MANILA, 23 September 2007 — In a belated move to soothe an outraged public and angry allies, President Gloria Macapagal Arroyo yesterday suspended an allegedly overpriced and irregular telecommunications deal her government has signed with a Chinese company.

Arroyo’s decision came amid signs of a widening rift among her political allies, with the House of Representatives Speaker and supporters publicly threatening to fight any move to oust him from power.

Trade and Industry Secretary Peter Favila announced the president’s decision to “indefinitely” suspend the $330 million deal with ZTE Corp. without saying why the sudden turnaround from an earlier adamant stance.

“I think this is the best thing to do now. Utos ng Pangulo (It’s the president’s order). Whatever reasons behind that, that’s an executive privilege. We are just implementing her orders,” said Favila, who made the announcement together with Acting Justice Secretary Agnes Devanadera in a press conference at the Edsa Shangri-La Hotel in Mandaluyong.

Palace officials admitted that the decision was meant to placate an outraged public.

Presidential Management Staff chief Cerge Remonde said the president bowed to “public opinion.” He said the scandal has generated much controversy and that suspending it is one way of putting it to rest.

Presidential legal adviser Sergio Apostol said the suspension order “will temper all sides — Malacañang, De Venecia and the Senate.”

Favila yesterday also announced the suspension of the $460-million Cyber Education Project, another China-funded loan project which seeks to connect 90 percent of all public schools nationwide.

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

Favila said the review of the deal will be discussed “quietly and appropriately” between himself and China’s Traded Minister Bo Xilai, who was in Manila yesterday.

Presidential Press Secretary Ignacio Bunye also said the Chinese government had been informed of the president’s decision of the decision to suspend the contract. “Minister Bo Xilai said his government understands and respects the decision of President Arroyo and will continue to support her and her programs,” he said in a statement.

Bribes and Kickbacks

Businessman Jose De Venecia III, son and namesake of Speaker Jose de Venecia, has exposed the broadband deal as rotten, alleging that it was overpriced by at least $200 million and that betters offers such as the one made by Amsterdam Holdings, Inc (AHI), of which he is a partner, were ignored.

Last week, the businessman accused Arroyo’s husband, Jose Miguel, of intimidating him to “back off” from trying to win the deal. He also accused Elections Commission Chairman Benjamin Abalos — a close ally of Arroyo — of brokering the deal with ZTE and receiving kickbacks.

Arroyo’s husband left for Hong Kong a day before the Senate investigation began, fueling suspicions that he was hiding something. His aides denied de Venecia’s allegations.

Arroyo’s officials, notably Transportation Secretary Leandro Mendoza, also initially refused to cooperate with investigators.

But the president on Thursday made a complete turnaround and ordered her Cabinet officials to go out in force and attend the hearings of the opposition-dominated Senate.

Supreme Court

The Supreme Court said Arroyo’s suspension order won’t have any effect on a pending case filed by Iloilo Gov. Rolex Suplico seeking to nullify the contract, which was signed in April, amid the allegations of bribery, overpricing and other irregularities.

Critics have alleged that the ZTE broadband deal violates several laws in the Philippines and would be financially disadvantageous to the government. Under the deal, the project would be financed by the Export-Import Bank of China.

The high tribunal had earlier ordered the contract suspended pending resolution of the case.

In an interview with the Philippine Daily Inquirer, Apostol said the president could suspend the contract because in the first place, “the contract can’t be implemented. It’s not ready for implementation because there’s no loan agreement, so there’s no executive agreement yet.”

When asked about the president’s rationale, he said Arroyo deemed it wise to suspend the deal because of so many pending investigations. “There is a pending case in the Supreme Court, an Ombudsman case versus Mendoza, legislative ... and even a congressional investigation. (The suspension) will allow investigations to proceed, so that whatever will be the outcome of the investigations, the executive will follow.”

Political Ploy

Opposition Sen. Alan Peter Cayetano, the chair of the committee on accountability of public officers & investigations (the Blue Ribbon), said by phone that the suspension was a “calculated political ploy rather than an honest response to public clamor.”

“It’s intended to defuse the political situation and pacify people who felt that billions of pesos would again be wasted,” said the senator, who once accused the first family of stashing millions of pesos in foreign banks. Cayetano suspected that the suspension of the ZTE deal was “being done to save the Cyber Education project, which is a bigger project.” He said the president was preempting the Senate from investigating other questionable projects.

Cayetano said he was perplexed why Arroyo would suspend it “when it is already suspended because of the Supreme Court temporary restraining order.” “At the same time the officials of the Justice Department keep on arguing that it is above board, yet they don’t have a copy of the contract. Things just don’t add up if you look at it from the legal point of view. But from the political point of view, the Arroyo administration has consistently made moves to appease people when there is a hot issue only to pursue their original intent once the issue is out of the public eye.”

“I hope that this move is not intended to stop Comelec Chairman Benjamin Abalos and former Socioeconomic chairman Romulo Neri from attending the hearing on Thursday,” Cayetano added.

Cayetano vowed that the blue ribbon committee would get to the bottom of the allegations surrounding the deal, to include “informing the people of all the aspects of this contract or deal.”

He said that even if the deal was not “consummated,” the committee should establish if the graft and corruption have already been consummated.

“Under the law, merely offering a public official bribe is already corruption of public official. If the public official accepts the bribe, it’s already indirect or direct bribery and furthermore is covered by the Anti-Graft Law,” said Cayetano. (With input from Inquirer News Service & agencies)