Arroyo suspends telecoms deal with Chinese firm

MANILA Sat Sep 22, 2007 1:00pm IST

Philippine President Gloria Macapagal Arroyo seen at the Cuneta astrodome in Pasay city, suburban Manila in this September 14, 2007 file photo. Arroyo has suspended a $330 million telecommunications deal with a Chinese firm after it triggered a kickbacks scandal that could rattle her government. REUTERS/Romeo Ranoco

Philippine President Gloria Macapagal Arroyo seen at the Cuneta astrodome in Pasay city, suburban Manila in this September 14, 2007 file photo. Arroyo has suspended a $330 million telecommunications deal with a Chinese firm after it triggered a kickbacks scandal that could rattle her government.

Credit: Reuters/Romeo Ranoco

Related Topics

MANILA (Reuters) - Philippine President Gloria Macapagal Arroyo has suspended a $330 million telecommunications deal with a Chinese firm after it triggered a kickbacks scandal that could rattle her government.

"I think this is the best thing to do now," Trade Secretary Peter Favila told reporters on Saturday. "Those were her instructions. We were just implementing her orders.

Favila said Arroyo made her decision after discussions with some cabinet members but he declined to give further details.

"Whatever reasons behind that, that's an executive privilege."

The suspension of the agreement with China's ZTE Corp to build a broadband network linking state agencies comes two days after Arroyo's cabinet defended the contract at a senate inquiry into allegations of kickbacks in the project.

The Supreme Court had earlier stopped the implementation of the deal after it received two separate petitions to scrap the project.

Political analysts have said the scandal could affect the stability of Arroyo's government because her husband was named in the senate inquiry and because it could lead to a split with a major coalition partner in Congress.

Favila said he had not been in contact with ZTE officials, but he had informed China's commerce ministry of the suspension.

"Minister Bo Xilai said his government understands and respects the decision of President Arroyo and will continue to support her and her programmes," presidential spokesman, Ignacio Bunye, said in a statement on Saturday.

On Tuesday, Jose de Venecia III, the head of a company that lost out on the contract, told the senate it was over-priced by at least $130 million to allow kickbacks to senior government officials.

He also said Arroyo's husband had told him to "back off" from the deal, signed in April during the president's visit to China's southern province of Hainan.

De Venecia is the son of House of Representatives Speaker Jose de Venecia, head of the dominant Lakas party, which forms the ruling coalition along with Arroyo's smaller Kampi party.

Analysts have said a split between Arroyo and de Venecia could open the way for an impeachment motion in the lower house of Congress against the president, who has failed to shake allegations she cheated in the 2004 elections.

FILED UNDER:

PALESTINE

REUTERS SHOWCASE

Nifty Above 8,600

Nifty Above 8,600

Nifty hits record high above 8,600; state-run lenders gain  Full Article 

Indian in Iraq

Indian in Iraq

India says no contact with 39 men held by Islamic State in Iraq.  Full Article 

Sahara Issue

Sahara Issue

Sahara looks to raise $650 million loan to fund bail.  Full Article 

Bhopal Tragedy

Bhopal Tragedy

Bhopal's toxic legacy lives on, 30 years after industrial disaster.  Full Article 

Essar Group

Essar Group

Exclusive - Essar's planned oil-for-steel deal tests Iran sanctions  Full Article 

Islamic Fund

Islamic Fund

India gets new Islamic equity fund but debt market still off-limits  Full Article 

Fiscal Deficit

Fiscal Deficit

April-October fiscal deficit nears 90 pct of full-year target  Full Article 

Oil Prices

Oil Prices

Oil hits new four-year low post OPEC as glut looms  Full Article 

Gold Imports

Gold Imports

India eases gold import rule in surprise move.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device  Full Coverage