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WTOPlurilateral Agreementon Government Procurement

Market Access Opportunities & Challenges for India

D-217, Bhaskar Marg, Bani ParkJaipur 302016, India

Tel: +91.141.2282821, Fax: +91.141.2282485Email: [email protected]

Web site: www.cuts-international.org

With the support of

© CUTS International, 2013

First published: March 2013

This document has been produced with the financial assistance of theBritish High Commission, New Delhi under the Prosperity FundProgramme of the Foreign & Commonwealth Office, United

Kingdom and under a project entitled �Government Procurement �An emerging tool of global integration & good governance in India.�The views expressed here are those of the authors and can therefore

in no way be taken to reflect the positions of the British HighCommission, NewDelhi.

ISBN: 978-81-8257-184-6

Printed in India by Jaipur Printers Private Limited, Jaipur

#1309

WTO Plurilateral Agreementon Government Procurement

Market Access Opportunities & Challenges for India

Published by

Contents

Abbreviations i

Note onContributors vii

Acknowledgement xi

Preface xv

Executive Summary xxi

1. Theoretical Issues for Consideration byProspective Entrants to the GPA 1

Factors Influencing Accession to theWTOGPA 1

Multiple Conditions Inducing Country AccessionintoWTOGPA 5

The Basis of Negotiating Strategy 11

Country Studies and Assessments Undertaken ByCountries Contemplating Accession to the GPA 27

The Way Forward 37

2. Dynamics of Government Procurement andOpportunities for India 45

Introduction 45

Understanding Size of Global GovernmentProcurementMarket 48

Government ProcurementMarket in Selected GPACountries 54

Trends in Public Procurement in Select Non-GPA Countries 71

Opportunities for India if it accedes to the GPA 76

Major Challenges for India, if it accedes to the GPA 88

Conclusion 89

3. Understanding Limitations toMarket Access 137

Part A: Assessment of the GPA Framework 138

Part B: Analysis of Experiences of Countries accedingto the GPA 262

4. Recommendations for New Entrant intoExtant GPA Framework: India Case Study 333

Recommendations for Approaching the Negotiation 334

Annex I: Specific Entities/Ministries which shouldbe excluded 337

Annex II: Sub-Central Entities 337

Annex III: Other Entities 338

Annex IV: Goods 342

Devolution of Finances in India 372

Strategy for Inclusion of Horizontal Policies 376

Centre-State Relations: The Indian Federal Experience 379

Annex III: Entities in India 386

Conclusion 398

5. Conclusion 409

List of Tables

Table 2.1: Top 40 GPA and non-GPA countries basedon GDP and size of Government Expenditure 91

Table 2.2(a): Trend in Government Procurement in Canada 93Table 2.2(b): Trend in Canada�s Sector-wise Government

Procurement in Goods 93Table 2.2(c): Trend in Canada�s Sector-wise Government

Procurement 94Table 2.2(d): Trend in Canada�s Sector-wise Government

Procurement in Construction 95Table 2.3(a): Trend in government procurement in

Chinese Taipei 95Table 2.3(b): Trend in Chinese Taipei�s Sector-wise

Government Procurement in Goods 95Table 2.3(c): Trend in Chinese Taipei�s Sector-wise

Government Procurement in Services 97Table 2.3(d): Trend in Chinese Taipei�s Sector-wise

Government Procurement in ConstructionServices 98

Table 2.4(a): Country-wise procurement in EU by typesof Annexes in 2000 98

Table 2.4(b): Country-wise procurement in EU by typesof contract in 2000 99

Table 2.4(c): Country-wise procurement in EU by typesof Annexes in 2007 100

Table 2.4(d): Product-wise procurement in EU in 2007 101Table 2.5(a): Trend in Japan�s government procurement 103Table 2.5(b): Japan government procurement status 103Table 2.6(a): Trend in Korea�s government procurement 105Table 2.6(b): Korea government procurement status 106Table 2.7(a): United States 107Table 2.7(b): Total Goods Procurement in 2008 108Table 2.7(c): Total Service Procurement in 2008 109

Table 2.7(d): Total Construction Service Procurementin 2008 109

Table 2.8: Estimates of government procurement ofselected six non-GPA countries 110

Table 2.9: Growth Trend in Government Procurement ofSelected Countries vis-à-vis India 110

Table 2.10: Estimate of India�s contestable governmentprocurement market 110

Table 2.11(a): Trend in Canada�s Sector-wise GovernmentProcurement in Goods 111

Table 2.11(b): Trend in Chinese Taipei�s Sector-wiseGovernment Procurement in Goods 112

Table 2.11(c): Trend in European Union Sector-wiseGovernment Procurement in Goods 113

Table 2.11(c:1) The Imports from India to European Unionfor the year 2011 114

Table 2.11(d): Total Goods Procurement Japan (2010) 115Table 2.11(e): Total Goods Procurement of Korea (2010) 116Table 2.11(f): Total Goods Procurement of United

States (2008) 117Table 2.12: Total potential market opportunity for India 117Table 2.13: Estimating sector-wise opportunities 118Table 2.14: Estimate of Future GPMarket Potential 118Table 2.15: Potential gains from acceding to GPA 120Table 2.16: Distribution of estimated procurement

contracts awarded by Chinese Taipei tofirms in other GPA parties (2011) 120

Table 2.17: Distribution of estimated procurementcontracts awarded by the EU to firms inother GPA parties (2007) 121

Table 2.18: Distribution of estimated procurementcontracts awarded by Japan to firms inother GPA parties (2010) 121

Table 2.19: Distribution of estimated procurementcontracts awarded by Koreato firms inother GPA parties (2003) 122

Table 3.1: Central Government Expenditure Expressedas a Percentage in terms of the GDP 146

Table 3.2: The Contribution of Public Entitiesto the GDP 149

Table 3.3: Indicators Influencing InfrastructureDevelopment 150

Table 3.4: Sensitive Products Subject to Exclusion undertheGPA 152

Table 3.5: Thresholds provided in Special DrawingRights 155

Table 3.6: CPCProv Classification on ConstructionServices 165

Table 3.7: Sub-classifications under ConstructionServices under CPCProv 166

Table 3.8: Further Divisions of Construction Services 167Table 3.9: States Presenting Sector Specific Exemptions/

Exclusions in the United States in Annex II 195Table 3.10: Classification of Corporations in Canada 201Table 3.11: Details of Sectors in which Market Access is

Denied or Limited by Country Members intheGPA 211

Table 3.12: Entities enlisted in Annex 3 engaged in theprovision of Utilities 215

Table 3.13: Trading Profile ofMember-Countries 223Table 3.14: Representation of Categorisation of SMEs 242Table 3.15: Size Standards in the SBA Size Standards

Methodology 245Table 3.16: Size-wise Categorisation of Enterprises 247Table 3.17: Green Procurement Targets of Countries

in the EU 251Table 3.18: Non-TariffMeasures 258Table 3.19: Thresholds committed by China and the EU 276

Table 4.1: Sectoral Allocation- Tenth Plan and EleventhPlan 342

Table 4.2: Items pertaining to procurement in the SeventhSchedule of the Indian Constitution 343

Table 4.3: Ministry-wise Expenditure on CentrallySponsored Schemes 344

Table 4.4: Items under Government Expenditure 345Table 4.5: State-Wise Capital Expenditure in Crore of

Rupees (2009-2010) 346Table 4.6: State Government Expenditure incurred in

2009-2010 347Table 4.7: State Government Expenditure incurred in

2009-2010 348Table 4.8: Ministry/Department wise Central Plan

Outlay 349Table 4.9: Ministries, Departments, Secretariats

and Offices 351Table 4.10 Entities and Products which could be

proposed as exemptions in Annex I 357Table 4.11: Navratna CPSES 359Table 4.12: CPSEs in different sectors ranked per their

Turnover 360Table 4.13: Investment in State Level Public Enterprises:

By Sector 370Table 4.14: State Level Public Enterprises with

Maximum Investment 371Table 4.15: Financing used in Different Sectors by

Separate 371Ministries 371Table 4.16: Development Expenditure andNon-

Development Expenditure Items forthe Government of India 395

Table 5.1: Mirroring Reciprocity in Procurement ofServices, Utilities, Annex 2 and Annex 3 424

List of Boxes

Box 1.1: Distinguishing between Public and PrivateProcurement: US Procurement of SonarMappingSystem 14

Box 1.2: Indo-Japan CEPA: Provisions on GovernmentProcurement 26

Box 2.1: Some Indicators of the Size and Growth ofGovernment ProcurementMarkets 52

Box 3.1: An Analysis of Korea Government Procurement 156Box 3.2: Observations Pertinent to Listing Entities

in an Initial Offer for a New Entrant 169Box 3.3: Massachusetts� Act Regulating State Contracts

with Companies Doing Business in or withBurma of 25 June 1996 190

Box 3.4: Observations Pertaining to Annex IIEntity-Specific Exemptions and Exclusions 197

Box 3.5: A United States Customs and BorderProtection Ruling: Electric Mini Trucks 231

Box 3.6: Canada: Procurement Strategy onAboriginal Business 240

Box 3.7: Specific Trade Concerns under the SPSAgreement 253

Box 3.8: Specific Trade Concerns under the TBTAgreement 256

Box 3.9: Japan-Procurement of a Navigation Satellite 259

Box 4.1: Service Departments v. CommercialDepartments or Undertakings 336

Box 4.2: Expostulation on the Flow of Expenditure 375

Box 5.1: Options for a New Entrant 414Box 5.2: Scenarios Altering Market Access 416

List of Appendix/Annexures

Appendix 1.1: Country Coverage 117Annexure 2.1: Total Goods Procurement 123Annexure 2.2: Total Service Procurement 124Annexure 2.3: Total Construction Service Procurement 127Annexure 2.4: Estimating Government Procurement in

SelectedNon-GPACountries 128

Abbreviations

AGE Ad-hoc Group of Experts

AMIR Access to Microfinance & ImprovedImplementation of Policy Reform

AMRPPHA Agency for Material Resources, PublicProcurement and Humanitarian Aid

ASA Antarctic Support Associates

ASEAN Association of Southeast Asian Nations

BCR Balance from Current Revenue

BoP Balance of Payment

BOT Build-Operate-Transfer

BRICS Brazil, Russia, India China and SouthAfrica

CAG Comptroller and Auditor General

CAGR Compound Annual Growth Rate

CBP Customs and Border Protection

CEPA Comprehensive Economic CooperationAgreement

CICA Competition in Contracting Act

CKTEA Canada-Korea Procurement ofTelecommunications EquipmentAgreement

CPAR Country Procurement Assessment Report

CPP Central Public Procurement

CPSEs Central Public Sector Enterprises

CPSMS Central Plan Scheme Monitoring System

CUTS Consumer Unity & Trust Society

CVC Central Vigilance Commission

DCSP Department of Coordination of StateProcurement

DGSND Directorate General of Supplies &Disposals

EIC Export Inspection Council

EPEAT Electronic Product EnvironmentalAssessment Tool

ESA Endorsed Supplier Arrangement

EU European Union

FDA Food and Drug Administration

FDI Foreign Direct Investment

FEMP Federal Energy Management Programme

FTA Free Trade Agreement

FYROM Former Yugoslav Republic of Macedonia

GAIL Gas Authority of India Limited

GATS General Agreement on Trade in Services

GATT General Agreement on Tariffs and Trade

GCC Gulf Cooperation Council

GDP Gross Domestic Product

ii WTO Plurilateral Agreement on Government Procurement

GFR General Financial Rules

GG General Government

GOI Government of India

GPA Government Procurement Agreement

GPP Green Procurement Policy

GSD Geelong Statistical District

IAWD Impact Assessment Working Document

IEBR Internal and Extra Budgetary Resources

IIAC Inchon International Airport Corporation

IMF International Monetary Fund

IP Intellectual Property

ITC India Tobacco Company

KAPPEC Karnataka State Agricultural ProduceProcessing and Export Corporation

KEPCO Korea Electric Power Corporation

KOACA Korea Airport Construction Authority

LDC Least Developed Countries

LTA Long-Term Agreement

MBRT Multi-Brand Retail Trading

MFN Most Favoured Nation

MMTC Minerals and Metals Trading Corporation

MoCT Ministry of Construction and Transport

MoT Ministry of Transportation

MoU Memorandum of Understanding

MSE Micro and Small Enterprises

WTO Plurilateral Agreement on Government Procurement iii

MSME Micro, Small and Medium Enterprise

MTRCL MTR Corporation Limited

NADG New Airport Development Group

NAFED National Agricultural CooperativeMarketing Federation of India

NAICS North American Industry ClassificationSystem

NCCF National Consumer CooperativeFederation

NSF National Science Foundation

NTBs Non-Tariff Barriers

NTMs Non-Tariff Measures

NTPC National Thermal Power Corporation

NTR Normal Trade Relations

NTT Nippon Telephone and Telegram

OECD Organisation for Economic Cooperationand Development

PPP Public Private Partnership

PSE Public Sector Enterprises

PSU Public Sector Undertaking

PWC PricewaterhouseCoopers

REACH Registration, Evaluation, Authorizationand Restriction of Chemicals

SAA Stabilisation and Association Agreements

iv WTO Plurilateral Agreement on Government Procurement

SCLAO State Council Legislative Affair Office

SIEFs Substance Information Exchange Fora

SLPE State Level Public Enterprises

SMEs Small and Medium Enterprises

SNA Standard National Accounts

SoEs State Owned Enterprises

SPS Sanitary& Phyto-Sanitary

STE State Trading Enterprises

TBT Technical Barriers to Trade

TVA Tennessee Valley Authority

USAID US Agency for International Development

USO Universal Service Obligation

USTR United States Trade Representative

WTO World Trade Organisation

WTO Plurilateral Agreement on Government Procurement v

Note on Contributors

Archana JatkarArchana Jatkar is Coordinator and Deputy Head of CUTSCentre for Trade, Economics & Environment (CUTS CITEE).She is a law graduate (LLM) from University of Kent (UK)and specialises in International Economic Law and has researchinterest in international trade policy issues, international tradedisputes; trade in services, intellectual property rights,transparency in government procurement. She has writtenseveral academic papers in her masters as well as in her currentstint at CUTS International on international economic lawand other WTO issues.

She has been leading and coordinating CITEE�s activitiessuch as studies/project implementation in three core areas ofinternational trade (WTO issues), Regional EconomicCooperation and Trade and Development issues. Besides,supervising the studies, she has been conducting policy analysisand research in the area of international trade covering variousWTO Agreements.

Bulbul SenBulbul Sen, formerly Chief Commissioner of Income Tax,served in crucial policy and executive desks in the IncomeTax Department as also in the International Trade PolicyDivision of the Ministry of Commerce and industry,Government of India. An MBA from the University ofLjubljana Slovenia, with specialisation in International Trade,

she gained expertise inWTOmatters, inter alia, by representingIndia in international conferences at home and abroad. Shehas published on tax andWTOpolicy in national level economicjournals and authored one of the first books in India on thebirth of the WTO.

Currently, she is a consultant for CUTS International anda Member of the Expert Group of the UN Office on Drugsand Crime (UNODC) on �Transparency, Competition, andObjectivity in Public Procurement� and participated in theUNODC�s apex meeting of experts from India and Mexico atVienna held on September 24-26, 2012.

Neha JainNeha Jain holds a Master�s Degree in Economics fromUniversity of Mumbai with a specialisation in InternationalEconomics and Infrastructure Economics. During herinternship with the Planning Commission of India, NewDelhi,she submitted a paper entitled �China�s Housing Bubble andLessons for India� and at her internship with the ObserverResearch Foundation, Mumbai, she was involved in twoprojects relating to urban transportation, namely, �Fatalitiesin Mumbai Suburban Railways� and �Cyclical Timetable forMumbai Railways�. Currently she is a Research Assistant atCUTS International where her areas of work pertain tointernational trade and development.

Nitesh Kumar SinghNitesh Kumar Singh has done B.A (Hons) in Economics andM.A in Economics. Working as a Research Assistant at CUTSInternational, he has more than two years of researchexperience on trade and agriculture. Before joining CUTS, hehas worked at Institute of Economic Growth (IEG), NewDelhias a research assistant.

viii WTO Plurilateral Agreement on Government Procurement

He has co-authored an IEG Publication titled �Pattern ofAgricultural Diversification in India�. His research work onGovernment Procurement (GP) includes estimation of GPmarket sizes and their growth rates for selected Non-GPAmember countries.

Suresh P. SinghSuresh P Singh has over 15 years of research experience. Heholds a Masters Degree in Economics from Rabindra BhartiUniversity, Kolkata, India. At CUTS, he works as PolicyAnalyst on issues such as international trade, climate changeand agriculture, sustainable consumption and production. Afew of his recent research works/contributions include project/studies on: Government Procurement in India: DomesticRegulations & Trade Prospects; Cotton Production andEnvironmental Sustainability in India, State of IndianConsumers 2012; Assessing Consumers� Awareness on EnergyEfficiency Products in India (the project cover 19 Indian statesand 3 Union Territories and has a sample size of over 20,000);Impact of Climate Change and Food Insecurity on Poverty(the project covered four countries in South Asia, namely India,Pakistan, Bangladesh and Afghanistan); A Ten YearFramework of Programmes on Sustainable Consumption andProduction.

