Pressure is mounting on India to open up its more than $300 billion-worth public procurement market under the proposed mega Free Trade Agreement (FTA) called the Regional Comprehensive Economic Partnership (RCEP).
Public/government procurement broadly refers to the process by which government (at the Central, State and local levels), its agencies/departments and State-owned enterprises procure goods and/or services only for their own use, and not for sale/resale commercially.
Binding commitments
Official sources told The Hindu that an increasing number of countries including China, Japan, South Korea, Australia and New Zealand as well as a few from the 10-member ASEAN bloc including Singapore and Malaysia, were pushing for binding commitments to mutually liberalise government procurement markets in the 16 Asia Pacific nations, including themselves and India involved in the mega-FTA talks.
Incidentally, during the ongoing 19th round of the RCEP Trade Negotiating Committee meeting at the technical level being held at the Hyderabad International Convention Centre, the 16 countries agreed to constitute a Working Group on government procurement to take forward negotiations on the topic and include it as a separate chapter in the final agreement, sources said.
They, however, said India would not give in to the demands from these countries for “market access and national treatment (equal treatment of foreign and local firms)” pertaining to government procurement in the RCEP agreement, and not even undertake any commitment on a “best endeavour basis.” Even in India’s separate FTAs with Japan, South Korea and Singapore (that are already in force), “market access and national treatment” have been kept out of the government procurement chapter. The maximum extent that India could go to, is to agree to ensure transparency and cooperation in government procurement matters (including information exchange and sharing of knowledge) as part of the RCEP agreement, they said.
Sources said though RCEP member countries including Japan, South Korea, Australia, New Zealand and Singapore may not have a “PSU [Public Sector Unit] culture” as such, they had norms that indirectly made it difficult for foreign firms, including from India, to take part in their public procurement process.
‘Language barrier’
Countries like China, Japan and South Korea, may outwardly have an open procurement market, but make it difficult for foreign firms to participate by phrasing requirements in local language, sources said.
This ensures that domestic firms with a grasp over the local language get to submit the documents on time, unlike foreign firms who get hit by the language barrier, the sources said.
India is not a signatory to the Government Procurement Agreement within the WTO framework because it wants to retain its policy space to meet its development needs through public procurement process. In May, the Indian government had brought out a policy providing preference in government procurement to local goods and services suppliers. This was to push the ‘Make In India’ initiative, ensure greater flow of capital and technology into domestic services and manufacturing, and in turn, boost job creation locally as well as promote small enterprises.
Then in June, it came up with an order restricting or excluding from public procurement tenders in India, the firms from those nations where Indian suppliers are not allowed to participate and/or compete in government procurement process.
The maximum that India could commit to, is ensure transparency
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