Mi CRA Presentation by Rughvir (Shyam) Khemani, PhD (LSE) Microeconomic Consulting and Research Associates (www. micradc.com) 3 rd Biennial International Conference on: Competition Reforms: Challenges in a Globalizing World New Delhi, India November 2013

Mi CRA Importance of Public Procurement  Government/Public Procurement: Purchase of goods and/or services on behalf of a public authority e.g., government department at national, regional or municipal level.  Estimates of Public Procurement: 10-15% of GDP in industrialized economies, up to 20% in developing countries. Also accounts substantial part global economy.  Most countries have laws, regulations and institutions relating to public procurement/tenders.  Fraud, waste, corruption, favoritism, protection of local interests among widespread problems. 2

Mi CRA Sensitive Industries/Markets Prone to Abuses in Public Procurement  Public health, energy supply, public transportation, construction….supply of various goods and services to public authorities.  Adverse impact on government budget, tax-payers….in developing countries on poorer segments of society.  Challenge: Curb abuses and maximize value for taxpayers/government budget 3

Mi CRA Instruments for Effective, Efficient Public Procurement-1  Competition Law & Policy (CLP) -Provisions relating to collusion (price-fixing), bid-rigging  Complements other policies but insufficient: -Focus on competition and not on combatting fraud, corruption, bribery…. -Detecting collusion/bid-rigging difficult, evidentiary problems  Cogent arguments can be advanced that intense competition can create “incentives” for engaging in corruption, bribery….especially in opaque public procurement systems, since detection is difficult 4

Mi CRA Instruments for Effective, Efficient Public Procurement-2  CLP provisions need additional “levers” e.g.: -Leniency program/whistle blower protection and requisite incentives  CLP may be useful instrument in combatting competition related abuses in public procurement ex ante and ex post with above “levers”.  BUT SOEs also participate as bidders/suppliers in public procurement.  Raises issues of “incumbency advantages”, “competitive neutrality” 5

Mi CRA Instruments for Effective, Efficient Public Procurement-3  Ex post abuses (project implementation stage) especially re: fraud, corruption, bribery…..need separate instruments.  Increasingly, in public procurement  shift to ex post abuses: extraction of payments, harassment, inspections, delays in approvals of project stages, kick- backs, …by public officials.  Require enactment/strengthening existing laws/measures dealing with corruption, bribery, etc 6

Mi CRA Other Instruments-1  WTO: Plurilateral Agreement on Government Procurement (GPA)—Effective 15 December Agreed framework of rights and obligations w.r.t. national laws, regulations, procedures & practices. Publication requirements. -Principles of non-discrimination and transparency. - Prohibition of use of “off-sets”: domestic content, local development, BoP, investment requirements….. --Access to foreign suppliers, “national treatment” 7

Mi CRA Other Instruments-2  Public Procurement Law and Institutional Structure -Many countries lack national/general public procurement law. -Public procurement fragmented, different public bodies, different procedures, delegated authority etc. -Lack of prudential controls, accountability, transparency. Recognized need for central public procurement law- policy 8

Mi CRA Other Instruments-3  E-procurement. Measures e.g.: -Single sign-on, single portal, -on-line access to policies, regulations, tenders/ purchase orders, etc. -Standardized documentation, -pre-registration, qualification of bidders, ensuring minimum number of bidders etc. -Electronic up-loading of bids, on-line acknowledgement of receipts, anonymous evaluation, etc……..among other features 9

Mi CRA Concluding Remarks  Government/Public Procurement is plagued with widespread fraud, corruption, bribery….in both industrialized and developing countries.  CLP is but one instrument that can foster a level playing field, “competitive neutrality” in public procurement in so far as collusive behavior, bid-rigging are common practices…. and where SOEs are ‘players’ but much depends on design of CLP  Other policy instruments are required to combat fraud, corruption, bribery confronted in public procurement…..that adversely impact on government budget, tax-payers and various segments of society 10