In addition, he has a number of research papers publishedin Journals and books, which include but not limited to�Mitigating the Impacts of the Financial Crisis: IncreasedCooperation among African Countries�, published in TrapcaTrade Policy Review; and others.

WTO Plurilateral Agreement on Government Procurement ix

Vinitha JohnsonVinitha Johnson graduated from the National LawUniversity,Jodhpur with a specialization in Trade and Investment Law.Following graduation, sheworked in law firms on internationaltrade, investment and private equity. She is engaged withCUTS International as an Assistant Policy Analyst. Her workfocusses on issues pertaining to international trade policy.

Some of her recent publications include �Market EconomyTreatment for Chinese Producers under the IndianAntidumping Regime� published in the Global Trade andCustoms Journal, and �Desperate Times Call for DesperateMeasures? Contrasting Thailand and Indian with respect toCircumvention of TRIPS (In)Flexibilities in the Access toMedicines Campaign�, published in the Thailand Journal ofLaw and Policy.

x WTO Plurilateral Agreement on Government Procurement

Acknowledgement

This publication is a result of efforts of several individualsand organisations. A diverse set of stakeholders, who have

keen interest in trade and development issues of India in generaland in public procurement, in particular. They were connectedthrough untiring efforts and wide network developed overthe project years and helped greatly in shaping up the projectand its publications.

We express our gratitude to the British High Commission,New Delhi for supporting this project. Special thanks are dueto Andrew Jackson, Claire Tynte-Irvine and Aarti Kapoor ofthe British High Commission and to Lindsey Block and SabaKalam of the India Office of the UK�s Department forInternational Development for their deep involvement.

The study benefited from special assistance extended bySimon Evenett, Department of Economics, University of St.Gallen, Switzerland, and our Project Advisory Committeeconsisting of experts on the subject from across the world.They are:

� Andrew Jackson, Counsellor (Knowledge Economy),British High Commission, New Delhi

� Anil Bhardwaj, Secretary General, Federation of IndianMicro and Small & Medium Enterprises, New Delhi

� Bernard Hoekman, Fellow, European UniversityInstitute, Florence

� Claire Tynte-Irvine, First Secretary, British HighCommission, New Delhi

� Dilip G Shah, Secretary General, Indian PharmaceuticalAlliance and CEO,Vision Consulting Group, Mumbai

� K P Verma, President, Public Procurement Group andformer Additional Member/Railway Board, Ministry ofRailways, Government of India, New Delhi

� Manab Majumdar, Assistant Secretary General,Federation of Indian Chambers of Commerce andIndustry, New Delhi

� Pradeep S Mehta, Secretary General, CUTSInternational

� Ronald Watermeyer, Director Soderlund and Schutte,South Africa

� Sangeeta Khorana, Lecturer in Economics, AbersywthUniversity, United Kingdom

A special thank goes is to Confederation of Indian Industryfor its valuable contribution in conducting stakeholdersconsultation on the subject in six metro cities in India.

We express our gratitude to all the relevant stakeholderssuch as procurement officials in various line ministries of theGovernment of India, policy-makers in these ministries/departments who deal with public procurement, some premierindustry and sectoral associations of India, some well-knowncompanies engaged with public procurement in India andabroad, and academicians who deal with the subject for sharingtheir comments and suggestions for improving the content ofthis study.

We also thank all participants of the consultation meetingsheld in Ahmedabad, Bengaluru, Chennai, Kolkata, Mumbaiand New Delhi from June to August, 2012; the ProjectAdvisory Committee meetings held in New Delhi in January,2013; and the participants of the Consultation Meeting heldin New Delhi in January, 2013.

xii WTO Plurilateral Agreement on Government Procurement

We acknowledge the meticulous efforts of our colleaguesat the CUTS Centre for International Trade, Economics &Environment in implementing the project. Special thanks aredue to Reena Purohit. Thanks are also due to Dipankar DeSarkar for editing of the study, Manika Gupta, MadhuriVasnani, Mukesh Tyagi and Rajkumar Trivedi of CUTSInternational for their assistance in lay-outing of thispublication, and to Arun Talwar, G. C. Jain and L. N. Sharmafor their work in preparing financial reports of the project. Aspecial thank to Caitlin Zaino, Independent Consultant basedinGeneva andRashid S Kaukab, Director, CUTS International,Geneva, for their valuable contributions in carrying out thefield research in Geneva.

Many other names deserve special mention, but could notbe referred here for want of anonymity and space. A largenumber of stakeholders have participated in the questionnairesurvey and gave valuable suggestions on this evolving subjectof India�s government procurement regime and its implicationsthereof. We thank all of them.

Finally, any error that may have remained is solely ours.

CUTS Centre for International Trade,Economics & Environment

WTO Plurilateral Agreement on Government Procurement xiii

Preface

Ever since India became an observer to theWTOPlurilateralAgreement on Government Procurement (GPA) in 2010,

the possibility of negotiating its accession to this agreementhas become a subject of intense debate. While there are manyinternal and external factors that have influenced this debate,two of them are most important:

� Application of principles of good economicgovernance; and

� Exploration of market access opportunities.

Domestically, imbibing good governance by espousingprinciples of transparency, efficiency and value for money inthe public procurement system is being addressed byformulating a central law � the Public Procurement Bill, 2012.This is expected to become a law soon. Secondly, �marketaccess� opportunities and challenges are to be analysed as thatwould have a significant influence in India�s decision to jointhe WTO GPA.

The public procurement market in India is huge � currentlyabout 30 per cent of its gross domestic product of US$1.946tnat nominal prices; thus, the size of this market is circaUS$584bn. Secondly, Indian companies are increasinglyexploring the possibility of accessing markets for publicprocurement in other countries.

Other than being an observer to the WTO GPA, publicprocurement was included in the recently concludedComprehensive Economic Cooperation Agreement withJapan. It is also being negotiated under the EU-India free tradeagreement. Evidently, there is a common interest on thissubject in India and some of its major trading partners.

Our study has addressed the following important questionson the basis of a robust analysis of opportunities and challengesprovided in the WTO GPA Agreement:

� Will India�s joining of the exclusive WTO GPA clubof developed countries provide increased marketaccess opportunities to its business?

� What will be the extent of its accession commitments?� If India decides not to join the WTO GPA, how will it

defend its market access opportunities which areincreasingly being ring-fenced by the current WTOGPA member countries through, among others, �BuyLocal� policies?

In trade jargon, �market size� is an important determinant of�negotiating space� of a country. In case of governmentprocurement, the determination of �market size� is much morecomplicated than that in other goods and services. For instance,the WTO GPA does not follow the customary principles oftheMost-Favoured-Nation norm owing to which it is possibleto offer more beneficial terms to some members of the WTOGPA vis-à-vis others.

In some cases, countries refuse to commit their sub-nationalgovernment entities or procurement pertaining to the provisionof certain utilities to the disciplines of the WTO GPA.However, these very markets to which access is limited may

xvi WTO Plurilateral Agreement on Government Procurement

be offered separately by negotiating countries in order to availadditional reciprocal market access.

It is, therefore, important to note that WTO GPA memberspresent sizable figures as �potential� market accessopportunities. They can be availed by either concludingbilateral commitments pertaining to government procurementor joining theWTOGPA. However, these figures are qualifiedby actual tendering practices. In practice, a large number ofcontracts are granted by governments below the notifiedthresholds, thereby eliminating the tendering process of thosecontracts from the disciplines of the WTO GPA.

Commitments to the WTO GPA entail listing of governmententities, sectors and services along with �thresholds� abovewhich these commitments are applicable. Exemptions andexclusions can be maintained on the terms of agreement andconditions of accession of a new member. These conditionsare determined by terms agreed upon with the existingmembers, and there is limited guidance on this in the provisionsof the agreement itself.

Given this complexity, the present study has undertaken aquantitative analysis of market access opportunities for Indiain WTO GPA member and non-GPA member countries. Ananalysis has also been carried out with respect to commitmentsundertaken by the members of WTOGPA and the manner inwhich they have maintained socio-economic policies as pertheir domestic interests within the purview of the WTO GPA,and bolstered and defended market access opportunitiesthrough astute deployment of �negotiated policy space�.

Amongst countries which are members of the WTO GPA,government expenditure amounts to a significant portion of

WTO Plurilateral Agreement on Government Procurement xvii

their GDP. For example, 56.2 per cent in France whichpresents market access opportunities worth US$1.56tn, 42.4per cent in the United States amounting to a market ofUS$6.37tn. The sectors in which India may have a distinctinterest include information technology, pharmaceuticals,minerals, machinery and electrical equipment. EU, Japan andthe US also offer such opportunities.

Furthermore, there is a substantial market for governmentprocurement in countries outside theWTOGPA. For example,the potential market access opportunity in China is as muchas US$1.7tn and that of Brazil is US$960bn. It is noteworthythat China is negotiating its accession to the WTO GPA.

After conducting a systematic analysis of opportunities whichcan be availed of and concomitant costs of accession, our studyhas identified some other important factors that should beconsidered by India while taking a decision to negotiate itsaccession to the WTO GPA. For instance, in the event Indiadecides to postpone its negotiation, the demands which maybe put forth by the members in future may be stiffer thantheir current demands.

At the same time, it is to be noted that theWTOGPA presentsspecific opportunities for acceding developing countrymembers as it permits phased-in entry for certain entities,thresholds can be lowered over time and �horizontal� policiesand exceptions based on socio-economic reasons can bemaintained based on the size of the market.

If India decides against negotiating its accession to the WTOGPA, it should undertake an active assessment of defendingand foraging market access opportunities in publicprocurement through preferential trade agreements. That

xviii WTO Plurilateral Agreement on Government Procurement

would help Indian trade policy-makers and negotiators to dealwith commitments and implementation issues.

On the other hand, if India decides to negotiate its accessionto the WTO GPA, it should be prepared with relevant datapertaining to government procurement, with strategies to alignnational interests with procurement activities, and strengthenand develop the necessary institutional mechanisms. Our studywill help the Indian government with such �negotiating space�.

In conclusion, our study makes a progressive recommendationthat given the current domestic and global economic scenario,India need not start negotiating its accession to theWTOGPA.Instead, India should strengthen its domestic institutions,conduct further in-depth analyses to identify importantpriorities pertaining to its procurement policy, and gainexperience from the implementation of this subject in thosePTAs where it is covered.

This should be done at two levels � firstly, at an individualgovernment entity level which undertakes procurement and,secondly, by evolving a national public procurement policywhile implementing the central legislation on publicprocurement. A holistic national public procurement policywill help in aligning its objectives with other majormacroeconomic policies such as National ManufacturingPolicy, National Competition Policy, etc.

This study was undertaken with support from the British HighCommission, New Delhi under the Prosperity FundProgramme of the Foreign and Commonwealth Office of theUnited Kingdom. It is a sequel to our earlier study titled�Government Procurement in India: Domestic Regulations& Trade Prospects�. I thank them for their whole-hearted

WTO Plurilateral Agreement on Government Procurement xix

xx WTO Plurilateral Agreement on Government Procurement

support and look forward to further strengthening thisrewarding partnership.

Also, I thank my colleagues who worked on this project. Ihope it will be widely disseminated and generate interestamongst policy-makers and aid the formulation of a NationalPublic Procurement Policy.

Pradeep S MehtaSecretary General

CUTS International

Executive Summary

The StudyIn 2012, CUTS International, with support from the BritishHigh Commission, New Delhi, under the Prosperity FundProgramme of the Foreign & Commonwealth Office of theUnited Kingdom, published a study on GovernmentProcurement in India: Domestic Regulations & TradeProspects. It assessed market access opportunities andalignment of domestic legislation with mandated requirementsof the WTO Plurilateral Agreement on GovernmentProcurement (GPA) with a focus on the values of transparencyand good governance

The current study undertakes an assessment of opportunitiesand challenges which India is expected to encounter if it decidesto negotiate to accede to the GPA.

It presents factors which could inform decision makers andsectoral stakeholders while making the crucial decision onwhen accession should be undertaken, if at all, and the mannerin which welfare objectives can be imbued in the negotiations.An economic analysis indicates market access opportunitiesin GPA member-countries, and non-GPA member-countriesof the WTO. Further, an anatomisation of the commitmentsconcluded by member-countries to the GPA presents insightson nuances in negotiating GPA commitments which can add

xxii WTO Plurilateral Agreement on Government Procurement

value to an acceding country. As expectations about a newentrant�s entity offer is based on �economic equivalence,� thestudy seeks to understand theweight of an entity offer in AnnexI, Annex II, and Annex III.

AdvocacyMessages� Extending the status-quo on abstaining from entering the

GPA or deciding to negotiate to enter the GPA is a decisionwhich should be taken after quantifying the market accessopportunities.

� As the agreement, its disciplines and the institutionalmechanisms envisaged in it are of evolving nature, it iscritical to ensure that there is policy space to accommodatethe concerns of a developing country like India, particularlythose relating to �economic and social welfare�aspects ofgovernment procurement.

� There should be more in-depth research on procurementprocess andmarket access opportunities in order to identifyissues for negotiation which should be aimed at �valuecreation�.

� Following the identification of potential market accessopportunities in government procurement, India shouldidentify logistical and other barriers which could hindersuch opportunities and, accordingly, negotiate to get realmarket access.

Major FindingsThe following Table presents market Access opportunitiesfor India in GPA and non-GPA countries.

WTOPlurilateralA

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Table 1: Top 40 GPA and non-GPA countries based on GrossDomestic Product and size of Government Expenditure

GPA countries

Rank/Country GDP Govt. Est. govt.(2011) (US$mn) expenditure expenditure

(% of GDP) (US$mn)

1 United States 1,50,94,000 42.2 6369668

3 Japan 58,67,154 42 2464204.7

4 Germany 35,70,556 47.5 1696014.1

5 France 27,73,032 56.2 1558444

7 United Kingdom 24,31,589 51.2 1244973.6

8 Italy 21,94,750 51.8 1136880.5

11 Canada 17,36,051 44.1 765598.49

12 Spain 14,90,810 45.8 682790.98

15 Korea, Rep. 11,16,247 33.1 369477.76

17 Netherlands 8,36,257 51.4 429836.1

19 Switzerland 6,35,650 33.7 214214.05

21 Sweden 5,38,131 55.2 297048.31

22 Poland 5,14,496 44.6 229465.22

Non-GPA countries


(% of GDP) (US$mn)

2 China 73,18,499 23 1683254.8

6 Brazil 24,76,652 38.8 960940.98

9Russian Federation 18,57,770 41.1 763543.47

10 India 18,47,982 29 535914.78

13 Australia 13,71,764 33.1 454053.88

14 Mexico 11,55,316 26.9 310780

16 Indonesia 8,46,832 16.7 141420.94

18 Turkey 7,73,091 37.2 287589.85

20 Saudi Arabia 5,76,824 45.7 263608.57

25 Argentina 4,45,989 37.9 169029.83

27 South Africa 4,08,237 30.6 124920.52

28 UAE 3,60,245 25.8 92943.21

29 Thailand 3,45,649 20.4 70512.396

xxiv WTO Plurilateral Agreement on Government Procurement

GPA

coun

tries

Rank/Country

GDP

Govt.

Est.govt.

(2011)

(US$mn)

expenditure

expenditure

(%of

GDP)

(US$mn)

Non

-GPA

coun

tries

Rank/Country

GDP

Govt.

Est.govt.

(2011)

(US$mn)

expenditure

expenditure

(%of

GDP)

(US$mn)

Note:Out

oftopranked

40countriesinterm

sof

GDP,18

are

notGPAmem

bers.The

totalGDPof

thesecountriesismore

than

halfthecombinedGDPof

22GPAcountries.More

interestinglygovernmentexpenditureconstitutesnearly

30percentof

GDPandam

ountsto

morethan

one-thirdof

combinedgovernmentexpenditureof

22GPAmem

bercountries.

23Belgium

5,11

,533

54.1

2767

39.35

24Norway

4,85

,803

46.4

2254

12.59

26Austria

4,18

,484

53.1

2222

15

30Den

mark

3,32

,677

58.4

1942

83.37

34Greece

2,98

,734

52.9

1580

30.29

36Finlan

d2,66

,071

56.2

1495

31.9

38Hon

gKon

g2,43

,666

17.3

42154.2

18

SAR,China

39Israel

2,42

,929

44.3

1076

17.55

40Sing

apore

2,39

,700

1740

749

Total

4,18

,38,32

045

.11,88

,75,34

9

31Colom

bia

3,31

,655

29.4

9750

6.57

32Iran

,Islamic

Rep

.3,31

,015

27.8

9202

2.17

33Ven

ezue

la,RB

3,16

,482

3310

4439

.06

35M

alay

sia

2,78

,671

30.3

8443

7.31

3

37Chile

2,48

,585

24.4

6065

4.74

Total

2,12

,91,25

829

.662

,97,57

3

The �available market access� is starkly distinct from themarketaccess which is available to member-countries after theoperation of non-tariff barriers. It is vital to include equivalenceagreements with the countries which maintain such policiesin order to ensure that suppliers are not denied market access.Alternatively, India/any new entrant should simultaneouslyexplore other avenues such as Trade Policy Reviews and othermeans of discussing policies which impede market access.

