$1Billion USD - Upgrading 23 important Military Assets DELAYED again for Corruption?

The Philippines relies on aging helicopters such as this UH-1 Huey seen on a recent mission in Mindanao. PHOTO: TREFOR MOSS/THE WALL STREET JOURNAL

Philippine Military Upgrade Stalls

Delay for $1 billion in defense deals leaves planned overhaul years from completion

MANILA—A push by the Philippines to overhaul its obsolete military has ground to a halt just as the U.S. ally is striving to deter China in the disputed waters between them.

A string of programs collectively valued at $1 billion stalled early last year, said military officials and executives involved in Philippine defense deals. The delay underscores how the government’s efforts to transform the country’s derelict navy and air force have become mired in red tape, funding problems and corruption allegations.

The delays leave long-held plans to build a “minimum credible deterrent”—comprising small but capable air and naval fleets—at least a decade from completion, said Jose Antonio Custodio, a Manila-based defense consultant. Even with a basic deterrent in place today, Manila would likely still lack the means to check Beijing’s assertiveness.

“We’re still at square one,” said Mr. Custodio. “With China building all these new bases [in the South China Sea], I’d say it’s already too late.”

Securing secondhand equipment from allies such as Japan and the U.S. may now be the Philippines’ only chance of quickly upgrading its forces, people familiar with the country’s procurement process said. The approach of presidential elections in May make it unlikely that any big contracts will be signed before then.

President Benigno Aquino III has promised to rejuvenate the military, which has been degraded by decades of underinvestment.

A pledge to spend $1.7 billion on new equipment initially bore fruit, as the administration signed a flurry of defense contracts valued at $834 million in late 2013 and early 2014, including deals for 12 Korean fighter jets, three Airbus transport planes and a new fleet of combat helicopters from Canada and the U.K.

“The record will show that the Aquino administration has stepped up the pace of [military modernization] considerably, surpassing the procurement program undertaken by three previous administrations combined,” said presidential spokesman Herminio Coloma.

However, Mr. Coloma said Mr. Aquino still hasn’t signed a law passed by the Philippines Congress in February 2013 earmarking $2 billion for defense procurement. Mr. Coloma didn’t explain the delay.

Government finances have been stretched thin after the government spent billions on reconstruction following Supertyphoon Haiyan (Yolanda) in 2013. Spending has also slowed after a recent scandal in which prosecutors charged three senators with corruption for their alleged involvement in the use of dummy NGOs to steal around $220 million in public money. All three senators denied the charges. Strict government procurement rules have been further tightened since then, putting the brakes on a range of spending programs.

The Philippine vessel Ramon Alcaraz participated in bilateral maritime exercise with the U.S. in June last year.PHOTO: AFP/GETTY IMAGES

Contracts for two naval frigates valued at $398 million and for two long-range patrol planes valued at $132 million—capabilities that would help the Philippines monitor its maritime territory, where it has overlapping claims with China—are among those that were scheduled to have been bid out last year but haven’t moved ahead. “It’s a bureaucratic logjam,” said Mr. Custodio.

Foreign defense companies seeking to supply these and other systems can only wait for the logjam to clear.

“It seems that all programs are paralyzed,” said a Western defense executive whose company is involved in one stalled project.

Another Western executive said the Philippines was hardly unique in experiencing lengthy holdups for military equipment, but recalled how the country’s defense leadership had built momentum in 2013, only to hit the buffers in early 2014.

“Defense officials just don’t have the authority to make things happen now,” he said.

The Philippine Department of National Defense and the Armed Forces of the Philippines didn’t respond to requests to comment.

With China accelerating its island-building program in the South China Sea, Philippine military chief Gen. Gregorio Pio Catapang recently urged Manila to spend more on defense as the country’s economy enjoys healthy growth. Last year’s defense budget was just $3.3 billion—far less than neighboring Singapore’s $9.5 billion.

A Philippines senate inquiry into the country’s military modernization efforts has meanwhile questioned the effectiveness of the funds spent so far, with one senator arguing there was practically nothing to show for the $1.4 billion spent on new weaponry in the decade to 2013.

