Procurement
May 7, 2012

Procurement challenges in developing countries

Effective public procurement can be “make or break” in developing countries where internal revenues stretch to reach 50 percent of inadequate national budgets. The budget gap is alleviated by hard and soft loans and grants from the wealthier nations of the world that seek assurances these funds are being used as intended for the purchase of the goods, services and works needed to achieve the UN’s Millennium Development Goals.

In many cases – for example, countries of sub-Saharan Africa – little attention was paid to public procurement processes and outcomes. Aid from OECD countries was fully tied in that goods, services and works were funded and exported from the OECD country. Major purchases procured with internal funds fell under the purview of developing country politicians, and small purchases were left to untrained junior staff. Legislation governing public procurement was either nonexistent or obsolete. Oversight agencies (such as an auditor general), the media, civil society and the judiciary (contract enforcement) were generally ineffective. Controls exercised by finance and planning ministries were inadequate.

More recently, developing countries have benefited from the OECD funding mechanism of untied aid. For those on the trajectory toward democracy and a free market economy, greater focus has been placed on governance. Where recipient countries satisfy due diligence criteria, direct budgetary support is provided. The World Bank, other multilateral financing institutions and bilateral donors – including Canada – are playing a key role in oversight and building the public procurement capacity of recipient countries. The World Bank, in conjunction with the OECD Development Assistance Committee on Strengthening Procurement Capacities in Developing Countries, is establishing international standards for public procurement.

This work has generally paid off, although in some fragile states the “complex and onerous” World Bank procurement policies have been blamed for the delayed delivery of goods and services needed to rebuild after civil strife or natural disasters. Such complaints are not limited to the developing world. Most OECD countries have, however, streamlined the process through sound budgeting and planning, supported by effective policies and procedures, highly trained staff and computerized systems. These tools are not yet available in poorer countries.

Although they are heading in the right direction, there is still much to be done in developing countries to improve procurement-related governance. There are still cases of locally funded goods that are purchased with the wrong specifications or for projects of dubious value (e.g., roads to nowhere). Similarly, late or inadequate funds for purchases can wreak havoc with the best procurement plans, especially when work under contract has to be stopped until cash is available.

As most economies of developing countries are agricultural-based, there can be limited local supply of the goods, works and services required for projects. International buying or leasing, even through local distributors, presents additional hurdles to embryonic procurement services, especially in those countries where purchasers have limited command of an international business language.

Perhaps the most daunting challenge for developing countries is attracting, developing, equipping and retaining competent government employees, including those for the procurement functions. Overall compensation packages for civil servants are significantly less attractive than those in the private sector. HIV/AIDS, while less of a death sentence than before, has still taken many in their most productive years. The pool of educated talent is small: in Africa, while free primary and (in some instances) secondary education is now generally available, there are still too few graduates.

Procurement is not generally recognized as a profession and thus is not necessarily seen as an attractive career option; graduates may choose to pursue work in the private sector or with foreign development partners, and opportunities to emigrate may arise. Some use the civil service as a training ground, moving on once they have marketable skills. In addition to these obstacles, the capacity constraints noted earlier in budgeting, planning, program design, purchase specification, and procurement auditing and enforcement must be overcome in parallel.

Clearly, public procurement inefficiencies are but one aspect of the struggles that developing countries face. However, there are many green shoots that indicate progress, and Canada, its OECD partners and the multilateral financing institutions should take pride in these advances. With continued support, developing countries can propel themselves towards transparent and effective public procurement.

 

John Brooks is the managing consultant of ANJO Global Consulting. He has worked extensively with CIDA, the World Bank, Irish Aid and CARICOM in North America, Europe, Africa, Asia, the Caribbean and South America (jfbrooks@sympatico.ca).

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