Even amongst GPA member countries, it is apparent that thefigure pertaining to �potential market access� is starkly differentfrom the �above-threshold� contracts which are actuallygranted.

In developed country markets, of the five percent that isawarded to international suppliers, the proportion of contractsawarded to developing country suppliers is minimal. Forinstance, a majority of EU contracts are awarded to the US,Switzerland, Canada andNorway. Similarly, in Taiwan, morethan 95 percent of contracts were awarded to local contractors.Nearly 12 percent were awarded to markets outside SouthKorea. It is evident that procurement undertaken by certaindeveloped countries is focussed on the imports of otherdeveloped countries.

Procurement undertaken by most countries is significant inareas of construction services and general services. There isalso amarked demand for computer-related services. Amongstgoods, many countries exhibit a significant demand forpharmaceutical products.

Areas where opportunities have been discovered for Indiansuppliers are as follows: pharmaceuticals in the US; mineralsin Canada; semi-finished products of copper, nickel,

WTO Plurilateral Agreement on Government Procurement xxv

aluminium, lead and gas generators in Taiwan; ships, boatsand floating structures in Japan and collector�s pieces andantiques, plastic, machinery and electrical equipment in SouthKorea.

Both developed and developing country participants areconsidering accession to the GPA. The factors impactingdecision-making for these players include:� transparency and good governance;� market access: new opportunities and perceived warranted

entry (through insulation from burgeoning �Buy Local� laws)to the markets of member countries; and

� political influence and being able to influence thedevelopment of modalities of the GPA and terms ofaccession for new entrants.

The costs of accession into the GPA include:� losses to domestic suppliers;� aligning domestic legislation to international legislation;� aligning the procurement system;� creating institutionalmechanisms to satisfy the requirements

posed by the GPA (statistical reporting, judicialmechanisms); and

� conducting feasibility studies, dealing with stakeholders,etc.

Entry into the GPA is no longer entirely voluntary. Conditionsin protocols of accession for new entrants to the WTO andpreconditions to obtaining normal trade relations with theUnited States (in the case of Russia and Moldova) are suchexamples. In certain cases, these preconditions result inreducing the costs of accession owing to previously achievedstability as in the case of the countries which concludestabilisation and association agreements with the EuropeanUnion.

xxvi WTO Plurilateral Agreement on Government Procurement

Member-countries with an Interest in GPA AccessionThe Annex which accounts for the bulk of procurement inevery country varies, based on factors such as extent ofdecentralisation, whether the state is unitary or federal, therole of public sector enterprises, etc. Discerning the value ofan �entity offer� demands an understanding of how publicexpenditure is incurred in a country.� EightWTOmembers have committed to accede to the GPA

and are currently going through the process: Chinese Taipei(Taiwan), Albania, Jordan, Oman, Krgyz Republic,Moldova, Panama and Georgia.

� The developing countries which have acceded/or in theprocess of undertaking accession are: Albania, Armenia,China, Georgia, Jordan, Krygyz Republic,Moldova, Omanand Panama.

� Apart from these, Ukraine and New Zealand are currentlynegotiating entry into the GPA. India and Vietnam areunderstood to be evaluating their interests in acceding tothe Agreement.

Countries seeking accession most frequently encounterrequests to include government entities/projects (such as thePanama Canal Authority) which undertake the bulk of theprocurement.

Key Issues in the Negotiation ProcessThe two key aspects of the accession negotiations are: 1.framing and presenting an �entity offer,� which lists the entitieswhich the country submits to the disciplines of the GPA and2. ensuring consistency of domestic legislation with the GPA.The process of negotiation to enter the GPA includes bothplurilateral discussions with all the GPA member-countries,and bilateral meetings with individual member-countries.

WTO Plurilateral Agreement on Government Procurement xxvii

Scope and Coverage of Entities/SectorsTwo vital issues which can arise in terms of a country�saccession are: 1. inclusion of sub-central entities in countrieswhich are federal or are becoming increasingly more federalin operation and 2. the exclusion of procurement pertainingto certain critical utilities like transport and telecommunications.The European Community exempts the procurement by itsAnnex 3 (public sector enterprises) entities in the water andenergy sectors and Switzerland exempts procurementpertaining to water, energy, transport and telecommunicationsby its Annex 2 (sub-central) entities. Notably, even the UnitedStates does not list all of its 50 states, and Canada had initiallydesisted from listing its sub-central entities.

Certain products the procurement of which is excluded fromthe scope of the disciplines of procurement are special industrymachinery, automatic data processing equipment, software,supplies and support equipment, office machines,communication, protection and coherent radiation equipment,air traffic control equipment, electrical transformers, plugs,switches and insulated cables, etcetera. Certain excludedsectors include �shipbuilding and repair� and �urban rail andtransportation systems.�

Profile of Procuring Entities: Estimating Weight of an EntityOfferThe Annexes (Annex 1 - central entities, Annex 2 - sub-centralentities, Annex 3 - �other entities� engaged in procurement,Annex 4 - Goods, Annex 5 - Services, Annex 6 - ConstructionServices, Annex 7 - General Notes) submitted by member-countries constituting Appendix I form a part of every country�streaty obligation. A �covered entity� or a �procuring entity� forthe purposes of application of the disciplines of governmentprocurement is defined by the contours in these Annexes.

xxviii WTO Plurilateral Agreement on Government Procurement

The entities that undertake the bulk of procurement differfrom country to country. Decentralisation of procurementactivity, centre-state relations and the evolving nature offederal obligations, and the extent to which procurement bypublic sector enterprises is pervasive are key factors. Withinthe EU, Annex 1 procurement is maximum in the UK, Spain,Netherland, Portugal, Greece and Luxembourg. However, incertain countries like Italy and Finland, Annex 2 entitiesaccount for more than 86 percent of procurements.Procurement undertaken by Annex 3 entities is most commonin Greece and Finland.

State Government EntitiesProcurement by sub-central entities is specifically prominentin those countries where procurement is decentralised.

In the United States, the general trend suggests that the stategovernments are bound by policies pertaining to internationaltrade and policy. However, individual states can keep out ofGPA obligations. Only 37 states in the United States havecommitted themsevles to GPA obligations.

In Canada, the provinces can accept or reject internationalagreements entered into by the central government.

Procurement Undertaken by State-Owned EnterprisesState-owned enterprises which were developed as a responseto the lack of private participation in certain critical sectorslike infrastructure and public utilities constitute a sizeablecomponent of procurement expenditure.

ThresholdsCountries seem to have uniformly established certainthresholds: SDR 130,000 for goods and services and SDR

WTO Plurilateral Agreement on Government Procurement xxix

5,000,000 for construction procurement for Annex I entities,and SDR 200,000 for goods and services and SDR 5,000,000for construction procurement for Annex II entities. Notably,the United States and Canada maintain higher thresholds ofSDR 355,000 for goods and services for Annex II entities.

Mode of Listing EntitiesA new entrant has the option of either listing all the ministries,departments and affiliated entities explicitly through a positivelist, or by the use of a definition which specifies the relationshipbetween the listed entity and the entities which are meant tobe listed through the definition. The two approaches have theirpros and cons.

Annex I Entities (Central Government Entities)Member-countries list a wide number of entities in their entityoffers. While Netherlands lists 7 entities in its Annex I offer,Norway lists 116 entities. The number of entities which havebeen listed do not indicate the value of the procurementundertaken, and are hence not a very useful indicator ofmeasuring the extent of a country�s procurement.

Annex II Entities (State Government Entities)Singapore andHong Kong have no Annex II entities. Notably,Canada lists all ten provinces � however, individual sector-specific exemptions and exclusions are advanced.The important states which have not been listed by the UnitedStates include North Carolina, South Carolina, Ohio andVirginia.

Annex III EntitiesWhile certain countries explicitly list the public sectorenterprises which have been opened for procurement, somecountries make reference to the utility sectors that they engage

xxx WTO Plurilateral Agreement on Government Procurement

in. The popular utility sectors which have been consideredand noted are drinking water, electricity, transportation, etc.

Israel has noted that procurement undertaken by entities inthe transport sector are open to sourcing only from the EC.

Some of the criteria pertinent to making an assessment as towhether a public sector enterprise which has been listed by acountry is an entity which undertakes sizeable procurementare as follows:� the level of infrastructure development/the extent to which

the public utility which is provided is �essential�;� whether the entity which is listed is a monopoly in the

country; and� whether the entity has been privatised/is likely to be

privatised as per policy formulations � this will result ineroding the value of the offer which has been advanced bya member-country.

Exceptions and ExclusionsExceptions are advanced at three levels in the annexes ofmember-countries demonstrating the delegation of authorityto decide conditions pertaining to procurement:� General notes advance exemptions or exclusions at the level

of a country � generally exceptions pertaining to reciprocityand exclusion of procurement pertaining to utilities isexempted at this level;

� Annex-level exemptions deal with certain exemptionsapplicable to an entire level of procurement (central, state,�other entities) or goods, services, construction services;and

� Entity-specific exemptions allow state governments, orpublic sector enterprises to determine specific conditionswhich they can apply to the benefit of the specific area/

WTO Plurilateral Agreement on Government Procurement xxxi

territory they operate in. Examples include South Dakotaexcluding procurement of beef, and the Port Authority ofNew York and New Jersey attributing the authority toinclude conditions in procurement to its Board of Directors.

Exceptions and exclusions are generally based on the followingreasons: (i) national security exemptions; (ii) derogationspertaining to a sector/product item based on socio-economicreasons; (iii) linkage with other international tradecommitments (such as the GATS), (iii) derogations based ondomestic policy considerations and (iv) derogations which arebased on reciprocity.

The national security exemption has been widely applied bycertain countries to exclude other country suppliers fromparticipating in the procurement processes in thetelecommunications sector. Examples include the UnitedStates� exclusion of Huawei and ZTE.

Some of the exceptions/exclusions are outside of the purviewof the GPA. For example, Quebec has maintained anexemption pertaining to the procurement of cultural andartistic goods. It remains to be seen how the WTO DisputeSettlementMechanismwill deal with such an extra-agreementexception in the event it has to be adjudicated upon.

Certain members deny access to challenge procedures undertheir domestic legal review system to the members who donot meet their demands to schedule certain sectors or entities,or remove the preferential procurement policies operationalin their territories. It is unclear if this provision is consistentwith the spirit of the GPA, and this issue may have to beresolved before any new entrant considers entering the GPA.

xxxii WTO Plurilateral Agreement on Government Procurement

Factors Impacting Market AccessThe GPA does not apply the Most-Favoured Nation principleresulting in a web of mutually discriminating arrangementsbetween the member-countries. These deleteriously impactmarket access opportunities for those countries which enterthe GPA.

�Buy National� policies which are increasingly common, havebeen enforced as a response to the current economic climateand may or may not be reflected in the commitments of themembers. Regardless, they impact on market accessopportunities in countries which are not granted a waiver tothese policies (either through the terms of the GPA itself, orby the grant of a waiver). Apart from the �Buy American�provision in the American Recovery and Reinvestment Act,2009, there is a new EU Proposal for a �Regulation of theEuropean Parliament and of the Council on the Access ofThird-Country Goods and Services� as well as similar legalinstruments in China.

�Horizontal policies� are those policies that impact onprocurement by government bodies which seek to advance asocial motive � examples include positive-discrimination infavour of small and medium sized enterprises, sustainable or�green procurement�, etc. Examples of procurement whichfavours small and medium sized enterprises include theProcurement Strategy on Aboriginal Businesses maintained byCanada and similar policies maintained by US and Japan.

Green Procurement� In furtherance of international commitments, �green

procurement� targets are made in procurement. In countrieslike the United States and Canada, the federal governmentand federal agencies are identified as being critical to the

WTO Plurilateral Agreement on Government Procurement xxxiii

xxxiv WTO Plurilateral Agreement on Government Procurement

implementation of a policy which aims to incentivise theuse of recycled content, energy-efficient devices and othersalutary devices.

� In the EU, 50 per cent of all tendering procedures arerequired to soon be made compliant with GreenProcurement Criteria. While dealing with procurement ofelectronic goods, the Electronic Product EnvironmentalAssessment Tool is utilised.

Other than these aforementioned aspects which may/may notfind reflection in a country�s commitments to the GPA, manycountries maintain logistical and other barriers in sectors suchas engineering, electronics and food items, which inhibitmarket access opportunities. Countries such as Japan havedemonstrated their intention to use trade remedies (anti-dumping measures) in order to ensure market access to theirsmall and medium sized enterprises.

Learnings& LessonsIndia is not impelled by any international commitments (suchas an accession process) to mandatorily accede to the GPA.The procurement activities of the 51 central governmententities, the state government entities, the 247 central publicsector entities and more than 800 state level public enterprisescan be astutely advanced as per provisions of the GPA in orderto obtain maximum advantage if India decides to negotiate itsaccession.

Thresholds: While developing countries may be allowed toutilise a phasing-in approach to gradually decrease thethresholds above which procurement is submitted to thedisciplines of the GPA, largely, countries seem to have uniformthresholds. The United States and Canada in the case of sub-

WTO Plurilateral Agreement on Government Procurement xxxv

central procurement have a significantly higher thresholdcompared to others. India may be able to use the option of�phasing in� from higher thresholds to moderate thresholds.

India�s Public Procurement Bill does not extend its applicationto state government entities. It has been argued that India maybe in a position to exempt state government procurement.Even if exclusion is not envisaged, it may be possible to allowindividual state governments to decide on the extent of theiraccession. It may also be possible for state governments toundertake an individual analysis on the socio-economicexclusions which can be maintained. Similarly, public sectorenterprises may also maintain individual purchase preferences.

Modification of Offer: If an entity is privatised or merged orthere is elimination of government control over the entityresulting in deeming its obligations under the GPA ineffectual,or where an entity is explicitly removed by a member, anotification to that effect has to be provided to the Committeeon GPA. This notification can be objected to by othermembers.

Quantification of Gains and Losses: According to stakeholders,India�s offensive interest in the information technology andpharmaceuticals sectors is set-off by its vulnerabilities in themanufacturing sector. India possesses a substantial marketwhich it presents for market access opportunities ingovernment procurement. Statistics pertaining to governmentprocurement indicating which body of the government isengaged in the purchase of what commodities and the quantumof procurement have to be collected. This is currently madepossible through themandate to list procurement opportunitieson an electronic portal.

xxxvi WTO Plurilateral Agreement on Government Procurement

Horizontal policies, �BuyNational� policies and the exceptions/exclusions advanced at the three delineated levels in a country�scommitments adversely impact market access. Clarity on theexact amount will help India and other new entran to advancethese figures during negotiations, as opposed to using thestatistics on the �size of available market.�

On Negotiating Accession� It has been opined that the expectations of the current

members of the GPA from China and India, or for thatmatter from other developing countries, are not uniform.However, it may be reasonably assumed that any substantialFTA commitments which India concludes may result increating certain obligations.

� An analysis of federal relations in India can providemultiplechannels for including/excluding state governmentparticipation in international procurement.

� Public sector enterprises which are autonomous in theiroperation may be permitted to determine the disciplines ofthe procurement undertaken by them � this extends toadducing welfare-inducing/economic-objective orientedexemptions and exclusions.

� India may not possess the capacity to mirror themaintenance of certain non-tariff barriers which mayrequire advanced technologies.

� After identifying important welfare objectives, avenues to�create value� through the GPA can be explored. Publicprivate partnerships in sectors engaged in the provision ofutilities, encouraging technology transfer, generatingemployment opportunities, forging channels for trade insustainable goods etc are a few examples.

� Exemptions to carve out goods produced by micro, smalland medium enterprises and policies which encourageprocurement from local industries may be negotiated by

WTO Plurilateral Agreement on Government Procurement xxxvii

offering sufficient market access opportunities in thenegotiations.

� Markets which are cut off to other GPA parties may beaccessed separately by commencing and concludingindependent negotiation processes where additional marketaccess may be negotiated.

India should try to use its position as �Observer� in theCommittee on Government Procurement to obtain clarity onthe scope/admissibility of certain exceptions/exclusionsmaintained by certain members.

Despite the challenges surrounding the process of accessionto the WTO Agreement on Government Procurement (WTOGPA or GPA), it presents a myriad of opportunities. Thenegotiating capital held by a new entrant into the GPA isprimarily based on the market access that it can provide. Asindicated from the earlier study on Government Procurementconducted by CUTS International, entitled �GovernmentProcurement: Domestic Regulations and Trade Prospects�,India provides access to a substantial market for the purposesof procurement. Further, India may be the first low-incomedeveloping country to explore accession to the WTO-GPAand it will be interesting to understand how flexibilitiesessential for Indian functioning in the WTO-GPA can besubsumed with the WTO-GPA framework. The negotiationswill occur over many sessions and pertain to multiple issues.Countries may decide to even exclude the application of theAgreement on Government Procurement to certain member-countries in the GPA.1 Whilst certain issues pertaining to aconcluding country�s commitments with respect to every othercountry in the GPA are handled on a bilateral basis, otherissues which are all-encompassing � such as �inclusion of sub-central entities� and �inclusion of enterprises engaged in theprovision of utilities and infrastructure� � may be negotiated

1Introduction

2 WTO Plurilateral Agreement on Government Procurement

upon with all other member countries. It may be importantto prioritise issues for negotiation in line with the negotiatingcapital held by a new entrant. Even though it may be possibleto set off trade concerns even beyond the scope of the GPAduring these negotiations, such a scenario is not within thescope of these chapters.

