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PIA Press Release
2008/02/09

DOTC officials refute Lozada allegations

Manila (9 February) -- Top officials of the Department of Transportation and Communications (DOTC) strongly denied yesterday allegations by Rodolfo Noel Lozada Jr. of overpricing in the aborted national broadband network (NBN) deal between the government and ZTE Corp. of China.

In a press conference at the New Executive Building (NEB) in Malacanang yesterday afternoon, the DOTC officials led by Secretary Leandro Mendoza refuted point-by-point Lozada's allegations.

President Gloria Macapagal-Arroyo has cancelled the ZTE deal in the wake of the controversy over the project. Yesterday, she ordered an investigation to pinpoint the personalities who could be held liable for possible violation of the Anti-Graft and Procurement Laws.

The NEB press conference was held as Lozada, the resigned president and chief executive officer (CEO) of the Philippine Forest Corp. (PFC), an agency under the Department of Environment and Natural Resources (DENR), was testifying before the Senate Blue Ribbon Committee on the NBN-ZTE project.

Mendoza explained that a major consideration in DOTC's choice of the Chinese firm to undertake the NBN project under a government-to-government arrangement was to ensure the security of the Philippine government's data.

He said that awarding the project and its operation to a private firm would render government data vulnerable to unauthorized personnel.

DOTC Assistant Secretary Lorenzo Formoso III explained that the original price of the project of $262 million was raised to $329 million because under the proposed $262-million contract price, only one-third of the country would be covered.

On the other hand, under the $329-million proposal, the entire country would be covered by the project including fifth and sixth class municipalities.

The NBN project is a component of the Medium-Term Philippine Development Plan (MTPDP).

Mendoza said he arranged for the press conference to "shed light on old and maybe new issues" that continue to hound the already-cancelled ZTE contract.

He explained that at present, the DOTC still has "bicycle allowance" for its people who deliver government mail and other communications in the countryside where "telegraphic transfers" remain the fastest communication system.

The DOTC official also stressed that the country would benefit more from a government-to-government NBN in terms of economy. He pointed out that the government spends P4 billion annually for telecoms services as against P1 billion a year in interest if the project is funded by foreign loan.

Aside from Formoso, former chairman Ramon Sales of the Commission on Information and Communications Technology (CICT) of the transportation department, was also attended the press conference.

Formoso defended DOTC's recommendation for a government-to-government contract instead of the build-operate-transfer (BOT) proposal of Amsterdam Holdings Inc. (AHI), saying that "from a theoretical point of view, BOT is more expensive."

"At the end of the day, we will still pay (for the BOT project)," Formoso said, adding that the BOT proponent would have to make money for its shareholders, aside from paying for the loans that it will contract to finance its proposed project.

Formoso described AHI as "a shell company" with a capitalization of only P5 million when it submitted an unsolicited proposal to undertake the NBN project.

He added that AHI lacked at least two key considerations in the award of the multi-million-dollar project like the NBN adequate capitalization and congressional franchise.

"Walang pera, walang franchise," Formoso said, adding: "It (AHI) says it will give government a 25-percent discount? Impossible."

In terms of security, the DOTC said a BOT by AHI or any private company would allow the private firm to have access to government communications.

An NBN funded by a foreign loan, on the other hand, would be owned and operated by the government itself even as its infrastructure maybe built by a private company local or foreign, the DOTC officials said. (OPS) [top]

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