Senators also looked into a deal for 21 secondhand helicopters, which the defense department canceled in April after only seven deliveries amid concerns about the quality of the technology, and with a Philippine tax official claiming that the aircraft had been ordered in exchange for kickbacks.

The defense department has denied the allegations.

The breakdown of the helicopter program has made defense officials even more reluctant to place new orders and expose themselves to further scrutiny, said Mr. Custodio.

Mr. Aquino has turned to allies for help. On a recent state visit to Japan, he requested secondhand P-3C Orion maritime patrol aircraft, having already received a $183 million loan from Tokyo to fund the construction of 10 new patrol boats. Tokyo has said it is considering the requests, though it hasn’t committed to anything specific. Australia, South Korea and the U.S. have all donated used military kit to Manila in recent years and have signaled a willingness to do more.

But hand-me-downs won’t deliver a deterrent capable of influencing decision makers in Beijing, Mr. Custodio says. “The Chinese are building islands on our doorstep.”  - THE WALL STREET JOURNAL: Write to Trefor Moss at trefor.moss@wsj.com

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Smartmatic bags ₱1.7-Billion Php voting machine contract for 2016 Election

In Resolution No. 2015-004, the Comelec Special Bids and Awards Committee -1 has recommended the issuance of the "Notice of Award" to Smartmatic-Total Information Management for its bid offer of more than ₱1.7 billion Php. photo: PhilStar

Smartmatic bags ₱1.7-B voting machine contract

MANILA, Philippines - The Commission on Elections (Comelec) has approved the awarding to Smartmatic-Total Information Management (TIM) of the contract to lease 23,000 optical mark reader (OMR) machines for the 2016 polls.

In Resolution No. 2015-004, the Comelec Special Bids and Awards Committee -1 (SBAC-1) has recommended the issuance of the "Notice of Award" to the joint venture for its bid offer of more than P1.7 billion.

"SBAC-1 resolves to recommend to the head of the procuring entity the issuance of the Notice of Award (to the joint venture) as the bidder with the lowest calculated responsive bid for the lease with option to purchase of election management system and precinct-based OMR or optical scan system," the committee said.

The project has an approved budget of ₱2.5 billion Php, but Smartmatic-TIM's bid offer was only ₱1.72 billion Php.

SBAC-1 had disqualified Smartmatic-TIM twice after it found the joint venture's bid documents to be "non-responsive" they did not contain Articles of Incorporation and actual bid price offer. The Comelec approved the joint venture's appeal for reconsideration.

The Comelec also declared a failure the joint venture's demonstration of its machines during the post qualification stage of the bidding. But when the joint venture protested, the poll body relented.

SBAC-1 added in its resolution that Smartmatic-TIM is required to "post its corresponding performance security in an amount equal to a percentage of the total contract price."

Currently, the Comelec is looking at two options for the conduct of polls next year.

One option is to refurbish some 81,000 precinct count optical scan (PCOS) machines, while the other option is to lease 70,000 more OMR machines.

The 23,000 OMR machines will supplement whichever of the two options is chosen.

Meanwhile, Comelec Chairman Andres Bautista met with officials and members of the Catholic Bishops' Conference of the Philippines (CBCP) last Sunday to brief them on what to expect from a computerized conduct of polls in 2016.

CBCP president Lingayen-Dagupan Arcbishop Socrates Villegas said the meeting coincided with the 111th Plenary Assembly of bishops.

Villegas said the prelates would further tackle election issues in the next plenary assembly in January. While the CBCP did not issue post-assembly statement on the elections, Villegas said it's the consensus among the bishops that next year's polls should be transparent, efficient and with public accountability.  – Evelyn Macairan :Sheila Crisostomo  - Philstar

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AFP is reinforcing rusting Navy ship on Spratly Ayungin reef outpost with Welding and Cement

Filipino soldiers wave from the dilapidated Sierra Madre ship of the Philippines Navy as it is anchored near Ayungin shoal (Second Thomas Shoal) in the Spratly group of islands in the South China Sea, west of Palawan, Philippines, in this photo taken in May. Photo: Reuters

Philippines reinforcing rusting Navy ship on Spratly reef outpost

Manila:  The Philippines navy is quietly reinforcing the hull and deck of a rusting ship it ran aground on a disputed South China Sea reef in 1999 to stop it breaking apart, determined to hold the shoal as Beijing creates a string of man-made islands nearby.