When a developing country considers its important tradingpartners under the GPA framework, it assesses thecompetitiveness of local producers in that country and othercommon suppliers in those markets. The markets which aresignificant for India include the US, the ASEAN and China.

Irrespective of if and when India decides to upgrade itsmembership in the WTO-GPA from that of �Observer� statusto �Member� status, it should take active steps to defend itsmarket access in countries where policies designed witheconomic or social objectives may impede access togovernment procurement markets. Countries have in placepolicies and have concluded agreements bilaterally andmultilaterally on issues that can increase or decrease marketaccess for certain participants. Some of these policies haveresulted in an erosion of market access for participants bothwithin and outside the GPA. While some of these policiesmay find support in the text of the WTO Agreementsthemselves, some others may have been reconciled throughnegotiations between two or more parties to the prejudice ofthose who are not party to such negotiations.

In evaluating some of these policies, we seek to assess ifthey have been justified by the WTO-GPA. Since a largenumber of these policies seek to establish either economic orsocial objectives, we explore best practices in facilitatingparticipation amongst small and medium sized enterprises,and encouraging incentives for Green Procurement in order.The task of understanding some of the policies maintained bymember-countries to the GPA at a federal and sub-central

WTO Plurilateral Agreement on Government Procurement 3

affair is complex. We can explore avenues such as the variousCommittees in the WTO, and Trade Policy Reviews to obtainclarity about the nuances of the policies maintained bymember countries.

Government Procurement is a specialist discipline requiringany research in this field to be undertaken with a certain�breadth of analysis� as well as affording insights which cometo light only when there is �depth of analysis�. Chapter 1 on�Theoretical Issues for Consideration by Prospective Entrantsto the GPA� lays down the foundations of a few theoreticalissues which will be encountered as the hardest pressingmatters in any new entrant�s negotiations, and which can alsopresent opportunities to safeguard market access at the sametime. The chapter suggests that preparations for internationalnegotiations should follow the establishment of a nationaldevelopment strategy.

Chapter 2, �Dynamics of Government Procurement andOpportunities for India,� explores the market accessopportunities which India can avail of in GPA member-countries and non-GPAmember- countries. Using governmentexpenditure as an indicator of government procurementopportunities, it presents insights into certain productcategories in which Indian suppliers can attempt to exploitprocurement opportunities.

GPA negotiations are hardly straightforward or easy tounderstand, absorb, assess and evaluate. As noted earlier,countries can decide to limit application of the GPA to certainother member- countries. Part A of Chapter 3, UnderstandingLimitations to Market Access: Evaluation of Entity Offers,Assessment of Exclusions and Study of Country AccessionExperiences, attempts to probe into the different layers of anAnnex (listing the central, sub-central and other enterprisesengaged in negotiations). The analysis is not conclusive. Butit provides certain insights which can be instructive for


negotiators seeking to understand an entity offer, or toformulate one.

It is clear that owing to the multitude of issues which willbe negotiated by any new entrant, certain issues takeprecedence over others. Key among these issues will be thosepertaining to coverage of sub-central enterprises in countrieswhich are evolving a new form of federalism, and procurementby/from entities engaged in the provision of utilities..

Another layer of analysis which is critical for understandinga country�s commitment is the breadth of the exclusions ithas sought to undertake. This analysis has two motives: can anew entrant emulate such exclusions/exemptions for same/similar interests? The second question is how such exemptionor exclusion advanced at the three critical levels in the GPA(The General Notes, at the level of the Annexes, and at thelevel of the Entities themselves).

Governments have multiple functions � whilst some are inthe nature of performing the functions of a Welfare State,some others are purely commercial functions. How do policiesevolved by the State in order to accommodate other economicand social disciplines, but which nevertheless constituteprocurement, form another layer of operations germane toan assessment of Government Procurement? These arecovered in Part A of Chapter 3.

It is imperative that an analysis be undertaken of thecountries which are in the process of accession, or whichhave acceded to the GPA through the bilateral andmultilateralnegotiation process described above to enter the GPA, in orderto understand how demands are made and met, concessionsarrived at, and whether there is an opportunity to create valuein the course of the negotiations. Data pertaining to thenegotiations are fairly limited to media reports, and certaindocuments at the WTO. We understand that members caneither co-operate or defect while engaged in a negotiation.


However, it is important to note that the GPA negotiationsare spread over a period of time, allowing a member countrythe opportunity to revise its commitments at multiple points.We assume that the members who have limited choice toaccede to theWTOGPA (their accession is strictly mandated,or they are subject to external political pressures) have limitedbargaining powers in terms of the commitments that they cannegotiate in order to enter the GPA. We undertake abehavioural analysis of the parties engaged in suchnegotiations. This analysis is undertaken in Part B of Chapter3.

With the dynamics of the negotiating process explained,Chapter 4 applies the lessons learnt to the Indian framework.It explores whether welfare objectives can be integratedwithin the GPA framework in the event India does accede tothe WTO GPA.

Chapter 5 presents the conclusion in terms of the optionsavailable for India, taking into account the time frame andthe effect of the actions of international players in reducing/increasing market access opportunities.

Factors Influencing Accession to the WTO GPAThe insights contained in this section have been drawn from

a survey conducted in Geneva. Key informants wereinterviewed in order to understand the motivations of differentcountries in abstaining from joining the WTO GPA or injoining the WTO GPA. These informants were from a cross-section of countries which were part of the GPA, or whichwere negotiating entry into the GPA, and countries whichabstained from concluding any commitments under theWTOGPA, as also commentators in think-tanks and policy-makers.The interviews were extremely helpful, particularly indiscerning how countries perceived the threat posed by theaugmented use of �Buy Local� legislation.


The more apparent gains which accrue from accession tothe WTO GPA are transparency and good governance.However, the members of the GPA themselves hold adifferent view. They contend that the GPA provides immensemarket access opportunities apart from the values of goodgovernance that it seeks to establish. Other observations whichmay be relevant for a country considering accession into theWTO GPA are as follows: a foreign investor may be moreinclined to export to governments which are party to the GPAbecause of the salutary investment climate they may beassumed to provide.

Certain developed countries that have opted to stay outsideof the Agreement on Government Procurement have done soconsciously because they possess ample market accessopportunities outside of the GPA. Some of these countriesmay have also negotiated FTA provisions on GovernmentProcurement with GPA Countries (US-Australia) or Non-GPCountries (Australia-Chile). However, even such countriesmay reassess the question of membership into the WTO GPAif newmembers like China following accession decide to limitmarket access through measures similar to �Buy American�.

Some developing countries started to seriously consideraccession into the WTO GPA following the implementationof the American Recovery and Reinvestment Act, one reasonfor it being the United States� status as amajormarket. Anotherpressing concern was that other member-countries wouldbegin to enact such laws (similar to the EU Proposal, coveredin Chapter 3). However, some other developing countrieswhich are currently considering accession, note that the GPAwill not insulate them against Buy National policies. Theyanticipate that such policies will have to be factored into theirtrade policy independently.

A lesser cited reason is that of political influence: a newentrant will manage to influence the terms of accession of


future new entrants, and to shape the manner in which theagreement itself evolves. They note that currently decisionshave been taken to formulate work groups in order todetermine the way forward with respect to GPA policies onsmall and medium sized enterprises, sustainable procurement,etc. It has been espoused that a developing country which hasinterests in these policy aspects should be able to participatein these work groups in order to sculpt the future of GPA ina manner which has integrated elements pertinent to its owncountry procurement processes.

Costs involved in WTO GPA AccessionThe costs involved in WTO GPA accession include the

costs incurred in the preparation stage, and the implementationstage following accession. The costs incurred in thepreparation stage include the cost of conducting feasibilitystudies, and costs of negotiating the accession (which wouldinclude conducting meetings with stakeholders). The costsincurred in the implementation stage include adaptinglegislations and other related procurement systems2 inaccordance with the standards formulated in the WTO GPA.Commentators have noted that the costs of complying withGPA obligations are so high that least-developed countries(LDCs) may find it hard to comply with them. Even if LDCsattempted to accede to the WTO GPA, it is presumed thattheir commitments would be limited to central governmententities because extending the agreement to apply to sub-central entities would prove cumbersome.

With respect to thresholds, the understanding is that eventhough there may be some chances of being able to negotiatefor certain preferences and advantages with respect to theentity offer, the leeway to do the same with thresholds wouldbe minimal. Developing countries which are considering entryinto the WTO GPA benchmark themselves against the


Chinese accession process for want of a better comparison.They are awaiting for the conclusion of China�s accessionprocess to better anticipate the expectations for their ownentity offers, thresholds and services. However, developedcountries who are part to the GPA have indicated that theexpectations differ from country to country. Developingcountry governments are concerned that domestic suppliersmay incur losses following accession to the WTO GPA.

Key Issues in NegotiationsFor new entrants, particularly developing countries which

are seeking entry into the WTO GPA, a key issue of concernis the inclusion of sub-central entities, with considerationspertaining to forms of federation or unitary state. Further,legislative impediments exist for creating and enforcingcommitments pertaining to international trade on sub-centralunits. Some countries offer a limited number of sub-centralentities. However, in the offers for revision the parties to theGPA insist that all the sub-central entities in the forms ofprovinces, state governments and municipalities are covered.This is especially cumbersome for the decision-makers in thosecountry governments because the different provinces enjoyuneven levels of economic development and may be subjectto distinct economic and social improvement programmeswhich may have an impact on the procurement obligationsundertaken.

Multiple Conditions Inducing Country Accession into WTOGPA

The WTO GPA is a plurilateral agreement. Ideally,accession to a plurilateral agreement should be purelyvoluntary. Amember-country should be in a position to decideon the question of WTO GPA accession based on the resultsof an assessment to determine market access opportunities.


However, currently, many countries feel impelled to enterthe GPA either owing to accession commitments (to theWTOitself) or the obligations contained in free-trade agreements.Further, a new entrant enters a framework where modalitieson participation; integration of welfare objectives withdisciplines of the GPA; and treatment of the entities tabledfor accession under the GPA have already been evolved bythe extant participants. Hence the new entrant has to remaincognisant of these new factors which influence market accessopportunities.

Any country which is a member of the WTO may accedeto the Agreement on the termswhich are agreed upon betweenthe government and the Parties.3 Entry into the Agreementon Government Procurement is governed by the terms ofArticle XXII (2). The process involves depositing aninstrument of accession with the Director General of theWTOwhich states the terms. The agreement results in a bindingcommitment on the 30th day following accession.

The GPA is a plurilateral agreement indicating that entryinto it is voluntary. However, the current parties to it areincreasingly beginning to present accession to it as a conditionfor accession to the WTO itself. In 2003, some membersdebating the process of accession contended that membershipin plurilateral agreements such as the GPA and Civil AircraftAgreement should not be made a condition of accession tothe WTO as Article XII4 of the Marrakesh Agreementestablishing the World Trade Organisation mentions thatprocedures for accession to a plurilateral agreement wereseparate from accession to the WTO itself.5 However,Vanuatu was required to join the GPA by the United Statesduring its WTO accession.6 These members presented thatthis was a WTO-plus obligation, and could be termed asamounting to an �abuse of economic power� because7


accession to the WTO was governed by Article XII of theMarrakesh Agreement.8

There are several examples of individual member-countriesattempting to induce accession to the GPA through variousmeans. The US can deny Normal Trade Relations (NTR)status (similar to the Most-Favoured Nation status underWTO law) under its Trade Act of 1974. The Russian andMoldova Jackson-Vanik Repeal Act of 20129 requires theUSTR to monitor Russia�s adherence with its WTOobligations, including the implementation of two plurilateralagreements � the WTO Information Technology Agreementand the GPA. Under the former, Russia will be required toeliminate high tariffs on information technology products, andunder the latter, the country is required to submit an offer tojoin the GPA within four years of accession to the WTO.Similarly, the EU has channelled a large number of countriesinto membership with the GPA when they attain EUmembership. Croatia will be next.

What are the implications for Indian suppliers and Indiangovernment entities of this rapidly altering landscape ofaccession to the GPA, web of commitments undertaken bycountries in regional trading agreements and other bilateralagreements pertaining to procurement? This question issought to be answered at a time when countries have rapidlyevolved Buy Local laws, green procurement policies andPreference/Encouragement procurement policies favouringsmall businesses. These factors cannot be ignored whileundertaking an assessment of whether market access of Indiansuppliers is shrinking or not.

This leaves us to consider the larger question of whetherthe decision to accede to the GPA can be based merely on acost-benefit analysis. Certainly, countries that are currentlyoutside the purview of the GPA, such as India, should remainalert about developments in the GPA framework in order to


determine if there are other factors which diminish access tothe markets commonl accessed by Indian suppliers. A cardinalquestion that remains to be addressed here is, what do westand to gain from the GPA, either by accession or byremaining outside? Countries have sought to address this issueby undertaking cost-benefit analyses of GPA accession.However, we are interested in what can a new entrant gainfrom accession to the Agreement on GovernmentProcurement?

We explore the exact scope and definition of �GovernmentProcurement� and the possible impact on the welfareobjectives of a new developing country entrant . We alsoexplore the extent to which membership of GPA remains�voluntary.� This is considered in light of theWTO provisionsgoverning procurement.

We briefly describe the scope of the commitments under aparty�s entity offer, with examples of the extent of a country�scommitments and exemptions/exclusions. These facets of acountry-specific offer are dealt with in detail in Chapter 3.The process of accession is elaborated upon. It covers thetwo mechanisms deployed under the GPA to define reciprocalcommitments in order to draw out entity offers and to ascertainthe consistency of the GPAwith relevant domestic legislation.Examples of strategic studies undertaken by other countrieshave been presented in order to obtain direction pertainingto methodology, the sectors which can be included/excluded,the possible use of offsets, and, possibly, evolving a strategyfor exluding or including entities.

The Basis of Negotiating StrategyIs the market for government procurement distinct from

the market for international trade in terms of demand andsupply?


D.Marron deals with the subject of commodities/products/services purchased by the governments of OECD countries.He notes that governments procure more than private playersin the fields of defence and transportation, whereas they arerelatively small purchasers of consumer goods.10 Researchconducted in 2003 covering nine OECD countries in the 1980sindicated that the sectors which covered 5 percent or moreof national demand dealt with the defence, transportation andenergy-related industries.11 Another study which dealt withonly the United States in the year 1987 indicated thatgovernment-purchase shares were most significant in defencerelated industries, construction and maintenance, as well assectors related to computers and scientific equipment.12 Astudy should be conducted domestically to determine thefollowing information:� What are the products (specific to government

procurement) for which there is a demand in the domesticmarket by domestic procuring entities, but no domesticsupply? Can transfer of technology improve the situation?

� In the international markets, is there demand amonggovernments for products that are distinct from theproducts consumed by households and industries?

� What are the products (particularly in intermediate goods)for which we can streamline or modify our production inorder to reach these markets?

Data on procurement by the various departments andministries of the government will be available shortly. All theministries/departments of the central government, centralpublic sector enterprises (CPSEs), and autonomous andstatutory bodies are required to publish their tender enquireson the Central Public Procurement portal after 1st January2012, 1st February 2012 and 1st April 2012 respectively.13


Accurate data on what procurement is undertaken by theministries over a span of three years may be calculated throughthe information put out by the CPP portal in the next twoyears.

Definition of Government ProcurementGovernment Procurement is not defined in the GPA.14 The

Agreement applies to �any measure regarding coveredprocurement, whether or not it is conducted exclusively orpartially by electronic means.� Covered Procurement isprocurement for governmental purposes which is not procuredwith a view to commercial sale or resale, or for use in theproduction or supply of goods or services for commercial saleor resale. The definition of Covered Procurement is furtherqualified as procurement which falls within the value whichis subject to the pertinent valuation norms, and which fallsabove the pertinent threshold which is agreed to by the party.Such procurement is Covered Procurement when it isundertaken by a procuring entity, and the means ofprocurement include purchase, lease, rental, hire purchase,with or without an option to buy.

The GPA states that procurement includes procurementfor �governmental purposes� � this raises the question as towhen is procurement by a government entity procurementfor a governmental purpose? Are these procurements limitedto those undertaken in furtherance of the welfare state aim,or do they also include purchases made by the state acting asa market participant?


Box 1.1: Distinguishing betweenPublic and Private Procurement:

US Procurement of Sonar Mapping System15

A US government agency, the National ScienceFoundation (NSF), a �covered entity� under the GPAconcluded a contract with a private entity, the AntarcticSupport Associates (ASA) to lease, equip and procure aresearch vessel. A sonar mapping system was required tobe to be provided on the vessel.

