By Saheli Wikramanayake
The Ministry of Transport decides that Colombo needs a subway system and pays a construction company to build it. The Ministry of Health buys a stock of vaccines from a pharmaceutical company. The Ministry of Education wants to provide school children with daily meals and hires a catering company to cook them. Most people don’t consider the government as a purchaser of goods, services, or works, and yet, governments are important players in markets. In fact, governments spend trillions of dollars each year on public procurement activities like this. In Sri Lanka, around 6% of our GDP is spent on public procurement (a lower figure than most other comparable countries). With deeper pockets than most private sector players, governments have a huge influence on the market. It is for this reason that government procurement is receiving increased focus internationally.
In Sri Lanka, government procurement is perhaps a familiar topic. Most Sri Lankans are aware of the rampant corruption (and the lack of transparency and accountability) that is commonplace. There are a plethora of examples of high-profile incidents to choose from. Most recently, the Ministry of Health was accused of importing stocks of medicines under forged waivers, bypassing the usual tender process. This incident underscores the importance of having strong, effective rules governing government procurement. The lack of it not only leads to a massive waste of taxpayer rupees, but also seriously undermines the trust citizens have in the government.
There is no doubt then that serious reforms are needed for Sri Lanka to address the pervasive problem of corruption in government procurement. What does this have to do with international trade? In the World Trade Organisation (WTO), several Members have ratified the Agreement on Government Procurement (GPA). The GPA is a plurilateral agreement – meaning that states have to opt into joining, rather than it being a condition of WTO Membership. In regular WTO Agreements, the need for consensus often brings negotiations to a halt – seen in the failures of the Doha Round of Negotiations, and more recently MC12 and MC13.
With plurilateralism, the parties are most often like minded Members, which can allow for more comprehensive treaties. The experience with the GPA proves this; through the years, Parties to the GPA have agreed on more comprehensive disciplines on government procurement. In the original GPA, which came into force in 1996, the issue of corruption was indirectly addressed through provisions on transparency in the procurement process. Lack of transparency can be a non-tariff barrier to trade, which is why negotiators chose to include these provisions. Yet, they have the happy side effect of reducing the ability for governments to adopt corrupt practices in their procurement by increasing scrutiny of the process. In that way, the original GPA indirectly provided a guard against corruption in government procurement.
The real breakthrough came in 2012, when Parties chose to reform the GPA significantly, making it better suited to address current challenges. This includes allowing governments to pursue green government procurement policies – a potentially useful tool for countries as they seek to combat climate change and meet commitments under the Paris Agreement. Relevant here however, are the obligations on Parties to combat corruption. These go beyond simply transparency obligations – the revised GPA places a positive obligation on Parties to prevent corruption in the procurement process. Moreover, the updated text requires a transparent tender process, and for the awarding of contracts based on objective criteria. Importantly, it also requires Parties to implement a system for unsuccessful bidders to request information regarding the awarding of the tender, and a review process. The preamble of the GPA also includes a reference to the United Nations Convention Against Corruption (UNCAC). While this doesn’t provide a positive obligation in and of itself, it can provide important context in reading the other obligations in the agreement.
The specific reference to corruption in the GPA is significant in the WTO, and signals how plurilateral negotiations in the WTO can lead to agreements that are more ambitious than those negotiated multilaterally. The IMF on several occasions has referred to the need for addressing corruption in the public procurement process several times. In particular, they note the high level of discretion granted to authorities and the difficulty in challenging decisions as contributors to the corruption in the procurement process. Accession to the agreement could be a useful step in Sri Lanka addressing its corruption problem, creating an international obligation to do so. It can also provide a strong signal internationally that the government is committed to reforming the system. The government needs to build trust, both internationally with our creditors, and domestically, with taxpayers. Accession to the GPA can be a useful step forward in building that trust.
Sri Lanka is currently only an observer to the GPA. Absent pressure to accede to the agreement (either domestic or international), it seems unlikely that the government (or indeed, any future government) would opt to do so. The current system of corruption is so deeply embedded in our political culture, and Sri Lanka lacks an existing legal framework on government procurement. Much is left to the discretion of the government. Yet, if the government is serious about its reforms to the economy, accession to the GPA is a useful step forward. For the Sri Lankan people, this will mean a better use of our taxpayer rupees, and a higher level of confidence and quality in the services received from the government. The process will not be straightforward, and will require significant changes to a deeply rooted system of corruption that has long benefitted politicians– but that is perhaps the biggest reason why Sri Lanka should accede to the GPA.
Further reading on the GPA and corruption.
The views and opinions expressed in articles submitted to the Comparative Advantage Blog are those of the author and do not necessarily reflect the views of The Moot Court Bench.
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