Balance good governance with commercial interests in public procurement: CUTS

January 31, 2013, New Delhi
Balance between good governance principles with commercial interests will be crucial in deciding whether to accede or not to international commitments on government procurement. Aligning possible strategies to enhance socio-economic objectives with public procurement principles and juxtaposing them with stakeholders’ perceptions on the subject will further prepare India to take a pragmatic call on whether or not to make international commitments,” said Bipul Chatterjee, Deputy Executive Director, CUTS International. He was speaking at a meeting in New Delhi on public procurement in India. The consultative meeting was held as part of a project, supported by the British High Commission, New Delhi under its Prosperity Fund Programme.

Pallavi Kalita, Senior Trade Policy Adviser, British High Commission said that the motivation behind supporting this project is to create a space for debates on this important subject of the Indian economy.

Earlier in the opening session Ronald Watermeyer, Director, Soderlund and Schutte, South Africa said that there is a need to build a good procurement regime at systemic level than through just rules and procedures. He also underlined that putting process and procedures for a quality management system is the beginning and not the end of a good procurement regime. He further stated that strategies need to be built at portfolio level for devising a win-win situation by forging public-private partnerships, building an enabling support system, and an effective and enforceable monitoring system to create an efficient procurement system. He said that huge socio-economic development opportunities exist for any country if it understands dynamics and totality of its procurement system.

The meeting discussed the findings of the study on Opportunities and Challenges for India within the WTO Government Procurement Agreement Framework. Two key objectives came into light for countries anticipating accession to the WTO GPA. They are to enhance export markets as provided by WTO-GPA member countries, and also to embrace reforms to internal market and administration so as to benefit from good governance aspects of the WTO GPA. While a country can employ a combination of objectives, its strategy of accession to the Agreement would need to be considered on its own merits, based on an assessment of potential benefits and costs.

Despite the incentive of having good governance principles of transparency and integrity, these reasons appear to be pale in comparison to tangible economic reasons of “market access”. The WTO-GPA members present huge figures as indicative of potential market access opportunities. The study provides that in practise, a large number of contracts granted by the government are below the threshold value which is out of the purview of the commitments under the WTO GPA. Further, countries maintain significant ‘exceptions’ and ‘exclusions’ for social purposes or for procurement pertaining to certain utilities, or exclude procurement by their sub-central entities.

For instance, in case of Chinese Taipei, data reveals that more than 95 per cent of total procurement contracts above threshold are awarded to domestic firms while in the EU less than 5 per cent of the size of its total government procurement market – that is out of €292 billion only €13 billion contracts in value terms was awarded to other GPA countries. Furthermore, owing to the absence of the principle of non-discrimination, WTO GPA members prohibit the access of certain markets to certain other member countries unless comparable market access is dealt out.

It came out from the meeting that India may not be prepared to accede to international agreement on government procurement given various compulsive reasons such as low manufacturing capacity in certain pertinent and potential sectors. However such a decision to ‘abstain’ from joining this agreement will not be passive anymore and will have to be taken after defending and foraging for market access opportunities elsewhere.

For more information, please contact
Bipul Chatterjee, +91(0)9829285921,
Archana Jatkar, +91(0)9928207628,