WORLD TRADE
ORGANIZATIONWT/WGTGP/W/41
17 June 2003
(03-3199)
Working Group on Transparency
in Government ProcurementOriginal:  English
POSITIVE EFFECTS OF TRANSPARENCY IN GOVERNMENT PROCUREMENT
AND ITS IMPLEMENTATION
Communication from the European Communities
The following communication, dated 13 June 2003, has been received from the Permanent
Delegation of the European Commission with the request that it be distributed to all Members.
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Since the launch of the study phase on Transparency in Government Procurement after the
Ministerial Conference of Singapore in 1996, WTO Parties have identified and discussed in detail allelements related to TGP capable of being included in a future WTO Agreement.  As Members are on
the verge of a decision on modalities for these ne gotiations, the EC would like to emphasize the
general aims to be achieved by these negotiations and the cost that the absence of WTO rules in TGP
could imply for WTO Members and in particular for developing countries (DCs).
I. THE BENEFITS OF A MULTILATERAL AGREEMENT ON TRANSPARENCY IN
GOVERNMENT PROCUREMENT
More efficiency and innovation
1. In a commercial environment it is difficult to know what the market strategy is or how to
assess the economic advantages of our competitors.  A lead in a given market is not permanent and is
constantly subject to pressure from competitors looking for a share in that market.  This situation callsfor a continuous analysis of industrial, commercial or  marketing strategies in an increasingly complex
environment.
2. Public procurement applied in a transparent environment with a clear set of rules defined in
advance and respected by all  participants may allow tendering companies from both developed and
developing countries to foster enhanced compet ition thus stimulating i nnovation amongst bidders.
Better value for money
3. Transparent tendering should lead to effective competition by comparing offers from different
bidders.  When tenders are to be opened to foreign bidders, the differences in terms of value and
quality regularly brings prices down, as in any other auction system.WT/WGTGP/W/41
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4. Governments and public entities have a political duty to purchase goods, services and works
through the most economically advantageous offer.  More transparency in procurement open to
foreign suppliers contributes to increased competition and governments obtain lower prices, thereby
reducing budget expenditure.
Encouraging investment and partnership
5. Access to a foreign market when tenders are to be opened to foreign bidders, is always
difficult, requiring, as it does, previous market research, the setting-up of a distribution system, the
opening of local branches and/or the appointing of representatives.  It is usually the case for foreign
bidders wishing to win a public contract to set up a joint venture or similar partnership with local
suppliers who are more familiar with domestic la w, rules and procedures thus increasing the chances
of success.  Transparency will increase investment and  partnership.
Reducing corrupton
6. Amongst the different forms of corruption affecting foreign trade (judicial corruption,
political corruption), bribery (to officials and politicians) during the tendering process is one of the
most significant and distorting of all corruption practices:  extra expenditure for public budgetsultimately borne by tax payers, reducing free competition and quality of deliverables, discouraging
investment, etc.
7. Publishing calls for tenders, notifying contract awards, including the successful bidder's name
and final price, and making award criteria more transparent and accountable are some of the basic
principles of transparency in government procurement which directly affect corruption practices.Although TGP will not eliminate corruption (more sophisticated practices will be used), it will reduce
it.
II. IMPLEMENTING RULES ON TGP
Most WTO Members already apply rules on TGP
8. All developed countries and many developing countries already
 apply rules on TGP which
enable procuring entities to attract sufficient bidd ers and introduce competition, and thus improve the
quality of the goods and services supplied while reducing public expenditure.  The cost for these
countries of introducing WTO rules on TGP would be minimal, if any.
9. Developing countries not applying procurement rules (where transparency would just be a
missing element) may justify this by claiming that the absence of rules reduces administrative costs.
But it is difficult to find countries where there is a complete lack of rules in government procurementand, even where there are such cases, the savings obtained by introducing competition will more than
offset administrative costs.  Where procuring rules already exist, the transparency exercise is limited
to making such rules available by whatever means and introducing a minimum number of items that
should be made public to obtain sufficient participation and accountability.  Where procuring rules do
not exist, are insufficient or when the introduction of these rules represents an important cost, theDoha mandate obliges to provide the necessary assistance for implementation.
New multilateral rules in TGP will not place institutional constraints on developing countries
10. It is not the case, as it is often claimed, that new multilateral TGP rules will open DC
procuring markets to suppliers from developed countries and will limit the ability to give preferencesto domestic suppliers.  This debate has been closed since Doha, where the scope of TGP was clearly
limited to transparency only , without reducing the option of countries to give preference to domestic
suppliers.WT/WGTGP/W/41
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11. The EC is in favour of minimising the impact of TGP rules on small entities in DCs by
making these rules only applicable above a given threshold, which could even be higher for DCs.
Good governance and efficient management in the public sector need a selection process that isproportionate to the value of the goods or services to be purchased. A procuring entity launching
major works or purchasing high-value goods cannot justify the absence of rules and transparency byclaiming insufficient institutional capacity or human resources.
Practical measures to be taken to help developi ng countries live up to possible future obligations
12. Firstly, by explaining what the future WTO rules might be, and, secondly, by helping to put in
place the necessary legislative changes (if any) and new methods.  This second aspect is the most
sensitive as it covers a wide audience of procuring officials, not only in many central government
entities, but also in regions, provinces and municipalities.  Thirdly, a minimum of infrastructure willbe needed to respond to these future obligations in an efficient manner:  publications, notifications,
etc.
13. The EC is committed to provide assistance during and after negotiations and is already
providing assistance on capacity building to many WTO Members.  The EC will enhance assistance
in the field of Information Technologies (IT) thus providing easier access to procurementopportunities worldwide.
Conclusion
14. A future multilateral agreement on TGP which, as agreed at Doha, will be limited to
transparency, will not open up new markets or increase existing ones.  In some cases it could
encourage entities to accept foreign bids, but this would only happen on a case-by-case basis.  The
real benefit for all, procuring entities and bidders alike, is the construction of a minimum set of rules,
applicable worldwide, introducing legal certainty in the existing procurement procedure and allowing
entities to compare alternative offers and thus obtain better value for money.
15. The EC is of the opinion that the future Ag reement on TGP should apply to all procurement,
without distinction between national or internationa l (on account, for one thing, of the problem of
defining the borderline between national and international bidders), thus allowing domestic bidders
also to benefit from a more open and transparent process and clearly indicating to international
bidders when a tender is limited to nationals, thus avoiding unnecessary cost.
16. Making government procurement more transparent does not mean renouncing national
sovereignty.  On the contrary, it should lead to better public opinion control of government action, and
also facilitate judicial review. Corruption operates in opaque environments and transparency is theopposite of opacity.
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