ONE of the many criticisms against the Trans-Pacific Partnership Agreement (TPPA) that Malaysia is negotiating to sign alongside 11 other countries throughout the Asia-Pacific region is that procurement by government and state-owned enterprises (SOEs) would be opened up to foreign companies.
This has raised ire among local firms that fear their bread and butter contracts were being taken away, since foreign companies would be allowed to bid on similar terms as locals for goods, services and projects.
This is especially so given that government procurement formed an estimated RM1 trillion worth of projects in 2013, which makes up 23% of that year’s GDP. Naturally, it is a significant market size within which greater competition would affect the inefficient, and therefore weaker, players.
The government has responded by saying that it is negotiating for greater carve-outs, namely that Malaysia has carved out build-operate-transfer projects from its scope of commitments in the TPPA, although the threshold for construction services has not yet been determined. In fact, the government’s position is that certain areas of interest to the bumiputra business community and small and medium enterprises, as well as certain domestic operations of SOEs have been excluded.
While it is understandable that there are fears that local companies will no longer receive government assistance through national treatment, procurement is in fact one of the areas in which the TPPA could possibly bring about greater openness, transparency and competitiveness in the way our government handles its public procurement system. In short, value for money as a principle by which the administration handles its contracts.
Of course, the country need not necessarily sign the TPPA just to ensure its procurement is better managed, but the reality is that reforming government procurement is a long and arduous task. Without external factors, one would have to depend entirely on internal political will to push through change, and trends have shown this is a tough nut to crack.
A series of policy papers that our organisation IDEAS has published throughout the year on promoting transparency in public procurement provides several proposals on how reform can be pushed through, with or without the TPPA. And it was shown that by implementing a transparent public procurement system, the government could save up to RM4.5 billion a year, assuming that 50% of current public procurement is in fact non-transparent in nature.
Some of the recommendations include improving the procurement process itself to improve transparency and accountability, for example including evaluation criteria and weightage within tender documents, which is currently not the case.
We also recommended that preferences given to bumiputras should always be stated in the tender documents, even if the weightage is zero. Under the TPPA, the government has said there should be carve-outs for the bumiputra community, and although preferential treatment based on ethnicity does not help national development in the long run, perhaps a phasing out period over a fixed number of years would be ideal.
Having independent observers sit in to attend bidding evaluation meetings may seem unusual, but this would actually allow for more independent monitoring of how contracts are awarded.
The Ministry of Finance has responded positively to calls for greater openness in recent months, for instance publishing directly negotiated contracts on its website, MyProcurement, but to date there are only 64 contracts listed, and several details are still left out, making it difficult for the public to track. The awards themselves should be accompanied by publishing the criteria for choosing successful bidders and whether or not this would be further sub-contracted.
One might argue that the annual Auditor-General’s Report already reveals a host of compromised deals made by ministries, many of which centre on problematic procurement, but which have not led to any prosecution. Indeed, stronger investigative processes and punitive action should be carried out. Individuals making compromised contracting decisions must be held responsible for their misdeeds.
A rather ironic situation is that although our public administration was one of the first in the world to embrace online platforms, today it lies in an alphabet soup of sorts. Just for public procurement alone, there exist five procurement portals managed by different ministries (ePerolehan, MyProcurement, Government Information Procurement System, ePerunding and National e-Tendering Initiative). Much effort would be needed to consolidate these into one central platform.
Surely this would make it easier for government officers, suppliers and the public, to keep track of contracts.
So whether or not the TPPA is implemented, there are steps that the government can immediately take to assure the public of its commitment to greater transparency to make its procurement systems more productive. Of course, signing the TPPA may speed up this process, but this would come with a host of other challenges that are not discussed in this article.
Although there have been briefings by the government on the TPPA status, the information could still be more forthcoming. For instance, although they have said that state and local governments will not be subject to government procurement rules, the exact thresholds – which are, understandably, still under negotiation – at the federal level have not been specified.
There has been much public disquiet about the TPPA namely because many stakeholders (the most affected parties like farmers, manufacturers of generic medicines and so on) likely feel that information from the government has only been general at best. Perhaps the ministry concerned could produce policy factsheets that demonstrate the magnitude and scale of how each interest group would be affected. Until then, the arguments for and against the TPPA will continue to take place in a vacuum, with asymmetric information.
Tricia Yeoh is the chief operating officer of IDEAS