I had requested Mr. Vinay Sharma, Director, African Development Bank to review my blog and offer his comments. I received his feedback on my mail and his take on sustainable procurement was so thought-provoking, I thought it would be injustice if I do not share it with you. Therefore, I sought his permission for putting his perspective on this blog and am glad that he has consented to my request for the benefits of you all. Here is what he wrote:
Thanks a lot. I did have a look at your blog a few days ago and found it
to be very informative and interesting. My compliments.
I am happy that the Government of India has taken policy initiatives in
this respect. I firmly believe that procurement cannot drive the agenda of
sustainability in public expenditure- this requires solid commitment from the
concerned line ministry and the political executive (hopefully based on
evidence that is rigorously analysed), but that procurement professionals
should find the right instruments to implement such policies.
I also believe that while environmental sustainability has adequately
been spoken about when discussing procurement, the issue of social
sustainability still requires to be more comprehensively discussed.
Regrettably, one does hear an argument, fairly frequently of late, that
any preferential treatment to sections of society as a part of public policy
causes inefficient use of resources and collusive practices. This has, however,
not been adequately demonstrated through evidence. I feel that the jury is
still out on this issue and that a variety of factors will need to be
considered if an acceptable model is to be constructed.
Discriminatory public procurement policies aimed at promoting
sustainable public procurement practices are becoming popular in the policies
of both developed and developing nations. The United Kingdom for instance has
outlined the social objectives that it aims to fulfill through its public
procurement activities. The U.K strives to deliver sustainable benefits while
achieving value for money by focusing its initiatives on green buying and on
purchasing goods that have been manufactured in a socially responsible manner.
Discriminatory procurement policies also serve as a way to gain political
support from the public. A focus on the whole life cycle of products allows us
to look beyond the upfront cost of the good onto the impacts of said goods on
society and the environment. Favoring domestic firms in order to foster local
private sector growth and to generate employment is the foundation of
discriminatory public procurement in Africa and it is a practice that is
increasingly debated in the international realm. Discriminatory procurement
policies are often criticized by mainstream development agencies as being a
form of protectionism and organizations such as the WTO are pushing developing
nation governments to sign the GPA that allows ‘equal opportunity in
competition’.
The currents of neoliberal globalization and trade liberalization have
left African (and Asian) firms and entrepreneurs with limited ability to
compete successfully in internationally open public bids. In an attempt to
level the playing field, African governments and IFIs such as the AfdB have
adopted discriminatory procurement schemes ensuring the survival of local
enterprises. There are financial concerns about the viability of discriminatory
procurement as a strategy for African governments who, more than ever, need to
ensure economy and efficiency in public expenditure. A recent study on the
public procurement practices of a few East African nations sums up the policy
contradictions of public procurement in developing nations as follows:
‘Opening up procurement
markets to foreign firms especially in developing countries would expose the
domestic firms to large foreign firms with high quality products, produced at
lower prices due to their high technological base and efficient production
mechanism. This would render many of them out of business leading to job losses
and reduced standard of living. On the other hand, favouring domestic firms for
advertised contracts would perpetuate complacency in production leading to
inefficiency. In the absence of foreign competition, there is little incentive
for domestic firms supplying the public sector to invest in innovation and
research to keep costs down and meet international standards. Developing
countries are then faced with a problem of making a decision of opening the
procurement markets given the rather contradicting policy outcomes.’(Ssennoga,
2010)
Many policy makers believe
that the assumed complacency, inefficiency and low standards of domestic firms
in the absence of foreign competition can be mitigated by the setting of strict
standards for the quality of products and ancillary national policies that
require a greater level of effort from the favored firms (Mouegot and Naegelen,
1998). Ssennoga (2010) suggests that one way to avoid complacency is to
ensure the constant evaluation of institutional growth arising from
discriminatory schemes and introducing time frames for the applicability of the
aforementioned schemes. He stresses that if this is not done, complacency sets
in and the intended objective of improving competitiveness is never attained.
His groundbreaking work on discriminatory policies in Uganda demonstrates that
there is a great need for a sectoral, case by case, piece meal analysis on the
use of discriminatory schemes in different countries. He analyzes set asides,
preference schemes, offsets and local content requirements and undertakes a
sectoral analysis on their applicability in Uganda. He concludes that ‘once
some form of discrimination is introduced alongside competition, some local
firms will start winning public contracts and this will motivate them to work
harder to brace up with competition. They will innovate and restructure their
production processes to be able to compete and win more domestic contracts.
This discrimination is positive for it assists local firms to play hard and
win. So, in the short run, discrimination schemes are justifiable for they
assist local firms to grow and once they grow and enlarge issues like wage
income would increase hence enabling government to achieve its social
objectives of improvement in welfare.’
Governments, IFIs and
MDBs aim to incorporate some sort of preferential procurement component in
their initiatives but the nature and extent of involvement varies across
regions, sectors and institutions. For instance in 2002 China promulgated the
Government Procurement Law that requires ‘Chinese government agencies and
entities must purchase domestic goods, works or services except where those
goods, works or services can’t be obtained within China under reasonable
commercial terms. Those reasonable commercial terms are defined as 20
percent more than imports’.
I hope the above helps you
in your discussions.
Regards,