ASA released a notice which mentioned that it intendedto procure a �multibeam, sonar, deep ocean, swathmappingsystem.� The ownership of the vessel would vest in theNSF. It also mentioned that the provisions of the �BuyAmerican� Act applied to the procurement, indicating twothings: (i) The system could not be foreign manufactured;(ii) Over 50 percent of the total cost of components wereto be of US origin, and a Certification of United StatesManufacture was required to that effect. The dispute dealtwith the procurement of the sonar mapping system.

One of EU�s contentions was that procurement of thesonar mapping system amounted to a private procurementandwas challengeable under the provisions prohibiting non-discrimination under the General Agreement on Tariffs andTrade.

The panel dealing with the dispute concluded that thiswas a case of government procurement, and not privateprocurement. It gave the following reasons: (i) the paymentfor the system was made with government money; (ii) theNSF would subsume title to the sonar mapping system atthe time of its delivery; (iii) the selection of the system wassubject to the approval of the NSF.

Contd...


The unadopted panel report on United States -Procurement of a Sonar Mapping System provides someguidance on whether procurement undertaken by a privateentity on behalf of a covered entity will be covered under theGPA.

The GPA may not have explicitly pronounced on caseswhere the government determines the price of the commodityto be supplied but mandated sale to the government at a pre-designed price (similar to a compulsory licence) would notfall afoul of the GPA in any case.

Generally, the conditions that invite the application of theGPA are as follows:� When procurement is undertaken by a covered entity� When the value of the procurement is above a certain

threshold� When no exemption/exclusion is applicable� When the procurement applies to a service/good which

has been listed by the country member

But determining whether a procurement is covered by theGPA is more complex than answering the above criteria. Themanner in which funds for the procurement are routed

The panel indicated that the US should undertakeprocurement consistently with its obligations under theGPA.

Observations: Hence, even if the procurement of acertain good, service, construction is delegated to a privateparty, if the final decision on the procurement lies with thegovernment, and the government makes the payment forit, and the ownership of the good is transferred to thegovernment, then the procurement will be said to have beenundertaken by the government.


through to the purchasing entity points to the need to ensurethat government accounting rules are stabilised over time.

Though this may be straightforward in certain cases (suchas ministerial procurement), it attains a level of complexitywhen dealing with procurement which is made for thepurposes of resale, or for commercial reasons. The GPA notesthat procurement for commercial sale or resale, or for use inthe production or supply of goods or services for commercialsale or resale, is not included under the purview of coveredprocurement. This raises two more questions that areespecially important from the point of view of developingcountries: (i) Is procurement which is essentially undertakenin an emergency situation, or for the purpose of administeringaid, or for the purpose of fulfilling a welfare notion at minimalprofit also included within the purview of commercial sale?(ii) If the government incurs a loss in the process of ensuringthat the prices of certain goods or services are kept below aminimum price which renders the good or service sustainablefor its population, would this fall within the purview ofcovered procurement?

Scope of CommitmentsEarlier, Appendix I was constituted of by five annexes

which dealt with the following: (i) central government entitiescovered by the Agreement; (ii) covered sub-centralgovernment entities; (iii) �other� covered entities (e.g.utilities); (iv) services coverage; (v) and coverage ofconstruction services. Parties have the option to includeGeneral Notes which qualify the application of the Agreement.

As per the Revised Agreement on GovernmentProcurement, Appendix I of a Party�s offer is required to listthe following information as noted in Appendix 1.1.16 Theearlier version did not require the enlistment of goods � thisis critical for any negotiating country if the enlistment


continues to ascribe to the positive list approach because inthis case, the enlistment can include limited number of entities.

Appendix 1.1: Country Coverage

Components CoverageAppendix I

Annex 1 Central government entities whoseprocurement is covered by thisAgreement

Annex 2 Sub-central entities whose procurementis covered by this Agreement

Annex 3 All other entities whose procurement iscovered by this Agreement

Annex 4 The goods covered by this Agreement

Annex 5 The services, other than constructionservices, covered by this Agreement

Annex 6 The construction services covered by thisAgreement

Annex 7 Any General Notes

Importance of the AppendicesArticle XXII(15) of the new text of the GPA entitled

�Appendices� states: �The Appendices to this Agreementconstitute an integral part thereof.� Further, the importanceof the negotiations to undertake obligations under the GPA,as will be crystallised in the GPA Annexes, are fundamentallytreaty negotiations.17 The Appendices are generallyinterpreted in line with the Vienna Convention on the Law ofTreaties.18


Negotiations with parties to the GPA pertaining to entities/thresholds/qualifications amount to treaty negotiations.19

There are specific ramifications which follow after theenlistment of a certain entity because under the GPA, aviolation is identified as emanating from the acts of a listedentity, and unlisted entities are generally not actionable underthe GPA.20

A Note to any of the Annexes can be used to qualify anycommitment which is undertaken by the parties � In Korea-Government Procurement, South Korea�s Note stated thatthe central government entities coverage included thesubordinate linear organisations, special local administrativeorgans, and the attached organs as prescribed in theGovernment Organisation Act of the Republic of Korea.21

When there was a dispute on whether the procuring entityhad a close enough relationship with the entity listed in theoffer, the Panel took note of the fact that South Korea hadqualified its commitment pertaining to other entities notincluded in the offer through an express reference to itslegislation. For the sake of establishing clarity it may be usefulto disclose and identify pertinent entity relationships in certaincases in India�s offer.22

Annex I: Central Government EntitiesThis includes the central government ministries,

departments and other entities. One crucial element to bekept in mind while assessing an Entity Offer in Annex I, orframing an offer is whether the procurement in that countryis centralised or decentralised. Counting the number ofentities offered is a superficial mode of examination. Animportant determinant is whether the most importantdepartments/ministries which engage in procurement � namelyhealth, transport, education, construction and development �


have been listed or not. It is common practice to list entitieswhich only procure office stationery.

Certain countries limit their entity offer in Annex 1 to the�entities proper,� thereby indicating that the subsidiaryorganisations are not included for procurement.

Annex II: Sub-central entitiesWith respect to government entities covered by the GPA,

the status of bodies which are independent governmententities, commercial state-owned companies, and joint venture(public/private) entities may be transient and difficult todetermine. Sub-central entities and negotiation based onopening up these entities are based on reciprocity, and hence,multiple �reciprocity-based derogations� are present in theAnnexes. A few examples of the commitments made bydifferent member-countries are as follows:� Forty seven of Japan�s prefectures had been included in

the GPA.� Switzerland lists all 23 cantons.� South Korea lists all of its sub-central administrative

government entities in the GPA Annex II, including sixmunicipalities and nine regions.

� Iceland and Liechtenstein do not mention any specificnames, but state that contracting local public authoritiesand public authorities at the local level are included.23

Canada consists of ten provinces, and three territories. Theprovinces are free to reject international agreements and theCanadian federal government cannot compel its provincialcounterparts to accede to Canada�s WTO obligations. WhenCanadamade its initial offer in 2000, it refrained frommakingany sub-sectoral commitments until 2010. Canada justifiedomitting sub-central entities in its offer by stating that it wouldpresent an offer on the satisfaction of two conditions: (i)


members were required to include the sectors of priority(namely steel and transportation) and, (ii) small businesspreferences did not result in eliminating business opportunitiesfor Canadian participants.24 Currently, Canada includes itssub-central entities. But, they include specific exemptions andexclusions which have been dealt with in Chapter 3.

The United States initially desisted from makingcommitments on behalf of its entities because although theUS Federal Government can compel state governments toaccede to international trade agreements, guidance orinstructions in the area of procurement may be viewed as anintrusion. Hence, states were allowed to voluntarily accedeto the GPA. Even now, the sub-central threshold forprocurement has been placed at SDR 355,000, which is muchhigher than the thresholds maintained by other countrymembers.25

Annex III: Other Entities Involved in ProcurementAnnex III entities include other entities in a country which

are commonly engaged in procurement activity. These includethose entities which have a certain degree of privateparticipation, state trading enterprises and those entities whichare engaged in the provision of utilities.

Purchasing agreements between public sector entities mayarise owing to one entity being the sole provider of a certaincommodity or a service, or the presence of a closeorganisational link existing between the parties. The desireto procure from the public sector rather than through themarket may be due to certain interests which could bedescribed as �legitimate� desire for closer control over theprovision of the service and trust in the public sectorprovider.26

The EC�s General Notes to Appendix I note that the GPA�shall not apply to contracts awarded to an entity in Finland


which itself is a contracting authority within the meaning ofthe Public Procurement Act�.27 This results in excludingprocurement of services from an entity with which theprocuring entity has a parent or subsidiary relationship (anaffiliated undertaking). Though this may be justified on thegrounds that it is actually an internal arrangement, the authorsWang and Perin anticipate that misuse may occur if countrieswith a large state sector like China resort to using thisexception/exclusion because the state entities which areregistered as separate entities are also capable of obtainingbusiness outside of the group. Canada excludes all purchasingarrangements between public sector entities. However, it isargued that the impact of Canada�s exclusion is limitedbecause Canadian federal enterprises listed in Annex 3 are inany case limited in number, and they enjoy certain exclusiverights in their respective businesses.28

As noted above, making an Entity Offer is a task thatrequires a sound rationale for every omission or inclusion ofan entity/product/service/construction service. As it is difficultto determine the exact economic impact of an entity offerwithout extremely detailed analyses for which information isnot always available, assessing and matching any country�sEntity Offer is a seminal requirement.

Annex IV: GoodsAnnex IV is a new addition in the current GPA Agreement.

Considering there are no disciplines which have beenmandated it is clear that either a positive list, or a negative listcan be maintained after undertaking an assessment of theGoods and Services which are exempt, or offered for thepurposes of government procurement.

Annex V: Services (outside the scope of the paper)


Annex VI: Construction Services (outside the scope of thepaper)

Annex VII: General NotesThe General Notes sometimes constitute the most critical

Annex by qualifying a country�s entity offer through the useof certain statements. In certain cases, they exempt Annex 2and Annex 3 procurement either universally or selectively.The impact/reduction of market access through a fewstatements in the General Notes can be immense. In certaincases, they exempt procurement pertaining to the provisionof utilities in sectors like water, telecommunications andtransport.

In this context it is important to determine how the paneland the appellate body have dealt with the significance ofgeneral notes in cases. The panel inUnited States-Restrictionson Imports of Sugar (as cited in Korea-GovernmentProcurement) noted that headnotes could be used to qualifytariff concessions.29 The panel in Korea- GovernmentProcurement extended this reasoning to ponder over whethera GPA signatory could use Notes to its Schedules to �qualifyentity coverage.�

Para 7.9 of the Panel Report says:�Like GATT Article II:7 which refers to the tariff

Schedules as �integral� parts of the Agreement, ArticleXXIV:12 of the GPA states that: �The Notes, Appendicesand Annexes to this Agreement constitute an integral partthereof.� Thus, it follows that we should consider theSchedules appended to the GPA as treaty language.Accordingly, we will refer to the customary rules ofinterpretation of public international law as summarisesin the Vienna Convention in order to interpret Korea�sGPA Schedule�.30


They also embody reciprocal obligations. Certain countriesexempt some other countries from the application of the termsof the Agreement pertaining to Annex 2 or Annex 3, or theyrequire further negotiation of market access opportunities.In this manner, the General Notes reveal that there are levelsand layers of statements through which market access can bequalified.

Another critical facet of the General Notes is where partiessometimes deny access to juridical procedures in theircountries in the event the country from which the supplierhas a grievance does not fulfil the expectations of the othercountry members. Some of these expectations include, thatno discriminatory preference policies for small and mediumsized enterprises be maintained, and that state governmentprocurement or procurement pertaining to utilities be openedup.

Process of AccessionThe accession negotiations have two main aspects:

(i) Entity Offer: The first aspect is the negotiation of anagreed coverage to be reflected in the appendicescontaining lists of entities and services as well as lists ofrelevant publications. Drafting the entity offer is crucialbecause, as discussed before, �the GPA has always beenbased on what is affirmatively included in Schedules�;entities not affirmatively listed in parties� Annexes couldonly be covered by the GPA in certain exceptional cases,namely (i) where the entity in question is essentially apart of, i.e. legally unified with, a listed entity; (ii) wherethe entity in question is procuring on behalf of a listedentity. 31

(ii) Ensuring Consistency of domestic legislation: The secondis ensuring the consistency of the applicable nationallegislation with the provisions of the Agreement.


A government which is interested in accession is requiredto first communicate such interest to the Director General ofthe WTO, and the Committee on Government Procurement.The initial offer is supposed to table the entities, goods,services, construction services and thresholds of coveredprocurement in the appropriate Appendices and list relevantpublications which disclose details about tendering (withrespect to Article I and Article V).

Following this, a working party will be constituted toexamine the offer. The working party is required to examinethe following: (i) The coverage offer made by the applicantgovernment; (ii) The information pertaining to the exportopportunities in the markets of the Parties after taking intoaccount the existing and the potential export capabilities ofthe applicant government and the export opportunities forthe Parties in the market of the applicant government.

Next, information has to be provided in response to thequestions in the document �Checklist of Issues for Provisionof Information Relating to Accession to the Agreement� underthe following heads: (i) legal framework (whether there is acentral law on procurement, whether there are other laws,regulations, decrees, administrative rulings, decisions, policyguidelines which deal with procurement, conflict between theagreement and the law; (ii) scope and coverage (requires asummarisation of the organisation of the government at everylevel that engages in procurement activity, central governmententities and sub-central entities which engage in procurementof goods, services and construction services, entities ownedor controlled by the government which are subject to the ruleson government procurement, any sectors whichmay be exemptfrom the scope of application of national procurement rulesand statistics on the procurement by government entities);(iii) provisions in the law which conflict with nationaltreatment and non-discrimination commitments as provided


in Article III, preference policies for domestic suppliers (iv)procurement procedures; and (v) bid challenge proceduresand the extent to which information technology is used inprocurement.32

The two mechanisms employed in the negotiation processare (i) bilateral consultations between an acceding countryand interested parties and (ii) plurilateral consultations33 inwhich discussions take place between the acceding countryand the member-countries. Though negotiations on theelimination of discriminatory measures and practices occurbilaterally, but they still remain subject to supervision by theCommittee as a whole.34

The Committee on Government Procurement determinesif the terms of the accession including the lists of entities andservices, and relevant publications of the applicant countryare apposite. The applicant country shall then deposit withthe Director-General of the WTO an instrument of accessionstating the said terms. The applicant country�s lists of entities,services, and publications in the authentic WTO languagesare then appended to the Agreement.

Having discussed the conditions of accession, we are keento understand if there are any current standards which defineany minimal threshold beneath which a possible offeradvanced by India cannot under-promise. The text of the EU-India FTA commitments on government procurement iscurrently not in the public domain, hence we refer to India�scommitments under the Indo-Japan CEPA. India�scommitment under the CEPA contains Japan �best-endeavour�clauses at best (see Box 1.2). It states that steps to ensuretransparency of the measures which pertain to governmentprocurement in accordance with the national laws andregulations will be endeavoured towards.


The Indo-Japan CEPA does not contain apply to Annex 2and Annex 3 entities. If this is an indicator of the Indiangovernment�s interests in formulating an initial offer for theGovernment Procurement Agreement, there is chance thatAnnexe 2 (dealing with sub-central entities) and Annex 3(dealing with �other entities) may not contain any/extensuvecommitments. However, it is important to note (refer to theportion on General Notes) that such omission of sub-centraland municipal entities may result in certain parties refusingaccess to challenge procedures under Article XX for Indian

Box 1.2 : Indo-Japan CEPA :Provisions on Government Procurement

� The Parties will commence negotiations on the Chapteronly when India expresses an intention to become partyto the Agreement on Government Procurement in Annex4 in the WTO Agreement.35

� The Government Procurement obligations undertakenunder the Indo-Japan CEPA are not applicable to stategovernments, their entities and the local governments.

� The Parties retained the safeguard that nothing in theagreement could result in their having to disclose anyinformation essential for the protection of the essentialsecurity interests relating to the procurement of arms,ammunition or war materials, or any procurementindispensable for national security or for national defencepurposes.36

� Further, the Indo-Japan CEPA contains the value of non-discrimination and states that each Party shall subjectthe goods, services and suppliers of the other Partytreatment which is no less favourable than that which isaccorded to its own Party�s goods, services and suppliers.


participants in those countries. Thus, at present, there are noconcrete indications on the commitments which should beundertaken by India.

Country Studies and Assessments Undertaken ByCountries Contemplating Accession to the GPA

As noted in the first part of the study, it is extremelyimportant to estimate what are the costs and benefits ofacceding to the GPA. Thorough research has to be undertakenin order to determine a country�s future strategy inprocurement. Procurement as a concept, and ensuinglegislation and jurisprudence pertaining to the modalitiesinvolved in procurement can often be traced back to theEuropean Union. Hence, the methodology and results of astudy which dealt with procurement practices in the EuropeanUnion is first dealt with. Following that, the methodologydeployed bymultiple studies which dealt with countries joiningthe GPA are presented. We seek to uncover best practices inestimating costs and benefits of GPA accession, with a focuson methods of data analysis, products identified as beingsensitive, etc.

