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Posts Tagged ‘ZTE-NBN’

[My forthcoming column in Catalyst].

The predicament of Philippine Air Lines, the nation’s flag carrier essentially parallels the problem of the Philippine National Bank, the erstwhile government’s own bank (which is in the process of a merger with Tan’s own Allied Bank). In both cases, the cause of the problem was named Lucio Tan.

The essence of the Tan strategy was to buy into the government asset at a minimum share percentage to establish a bridgehead, cajole the government (or as some put it, put forward an offer some key public officials cannot resist) into deciding for the privatization of the asset. When the asset is sold to the Tan group, the most profitable components of the asset are stripped away or transferred to a similar Tan-controlled company. Then, the now-unprofitable government asset is left withering on the vine and eventually dies.

Or, if it can still be cajoled further, the government infuses more money into the asset and the asset redirected to new markets (with the big advantage of having the government on its side). Eventually, the asset is still merged into a Tan-controlled company and is left to die.

PAL has always been a problem for the TAN group because it has been milked before by the past managements and it miscalculated the effects of the Asian crisis of 1997 and the rising oil prices. It has also to contend with various new competitors, notably the Cebu-Pacific Air. Its own Air Philippines languishes.

Tan has an additional problem with PAL. As a national carrier, it has certain advantages in the international routes, such as preferential treatment for national carriers, first choice in newly-opened routes, and as official government carrier. However, these advantages cannot be carried over to Air Philippines in a merger, and if Tan continues to operate PAL, it would only compete against Air Philippines and cause losses for both. Additionally, it has to contend with stricter requirements for air travel as a national carrier, suffer stricter government supervision (it is still partly owned by government), and cannot compete favorably against the new king of the sky—the budget airlines such as Cebu-Pacific Air.

Tan’s solution is to squeeze PAL more within these limits while attempting to convince government to assist it in its merger plan (straightforward or de facto) and to transfer the national carrier status to Air Philippines. This is the context of the move to emasculate PAL’s independent capability for various services such as catering, maintenance, and other ground operations by outsourcing these to other TAN companies (which also service Air Philippines). At the end of the day, the two TAN airline companies will have been indistinguishable from each other.

In the meantime, the 2,600 PAL ground-based workers are forced into early retirement or re-hired into TAN’s service companies at reduced benefits. The fate of PAL’s pilots and air stewards and stewardesses is not far behind.

PAL should not have been outrightly privatized and should have remained under government control, not only for economic reasons but also for political and security reasons. Tan himself is heavily investing in China and has partnered with prominent Chinese businessmen identified with the Chinese government. Just like in the ZTE-NBN case –in which security concerns have been raised—the PAL case also has a security angle, especially in the light of tensions in relations with China.

The PAL case demands a longer-term solution from government. So far, the Aquino administration has sided with Lucio Tan. What magic does Tan have to inveigle Philippine presidents, all the way from Marcos, into agreeing with his schemes?

Remember, in PAL’s case, greed does not fly planes.

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The House of Representatives Committee on Justice, by a vote of 42-8, junked the fourth impeachment complaint against president Gloria Macapagal-Arroyo, branding it as “lacking in substance.” Another try at the plenary for the 80 votes required for an impeachment case is deemed very difficult, even impossible, to attain.

It however succeeded in drawing attention to the testimony of former Speaker Jose de Venecia on GMA’s links to the ZTE-NBN scandal and on the P500,000 “brown bag” distribution in Malacañanang. In addition to the ongoing Bolante investigation, these effectively focused the spotlight on GMA’s many corruption-related cases and her quality of leadership.

This is significant in its coinciding with the more substantive battle over Malacañang’s last attempt at charter change. Succeeding with the latter is crucial to GMA’s political fortunes and her people’s desperate scheme to stay in power beyond 2010. Preventing this from happening would immediately render final the creeping lameduck presidency and put firmly in place the 2010 election scenario.

At the same time, a charter change defeat would mean GMA’s vulnerability to pressures for her to resign and negotiate a graceful exit. It would determine whether the ruling coalition will be able to field a winnable candidate or break up under the onslaught of the electoral reality of playing on the sidelines or only in a supporting role.

The defeat of the fourth impeachment petition is a non-event. It has already done its job and political forces are moving to the more decisive battleground of charter change.

