African Development Bank High-Level Forum on Procurement Reforms: Sustaining Economic Development and Poverty Reduction through the Economic Crisis, Tunis, November 2009 Protectionism versus open markets: are current public procurement reforms appropriate for African countries’ economic recovery from the economic crisis? Kodjo Osei-Lah WTO Secretariat 1

Procurement reforms in Africa: acquis, future direction and challenges Successful period of procurement reforms – Introduced: modern procurement legislation – Targeting more use of country systems in aid delivery Challenges – Implementation and related issues – Room for improvements in efficiency, integrity, value for money – Significant adverse impact of global economic crisis – Effective participation of domestic suppliers/SMEs Objective – Public procurement as tool for development : road map Issue/question: – Protectionist or open market route 2

Insights from analysis of AfDB 2008 contract awards: average value of contracts Regional Suppliers (UA) Non-Regional Suppliers (UA) Regionals as % of Non- Regionals Overall (UA) Goods112,9532,540,8004.4%461,782 Works675,15615,272,8004.4%1,296,218 Services158,340457, %219,768 Other245,4553,420,0007.2%1,000,370 Overall340,1013,143, %686,765 3

Nature of public procurement markets in Africa: insights from analysis of 2008 AfDB contracts Total value of contracts reported: UA 1,394.83m – 43.4% by value won by regionals (UA m) – 55.4% by value won by non-regionals (UA m) – 1.1% won by others (‘multinationals’) (UA 15.77m) Average size of contracts won (regional vs non-regional suppliers) – Goods and works: average size of contracts won by regional suppliers less than 5% of corresponding size of non-regional suppliers’ contracts – Services: equivalent proportion: 33%; overall: 11% Emerging picture – Foreign suppliers won higher-value contracts in goods/works – Local supplier performance higher in services 4

Public procurement in Africa: example of an approach to market segmentation and implications for policy 5

Procurement rules appropriate to target markets and level of policy ambition Global markets: GPA? EntitiesSuppliers Regional markets: regional rules – e.g. COMESA, WAEMU directives; RTAs EntitiesSuppliers Local markets: national rules EntitiesSuppliers 6

7 WTO disciplines in government procurement: the GPA Government procurement in the WTO – exclusions from WTO basic disciplines in GATT and GATS GPA: common rules applicable in all Parties’ markets – Plurilateral agreement – only applicable to Parties – Basic principles: national treatment / non-discrimination – Transparency and procedural rules, including review procedures, consistent with international norms – Enforcement: applicability of WTO DSU Applicable only to covered procurement – Coverage of entities, goods and services specified in Appendix I – Subject to specified derogations – Significance of thresholds 7

The GPA (2) GPA general threshold levels – SDR 130,000 for goods and services at central govt level – Higher thresholds at sub-central level (SDR 200,000) and for ‘other’ entities (SDR 400,000) – SDR 5,000,000 for construction services Flexibilities for developing countries – Use of offsets; price preferences; higher initial thresholds; entity or sector phase-in – Possibility of deferred implementation

Participation in the GPA: benefits and challenges Potential benefits – Improved transparency and competition in national procurement markets – Improved business confidence, potential for inward investment – Enhanced value for money attainment – Assured access to Parties’ covered procurement markets Potential costs/challenges – Accession preparatory and negotiating costs – Implementation and operational costs – Capacity challenges Longer-term hidden cost of non-participation – Opportunity cost of non-participation when price paid through autonomous reforms 9

Public procurement as a tool for development: protectionism or open market principles Support to regional suppliers – Protection vs support/capacity development initiatives – Need to balance defensive and offensive interests Correlate procurement policy with related policies, e.g. – Private sector/SME development policies Consider longer-term offensive interests – Future market access opportunities for African suppliers Regional markets; global markets: GPA in longer-term? GPA possible preliminary policy actions – Shadowing of rules – preliminary cost/benefit analyses, other studies 10