The Eurostrategy Consultants StudyThe objective of the Eurostrategy Consultants Study was

to determine the effect of the European procurement rulesbetween 1987 and 1994 (revised directives).

Methodology: Primary research was undertaken with asurvey of suppliers to the public sector/utilities and a surveyof a cross-section of regulated purchasers. Purchasersrepresenting 80 percent of the procurement at each level ofgovernment, and utility type (698 purchasing entities) weretargeted. These included: central government ministries


dealing in procurement (mainly defence, public works,transport, education, interior/home office, health and postand telecommunications); at the sub-central/regional level, theentities which were responsible for 80 percent of procurementof the regional level government in regions which accountedfor 80 percent of national GDP; bodies which wererepresentative of local government procurement; and, utilitieswhich accounted for 70-80 percent of procurement in thesub-sectors defined in Annexes I-X of the Utilities Directive.37

Procurement-sensitive sectors were identified based on thefollowing criteria: (a) sectors which account for a large sharein the total public purchasing; (b) sectors which are dependenton public-sector purchasers; (c) products can be transportedlong distances and are tradable; (d)were not freely traded in1987 due to nationalistic purchasing policies; and (e) weresupplied in 1987 by a few dominant suppliers.

Using these criteria, nine sectors were identified as beingprocurement sensitive: building and civil engineering works,business services, electrical goods (power generation andtelecom equipment), paper products, metal products, officemachinery, motor vehicles, other transport equipment, textilesand clothing, and footwear.38

Measuring ImpactIn the EU study, it was noted that the number of notices

which were published in the Official Journal of the EuropeanUnion increased from 12,000 in 1987 to 95,000 in 1995.However, it was found that SMEs did not read or access theOfficial Journal. Owing to the publication of notices in theOfficial Journal, a large number of new opportunities wereaccessible to suppliers to the public sector. Owing to the factthat there was no systematic recording of the national originof purchases made by entities, demand side data could not beused to estimate import penetration and, instead, private


sector company information which is published in annualreports at the regional level was used. The study sought tomeasure public sector import penetration � foreign purchasesmade by the public sector (public sector purchases of foreignorigin39 divided by total public sector purchases).

Observations1. The study importantly noted the need for harmonising

product standards. Currently, Article VI of the GPAstipulates that purchasers should base their technicalspecifications on international standards. Theseinternational standards are yet to be developed in manycases. Apart from the development of these standards, itis important to negotiate and conclude mutual recognitionagreements in atleast procurement sensitive products (inareas like railways where the Operational Safety exemptionhas been resorted to).

2. An important objective of the study was to discern therequirement to establish a local presence, and to determinethe ease of doing so. Article III:2 of the GPA prohibitsdiscrimination against locally established firms on the basisof foreign affiliation or ownership, or the origin of goods,or services.

An approach which may be used to assess the size of theprocurement market is using the data collected from publishedtenders. The European Commission estimates the total valueof tenders which are published in the Official Journal of theEuropean Union (OJEU) based on the number of tenders andthe value of contracts.40

JordanConsultation and Research on Preparedness to Accede to

the GPA: In the year 2001 the Access to Microfinance &


Improved Implementation of Policy Reform (AMIRProgramme) funded the creation of a database of procurementby all Jordanian government entities for the year 1999-2000.41

This in turn facilitated the identification of the goods andservices which were purchased by the Government of Jordanin that period, as well as the government entities which wereengaged in procurement and other information pertaining toprocurement. USAID undertook the exercise of drafting entityoffers, and used econometric modelling and quantitativemodelling methods for the purposes of evaluating alternativeoffers.

The strategy document for Jordan notes that Developingcountry members can negotiate exclusions based on specifiedentities, products and services from national treatment. Thefollowing studies were undertaken and incorporated intoJordan�s WTO Accession Memorandum:1. Survey on Price & Profitability Control: The products and

services which were subject to price and profitabilitycontrol in Jordan were identified.

2. Survey on State Trading Practices: State traders under theWTO definition were identified amongst companies andgovernmental bodies. A full analysis of state trader entitieswas conducted in order to highlight the impact of thoseestablishments on international trade activity in therespective fields.

3. Privatisation Survey: The survey identified state-ownedorganisations, the value of those companies in light of theirGDP contribution and employment size, the rules andregulations which affect the privatisation process, thegovernmental agencies involved in it, etc.

Methodology in the Jordan Strategy DocumentThe goods and service industries which would be included/

excluded in the Jordanian accession process were subject to


certain strategic studies. Based on the effective and nominalrates, the government could decide to promote industries withhigh nominal protection but low effective protection (andexclude products originating from manufacturers ofpharmaceuticals, medical and surgical equipment, andagricultural and forestry machinery).

Another strategy which was available to the Jordaniangovernment while pursuing accession was that it couldpromote the industries which already enjoy high levels of bothnominal and effective rates of protection. It could excludeproducts based on factor intensity: this could be done bytargeting high-technology and capital intensive products whichsupport the development objectives of the Government ofJordan. Furthermore, it could target labour-intensive industries(furniture, textiles, jewelry, leather and manufactures) tosupport development objectives and minimise the GPA�simpact on employment.

A study assessing the impact of Jordan�s accession to theAgreement using data from 1997-2000 had been finalised inAugust 2002. Sectoral institutions like the EngineersAssociation had also submitted individual impact assessmentstudies. These were to be examined by a national committee.The national committee was constituted of by both publicand private players.

Jordan had encountered roadblocks in the negotiationprocess from the pharmaceutical industry, and the legal statusof the Aqaba Special Economic Zone.42

As noted in the Jordan strategy document, when adeveloping country is confronted with having to make adecision on whether it should accede to the GPA or not, apartfrom considering the benefits of gaining access to the GPAmember-country markets, and after estimating the possiblelosses which may be incurred by its domestic players in thosemarkets it is also required to take into consideration, the �costs


of adjustment�.43 Included in these are the costs of adoptingnew legislation, setting in place the adequate challengeprocedures, and the requirement to maintain statisticalreporting in conformity with Article XIX of the GPA.

In Jordan, the eight industries which had been identifiedas accounting for three-fourth of government purchases were:(i) Food and Beverages; (ii) Chemicals; (iii) Pharmaceuticals;(iv) Paper, Printing and Packaging; (v) Information Technology;(v) Construction Services; (vi) Furniture and Fixtures; and(vii) Medical Supplies.

The approach in the Jordanian strategy document to tablean entity offer after identifying the critical goods and serviceswas as follows:� The goods and services which were procured by the

government in the period 1997-2000 were identified;� The origin of the goods and services (foreign or domestic)

was determined;� Themost important government entities in the procurement

process were identified;� The impact of accession to the Agreement on the domestic

production for select industries was estimated;� The export market potential for the industries which would

result from opening up the Jordanian businesses of thegovernment procurement market of the GPA membercountries was measured;

� The net impact of Jordan�s membership in the GPA onthose industries was forecasted.

The impact assessment subscribed to the �Bottom-UpApproach� to resolve lack of information problems. Theprocurement expenditure data was collected from nationalentities which undertake procurement. The effect ofmembership in the GPA is measured based on thoseexpenditures.


Negotiation in Services: While tabling services in theServices Annex, as per the Jordan Strategy Document, owingto the existence of the element of reciprocity between theparties to the GPA, it is common practice to exclude/includesectors based on the offers of other countries. Similarly, itmay be advisable to leave out those sectors which are crucialto the development interest of the country. The JordanStrategy document indicates that if a country offers a sub-setof services in its initial offer document, gradually, the othermembers will attempt to persuade the country to include othersectors in that sub-set also.

Non-sensitive procurement in defence: In the year 2006,Jordan noted that non-sensitive procurement by the Ministryof Defence would be governed by the GPA�srequirements.44This is an essential aspect of negotiationswhich negotiators should be aware of: in the event any sectoris pleaded as being sensitive, there is a likelihood that thenegotiators will advance that the sector be split into sensitiveand non-sensitive components and proceeded upon fromthereon.45

South KoreaThe government initially established the Task Force on

Accession to the GPA. This group was responsible for SouthKorea�s overall preparations in pursuing the accession to theGPA. Under the task force, there were two working groups �the Working Group on Offer List Preparations and theWorking Group of Systemic Revision.

The task force studied the economic impact of accessionto the GPA by assessing the effects accession would have onthe domestic industry. It was understood that South Koreanindustries would lose about US$0.9bn in sales of governmentprocurement supplies. However, they would gain about


US$1.3bn through increased exports to the foreignprocurement market.

The Korean Task Force experienced various difficulties incollecting information, especially information pertaining tothe local government entities and public corporations. Detailedstatistics related to government procurement had to becollected.

While preparing the offer list, three elements wereidentified as crucial: (i) the interests of the domestic industries;(ii) the interests of procuring entities and (iii) offer lists ofmembers of the GPA and other international instruments ongovernment procurement.

TheWorking Group on Systemic Revision was responsiblefor revewing national legislation related to governmentprocurement, to train personnel and to set up and collect andreport mechanisms for procurement statistics. It was notedthat after the preparation of the initial offer, a country canstart negotiating with the interested parties in the agreementand the negotiation may be conducted bilaterally on a request-offer basis.

Some of the other countries which undertook preparatoryassessments of the gains they could obtain through accessionto the WTO GPA are Armenia and Taiwan.

ArmeniaAn �Analysis of the Armenian Public Procurement Law and

Implementing Decree vis-à-vis the EC Public ProcurementDirectives and the Agreement on Government Procurement(WTO)�, and an overview of �Public Procurement in Armenia�was prepared by SIGMA (a governance institute associatedwith the OECD, and supported by the European Community).


TaiwanIn the year 2002, research was conducted by the Public

Construction Commission of the Executive Yuan. The studyestimated that Chinese Taipei would be able to compete forUS$200bn with foreign suppliers.46

ChinaConsidering China�s large state sector, it has been opined

that an independent study similar to the study conducted in199447 in the US and EU must be undertaken to estimate theabove threshold procurement by Chinese and localgovernments and the important state enterprises.

Insights from the various studies undertaken on accession intothe GPA� Like the study undertaken by the Public Construction

Commission in Taiwan, it is critical to undertake a studyon the market access which Indian suppliers will be ableto compete for in other markets. Chapter 2 presents apicture on the market access opportunities available in GPand non-GP markets.

� Economic Impact analysis similar to the South Korean studyundertaken by the Task Force on Accession to the GPAhas to be undertaken. The current study estimates marketaccess available in GP and non-GP markets. However, theexact penetration by our producers into those markets haveto be determined through further analysis.

� Similar to the Armenian approach, a study juxtaposing thePublic Procurement Bill, 2012 and the WTO GPA wasundertaken by CUTS International.

� As India has a large number of state-owned enterprises(similar to China), a study should be undertaken to assessthe amount of procurement undertaken by these entities,in addition to studies to assess the procurement undertakenby central and sub-central entities.


� A more detailed study on the �costs of adjustment� acrossthe different levels of government has to be undertaken.

� Similar to the Jordanian approach, the impact assessmentsubscribed to the �Bottom-Up Approach� to resolve lackof information problems. The procurement expendituredata was collected from national entities which undertakeprocurement.

� Also, the industries which should be accorded specialtreatment in the GPA negotiations should be identified byan analysis which takes into consideration the effectiveprotection available for the industry and the factor intensityof the industries.

� It may be essential to conduct negotiations side by sidewith the domestic industry as negotiations progress overtime.

� Possible Methodology:It is important to understand if the GPA presents newmarket opportunities distinct from the existing marketopportunities in a certain country. This may be instrumentalto either build new capacities, or to better determine ifthe demand profile under the GPA is incompatible with acountry�s strength profile. After determining demand fora certain product, the gravity model may be used to betterdetermine if it is possible for India, or any other countryconsidering accession to penetrate the specific market.

� Above-threshold procurement has to be estimated for eachministry.

� Theministries, the sub-central entities and the other entitieswhich engage in procurement could present a list of itemswhich they procure in bulk, and identify if there are othercountry suppliers which could provide cost-effectivealternatives. This could be conjoined with the long-termgoal of encouraging technology transfer in order to builddomestic capacities. Another exercise which should be


undertaken should include a list of products/items whichare procured from SMEs, or which are labour-intensive �these items can be excluded in a possible offer advancedby India.

� While tabling a possible offer advanced by India, the keyCPSEs, ministries and sub-central entities have to beidentified based on the quantum of procurementundertaken. A sample can be taken from each category ofprocurer to understand which items are being procured,and what the key procurement interest is.

There are two aspects which we are interested in drawingfrom every conclusion which adds value while engaging in abilateral negotiation: (i) undertaking a better assessment ofthe value of an entity offer; (ii) how best to present an entityoffer if entrant country considers accession.

TheWay ForwardAny new entrant confronted with having tomake a decision

to either accede to or remain outside the scope of the GPAcan desist from making a decision by �deciding not to decide�.This view argues that the �decision not to decide� is in itselfan active decision and not a passive one of maintaining thestatus quo. Such a decision should be taken after undertakinga thorough analysis of how opportunities in governmentprocurement are being altered worldwide owing to theevolution of international disciplines in the forms ofinternational and bilateral agreements and treaties pertainingto government procurement and national policies which couldhave evolved as a response to these internationalcommitments, or economic and social policies which have animpact on the scenario pertaining to government procurement.

While seeking to understand the negotiation experiencewe keep the following questions in mind48:


� How was the basic structure of the negotiationestablished?

� Did the negotiations get linked to other negotiations? Couldparties tap linkages to create value?

� Was there use of momentum in channelling the flow of thenegotiation process, and to use action-forcing events?

� Who was in a better position to influence the process, andwhy?

� Which channel was selected for the negotiations? Did theforum influence the outcome?

� Who induces a party to enter GPA negotiations? Is it theGPA Committee, FTA/SAA negotiations, accession to theWTO, or any other channel?

As noted from the factors determining accession asoutlined above, India, is not a country which has so far facedany mandatory obligation to accede to the WTO GPA (eitherthrough any FTA, or accession obligations). Hence, it has achoice � referred to in negotiation theory as (Best Alternativeto a Negotiated Agreement) or BATNA, to walk away fromthe GPA.49 However, considering the extent of the marketaccess it can afford the member countries of the GPA, thequestion is as to whether it will be missing an opportunity tocreate value, through the mutual gains approach50, if it doesnot urgently undertake a need-based analysis, measure theexact extent of its markets, carve-out procurementopportunities critical for social welfare such as labour-intensive products, and identify areas where mutualcollaboration can benefit the governments, the suppliers andthe larger public in the context of the GPA.

It is critical to juxtapose the process, the parties and thestructure in which the negotiations take place in order toidentify the opportunities to create maximum value even ifthe decision made is to �desist from joining the GPA�. This


scope of the analysis undertaken in this study is limited to theGPA even though it briefly mentions bilateral agreements. Itdoes not deal with Free Trade Agreements, which containgovernment procurement chapters in detail.

In the event India decides to negotiate for membership ofthe GPA, a negotiating strategy should be based on soundpreparation. The first part of the GP study �GovernmentProcurement in India: Domestic Regulations & TradeProspects� identified issues pertaining to alignment ofdomestic legislation pertaining to procurement to internationalinstruments, including the GPA, and provided insights oncertain critical sectors. The new revised form of the agreementhas called for a reassessment of the decision to accede, andthe option to alter one�s commitments for the existingmembers. The revised agreement limits flexibilities withrespect to the accession process in comparison to the earlieragreement. However, a transitional option is available fordeveloping countries.

It would be useful for policy makers to consider thesecardinal issues, the preparatory steps taken by other countriesand, most importantly, by other developing countries asdiscussed in this chapter. The conditionalities imposed by thenew GPA are pertinent for India�s accession or otherwiseinto the GPA at a future date.


Endnotes1 Article XXII(14) of the current version of the GPA states: �This

Agreement shall not apply as between any two Parties where eitherParty, at the time either Party accepts or accedes to this Agreement,does not consent to such application.�

2 Reporting Requirements: Article XVI of the current text entitled�Transparency of Procurement Information� lists certain obligationspertaining to statistics related to procurement activity undertaken bythe governments. Article XVI (4) of the current text of the GPA dealswith reporting requirements. Apart from the contracts awarded bythe entities, below-threshold procurement and procurement which isundertaken through single-tendering have to be covered under thedisciplines of the agreement.

3 Decisions on Procedural Matters under the Agreement onGovernment Procurement (1994), GPA/1, issued on 5th March1996, Committee on Government Procurement.

4 Article XII:3 of the Marrakesh Agreement Establishing the WorldTrade Organization. Accession to a Plurilateral Trade Agreementshall be governed by the provisions of that Agreement.

5 Because no explicit membership criteria is specified, and theprocedure for negotiation is not stipulated, the �terms to be agreed�between the WTO Members and the acceding country, the member-countries dictate the terms and conditions of the entry. RatnakarAdhikari and Navin Dahal, South Asia Watch on Trade, Economics& Environment (SAWTEE), LDC�s Accession to the WTO: Learningfrom the Cases of Nepal, Cambodia and Vanuatu.

