From Ricky Carandang’s Blog


Allow me to expound a little on a story I did for The Correspondents on February 19th.

Seven countries claim ownership of the disputed Spratly Islands, just off of Palawan. China, Vietnam, Taiwan, Malsysia, Indonesia, Brunei, and the Philippines all claim to own part or all of the Spratlys. These overlapping claims have been a source of tension over the years since the Spratlys (we Filipinos call them the Kalayaan Islands) are believed to contain significant reserves of oil and natural gas. China was the most aggressive in pursuiung its claim. In 1999, the Philippines–under President Joseph Estrada– led an effort to prevent tensions by getting all the claimants to agree not to take actions to provoke other claimants.

But in 2003, the Philippines–now under Gloria Macapagal-Arroyo– rocked the boat that it previously steadied when it signed an agreement with China to jointly undertake seismic studies of the Spratlys and explore for oil and natural gas. Naturally, the other claimants were angry. After getting them to agree not to rock the boat, the Philippines sucker-punched them with the China deal. China’s traditional ally, Vietnam was so angry they it had to be let in to the deal to appease them.

Aside from angering our neighbors and potentially undermining regional stability, Arroyo’s action may also be illegal. Ombudsman Merceditas Gutierrez–who was then acting justice secretary–told former Senator Frank Drilon, who was then allied with the administration, that she believed that the deal violated the constitution, because while it was a deal between the state owned oil firms (PNOC of the Philippines and CNOOC of China) of the two countries, it implicitly gave China access to our oil reserves. Officers of the Foreign Affairs Department were also upset because the deal effectively strengthened China and Vietnam’s claim to the Spratlys.

What would compel Gloria Macapagal-Arroyo to sign a deal that potentially undermines regional stability, possibly grants China parity rights to oil reserves in the Spratlys that we claim to be ours, and likely violates our constitution?

How about $2 billion a year? After the Spratly deal was signed, the Chinese government committed $2 billion in official development assistance a year to the Philippines until 2010, when Arroyo is supposed to step down from office. My sources tell me that the Spratly deal was an explicit precondition to the loans.

A sizable amount to be sure, but for the Arroyo administration the China loans are particularly appealing. Not so much because the interest rates are so low and the repayment terms so lenient, but because Chinese loans do not have the cumbersome requirements that loans from the US, Japan, the EU, and big multilateral lenders have. Requirements for documentation, bidding, transparency and other details that make it very difficult for corrupt public officials to commit graft. In fact, in November of last year, those cumbersome requirements made it impossible for some government officials and private individuals with sticky fingers to avail themselves of the World Bank’s generosity.

It had gotten to the point where a corrupt government could no longer make a dishonest buck. That is until China’s generous offer came along. Given China’s laxity with certain conditions, its no wonder why almost every big ticket government project funded by Chinese ODA has been the subject of allegations of graft and corruption. There’s Northrail, Cyber Education, the Fuhua agricultural projects, Southrail, and of course the ZTE National Broadband project.

Until the ZTE National Broadband scandal, the Chinese government has had little official reaction to any of these allegations. Why should they? The $8 billion is a loan, not a grant. It enhances their influence in the region, strengthens their claim to the Spratlys, and expands their influence in the Philippines. The best part is, regardless of what Philippine officials do with the money–whether they put it to good use or steal it–it still has to be paid back. Its no wonder that anytime some midlevel Chinese official comes to the country, congressmen and adminstration officials literally trip over themselves to roll out the red carpet.

For corrupt Adminstration officials and their cronies, $8 billion represents unprecedented opportunities for graft on a scale that would shock ordinary Filipinos.

And at the end of the day, that $8 billion is going to be paid back. Not by the grafters in and out of government; not by the Chinese citizens; but by the millions of ordinary middle class Filipinos who go to work everyday, pay their taxes, struggle and to keep their small and medium businesses afloat. The price will also be paid indirectly by tens of millions of poor Filipinos who will not have access to health care, quality education, and a functioning court system because those resources are not going where they should be going.

There’s a word for that. Its called Treason.


2 thoughts on “the real story behind ZTE scandal from the POV of Ricky Carandang

  1. hi dennis 🙂 my comment has no connection to your entry hehe i just wanted the space. ive upated your link in my blog roll, and yung sa Davao – game! hopefully within the year, maka-ikot ang ytrip to spread the word and the projects. mangyayari din ang ytrip sa davao 🙂 ingat palagi!

  2. i’ll look forward to it clare.hehehe

    i can hook you up with the regional director for Region XI of DOT.

    i’m kinda gathering some pics now for the site. hopefully it will be approved.

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