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During the week of a much anticipated visit of Chinese President Xi Jinping to the Philippines, the country of Southeast Asia is about to approve a major investment of one Chinese telecommunications company.
A new competitor in the over-protected telecommunications sector, worth $ 5 billion, should be warmly welcomed, especially by Internet users, who have been suffering for a long time. The existing comfortable duopoly that provides some of the slowest and most expensive Internet services in the world, late for a real upheaval.
But instead, the plan raises many political and security issues, as the main investor of the Mislatel consortium leading the race to conquer the market is China Telecom, a state-owned company.
President Rodrigo Duterte is under intense pressure from critics to ensure that he addresses concerns about the transparency of the agreement and the potential implications for security. It would be wise to take into account these criticisms, by examining both the specific aspects of a contract that changes sector and the broader issue of relations with China.
Duterte describes the entry of this new operator as a big step forward, since "many will benefit" from a "good competition". For the populist leader, who came to power in part by promising better government services, the deal would be a significant political success before the crucial mid-term elections next year. But if the concerns of transparency and security multiply, the project could still turn against the president.
The Mislatel consortium, led by Udenna Corp., a Chinese and Filipino businessman, and China Telecom seek to challenge the duopoly that has lasted for several decades between PLDT and Globe Telecom.
Under the protectionist clauses of the 1987 constitution, the Philippines prohibits the full ownership of critical public services, including media telecommunications, to foreign owners. Foreign companies must team up with local players, who must hold at least 60% of the investments.
These rules partly explain the domination of these sectors by some local conglomerates accused of providing poor quality services at a high cost. The Duterte government hopes to reduce the grip of the so-called Filipino "oligarchy" by the entry of new foreign investors.
If it wins, Mislatel is committed to spending more than 250 billion pesos ($ 4.74 billion) over the next five years to build a world-class telecommunications infrastructure. It has announced speeds of up to 27 megabits per second on average in its first year of operation and up to 55 Mbps in subsequent years. Today, the average Internet data download speed in the Philippines is 1.54 megabits per second, a fraction of the world average of 10.6 Mbps.
The consortium also plans to cover up to 84% of the country with its services by the fifth year of operation, compared to 68% for Globe and 64% for Smart. In any case, all of this would benefit consumers.
In August, seven foreign companies from the United States, Japan, South Korea, Vietnam, Norway and China formally expressed interest in bidding. But only four groups, including Mislatel, were presented to the public, was broadcast live on November 7, auctioned on November 7, organized by the National Telecommunications Commission, the regulator.
The other three competitors were disqualified for various reasons, including the inability to meet the technical requirements, leaving Mislatel to impose unopposed.
As Mislatel's candidacy is still facing final verification, some competitors have protested against the unfairness of the procedure. For example, a consortium grouping the highly reputed Korea Telecom withdrew its bid after complaining that the third telecom company would "be required to commit an inordinate amount of funds and incur obligations to a pace that did not require the current dominant service providers. "
Other critics have focused on the presumed support of the president to a Chinese investor. In a speech delivered two years ago, Duterte openly threatened national actors to give way to a Chinese player in the telecommunications sector. "If you do not do it right, wait, I'm going to China."
In a joint statement this month, opposition senators led by Senate leader Franklin Drilon asked, "Why were the other bidders excluded?" followed the process? " They emphasized the alleged "involvement of Malacanang [the presidential palace]"by facilitating and speeding up the entry of China Telecom.
Opposition senators also expressed concern over the president's ties with China Telecom's local partner, Uy. "The choice of the joint venture of a state-owned, state-owned businessman in Davao, China Telecom, as a temporary new player in the telecommunications sector should be closely examined" they said.
Uy and his wife Cherylyn contributed greatly to Duterte's campaign in 2016, contributing $ 31 million in cash, according to Duterte's official statement.
The presidential spokesman, Salvador Panelo, however, insisted that any suggestion of political favor is "an unfounded assumption" and that "relations, alliances and friendship do not count for this president" in decision making.
Critics of Duterte's Senate also raised concerns about national security. Senator Grace Poe, a prominent independent legislator, who chairs the Public Services Committee, demanded that the Philippines' armed forces and security and intelligence agencies check China Telecom's entrance.
At the same time, a former high-ranking intelligence officer told Philippine Daily Inquirer that China Telecom's entry would be "a long-term disaster for us," criticizing Duterte for "being so in love with China".
Hermogenes Esperon Jr., Duterte's national security advisor, said the security agencies had examined the candidacy. Panelo however asserted that there was no political interference in the process. "There was a transparent, fair, public and open selection process, made in accordance with the laws, as well as the relevant rules and regulations."
In the late 2000s, the administration of Gloria Arroyo suffered a political setback when the financial controversy forced the authorities to abandon China-led broadband project NBN-ZTE after the opposition mobilized against growing of China.
This time, under Duterte, independent lawmakers and the opposition could press for the Senate to open an investigation, while other critics could seek judicial intervention to block the case. entry of China Telecom.
The government must reassure the public about the integrity of the bidding process and about the security of allowing the entry of a company run by the Chinese state. Otherwise, critics could escalate into public reactions and derail an essential investment in telecommunications.
Richard Heydarian is an academic, columnist and author based in Manila. his latest book is "The Rise of Duterte: A Populist Revolt against Elite Democracy".