6 Grynberg, Roman and Roy Mickey Joy (2000), �The Accession ofVanuatu to the WTO: Lessons for the Multilateral Trading System�in Journal of World Trade, 34(6), as cited in Adhikari and Dahal,South Asia Watch on Trade, Economics & Environment (SAWTEE),LDC�s Accession to the WTO: Learning from the Cases of Nepal,Cambodia and Vanuatu.

7 Technical Note on the Accession Process, Note by the Secretariat,Revision, WT/ACC/10/Rev. 1, 28 May 2003.

8 �Any State or separate customs territory possessing full autonomyin the conduct of its external commercial relations or for the othermatters provided for in this Agreement and the Multilateral TradeAgreement may accede to this Agreement, on terms to be agreedbetween it and the WTO�


9 Available online at http://www.gpo.gov/fdsys/pkg/CRPT-112hrpt632/html/CRPT-112hrpt632.htm, accessed on 20.11.2012.

10 D.Marron (2003) �Green Public Purchasing as an EnvironmentalPolicy Instrument� OECD Journal of Budgeting, 3 4.

11 Ibid.

12 Ibid.

13 �About Central Public Procurement Portal�, available atwww.eprocure.gov.in

14 Korea - Measures Affecting Government Procurement, WT/DS163/R, DSR 2000, Panel report adopted on June 19, 2000.However, according to the OECD, general government procurementis defined as the sum of intermediate consumption (goods andservices purchased by governments for their own use, such asaccounting or IT services), gross fixed capital formation (acquisitionof capital excluding sales of fixed assets, such as building new roads)and social transfers in kind via market producers (goods andservices produced by market producers, purchased by governmentand supplied to households). �Size of public procurement market� inGovernment at a Glance 2011, OECD Publishing. http://dx.doi.org/10.1787/gov_glance-2011-46-en. Accessed on 26th October 2012

15 United States - Procurement of a Sonar Mapping System, GPR.DS1/R, Panel Report Circulated on April 23, 1992, unadopted. TheAppellate Body in Japan - Taxes on Alcoholic Beverages, AB-1996-2, WT/DS1/AB/R noted that non-adopted reports provide usefulguidance.

16 Article II (4), Annex to the Protocol Amending the Agreement onGovernment Procurement

17 Para 7.124 of the Panel Report in Korea-Government Procurementsays: �As the Appellate Body has pointed out in EuropeanCommunities-Computer Equipment and in Canada-Dairy, schedulesare an integral part of a treaty. Hence negotiations about schedules,in this case GPA Annexes, are fundamentally treaty negotiations.�Korea - Measures Affecting Government Procurement, WT/DS163/R, DSR 2000, Panel report adopted on June 19, 2000.

18 Para 7.9 of the Panel Report says: �Like GATT Article II:7 whichrefers to the tariff Schedules as �integral� parts of the Agreement,Article XXIV:12 of the GPA states that: �The Notes, Appendices andAnnexes to this Agreement constitute an integral part thereof.� Thus,it follows that we should consider the Schedules appended to the


GPA as treaty language. Accordingly, we will refer to the customaryrules of interpretation of public international law as summarizes inthe Vienna Convention in order to interpret Korea�s GPA Schedule.�Korea - Measures Affecting Government Procurement, WT/DS163/R, DSR 2000, Panel report adopted on June 19, 2000.

19 Para 7.124: �As the Appellate Body has pointed out in EuropeanCommunities-Computer Equipment and in Canada-Dairy,schedules are an integral part of a treaty. Hence negotiations aboutschedules, in this case GPA Annexes, are fundamentally treatynegotiations.� Korea - Measures Affecting GovernmentProcurement, WT/DS163/R, DSR 2000, Panel report adopted onJune 19, 2000.

20 Para 7.56: �It is an important question under the GATT/WTOAgreements as to whether an action is being taken by a�governmental� entity or a private person for the coveredagreements are considered to apply to �governmental� action only.However, once it is determined that there are �governmental�measures at issue, it is not generally of legal relevance which�governmental� entity is applying the measures. But within the GPAthis is a critical question. There are obligations on the part of certaingovernment entities but not others.� Korea- Measures AffectingGovernment Procurement, WT/DS163/R, DSR 2000, Panel reportadopted on June 19, 2000.

21 Korea- Measures Affecting Government Procurement, WT/DS163/R,DSR 2000, Panel report adopted on June 19, 2000.


23 D. Collins (2011). Canada�s Sub-Central Entities and the Agreementon Government Procurement: Past and Present. In S. Arrowsmithand R. Anderson (Ed.), The WTO Regime on GovernmentProcurement: Challenge and Reform (pp.175-196), New York, NY:Cambridge University Press.

24 Ibid.

25 Ibid.

26 P. Wang, R. Perin and D. Casalini (2011). Addressing PurchasingArrangements between Public Sector Entities: What can the WTOlearn from the EU�s experience? In S. Arrowsmith and R. Anderson(Ed.), The WTO Regime on Government Procurement: Challengeand Reform (pp.252- 282), New York, NY: Cambridge UniversityPress.


27 Ibid.

28 Ibid.

29 Para 7.30, Panel Report, United States � Restrictions on Imports ofSugar, BISD 36S/331 (1990), adopted 22 June 1989.


31 Panel in Korea-Government Procurement.

32 �The Indicative Time Frame for Accession Negotiations andReporting on the Progress of Work� (GPA/W/109/Rev.2), 3 January2001.

33 Indicative Time-Frame for Accession Negotiations and Reporting onthe Progress of Work, GPA/W109/Rev.2, dated 3 January 2001,Committee on Government Procurement.

34 Modalities for the Negotiation on Extension of Coverage andElimination of Discriminatory Measures and Practices, Decision of16 July 2004, GPA/79, Committee on Government Procurement.

35 Article 113, Indo-Japan CEPA. Comprehensive EconomicPartnership Agreement between the Republic of India and Japan.

36 Comprehensive Economic Partnership Agreement between theRepublic of India and Japan.

37 Gordon H, Rimmer S and Arrowsmith S �The Economic Impact ofthe European Union Regime on Public Procurement: Lessons for theWTO�, Blackwell Publishers (1998).

38 Gordon H, Rimmer S and Arrowsmith S, �The Economic Impact ofthe European Union Regime on Public Procurement: Lessons for theWTO�, Blackwell Publishers (1998).

39 Public sector purchases of foreign origin in this case refer to bothpurchases which are directly acquired from a supplier outside thepurchaser�s national territory, and a purchase of foreign origin froma supplier operating inside the purchaser�s national territory.

40 �Size of public procurement market� in Government at a Glance2011, OECD Publishing. http://dx.doi.org/10.1787/gov_glance-2011-46-en. Accessed on 26th October 2012.

41 Master Plan for Jordan�s accession to WTO GovernmentProcurement Agreement (April 2002), Final Report, Achievement ofMarket-Friendly Initiatives and Results Programme (AMIR 2.0Programme), Funded by U.S. Agency for International Development.


42 Minutes of the Meeting held on 13 April 2005, GPA/M/26, issuedon 13 April 2005, Committee on Government Procurement.


44 Minutes of the Meeting held on 2 June 2006, GPA/M/30, issued on4 July 2006, Committee on Government Procurement.


46 C. Lo (2011). The Benefits for Developing Countries of Accession tothe Agreement on Government Procurement: The Case of ChineseTaipei. In S. Arrowsmith and R. Anderson (Ed.), The WTO Regimeon Government Procurement: Challenge and Reform (pp.140-148),New York, NY: Cambridge University Press.

47 See Deloitte &Touche, June 1994, Study of Public ProcurementOpportunities: European Union and Government of the UnitedStates.

48 Institute of International Economics, �Negotiating TradeAgreements�, Available at http://www.iie.com/publications/chapters_preview/392/02iie3624.pdf, accessed on 16.11.2012.

49 Bargaining theory states that each player will have a �threat point�which is their best alternative to a negotiated agreement (BATNA),the potential net benefits constitute �negotiating set� and themaximum gains which can be amassed as against the threat pointwill depend on the power of the player. See B. Hoekman and D.Vines (2007) Multilateral trade cooperation: what next?, OxfordReview of Economic Policy, 23 (3) 311-334.

50 A. Grzybowsli, S. McCaffrey and R. Paisley (2010), �BeyondInternational Water Law: Succesfully Negotiating Mutual GainsAgreements for Internatinoal Watercourses� available at http://governance-iwlearn.org/wp-content/uploads/2010/09/beyond_international_water_law.pdf, last accessed on 16.11.2012.

2Dynamics of GovernmentProcurement andOpportunities for India

IntroductionThe concept of public procurement owes its origin to publicexpenditure. We explain and describe the latter in order tohelp an understanding of the former.

Public expenditure, of which procurement is a veryimportant component, is defined as the expenditure incurredby public authorities such as central, state and localgovernments in order to satisfy the collective social wants ofthe people. It can be classified in three different ways.1 1. Interms of the kinds of goods and services bought: capital goods,consumption goods and also personnel expenditure. 2. Interms of who incurs the expenditure: public bodies, such ascentral and state government ministries; regional and localauthorities; and international organisations. 3. In terms of thefunction of expenditure: for justice and public order;infrastructure (roads, railways, etc.); military; education;environmental protection; health care; support for the poor,


old and disadvantaged; support for firms, export andproduction; regional spending for rural and urban areas; specialpolicy expenditure (foreign aid, integrated fight against drugs,etc.).

Public expenditure is also an indicator and measure of thescale of government involvement in the economy. This scaleis generally reflected by the share of public expenditure as apercentage of GDP. Data on public expenditure shows varyingpercentages of GDP incurred by different countries,� publicexpenditure varies from 11.7 percent for Burma to more than100 percent in case of Timor-Leste.2 Aggregation of publicexpenditure available for 178 countries in the 2012 Index ofEconomic Freedom shows that these countries spent a totalof US$24tn. Using the World Bank 2011 GDP of thesecountries, this translates into and constitutes about 35 percentof GDP of these countries.3

The share of public expenditure increases further if theanalysis is restricted to top ranked 40 economies of the world(as ranked by the World Bank in terms of 2011 GDP). In thiscase, the share of public expenditure in GDP is estimated atalmost 40 percent. Again, within these 40 countries, therecan be no generalisation, as the share varies from country tocountry. Denmark and Indonesia present the highest andlowest shares � over 58 percent and 16.7 percent respectively� of public expenditure as percentage of GDP (see Table 2.1).

With the above background, it needs to be mentioned thatthe focus of the present analysis is to understand publicexpenditure (more specifically public procurement) in majoreconomies of the world, which have acceded or are likely toaccede to the GPA.4 Distribution of the top 40 economies intwo groups � members and non-members � reveals that thereare 22 countries who are GPA members and 18 countriesthat are at different stages of their negotiations for accession.Estimates show that public expenditure in GPA member-


countries accounts for over 45 percent of GDP, compared to30 percent in non-GPA members. There might be numerousreasons for this gap between members and non-members,which is not within the scope of this paper.

The above analysis is indicative of the fact that the conceptof public procurement directly flows from public expenditure,and it denotes procurement of goods and services by publicbodies. Public procurement is one of the four most importanteconomic functions of governments across the world, the otherthree being (i) providing the legal framework for all economicactivities, (ii) redistributing income through taxation andspending; and (iii) providing public goods and services freelyavailable to the public, such as national defence, public safety,education, and infrastructure (bridges and roads).5 Since publicprocurement constitutes a part of overall public expenditure,it is always lower than the latter. This is because there areseveral expenditure items which are not included in publicprocurement. Some of these are personnel expenditure,expenditure on subsidies, support for the poor, the old, thedisadvantaged; support for firms, export and production ingeneral; regional policies for rural and urban areas, etc.

The scope and coverage of public procurement, as indicatedabove, makes it clear that it helps the government achieve thetwin objectives of economic growth and social development.In addition, procurement helps a country to function smoothlyand it also helps in meeting both short term and long termrequirements of growth and development. An efficientprocurement system ensures that goods and services areprocured at the best possible cost to meet the needs of thepurchaser in terms of quality and quantity, time and location.This is corroborated by observations made in a paper6 whichsays that the patterns of public expenditure and governmentprocurement have a significant impact on economic and socialdevelopment in localities and regions.


The present scope and potential of public procurement isno more restricted to domestic market and domestic players.It has rather become an issue of global importance and hasgrown much bigger and expanded its horizon. This hasoccurred mainly because of increasing globalisation andintegration coupled with the establishment of GPA7 in the1990s. With procurement market now being considered inan integrated manner � the available global procurementmarket � has increased many fold.

The focus of the present analysis is to estimate marketaccess potential for India (and also other developing countries)in view of its likely decision to accede to the GPA. The analysiscovers estimates of market access opportunities in both GPand non-GP markets, implying that those countries which arepresently negotiating accession will also be covered. Theexperiences of other countries and possible lessons for Indiawill also be covered. In addition, the analysis makes an attemptto understand and assess the capacity of business enterprisesin India in the context of emerging opportunities in the globalprocurement market, if India accedes to the GPA. This includesboth GPA and non-GPA countries. For assessing capacity,India�s export penetration in different countries and differentsectors has been used as a measure.

Understanding Size of Global GovernmentProcurementMarket

Despite a significant increase in the size of publicprocurement markets, no concrete data exists which can showaggregated global procurement. Things have, however, slightlychanged with the inception of the GPA and due to members�obligations; data for the GPA member-countries are nowavailable. Specifically since 2009, statistical reports have beenprovided to the GPACommittee by the following GPA Parties:


(i) Canada, for the years from 1996 to 2009; (ii) the EuropeanUnion, from 1996 to 2007; (iii) Hong Kong, China, 1997 to2011; (iv) Japan, from 1997 to 2010; (v) Liechtenstein, for2008 and 2011; (vi) Norway, from 1996 to 2009; (vii)Singapore for 2007 and 2008; (viii) Chinese Taipei for 2009and 2011; and (ix) the United States, for 1996 to 2008.8 Thesedata are now used as sources of most of the estimates ongovernment procurement market.

Publication and release of these data, however, are limitedto above threshold limits (with some exceptions), which varyamong member-countries, and also for different categoriesof procurements within the country (categorised by the GPAas goods [supplies], construction services, and services; andalso in terms of category of procuring entities, Annex 1, Annex2, and Annex 3). While Annex 1 and Annex 2 cover centralgovernment and sub-central government entities; Annex 3covers all other entities (such as public sector enterprises)that procure in accordance with the provisions of thisAgreement. In addition, the GPA also provides threshold limitsthat qualify procurements as pertaining to the GPA, implyingthat only procurements above a certain (threshold) limit aresubject to GPA. Covering all types of procurements by alltypes of entities, published procurement data above thresholdlimit from these (42 GPA member countries) indicate thatthe present size of the procurement market is estimated atUS$1.7tn.

For non-GPA countries, due to lack of data, it is verydifficult to give or understand its real size. Most of theaccessible data on procurement, especially for non-memberstates are based on estimates which assume governmentprocurement to constitute 15 to 30 percent of GDP.Therefore, in a large number of estimates, the range of 15 to20 is used. Assuming that average government procurementconstitutes 15 to 20 percent of GDP, the overall size of


government procurement could be estimated in the range ofUS$10.4 to US$14tn (this, however, includes procurementmarkets in GPA member- countries). This is on the basis ofglobal GDP of US$69.99tn in 2011 as per the WorldDevelopment Indicators 2012 of the World Bank.

At the regional/country levels, different estimates fordifferent countries exist. In case of the EU, estimates showsoverall EU government procurement at �2,088bn,constituting 17 percent of GDP.9 The contestable procurementmarket, however, is much lower. A report by the EuropeanCommission10 shows that every year around one-fifth of GDPis spent by different levels of government (central and sub-central), bodies governed by public law and utility serviceproviders to procure goods, construction works and services.The report also indicates that almost 20 percent of this totalis spent on purchases exceeding the thresholds value.According to Commission estimates, the total value ofinvitations to tender for contracts in 2010 was approximately�447bn constituting 3.7 percent of EU GDP. Out of this, totalvalue of procurement covered by the GPA (above the thresholdlimit) as reported by member-states in 2010 is estimated atapproximately �340bn (based on data as given in 2010statistical reports submitted by 24 member-states),constituting over 76 percent of the value of invitations totender. The difference of almost a quarter of the value of theCommission�s estimates is due to various reasons, such as thelevel of compliance with the statistical obligations amongstmember-tates, the difference in economic phenomenareported, differences in coverage of procurement in the utilitiessectors and possible time-lags between the two estimates.11

In China the overall public procurement by the central,sub-central and other government entities is estimated atapproximately US$1.02tn, representing 20 percent of China�sGDP. In the case of India, as per a WTO source, government


procurement constitutes about 30 percent of GDP, amountingto US$347.8bn in 2008. This, however, varies according toother estimates done on government procurement. A recentstudy (CUTS 2012)12 estimated government procurement atRs15,30,040 crores in 2010-11, which amounts to overUS$344bn (US$/INR exchange rate on 31st March 2011: INR1=US$0.02249).13

According to the EU�s Statistical Report of 2007, the overallestimated size of the government procurement markets of thecurrent and possible future accession candidates to theAgreement is between US$2.3 and US$3tn annually,representing between 3.8-5 percent of world GDP for 2008.Out of this, based on the statistical reports submitted by GPAParties, it is estimated that the EU and the US alone providedfor approximately 75 percent of the total value of existingmarket access opportunities under the GPA, valued atUS$1.2tn.

