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Volume 3,  Number 8              March 23 - 29, 2003            Quezon City, Philippines


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Corruption Still Haunts Arroyo Presidency 
(First of two parts)

Many Filipinos believe what made the President change her mind about the presidency is the fact that given the deep plunge in her popularity rating she may not be able to survive a tight presidential race. Her own father, President Diosdado Macapagal, lost his reelection bid in 1965 partly due to charges of corruption. In President Arroyo's watch, reports of bribery and irregular transactions, some of them linking her own husband and close associates, wracked the presidency one after the next and pulled her popularity rating down. There have been calls for her to resign even before she finishes her term.

By John Paul E. Andaquig  
PMC Reports
Reposted by Bulatlat.com

“You ask, what was Edsa II? I tell you it was the most powerful answer of the weak to the corruption of the powerful.”— President Gloria Macapagal-Arroyo at the recent Edsa II anniversary celebration.

It’s been almost three months since President Gloria Macapagal-Arroyo announced her decision not to run in the presidential election of May 2004. Too much politics, she said, distracted the country’s development growth and she pledged to spend the rest of her term bringing the economy back in shape.

The heat generated by the scams has somewhat simmered down and the president’s husband, lawyer Mike Arroyo, has apparently avoided the limelight. All these tend to give the President some breathing space to prove her point — to steer the economy forward. But until the charges of corruption are settled decisively and the culprits punished, the specter of scandals that have hurt her presidency will continue to haunt her.  And not without reason. Among other factors, issues of corruption have toppled two presidents in 15 years - Ferdinand Marcos in 1986 and Joseph Estrada in 2001. Marcos fell in disgrace after long years of dictatorial rule that saw the rise of cronyism and the amassing of public wealth by the strongman and his close associates. Long after his ouster by a second people power, Estrada remains in detention and faces trial for plunder and other charges.

Corruption in the country, however, is a systemic virus that has reared its ugly head once again under Macapagal-Arroyo. When she took power, the president promised to eliminate graft and corruption. But soon enough serious doubts were raised whether she can really address the nation's decades-old problem.

Abroad, the Philippines continues to be seen as an underveloped country that is riddled with widespread graft and corruption. In its latest report, Transparency International (TI) revealed that the country continues to perform poorly in getting rid of these problems. In its 2002 Corruption Perception Index, the London-based corruption watch gave the Philippines a low 2.6 rating out of a perfect 10 based on perceptions on corruption by business people and risk analysts. This puts the country at 77th place with Pakistan, Romania and Zambia, in terms of being free from corruption. This also indicates a fall in ranking from the 55th slot it occupied three years earlier.

Way into Arroyo’s first two years in office, three major cases hogged the headlines - all involving public infrastructure projects (traditional source of government kickbacks) and whose implementation involved past administrations as well as players close to the present Malacañang occupants. The cases involved top officials of the Arroyo administration — the justice secretary, the directors of the Public Estate Authority (PEA) and the transportation and communications secretary — as well as powerful business magnates.

 Arroyo’s Close Aide

On Jan. 24, 2001, only four days after Arroyo took office, newly-appointed Justice Secretary Hernani Perez approved a request for a Department of Justice (DoJ) ruling by the Argentine firm Industrias Metalurgicas Pescarmona Sociedad Anonima (IMPSA). Perez’s signature removed all legal obstacles to the implementation of the IMPSA contract to build the Caliraya-Botocan-Kalayaan (CBK) power plants in Laguna, south of Manila. Moreover, the ruling committed the government to cover or finance obligations to the CBK rehabilitation projects.

The IMPSA project began in 1994 when the Argentine company submitted a proposal to President Fidel Ramos to rehabilitate the Kalayaan hydropower plant as well as the Caliraya and Botocan plants. Costing $400 million, the CBK project was approved later by President Estrada with himself as witness and his alleged crony Mark Jimenez as lobbyist. (Jimenez, now a Manila congressman, was Estrada's presidential adviser on Latin-American affairs.)

But Estrada's approval left some legal issues surrounding the IMPSA unsettled. As a result, the National Economic Development Authority (Neda), the DoJ and the Department of Finance (DoF) refused to endorse it. Claiming, however, that it was severely hit by the Asian financial crunch, IMPSA asked for a government guarantee. The guarantee, meant to help the Argentine company raise funds for the CBK project, required a DoJ ruling to signal the release of the money.

Armed with Perez’s approval, IMPSA wasted no time compelling the National Power Corporation (NPC) to start payments to the company. From April to December 2001, NPC, a heavily indebted state-owned utility company, coughed up some P1 billion in “capital recovery fees” that it supposedly owed IMPSA for the rehabilitation of the Kalayaan plant.

