‘Loan stoppage due to graft a huge national embarrassment’

GMA, execs blame WB for RP corruption

By Ruben Hortelano

11/21/2007

It’s never President Arroyo’s or her government’s fault, not even when there is proof of corruption.

A day after claiming that the World Bank’s stoppage of P21.5 billion due to many anomalies, collusion and excessive price paddings in Philippine road projects was a “wake-up call” for the Arroyo administration with a promise from Malacañang to set up measures to curb graft and ensure transparency, both Malacañang officials and Mrs. Arroyo’s economic officials laid the blame squarely on the WB for the corruption in the road projects overprice and other anomalies.

Malacañang claimed the Arroyo government is a victim of infighting in the WB, the result of which

has cost the country P21.5 billion loan for these projects.

Secretary Cerge Remonde, head of the Presidential Management Staff (PMS), vehemently denied that corruption in the Arroyo government was what pushed the WB to cancel the multi-million dollar loan, insisting that it was “politics” inside World Bank that caused the cancellation.

“We are caught in an internal row in World Bank... the new president (Robert Zoellick ) stops projects because these have not been fully explained to him. He had alienated some bank officials who protested suspending projects, which has punished impoverished nations,” Remonde said.

Both Remonde and Chief Presidential Legal Counsel Sergio Apostol, however, admitted that they will seek clarification from the WB on the matter.

Apostol said they are ready to appeal the WB’ decision and conduct appropriate investigation on the alleged anomaly.

Remonde expressed dismay that the WB failed to equally apply their criteria specifically to a developing nation like the Philippines.

Economic officials, for their part, also said the WB was to blame over its findings of anomalies and corruption in the National Roads Improvement and Management Program saying an alleged flawed public procurement system has forced the multilateral agency to defer $232 million worth of infrastructure projects.

To some senators, however, the cancellation of the huge road projects loan “due to strong signs of collusion and excessive pricing” is a huge national embarrassment.’

But it didn’t seem to be taken that way by the Palace and its economic managers.

At the briefing where Finance Secretary Margarito Teves revealed the extent of the deficit in the first 10 months, Budget Secretary Rolando Andaya had no one to blame but the WB itself for insisting on adopting its own system rather than one which reflects local settings.

“This would not have happened had the World Bank not insisted on choosing its own system. It was the WB that chose this system,” Andaya said without conceding anything that has thus far been alleged.

He welcomed the WB’s decision to defer the entire infrastructure program saying this was an opportunity for government to dialog on the choice of system.

“We’re saying no (procurement) system is perfect but ours was the better model had they let us adopt it,” Andaya said.

“Now they (WB) are blaming us for something that they themselves insisted on adopting,” Andaya said.

He added if anyone was to blame, then let that blame fall on the WB (officials) who were beside us in drafting the guidelines every step of the way. They were guarding us very closely”

According to Andaya, the WB may cancel the entire project if the anomalies can be substantiated but he shrugged off its potential impact on next year’s budget program.

Teves confirmed the claim, saying Manila was “in a better fiscal position to consider other options in case the World Bank takes action (and cancel altogether).”

“In terms of effect on our other loans, I don’t think so,” Teves stressed.

The World Bank has committed at least $500 million worth of projects and programs for the Philippines for three years ending next year when Andaya and Teves together shall have spent no more than was guaranteed by revenues.

Teves added there were other multilateral lenders they can tap should push come to shove.

Andaya recalled the Philippine model that accepts only the low bids cured the flaws related to the purchase of Army boots some three years earlier.

Because the Manila model was “pababaan,” the lowest bidder who turns out to provide low quality boots was rejected and so was the second lowest bidder.

The third lowest was accepted as its boots mustered the quality desired, according to Andaya.

“I know because I wrote the procurement rules of that system they rejected,” he said.

He also said public works projects now carry five-year guarantees that bind contractors to repair or reconstruct at their own expense projects that fail before the five-year period.

Andaya said it was unfair for the Arroyo government to be accused of engineering the overprice since it was “for all intents and purposes a World Bank bidding.”

But for senators, the foreign lender’s move to cancel its infrastructure loan package to the Philippines due to strong signs of collusion and pricing’ is a huge national embarrassment.

Sen. Mar Roxas yesterday said that “the executive branch must not be seen as condoning the rigging of projects funded by multilateral organizations such as the World Bank through loans that eventually will be shouldered by the Filipino people.

“A thorough investigation is needed to verify the facts surrounding the failed bids and the circumstances that led World Bank officials to defer the grant of these infrastructure loans. If indeed, Public Works Secretary Hermogenes Ebdane had ordered an early investigation into the three failed bids cited in the World Bank report, then what were his findings?

“The results of his inquiry and any subsequent steps he took to prevent a repeat of such questionable biddings must immediately be made public.”

Administration and opposition senators yesterday expressed fear over the possibility of a loan crisis taking place in the country in view of the WB’s decision to freeze billons worth of loans for road projects.

Minority Leader Aquilino Pimentel Jr. and administration Sen. Edgardo Angara raised this possibility saying it could send a signal to other international financial institutions in imposing the same to the country.

“It is tantamount to (the WB) telling Mrs. Arroyo that you had better shape up or you will be shipped out. In other words, resign now, you can’t hack it, “ Pimentel said, adding that the “stink of corruption has become so pervasive that even the international financial institutions have smelled it.”

Angara, while aligned with the administration expressed the same concern over the impact of the WB’s move in other pending or incoming loans or financial assistance to the country.

“That bad for us. Our ODA is already miniscule, now one of the cheapest lender, the WB, if it is really insulting us, that’s really bad. The biggest example is WB that is the lender. It is being followed by multilateral agencies as well as donor-countries so the WB is a pace-setter, which can mean that no one else will give us the ODA,” Angara pointed out.

Senate President Manuel Villar was in agreement, saying that has to be looked into by the Senate through a probe.

He said that when a country is called corrupt by others, that doesn’t carry as much weight, but in this case of the WB, it was specific to the Philippines; its specific projects where anomalies were found. This is a huge embarrassment to the country.” With Angie M. Rosales, Sherwin C. Olaes, AFP and Tribune wires

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