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Another day, another scandal for Arroyo
Asia Times - February 5, 2009
Joel D Adriano, Manila – Another scandal, another official investigation and likely the same result: no convictions and no impact on Philippine President Gloria Macapagal-Arroyo's staying power. Arroyo's government is now embroiled in yet another high-profile corruption controversy, this time involving her husband, a clutch of private companies and the World Bank.
In mid-January the multilateral lending agency released a blacklist of three Philippine and four Chinese construction firms that it banned from participating in future World Bank-funded infrastructure projects due to alleged collusion in bidding for recent projects. A World Bank investigation found the firms were
involved in a "major cartel" that tried to rig bids in their favor for the National Roads Improvement and Management Program, or NRIMP-1.
Cavite Ideal International Construction and Development Corp and C M Pancho Construction Inc were both banned from future World Bank projects for four years, while EC de Luna Construction and its sole proprietor, Eduardo de Luna, were both barred indefinitely, representing the first permanent ban on a contractor the bank has handed down since 2004.
The barred Chinese firms included China Road and Bridge Corp, China State Construction Corp, China Wu Yi Company Ltd and China Geo-Engineering Corp. The US$33 million loan scheduled for the road projects was canceled before funds were disbursed, the World Bank said. The barred companies are known to be close to the government, winning over 17.2 billion pesos (US$366 million) worth of state road, bridges and irrigation contracts from July 2005 to June 2008.
The NRIMP-1 projects, entailing the construction and rehabilitation of 1,400 kilometers of roads, had received $150 million worth of World Bank partial financing beginning in 2000. The projects have since been particularly prone to corruption. In August last year, the multilateral lender put South Korea's Dongsung Construction Company Ltd on a blacklist for "fraudulent and corrupt practices" – charges the company did not contest.
In a statement, John Adams, the World Bank's vice president for East Asia, took an indirect jab at Arroyo's record when he said: "Misuse of public money... deprives the poorest people of the development funds that are so vitally needed and it undermines public confidence in public and private institutions."
Although the scandal has focused primarily on private sector foul play, an official twist has emerged involving Arroyo's husband, Jose Miguel Arroyo, marking the latest corruption allegations to swirl around the controversial first gentleman. Filipino legislators and the ombudsman have launched full-scale inquiries into the World Bank allegations.
Opposition Senator Panfilo Lacson first implicated Arroyo in the scandal, citing information from one of the her husband's alleged appointment books that showed he met with EC de Luna Construction's owner over 20 times in 2002. During the senate hearing, Lacson described Luna as the "mystery man" behind an alleged 70 million peso bribe to land part of the multi-billion peso World Bank-financed infrastructure project.
He claims to have a key witness that will back up his claims that contractors paid top public officials, including from the Department of Public Works and Highways. Luna has denied any wrongdoing during senate hearings, admitting that he met with the first gentleman on just three occasions. Palace officials have downplayed the bribery allegations against Mr Arroyo, arguing that the meetings are not proof of foul play.
However, the World Bank has made available material from its internal investigation which mentioned an unnamed Japanese contractor who held a meeting with Mr Arroyo and a former senator where bribes were discussed. "From that meeting, it was impressed on him that [bribe] money was important to do business in the Philippines," the report said, according to a copy obtained by a local television news channel.
The ex-senator, whose name was not divulged in the document, told the Japanese contractor "that money would have to be paid as high up as the president, senior government officials, and politicians in order to do any further business in the country".
The Japanese firm, after making two unsuccessful bids on World Bank-financed road projects it subsequently claimed it didn't actually make because the firm's president's signature was forged on the offer, has since exited the country.
That murky account is so far the only direct evidence linking the President's husband to the still-unfolding bid rigging controversy. Three other interviewees in the senate hearings gave testimony that indirectly linked Mr Arroyo to the alleged bid manipulation.
Scandal-plagued
Arroyo's administration is no stranger to scandal. Congress is currently looking into a reported bribery attempt by Securities and Exchange Commission officials to extort money from Legacy Inc, a local financial company. Similar investigations are underway of alleged bribery of Department of Justice prosecutors to acquit suspects in a recent high-profile drug trafficking case.
Both Arroyos have been accused by the political opposition of corruption. Those allegations have included most prominently a $329 million broadband infrastructure contract tendered to China's ZTE Corporation. Arroyo was later forced to cancel the deal after irregularities, including allegations that her husband requested multi-million dollar kickbacks, were exposed by opposition lawmakers. "Corruption has become pervasive, persistent and prolific. And the president, instead of fighting it, has become its prime protector," said former senator Vicente Paterno.
He contends the reason corruption scandals have not brought Arroyo's government down is due to her appointment of several senior former military and police officials to the bureaucracy. Senior military officials have been involved in orchestrating past People's Power protests that have brought down different Philippine government's on corruption and abuse of power charges.
"Nearly 60% of the 4,000 positions from directors to under secretaries belonging to the career executive service are occupied by her appointees. She has appointed more than 80 assistant secretaries and undersecretaries whose positions are not even provided by law," Paterno said.
With the three pro-administration political parties, Lakas-CMD, Kampi and the Nationalist People's Coalition, in her camp, Arroyo holds sway over 172 of the Lower House of Congress's 238 congressmen. Arroyo-aligned lawmakers are now again bidding to fast-track constitutional changes that would allow Arroyo to extend her term beyond in 2010, when according to term limit provisions in the current charter she must step down.
Arroyo was first catapulted to power in 2001 when corruption allegations galvanized popular protests that eventually drove president Joseph Estrada from power. During Arroyo's nearly eight-year tenure, the World Bank, Transparency International, and local business surveys have all ranked corruption as a major inhibitor of the country's development, including its ability to attract badly needed foreign investment.
The Index of Economic Freedom, prepared by the Washington-based Heritage Foundation think-tank and right-wing newspaper The Wall Street Journal, ranked the Philippines 104 out of 183 countries surveyed in terms of economic freedom. The country scored the lowest in the survey's corruption ratings, which noted the difficulty in enforcing contracts, protecting intellectual property rights and the vulnerability of the judiciary to political influence.
For her part, Arroyo has repeatedly vowed to stamp out endemic corruption but done little to actually combat the scourge. She has since October 2004 consistently received negative approval ratings in quarterly surveys conducted by the Social Weather Service polling agency. Now the World Bank scandal will add more fuel to those poor popular perceptions.
[Joel D Adriano is an independent consultant and award-winning freelance journalist. He was a sub-editor for the business section of The Manila Times and writes for Asean BizTimes, Safe Democracy and People's Tonight.]
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