In its first two years of operations, IMPSA received more than $50 million or several-fold bigger than what the company invested — only $9 million, as confirmed by a report released last August by a New Zealand firm specializing in power plant designs. NPC also paid IMPSA tens of millions of dollars in extra fees not provided for in the original contract.

But why in the first place did Perez approve IMPSA’s request just four days after the Arroyo government took over and despite the issues raised against it by NPC and other agencies? The “bombshell” was finally dropped when Congressman Jimenez testified before the Senate Blue Ribbon Committee late last year that the justice secretary received $2 million in return for the favorable DoJ ruling on IMPSA. Jimenez and a House colleage, Rep. Willie Villarama, also said the money was part of a $14-million bribe offered to officials of the Arroyo administration. The president's husband, Mike was dragged into the controversy.

Perez has since been “on leave” as justice secretary.

 Highway Robbery

The second scam involved the alleged overprice in the costs of building the 5.1-kilometer President Diosado Macapagal Boulevard (PDMB). Formerly the Central Boulevard, the PDMB was intended to spur development on the 1,500-hectare reclaimed area, “the Bay City in Manila,” and ease traffic congestion along Roxas Boulevard.

Middle of last year, Sulpicio Tagud Jr., then board director of the Public Estates Authority (PEA), blew the whistle, saying that the PDMB project was overpriced by nearly P700 million and had cost the government a whopping P1.1 billion. In a press conference, he questioned the approval by the PEA board of various price increases in the contract of Jesusito D. Legaspi Construction (JDLC), the firm that won the bid to construct teh controversial highway.

The Macapagal Boulevard runs parallel to Roxas Boulevard, starting at Buendia Avenue in the north and ending at the Pacific Avenue in Asiaworld farther south. When the PEA approved the project during the Estrada administration, contracts for constructing the PDMB were allocated to three companies: Shoemart Inc. (one portion), DM Wenceslao (one portion), and the remaining JDLC (three portions). JDLC secured the contract through a simplified bidding in Sept. 1999 for P584 million, a cost that Tafud described as “highly irregular” and one that has no board approval.

Although the PDMB project was funded by a P1 billion loan from Landbank, only P300 million was released, prompting PEA and JDLC to revise the original concession agreement, in which the PDMB project was divided into two phases. By mid-2000, the first of a series of variation orders was requested by the PEA management. The first was worth P117 million (later increased to P126 million), for additional works such as a proposed Seaside Drive extension. Other variation orders were subsequently signed by the new PEA board appointed by Arroyo.

Eventually, almost every request of JDLC for a “price adjustment” was approved by the PEA management, while the new PEA board, unaware of the revisions in the original agreement, approved almost every prive increase. Tagud made his own investigation but his findings, he said, were rejected by his colleagues in the board.

The construction project remains unfinished. But the government has paid all claims of the JDLC such as cost escalations and cost adjustments due to overruns. JDLC, said Tagud, was paid P816 million for the construction of a 2.14-km road, while the PDMB project was overpriced by at least P631 million.

Together with Plunder Watch, party-list Bayan Muna and other people’s organizations, Tagud filed an administrative case against members of the PEA Board and Management for violation of Republic Act 7080 (or the Anti-Plunder Act.) More significantly, a supplemental complaint was filed last December against Winston Garcia, chairman of Government Service Insurance System (GSIS), and Presidential Adviser Avelino Cruz.

 Piatco: A Case of State Manipulation?

The third case involved the construction of Terminal 3 of the Ninoy Aquino International Airport (NAIA) by the Philippine International Air Terminals Co. (Piatco) in Parañaque. The 1.1-km long, four-story terminal NAIA-3 was supposed to open last Dec. 15 but was aborted due to legal controversies surrounding Piatco’s contract.

Heeding the recommendation of a former presidential lawyer on strategic projects, President Arroyo announced the government’s plan to take over the NAIA-3 Terminal on the ground that the Piatco contract was void and onerous to the government. The issue even reached the Supreme Court (SC), which ordered last Dec. 10 both government and Piatco to settle their dispute through arbitration. After a series of refusals, Malacañang recently declared its intention to hold talks with the private concessionaire, but reiterated its earlier position that the contract was unfair to the government.

But Malacañang’s decision ran smack against the Ombudsman and the House Committee on Transportation and Communication, both of which found the contract as advantageous to the government. The government corporate consel also ruled last October that the concession agreement was legal and not onerous. One report said government, “stands to earn much more that what it originally expected.”

How did it all start?

The idea of building a more spacious and modern international passenger terminal was first broached by Philippine Airlines (PAL) owner and tycoon Lucio Tan, along with five other taipans to former President Fidel Ramos during a trip to China in 1993. On Sept. 15 that year, Tan, along with Shoemart’s Henry Sy, Alfonso Yuchengco, George K. Ty, Andrew Gotianun and John Gokongwei Jr., formed the Asia’s Emerging Dragon Corporation (AEDC).