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The mutual fiasco of the Cha-cha adventure’s interweaving with the MOA-AD has not deterred increasingly-pressured Malacañang’s strategists from attempting–for the umpteenth time–another try. Sec. Peter Favila’s feeble citing of the need to change the 60-40 Filipino ownership in the Constitution is the new rationale.

I do not know if this is in response to the reported demand of the Chinese partners in the Mt. Diwalwal mining venture with a newly-organized Filipino mining company controlled by cronies close to the Palace. Mr. Favila was accused of signing earlier a memorandum of understanding (MOU) on this with the ZTE corporation of the NBN fame. His call for Cha-cha is suspiciously close to the announcement by the Philippine Mining Development Corporation (PMDC), the mandated government corporation, for bids on joint ventures on developing the Mt. Diwalwal gold area. The Mt. Diwalwal motherlode, estimated to amount to more than US$5 billion, has been supposedly discovered recently. Strangely, the area is part of the Category B areas listed in the MOA-AD.

In the light of Mr. Favila’s call, the initiative for charter change once again exposed another objective for the attempt to maintain GMA beyond her 2010 end of term. Huge, lucrative contracts and superprofits, as well as possible largesse from political corruption, awaits the new president as the opening of mining and oil ventures swamp the country in the next decade.

When former Sec. Nonong Cruz (and the Former Senior Government Officials-FSGO) warns of possible martial rule or state of emergency, he was actually saying–in the subtext–that those in power are quite desperate now as the window of opportunity for Charter change inexorably narrows and all attempts to do so fail.

Federalism, even if Sen. Pimentel’s resolution has started its committee hearing, lost steam as Cha-cha vehicle. Even Sen. Gordon, the chairman of the Senate Committee on Constitutional Amendments, Revision of Laws has said that Charter change can only come about after 2010. The corresponding House Committee on Constitutional Amendments has vacillated on holding national consultations, leading to suspicions that it is only dribbling the Cha-cha ball. Of late, there is rumbling from Speaker Nograles’ erstwhile GMA loyalist allies to unseat him for suspicion of disloyalty.

The only card left is the attempt to create a situation of national emergency, stage a palace coup, declare some form of martial rule, disorganize cha-cha opponents, and railroad Cha-cha. Will she do it?

Certain people close to her wants it and are mightily moving the AFP and the Moro rebels to enter the prepared script for a martial law declaration. Will she play along?

The situation generally points to the holding of normal elections in 2010; the Charter change express train shrinks by the day to being an irrelevancy. It was Alice of Wonderland who said, “If it had grown up, it would have made a dreadfully ugly child; but it makes rather a handsome pig, I think.”

Any other scheme faces big difficulties in execution. However, the current situation also says anything can happen because all political forces are moving, including the people’s movement against GMA’s Charter change.

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‘Tis the season for presidential appointments. Leonida, Tagle, Sotto, Neri, Ducut–these are names in the front pages these days. After the first round in May, the new round–only beginning–promises to be more wide-ranging, affecting more senior jobs, and more indicative of the GMA (or more precisely the GMA administration) political agenda in the next six to eighteen months.

The first two appointments caused a stir not because the appointees are well-known and highly credible for the Comelec commissioner’s job they were appointed to. Rather, it was because they were virtual unknowns, not in any list submitted by either of the citizen search committee or the presidential selection committee.

When later, Executive Secretary Ermita said that these two were in the twenty names submitted to Malacañang, it was a dead giveaway because there were only ten names submitted through the presidential selection process. As such, the initial reaction of electoral reform advocates was to put these two in grave doubt. They have a lot to do in order to assure their credibility before the people. It also adds further to the burden of the Commission on Elections to regain its own institutional credibility.

Former senator and defeated TU senatorial candidate Tito Sotto was appointed chairman of the Dangerous Drugs Board. It must be conceded that he had the background on the issue since his days in Quezon City as Vice-Mayor. Of course, the eradication of the drug problem is another matter. Incidentally, the position was raised to Cabinet level.

Commission on Higher Education chairman Romulo Neri of the ZTE-NBN fame (or notoriety?) was transferred to the chairmanship of the Social Security System, coinciding with the formation of the National Social Welfare Program headed by the SSS chairman. He also obtained Cabinet rank.

