spare parts must be paid for in advance). The government not only will no longer provide such advances, but typically demands a guarantee (or performance bond) from the company - which favors larger, financially stronger enterprises.

More important, once the good or service is delivered, the government is notoriously bad about paying its debts. Before the worsening of the financial crisis in 1988, the government was said to commonly take a year to pay its bills. Now, it has become common for the government agencies and public enterprises to simply ignore their debts and arrears (or simply lack the means to pay). An small, informal survey' of SMEs supplying the govermment found all of them suffering from the government's financial practices, some waiting three or more years for payment of substantial contracts. For those firms with private sector customers, this has meant a substantial reduction in the percentage of business transacted with the government. For those without, this has meant missed payments or default on loans, missed payrolls, layoffs and financia **l** osses.

The experience of a small training firm exemplifies both the potential and current problems for private businesses contracting with the government. The firm was created to meet the demand for training programs created by the govemment, through the training fund financed by the FNR tax Recently, however, the govemment has not been paying FNR commitments, and this firm was left with an unbearable receivables balance, and forced to reduce staff by two thirds.

A shoe manufacturer reported another type of problem: after winning, and fulfilling a competitive bid and subsequent contract for the supplv of shoes to the police, it took more than two years for him to be paid. His mistake was to underbid other manufacturers (who the entrepreneur indicated were setting a price three times the cost of production) and refuse to 'lubricate the convoluted process of delivery certification and of payment authorization. The result was a two and a half year wait for payment, and the end of his interest in supplying government contracts.

One consequence of the government's behavior has been a reduction in competition for those contracts submitted for competitive bidding. This, in turn, has reinforced the trend towards negotiated (gig a gre) procurement. Thus the procurement process is playing a progressively smaller role in the encouragement of a competitive market economy.34 While the formal procedures for contracting and procurement appear to sharply limit the ' Six suppliers of items ranging from construction services to uniforms were surveyed by SOCOGEC, as a follow-up to the CECPS mission, during the second half of 1990.

3 Why do some businesses continue to deal with the state? An official of the Ministry of Economy and Fnance offered three reasons: 1) Price inflation - some enterprises are always interested in dealing with the state because (it pays) high prices. 2) There are those who are paid quickly. 3) In some cases, when someone sells the state goods, [sJhe'll deliver half to the state. The deliverer gets half for goods or services and splits the rest with government functionary. Or [s]he delivers the full order, keeps half the money, and the functionary returns half the goods to the supplier to resell, again dividing the gains.

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