agreement was signed by Mendoza and ZTE vice president Yu Yong in Boao, Hainan, China in the presence of President Gloria Macapagal Arroyo.

Mendoza said the contract was reconstituted on May 24, or more than a month after the theft. He said they only did so after receiving a report about the theft from the National Bureau of Investigation, which they requested to look into the incident.

Pimentel rebuked the transportation department officials for refusing to furnish copies of the contract to interested parties, including the Senate. At one time, chief presidential legal counsel Sergio Apostol said even Malacañang did not have a copy of the contract after the loss of the document was reported.

But Mendoza claimed that his office has given copies of the contract to certain parties who have formally requested for it, such as a Metro Manila newspaper, the ABS-CBN News Channel and former Socio-Economic Planning Secretary Solita Monsod.

He said the government-ZTE contract is an accountable document and the proprietary rights of the contractor must be respected by not divulging its full contents.

Meanwhile, the department yesterday reiterated the need to implement the $329-million national broadband network project following the Senate hearing on the controversial deal.

The transport department said the need for a fully integrated single IP-based platform nationwide broadband network is still there despite questions raised by some senators Thursday on the project’s viability.

Transportation and Communications Assistant Secretary Lorenzo Formoso said in briefing paper that the project will allow seamless voice, data and video connectivity within and among national, regional and local government agencies and state firms.

Thursday’s hearing was attended by most Cabinet secretaries led by Mendoza and Trade and Industry Secretary Peter Favila. Other executives who were present were Executive Secretary Eduardo Ermita and Apostol.

Formoso defended the government’s decision to award the contract to ZTE. He said ZTE was the company nominated by the Chinese government in consideration of the concessional loan for the project.

He added that considering the network coverage and specifications of the government broadband project, ZTE’s proposal turned out to be the cheapest among three proposals submitted.

The two other companies that vied for the project were Amsterdam Holdings Inc.— owned by Jose de Venecia III, son of Speaker Jose de Venecia Jr.— and Arescom.

Formoso reiterated that the project is expected to generate savings for the national government, which is currently paying P4 billion a year for its telecommunications services.

As this developed, Budget and Management Secretary Rolando Andaya Jr. assured the Senate that no money will change hands in the government-to- government deal.

Upon questioning by Senator Mar Roxas Thursday night, Andaya said the $329.4-million loan will remain in China but would go straight to ZTE, the firm that would put up the NBN for the Philippine government.

“The physical money will not pass through us. But for booking purposes, it will reflect in our books,” Andaya said.

But the P1-billion amortization, excluding the interest, would be reflected in the national budget as automatic debt appropriations, Roxas said.

Based on the contract that was signed by ZTE and Mendoza, the ZTE guarantees a 10-year warranty on equipment. ZTE warrants that upon delivery, the equipment to be supplied by the ZTE shall be new and unused and free from defects.

But spare parts in sufficient number and appropriate quality shall be made available for at least 10 years from the expiry of the warranty period.

The ZTE will bear the cost of “correcting any defect by repairing such defective equipment or part or replacing the equipment with a new one,” the contract says.

Under the 39-page contract, a copy of which was furnished the Standard Today, the total contract price is $329,481,290, broken down as follows: $194.05 million for the equipment, $118.6 million for engineering services, $14.87 million for managed services and $1.94 million for training.

Mendoza said the 20-year $1.8-billion loan had not been subjected to any public bidding because it was a government-to- government contract.

Meanwhile, other senators expressed doubts about the capability of the younger De Venecia’s company to undertake the project.

Senator Joker Arroyo noted the “gross disparity” between the cost of the NBN project, which would involve P12 billion to implement, and the capitalization of De Venecia’s Amsterdam Holdings Inc., which AHI pegged at P25 million but which the transportation department said was actually just P312,000.

De Venecia explained at the resumption of the Senate inquiry that his company’s capital reached P25 million because it had to hire foreign consultants, something that Arroyo doubted.

“With P25-million capital, how can you implement a P12-billion deal?” the senator asked.

Senator Juan Ponce Enrile, on the other hand, asked whether the government would have given AHI’s offer a second look had the proponent not been the son of the Speaker of the House of Representatives.