Almost a year later, AEDC submitted a proposal for the construction of NAIA-3, through then Department of Transportation and Communications (DoTC) Secretary Jesus Garcia. As an unsolicited bid, the government can accept the project provided that no direct guarantee will be required from the government under Republic Act No. 6957 or the Build-Operate-Transfer (BOT) Law.

However, in a bidding held in 1996 by the DoTC for the NAIA-3 project, AEDC lost to Paircargo Consortium. The consortium, composed of the People’s Air Cargo, the Philippine Airport Ground Services, Inc. (PAGS) and the Security Bank, offered to pay the government P17.75 billion for 27 years. AEDC, on the other hand, could only offer P5 million annually over the same period.

Interestingly, acting as lawyers for AEDC were Simeon Marcelo, the present Ombudsman, and Augusto San Pedro. Both were from the Carpio, Villaranza and Cruz law firm, which is allegedly close to President Arroyo. But on Feb. 9, 1999, Lucio Tan and Rivera decided to settle the case “amicably.”

Another case was also filed, this time with the Ombudsman, by Bangon Pasay Movement President Rogelio Estrella against the same respondents in the AEDC case, along with the Manila International Airport Administration (MIAA), and Piatco President Henry Go. It was dismissed in Dec. 2000.

Despite this, a new case was filed with the Ombudsman by Leto Escallar questioning the decision of PBAC in awarding the construction to Piatco. Members of the MIAA-NAIA Association of  Service Operators (MASO) also protested against new DoTC Secretary Pantaleon Alvarez.

Piatco questioned the motive behind the new cases, saying some of the complaints were not even connected to the NAIA-3 project. Interviewed by PMC Reports, Piatco Vice-President and spokesperson Moises Tolentino insinuated that those who lodge cases against Piatco and those who approved the NAIA-3 project may be “fronts” acting in behalf of someone “powerful” and close to Malacañang, a mystery player behind moves to derail the opening of the NAIA-3 Terminal.

Officials of the private firm also questioned Tan-Climaco’s motives in suggesting a government takeover of NAIA-3. Piatco alleged that Tan-Climaco was “packaging a deal” for NAIA-3. Even members of the Senate blue ribbon committee were reportedly intrigued by a letter from Tan-Climaco and addressed to Fraport, a German firm which has a 30 percent stake in Piatco. The letter allegedly proposed that the government would buy off Fraport’s interest in NAIA-3 for $400 million while allowing the German firm to continue managing the airport despite the buy-out.

Presidential Adviser Avelino Cruz was implicated when Tan-Climaco told the Senate Committee that Cruz, along with Executive Secretary Alberto Romulo, “cleared” all her actuations. Cruz is connected with the same Villaranza and Cruz law firm that stood as counsel for the AEDC.

Both Tolentino and Piatco lawyer Frank Chavez referred to a “game plan” designed to discredit Piatco’s stake at NAIA-3. Moreover, Chavez, a former solicitor general, pointed to Lucio Tan as the major player behind the NAIA-3 issue. He also told PMC Reports that Tan is still after NAIA-3 when he reportedly pressured the Chengs to yield control of the air terminal.

Tan, Tolentino added, wants NAIA-3 to complete his domination of the local aviation industry since the taipan already owns NAIA-2 and also provides other services for the country’s majot international airport.

Both Chavez and Tolentino implied that Tan is using his connections with Malacañang to bump Piatco out of the project and effect a government takeover. Considering its cash-strapped situation, the government may look for a private contractor once it ends its agreement with Piatco. According to Tolentino, no other proponent is left in connection with the NAIA-3 project but Tan’s AEDC. In other words, a government takeover would be AEDC’s gain.

The Lucio Tan group, as expected, dismissed the accusations as an “act of desperation” by Piatco’s lawyers.

 Where’s the Public Interest?

Last October, NAIA-3 held a dry run. The terminal is 97 percent complete, DoTC officials said. Four times bigger than the present Terminal 1, the NAIA-3 terminal will feature the country’s first moving walkway aside from offering the most advance security system with state-of-the-art baggage screening abd explosives-sniffing machines. Among those expected to benefit are overseas Filipino workers (OFWs) and Muslim Filipinos who will be exempted from the payment of terminal fees. Sadly, the controversy that continues to grip NAIA-3 will delay all these promised developments.

Meanwhile, the almost P700 million allegedly diverted from the PDMB project remains unaccounted for. This could be seen as a bigger scam especially to the millions of GSIS payers who, without being aware of it, helped fund the project from their own savings. Reposted by Bulatlat.com  

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