Former Pampanga representative Zenaida Ducut hails from Lubao and has the distinction of being a friend and classmate of GMA. She was appointed acting chairman of the crucial Energy Regulatory Board.

These four appointments created a buzz. Speculations abound that the Comelec appointment is tied to the desperate charter change initiative. The weakest point of this initiative is the huge unpopularity of GMA and widespread opposition to any hint of her extending herself in power beyond June 30, 2010 and to charter change under her tutelage.

In the charter change scenario, the decisive battleground will be the ratification plebiscite (if the initiative gets this far). The Comelec will then be crucial. The appointment of the seventh commissioner will either confirm or disprove this speculation.

The Sotto appointment is obviously a political payback. Similar appointment of defeated Team Unity senatorial candidates are expected in the coming days. This trend constitutes a part of the political consolidation by the GMA loyalists–possibly within the scenario of extension of her stay in power.

The Neri appointment can be interpreted as part of the consolidation process and basically was done to ensure and maintain loyalty in times of political transition and uncertainty. As in his appointment to CHEd chairmanship, the appointment to SSS will certainly provoke more controversy.

Aside from its implication of her personal closeness to GMA,  the Ducut appointment will certainly raise a few eyebrows because of the sensitivity of the post (and of course the huge implications of the subject matter on government fund sourcing, inflationary impact, and Meralco tussle).

The criteria of competence and integrity, as well as the principles of transparency and accountability are the victims in the current appointment. The imperatives of political survival prevailed. Political appointment, where is thy logic?

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Now that the ZTE scandal has partly unfolded–with Sec. Neri’s “hanging” testimony–there are already glimpses of its eventual direction. It can only go up.

The Neri testimony has two seemingly logical and plausible points: One, that the ZTE broadband deal has for its primary backer Comelec Chairman Benjamin Abalos, Jr; and two, that the President herself knows of Abalos role (particularly in the attempt to bribe Neri with 200 (kilos of fish from the Abalos fishponds–sorry, can’t resist that one).

Neri testified that the President told him not to accept the bribe. He thought that may be sufficient to end the matter, even if it puts Abalos in hot water. However, he refused to elaborate or to testify on other conversations with the President regarding the ZTE matter, citing “executive privilege.”

Of course, this puts the Neri testimony on a continuing downslide thereafter as senators expectedly try to elicit the information behind the “executive privilege.” Many do not believe he told the other half of the truth, may be not even the truth he told–primarily because of his own hypes before the Senate testimony. It is also a glaring inconsistency when he readily volunteered the fact of his talk with the President regarding the Abalos bribe, but not the other talks on the ZTE matter itself.

However, we can already glimpse something from the Neri testimony. One, there is definitely the BIG ONE in terms of information hiding behind the “executive privilege.” Two, there are possibly others–more powerful and far more vulnerable–deeply involved in the ZTE scandal. Three, the ZTE scandal has implications that go to the heart of the survival of the GMA administration and ruling coalition–possibly more than the Garci tapes scandal itself.

Secretary Neri is protecting not only the President but an entire arrangement regarding Chinese investments and loans in the Philippines. The arrangement, I think, stinks to high heavens. It is too early to say but there are certain implications already on Philippine national security, the government’s “special relations” with the United States, Philippine sovereignty and national patrimony, violations of the Constitution, and sectoral concerns.

Senator Miriam Santiago is partly correct when she raised the observation that it is all a “squabble over kickbacks.” After all, at the heart of it all is the purported availability of some $18 billion dollars for Chinese investments and loans for the Philippines–a sum approaching, if not surpassing, the money available during the Marcos one-man rule. Senator Mar Roxas himself said the ZTE deal seems to be a “supply-side” decision–meaning the availability of the Chinese money preceded the project. However, as the ZTE drama unfolds, it is slowly becoming clear that what is at stake is the survival of the GMA administration itself.

Given the situation that she failed to reconcile with the opposition after the 2007 elections, that she still does not have any agreement with any or all of the presidentiables, and that there is the inability (for the present) to force a martial rule, GMA is running a clear risk of going down even before the 2010 term ending. The clock is running out on her, with diminishing influence over events as perceptions increase over her lame-duck presidency. The ruling coalition does not have a viable presidentiable at this time, cannot absorb the pressures, and may disintegrate well before 2010.

The ZTE scandal may well be the Waterloo of the Arroyo presidency.

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