The Presidential Veil of 'Administrative Authority' Over Foreign-Financed Public Contracts in the Philippines

Abstract

Over the past decade, incumbent Philippine President Gloria Macapagal-Arroyo has been besieged by accusations of corruption, bribery, and influence-peddling in the approval and allocation of foreign-financed public contracts. The latest scandal directly implicating the President involved a proposed National Broadband Network (NBN) to be undertaken by a Chinese contractor, ZTE Corporation, under a foreign loan financing agreement with the Chinese government. During Senate investigations of the NBN contracts, then-Secretary of the National Economic Development Authority (NEDA) Romulo L. Neri disclosed that he was offered a 200 million Philippine peso (Php) bribe to favorably endorse the contract. A subsequent NEDA whistleblower was later abducted by government authorities, apparently to prevent him from testifying on multimillion dollar kickbacks demanded for the NBN project, and how NEDA had been reduced to a rubber-stamp in the evaluation and approval process. On the heels of public riots, impeachment threats, and the near-toppling of the Arroyo government, the President declared the cancellation of the NBN contract in October 2007. This paper examines the Presidential use of "administrative authority" within the process of approving, policing, and monitoring of foreign-financed contracts, specifically in the form of projects financed through Official Development Assistance (ODA) or through "tied loans" that require selection of the project contractor from the donor country. Analysis of Philippine administrative law and jurisprudence reveals that the President's broadly-construed authority to conduct administrative reorganizations grants her virtually full control of the ODA approval, evaluation, and monitoring process and seriously undermines the functional independence of NEDA (and its Investment Coordination Committee). This is contrary to the legislative intent of ensuring inter-agency checks and proper project vetting under the Official Development Assistance Act of 1996. To date, however, the Philippine Supreme Court has set a relatively low threshold of "good faith and administrative efficiency" for affirmation of the validity of administrative reorganizations. The Court has exhibited an almost-automatic deference to the President's assertion of "good faith and administrative efficiency purposes." In light of important constitutional policies that regulate foreign loan contracting, this paper proposes that the Court reconsider its minimal test for the validity of administrative reorganizations, particularly when they occur against the sensitive context of ODA project approvals and allocations. When the President's administrative fiat is apparently deployed to circumvent legislative standards and constitutionally-mandated independent agency oversight, the Court should exercise its expanded power of judicial review under the 1987 Philippine Constitution to impose higher scrutiny on the President's exercise of power to reorganize the Executive Branch.