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North-South, South-South: with Good Procurement, oh, the Places You’ll Go!

During the last Korean meeting in Busan for a new Aid Effectiveness strategy for Development the big shots were there: Hillary Clinton, Queen Rania of Jordania, Lee Myung-Bak, President of the Republic of Korea, and  Ban Ki-moon, Secretary-General of the United Nations , to testify of the big challenges at stake and the insufficient progress made so far (only one of the 13 target Millennium goals being achieved). “Guilty of being too ambitious” one said. “Reduce fragmentation in aid”, “Enlarge space for civil society”, “Rich donor countries for lack of trust do not make use of national systems of poor recipient countries, even when the quality of these has been certified”, “Reduce Tied-Aid and Favor Local Development”.

While we as a public were finishing off our parallel sessions on a variety different topics (the menu in the program was quite full and able to satisfy everyone’s taste) some key actors were often seen leaving abruptly the public rooms to enter those closed ones where negotiation for the final declaration was taking place. For an expert of public procurement like me, the key issue was the one of the so-called “Country-Systems” where money sent from rich countries to poorer Nations was to be used by those Governments to award contracts to firms that would carry out projects or sales of goods and services. Key issue: who to award? The question is never framed in such a way but in the gentler and more neural one: with which rules? The local ones or the international ones, more fit to open competition to rich countries firms and more costly to be understood for local firms from emerging countries? The debate has risen dramatically in importance in the past decade, possibly due to the more aggressive role that China has played in financing emerging and poor countries with better financial conditions, a stance that has forced Western countries to be more open in its concessions to the recipients of funds, including a more tolerant approach to allowing Country Systems.

This battle in the negotiating room was played on even subtler issues. The final declaration was framed as follows:  “use country systems as the default approach for development cooperation in support of activities managed by the public sector, working with and respecting the governance structures of both the provider of development cooperation and the developing country.” So where was the big deal in all this? In the word “default approach” that won in the end against the alternative wording of “as the first option”. Now, question 1: what is the difference between default option and first option? Probably not much, someone that was inside the process told me: “I suppose, he continued, that one can argue in a more nuanced way that a “default” option gives a bit more push and legitimacy to using country systems, because it becomes a standard operating procedure as distinct from a ‘first’ option (which is one — a preferred — approach among others);  in other words, the ‘presumption’ now is use of country systems and one needs to justify why such systems are not used;  it is no longer simply a ‘preferred’ option, amongst other possible options.” But another one added: “personally I really don’t see much practical difference.  Please also note that the important reference to the donor’s governance structure”, hinting at the fact that business could continue as usual by leaving donors a space of discretion on whether to use country systems or not.

The final wording of the declaration also mentioned the role of assessing “jointly country systems using mutually agreed diagnostic tools. Based on the results of these assessments, providers of development cooperation will decide on the  extent to which they can use country systems. Where the full use of country systems is not possible, the provider of development cooperation will state the reasons for non‐use, and will discuss with government what would be required to move towards full use, including any necessary assistance or changes for the strengthening of systems. The use and  strengthening of country systems should be placed within the overall context of national capacity development for sustainable outcomes.”

One might ask naively, question 2, if the system is by default, how can country systems not be chosen? Another source told me: “the assumed or presumed approach will now be country systems, but there can be exceptions to this provided such exceptions are fully justified and explained …. In other words, the burden of proof for not using country systems is now with development partners — previously, in practice, the burden of proof for using country systems was, essentially, with partner countries (or at least in part with partner countries) – trying to show why use of their local systems was sufficient in terms of ‘acceptable’ levels of fiduciary risk exposure of development partners… For example, if a particular country’s procurement system does not have adequate safeguards for corruption and fraudulent activity oversight, this could be one reason what a caveat would be needed that would, in effect, not permit complete use of the local systems — that is, the bidding process could be in accordance with the (determined to be) acceptable local procedures, but the anti-corruption oversight process would be, for instance, in accordance with the anticorruption policies and procedures of the Multilateral Development Bank or of the relevant development partner.” Another more puzzled voice claimed that “this is not a new commitment”.

Overall, one wonders if it is in the end these technicalities that drive development and poverty alleviation or rather if we need to fight heads on for better procurement professionalism, including auditing and performance measurement so as to increase the accountability of all Governments, rich and poor, included. The document attached, prepared by the Asian Development Bank, sums up pretty well how far you can go with good public procurement practices. Oh the places you’ll go!

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