MANILA, Philippines -- Is the
broadband network supply deal entered into by the Department of Transportation and Communications
(DOTC) and China''s ZTE Corp. a contract or an
executive agreement?
Government officials fumbled in explaining to senators the status of the supply contract for the National
Broadband Network (NBN) project signed in the presence of President Gloria Macapagal-Arroyo in Hainan, China, on April 21.
Transportation and Communications Secretary Leandro Mendoza said the supply contract was not covered under Section 4 of Republic Act No. 9184, which requires a bidding for government projects, because it was an executive agreement and a government-to-government deal.
"It''s a contract under an executive agreement. It''s conditional," said Mendoza.
But Sen. Panfilo Lacson questioned how the contract could be considered an executive agreement when there was no loan obtained.
"When you sought the legal opinion of the Department of Justice, you were not sure whether it was a contract or an executive agreement?" said Lacson, who noted that in all prior legal opinions of the DOJ, a loan agreement was a must for an executive agreement.
Sen. Miriam Santiago summed up questions on the process involved in completing a government-to-government agreement on a loan-tied project.
She asked Mendoza if the process involved the following:
1. After the executive agreement is signed, the Department of Budget and Management will issue a forward obligation authority (FOA) saying the government has the resources to pay the proposed loan.
2. Having received the FOA, Malacañang gives the go-signal to the Department of Finance (DOF) to negotiate a loan for the project.
3. The DOF talks to its foreign counterpart to finalize the loan.
4. The Monetary Board reviews the loan agreement.
5. Congress then approves the budget for the loan.
Santiago also asked if, usually, the supply contract was signed after these steps had been completed.
Mendoza agreed. However, he clarified that the sequence sometimes changes depending on the rules of the foreign financial institution extending the loan.
"In Japan, for example, with JBIC (Japan Bank for International Cooperation), the executive agreement comes before the supply contract.
But with China''s Eximbank, it wants the conditional supply contract first," Mendoza said
Citing the Supreme Court ruling in Abaya v. Ebdane, Paras said his office took into consideration not only the loan but also the exchange of notes between the Japanese ambassador and the Philippine foreign secretary, which was similar to the exchange of notes between the Chinese ambassador and then Presidential Chief of Staff Michael Defensor.
As an executive agreement and a foreign project, the deal was not only exempt from public bidding but also from the election ban on projects which needed the approval of Chair Benjamin Abalos of the Commission on Elections, Andaya said.
"The contract signed by Secretary Mendoza is unenforceable at this time until there is a loan agreement," said Andaya.Sen. Alan Peter Cayetano pointed out that in the reconstituted contract, it was clearly stated that between the Philippines and China to bankroll the NBN through a loan agreement with the Export-Import Bank of China on the condition that the equipment and services came from ZTE.