Using wooden fishing boats and other small craft, the navy has run the gauntlet of the Chinese coastguard to move cement, steel, cabling and welding equipment to the BRP Sierra Madre since late last year, according to two navy officers who have been inside the vessel.

The BRP Sierra Madre, a marooned transport ship which Philippine Marines live on as a military outpost, photographed last year. Photo: Reuters

The 100 meter-long tank landing ship was built for the US Navy during World War Two. It was eventually transferred to the Philippines navy, which deliberately grounded it on Second Thomas Shoal to mark Manila's claim to the reef in the Spratly archipelago of the South China Sea. A small contingent of Philippine soldiers are stationed onboard.

Manila regards Second Thomas Shoal, which lies 195 km south-west of the Philippines region of Palawan, as being within its exclusive economic zone. China, which claims virtually all the South China Sea, says the reef is part of its territory.

"We know China has been waiting for the ship to disintegrate but we are doing everything to hold it together," said one of the officers, adding that while the work was progressing slowly, it should be finished by the year-end.

A newly deployed Philippine Marine, part of a military detachment stationed aboard the BRP Sierra Madre, fishes near the ship in the disputed Second Thomas Shoal, part of the Spratly Islands in the South China Sea in this photo taken last year. Photo: Reuters

The other naval officer said welding was being done at night because of the heat. Concrete foundations were being laid inside the ship's hull to try to stabilize it, he added.

Without giving exact dates, both sources said they witnessed the repairs taking place earlier this year. They declined to be identified because they were not authorized to speak to the media. The soldiers currently stationed on the ship, who are demolition experts, were doing the work, said the second source.

Just to the west of Second Thomas Shoal is Mischief Reef, one of seven coral formations in the Spratlys that China is rapidly turning into islands that Beijing says will have undefined military purposes.

Vietnam, Malaysia, Taiwan and Brunei also have overlapping claims to the Spratly waterway, which is some 1,100 km from the Chinese mainland.

Asked about the repairs, Philippine Foreign Ministry spokesman Charles Jose declined to comment. But such work would not violate an informal code of conduct signed in 2002 by China and south-east Asian states that prohibited any change to the status quo in disputed areas, he said.

"In our view, repairs and maintenance of existing facilities are allowed ... especially if such repairs and maintenance work are for the safety of our personnel and safety of navigation," Mr Jose added.

A Philippines general familiar with the repairs  said the ship's hull and deck were being strengthened, and air-conditioning units added.

"We are improving the living quarters inside, to make life for our soldiers more comfortable," he said, declining to give further details about the repairs or to be identified.

Photos show a pockmarked vessel covered in rust, sitting on the permanently submerged reef but listing slightly to one side. Much of the boat's hull is visible.

Besides being a military outpost, the BRP Sierra Madre is also a commissioned Philippine navy ship.

That means Manila could request U.S. military assistance under a decades-old security treaty with Washington if the ship was attacked, said senior Philippine military officials.

"Even if it's covered with rust, it will remain an active duty commissioned navy ship. It's a symbol of our sovereignty," said the Philippine general.

Second Thomas Shoal illustrates the mismatch in power between the Philippines and China.

Since the start of 2014, the Philippine navy's regular attempts to resupply soldiers on the BRP Sierra Madre with food and water have become a cat-and-mouse routine, with large Chinese coastguard vessels on patrol in the area trying to block the path of the smaller Philippine boats, naval officials said.

The Philippine vessels have always got through by making a run for the shoal's shallow waters, which aren't deep enough for the Chinese coastguard, naval officials said. The tear-shaped shoal itself is large, some 10-11 nautical miles from top to bottom.

Zhang Baohui, a mainland security expert at Hong Kong's Lingnan University, said Beijing would be angry about the repairs, adding that Chinese ships would probably continue their "menacing" tactics. But they would not do anything that could be considered an act of war, Dr Zhang said.

"The larger geo-strategic context is more important than Second Thomas Shoal," he said. - Reuters/The Sydney Morning Herald

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