President Benigno Aquino III, who took office in 2010, has made the fight against corruption a cornerstone of his administration, vowing to end a culture of impunity that is widely blamed for making the Philippines the economic laggard in an otherwise booming region.
His battle, however, has added to friction with China, an economic powerhouse that his predecessor, Arroyo, often bent over backwards to please. Her government signed a raft of big-ticket business deals with mostly state Chinese companies and, in a bid to reduce tensions in the South China Sea, also agreed to a program of joint seismic surveys of waters believed to be rich in oil and natural gas. The joint surveys triggered outrage here because they covered Philippine territory that is not claimed by China and, according to Arroyo’s critics, thus undermined Philippine sovereignty.
Politicians and media commentators have linked the now lapsed seismic-survey deal to alleged Chinese kickbacks, accusing Arroyo’s government of selling sovereignty in return for cash. “In short, it was territory in exchange for pay-offs,” said a columnist recently in the Manila Standard Today newspaper.
Speaking to Washington Post editors and reporters recently in Washington, Aquino denied wanting to cool relations with China and put an end to the ardor of the Arroyo years.
“We have set out to enhance the relationship,” he said, dismissing as “unfair” a suggestion that he took office determined to reverse Arroyo’s push for close economic and diplomatic ties with Beijing.
He acknowledged, however, that China has perhaps been upset by investigations into various business deals involving powerful Chinese companies. Beijing seems to have been angered most, he said, by his government’s suspension of a railway project for which China had offered more than $500 million in soft loans. This project, known as NorthRail, has also been mired in allegations of corruption.
But it is the ZTE affair that has attracted the most attention, thanks to intense media interest after Senate hearings that featured detailed testimony of illicit payments.
Jose De Venecia, a businessman who first blew the whistle on alleged kickbacks, said in an interview that his own company, Amsterdam Holdings, had proposed building a broadband network linking government offices in 2006 and offered to do it for $130 million. ZTE later proposed doing the same for $329 million and got the contract.
“I put two and two together — they were overpricing to pay so-called advances,” said De Venecia, recalling a December 2006 meeting he attended with ZTE executives and the then-head of the Philippine Election Commission in Shenzhen. The meeting, he said, revolved around discussion of kickbacks.
De Venecia, whose father served for more than a decade as speaker of the Philippine House of Representatives and had close ties with Chinese leaders, puts most of the blame for the broadband fiasco on officials in Manila, saying that China merely got sucked into local shenanigans by its determination to win the contract.
“Officials here were trying to extort money from ZTE. Unfortunately, ZTE was willing to participate,” De Venecia said. “ZTE is a company we will all remember.”