Putting together the government procurement markets ofboth GPA members and non-GPA members, the overall themarket becomes quite large. What is more important is thatin nominal terms the covered procurement markets of somekey GPA Parties have grown by up to 300 percent over a 10year period to 2006-2007.

In addition, it is expected that with the accession ofcountries that have presently observer status or have advancedtoward accession, the size of the procurement market willincrease further. This implies that countries acceding to theGPA could have access to this market, spread in differentsectors. It, however, needs iterating that the real accessibilitywill be determined by various factors, including and limitedto, competitiveness of these countries and their sectors in theglobal market, especially in the GPA member-countries. Onthe positive side, there is one clear advantage, i.e. theagreement provides for preferences to member-countries.


Box 2.1: Some indicators of the size andgrowth of government procurement markets

A. Some indicators of the size of government procurementmarkets

� In 2002, the total size of the government procurementsector was estimated to be in the range of 15-20 percentof GDP across OECD and non-OECD economies(OECD 2002).

� The European Union valued the total amount ofgovernment procurement in Europe at �2,088bn in 2007.This represents 17 percent of EU GDP (European Union2009).

� The size of government procurement markets in someemerging/developing economies:

- The Chinese central government indicated that it aloneprocures more than US$88bn in goods and servicesannually; and that its sub-central entities� procurementis even more significant.

- Another source (the European Union Chamber ofCommerce in China 2011) estimates the overall publicprocurement market in China (including central, sub-central, and other government entities) to be worthapproximately 7 trillion RMB (US$1.02tn), or 20percent of China�s GDP.

- Total government procurement in India has beenestimated to constitute about 30 percent of IndianGDP, or US$347.8bn in 2008.


B. Some indicators of the overall size of GPAmarket accesscommitments

� The aggregate size of market access commitments underthe GPAwas valued at US$1.6tn in 2008. This represents2.64 percent of world GDP in that year.

� The GPA accession of Chinese Taipei, which joined theGPA on 15 July 2009, brought under the Agreementadditional procurement opportunities that have beenvalued at more than US$20bn annually. This representsaround 5 percent of Chinese Taipei�s GDP.

C. Some indicators of the growth of governmentprocurement markets

� The average annual growth rate in the value of China�snational government procurement market in the period1998-2006 estimated at 68.1 percent.

� The total value of EU procurement above the thresholdsof the relevant Guidelines grew by 297 percent innominal terms to �377bn in the 10 year period to 2006.

� The United States total value of GPA-coveredprocurement at the federal level grew by 287 percentin nominal terms to US$797bn in the 10 year period to2007.

Source: Adapted from Robert D. Anderson, Philippe Pelletier, KodjoOsei-Lah and Anna Caroline Müller, Assessing the Value of FutureAccessions to the WTO Agreement on Government Procurement, 9October 2011


Government Procurement Market in Selected GPACountries

Government procurement in the context of the GPA isslightly different compared to what is observed at theindividual country level. At the national level governmentprocurement denotes acquisition of all goods and services bythe government and or its agencies directly or indirectlyassociated with it Under the GPA, government procurementimplies acquired goods and services that are above a givenvalue, termed in the GPA as threshold limit. Only thoseprocurements which are above this threshold limit are subjectto this agreement. Threshold limits vary across different typesof acquisitions as well as for some countries � depending onthe type of procuring entity and contract. For example, in thecase of Annex 1 construction services, threshold limit of Japanis different from other GPA member= countries; in Annex 2for goods and services procurement, threshold limits ofCanada, Israel and the US vary from others. There is alsovariation in case of construction for Japan and Korea. InAnnex 3, Canada, Israel and Japan have different thresholdlimits in goods and services procurements.14

Based on the threshold limits for different GPA member-countries, the value of the total market access commitmentsis estimated at US$1.6tn in 2008. This represents 2.64 percentof the world�s GDP.15

From the perspective of developing and emergingeconomies, some of which are either negotiating or haveobserver status presently, it is important to understand thesize and trend in government procurement. The presentanalysis focusing on some important and relevant questionsin this regard:� What is the size and trend at the individual country/group

level?


� Has the market expanded over the last few years, and ifyes, what are the products and sectors?

� What are the negotiating countries� advantages in sectorswhich are presently open for GPA countries?

� What are the potential gains if developing and emergingeconomies at various stages of negotiations accede to theGPA?

For the purpose of the present analysis, six major GPAmembers have been selected � Canada, Chinese Taipei, EU,Japan, Korea and the US. The case of the EU has been analysedin a consolidated way, implying that the trend in all themember-countries (15 in 2000; 27 in 2007) have beenanalysed. The selection of GPAmember-countries is premisedon the assumption that these countries, constituting a majorportion of total market access commitment under GPA, couldreveal the real dynamics of government procurement in theGPA countries (though in reality it might not be so). Forpresenting the case of each of the countries, two interveningyears between the year of joining and the last year have beencovered. Selection of last year is indicative of latest availabledata for respective GPA member as provided to the WTO.Use of data is restricted to WTO, unless otherwise specified.All the data that has been considered is the above-thresholddata.

CanadaCanada is one of eight members who joined the GPA in

1996 when the agreement itself came into force. The presenttrend analysis is, however, limited to two selected years: 2000and 2009. While selection of year 2000 is to provide itconsistency with other countries (wherever applicable)16

included for analysis in this section, selection of the year 2009coincides with the latest available data for the country.


Procurement data for Canada for the two selected years(2000 and 2009) shows that overall procurement above thethreshold limit has multiplied by over two times during thenine-year period. The trend, however, is not uniform acrossdifferent types of procurements � goods, construction andservices. While procurement for construction works hasincreased the most � multiplied by over three times �procurement for services has increased at relatively lowerpace of only 1.6 times. Goods procurement falls in betweenthe twomajor trends, realising an overall increase of 2.5 times.

Along with the increase in the size of the overallprocurement market, one can identify some structural changesthat have occurred over the analysis periods. Data clearlyshows that while the share of goods and construction in thetotal procurement has increased, the share of services hasdeclined in 2009 compared to 2000 (Table 2.2 (a). Where in2000 the share of goods was 50.1 percent of totalprocurement, in 2009 it increased to 59.1 percent. In the caseof services, it is observed that there has been a decline in theshare � from 44.5 percent in 2000 to 32.8 percent in 2009.

From the above analysis, it is clear that the trend in the GPmarket is tilted towards the goods sector with the share of59.1 percent of total procurement in the year 2009. The goodsprocurement trend in Canada�s GP market has been analysedin Table 2.2(b), which shows that though there are a largenumber of products which are procured by the government,a major proportion of procurement is concentrated in fivemain products. These five products, accounting for over 56percent of total goods procurement in 2009, are: mineralproducts (39.4 percent), automatic data processing equipment(12 percent), telecommunication (2.8 percent), textile andtextile articles (1.6 percent), and medical and dental surgicalequipment and apparatus (1.5 percent).


Interestingly, four of the five goods indicated above realisedthe major increment in total procurement during the period2000 to 2009. While procurement of mineral goods increasedby over 83 times in the nine years, that of telecommunicationsincreased by 43 times. Increase in procurement sizes of twoother products � medical, dental surgical equipment and textileand textile articles � was in the range of 4 to 6 times that ofprocurement in 2000. In some other cases, even though theincrement appears significant but these are low in terms ofvalue or in terms of share of total goods procurement..

In case of services and construction services, there wereincreases of 1.6 and 3.2 times respectively during the period2000-2009. Within the services sector, segments that realisedsignificant gains in their share included professional andenvironmental services (with shares of 44 and 7 percentrespectively). These two services also witnessed significantincrements in their procurement values in 2009. While thesize of professional services multiplied by over ten times,environmental services procurement increased by nearly fivetimes. There are also other services, such as informationprocessing and related telecommunication services, which hadhigh shares, but these in value terms came below others.Information processing and related telecommunicationservices saw a steep decline from 51.5 percent in 2000 to15.2 percent in 2009 (Table 2.2 (c).

Similarly, in construction services, while there weresignificant gains for some services, other registered significantlosses. For example, while construction works for civilengineering multiplied in value terms by over 144 times;construction work for buildings declined (0.9 times) in 2009over 2000. And its share in the total construction procurementwent down from 93.21 to 26.46 percent (Table 2.2 (d).


Chinese Taipei (Taiwan)Chinese Taipei is the second last entrant, having acceded

to the GPA on 15 July, 2009 (Armenia joined in 2011). Itsexperience, therefore, holds special significance to all aspiringcountries, including India. Its importance can be gauged fromtwo specific points: 1) it is a developing country with notmore than a decade-long experience in internationalorganisations; and 2) It is a new member in the GPA. Thetwo features make it an interesting case mainly forunderstanding how much it has gained from this agreement,especially in terms of increased market opportunities and atwhat cost.

Chinese Taipei is one of the few member-countries to havesubmitted their procurement data regularly since acceding tothe GPA. Procurement data for all three years (2009 to 2011)has been made available to the GPA.

Analysis of data for the two year periods 2009 and 2011shows that total procurement above the threshold hasincreased 1.1 times in 2011 over compared to 2009. This isan increment by 10 percent over the two-year period. For atwo-year period, this can be considered as a decent increment.If one looks at the trend in procurement, it becomes clearthat in this short period there has been a shift fromconstruction to goods. The data also shows that the share ofconstruction services in total procurement came downsignificantly from 76.5 percent to 55.3 percent in the span oftwo years. On the other hand, there was a noticeable upwardshift in the goods sector and its share in the total procurement.Whereas in the year 2009 it accounted for just 8.9 percent oftotal procurement, in 2011 it increased to 17.4 percent. Inthe case of services, the increase has been nearly two timesover the 2009 value and its share in the total procurementhad a reasonable upward shift from 14.6 percent to 27.3percent in 2011 (Table 2.3 (a).


Hence, it can be stated that the construction procurementtook a back seat in 2011 and it is the goods and servicesprocurement which are driving the total procurement to theincrement of 1.1 times over the total procurement value of2009. There is, however, a caveat: it is really not advisable togeneralise the trend as the data relate to only two years.

The table (Table 2.3(b) shows the product wiseprocurement of Chinese Taipei in the year 2009 and 2011.Analysis of goods procured during the year 2011 showspharmaceuticals having the maximum share in the totalprocurement value (25.4 percent). This is followed bycomputing machinery and parts (16.5 percent), pulp paperand paper products (over 10 percent) and office andaccounting machinery (nearly 9 percent).

When one analyses the data in terms of increment overthe two-year period, it is observed that electric filament anddischarge lamp realised an increment of over 77 times. Thisis distantly followed bymotor vehicles (about 25 times); radio,television and communication equipment (over 23 times);medical and surgical equipment (12.6 times); and gasgenerators, distilling plant (nearly 12 percent). There arevarious other products where procurement has increased inthe range of 2 to 7 times. Hence, it can be concluded thatthough the goods procurement hasmoved forward in the initialtwo years of the GPAmembership, at the same time the goodscategory experienced major rearrangements and shifts in theinitial two years. This is probably because of changingrequirements of the government and its business entities whichfall within the purview of GPA.

In case of service procurement, it is observed that it almostdoubled in 2011 compared to 2009. This can be considered asignificant increase in a short time span of two years. Theservice categories which reflect the maximum increase orwhich have at least doubled in the two years include: sewage


disposal and other environment protection services (22 times);research and development services (nearly 6 times); healthand social services (over 4 times); administrative services tothe government (nearly 3.5 times); technical testing andanalysis services (3 times); education services (3 times); andsupporting and auxiliary transport services (nearly 2.5 times).One interesting point to note is that in 2009 there was noprocurement of computer and related services, whereas itaccounted for a major share in 2011 (Table 2.3 (c).

In construction services, what stands out is that there areonly three categories, out of ten categories of constructionservices, which realised any increase in year 2011 over 2009(Table 2.3(d). And the category which had the maximumincrement and also major share in the total procurement valuein 2011 is bridges, elevated highways, tunnels and subways(over 11 times). Coincidentally, this segment also accountedfor the largest share in overall procurement in constructionservices. The other two categories with over ten percent sharein procurement were highways (21 percent) and �otherbuildings� (over 10 percent).

European UnionAs far as the EU is concerned, it is challenging to derive

any trend in public procurement even though there is dataavailable for the group since 2000 (more specifically since1996 when the EU consisting of 15 members acceded to theGPA). This is primarily because of structural changes thathave occurred during the period. While data for 2000 for thegroup cover 15 EU states; in 2007 the coverage expanded to25 member states. Attempts to understand the trend requiresthe assumption that since most of the new members whobecame GPA members in May 2004 are relatively small ineconomic size, it therefore would not have made muchdifference to the overall procurement of the group.17


Accounting for this assumption, comparing data of the EUfor the period 2000 and 2007 demonstrates that overallprocurement conforming to the GPA (above thresholds) havemultiplied by nearly three times, increasing from over �100bnin 2000 to �292bn in 2007.

The figure for 2007 appears a little surprising consideringthat the EU as a group accounts for about 25 percent of globalGDP. The low procurement figure might be because of giventhreshold limits and/or misestimations. This is corroboratedby a report (PWC, March 2011 prepared for the EuropeanCommission) which shows that as much as 70 percent ofworks contracts are recorded below the threshold level.Germany stands out as having nearly 95 percent of contractvalues recorded below threshold followed by France, Austriaand Hungary. The report finds it difficult to fully explain thereason as the contracts not covered under the GPA are inprincipal contracts, which are not under the scope of thedirectives and the obligation to publish an award notice.Misestimations could be another reason.18

Country-wise procurement of the then 15 European Unioncountries by types of annexes (value in �mn) and theirpercentage share for 2000 has been presented in the Table2.4(a). The percentage share of six of the 15 countries abovefive percent level is 88.5 percent. This implies that the rest ofthe nine EUmember-countries accounted for only 11.5 percentand shares of all of these countries are below the 5 percentmark. Among the leading countries, the share of the UnitedKingdom (23.8) was highest, followed by France (19.8),Germany (15.9), Spain (15.3), Italy (8.3), Sweden (5.4).

Procurement trends in terms of type of annexes shows thatwhile in some countries Annex 1 entities have dominatingshares; in many others procurement by Annex 2 entities arethe most dominant. This is reflected by shares of each type ofannexes for each of the countries. Table 2.4(a) clearly shows


that in six countries � UK, Spain, Netherland, Portugal, Greeceand Luxemburg � the shares of Annex 1 entities are the highest.This is in sharp contrast to the remaining nine countries inwhich Annex 2 entities command the highest shares. The trendis indicative of the dominant positions of Annex 2 in thesecountries, which might be due to the presence of a largenumbers of entities put under the GPA, or their high value ofprocurements.

Country-wise procurement of the European Union by typesof contract for three sectors like Supplies (Goods), Servicesand Work (construction) for 2000 has been shown in Table2.4(b). The table shows that while overall procurement inthe EU is almost equally distributed among goods, servicesand construction; three different, country-specific trends areobserved. There are five EU member- countries, along withEU institutions in which procurement of goods account forthe highest shares. These are the UK, Germany, Sweden,Netherland and Finland. In another six countries � France,Spain, Italy, Austria, Ireland and Luxemburg � shares ofconstruction services are the highest.

As in the case of procurement of goods and constructionservices, there are four countries in the EU which reflecthighest shares for services procurement. These includeBelgium, Denmark, Portugal and Greece. The tables thusclearly reflect that procurement activities and their type amongEU member-countries.

By 2004, the EU had witnessed structural changes. TheEU�s membership swelled to 25. Three years later, with thejoining of two more countries � Bulgaria and Romania � themembership increased to 27 and with this, all the newmembers automatically became members of the GPA. Suchstructural changes in the grouping make it difficult to comparedata of 2000 to that of 2007. Discounting for this structuralchange, data demonstrates that overall procurement has


increased by nearly three times in the seven-year period. Asnoted, in 2007 it was estimated at over �292bn.

The seven-year period witnessed several changes. What,however, stands out is that despite the increase in EUmembers, some countries were not only able to retain their2000 position but were also able to increase their shares inthe overall EU�s public procurement. Countries such as theUK (its share increased from 23.8 in 2000 to 35.2 percent in2007) and Italy (from 8.3 to 10.7 percent) were able to furtherconsolidate their share in the overall combined procurementby EUmember-countries. At the same time, it is also observedthat some of the members saw a decline in their shares.Germany, France and Sweden are some examples.

In terms of procurement by type of Annexes, as comparedto the year 2000, share of procurements by Annex 1 entitieshas declined in most of the major countries, including UK. Atthe country level there are seven countries (UK, Latvia,Lithuania, Bulgaria, Cyprus, Luxemburg andMalta) in whichAnnex 1 entities have highest shares in total procurement. Itis, however, noteworthy that out of these seven, none of thecountries except UK have more than one percent share inEU�s total procurement. This could mean) lesser coverage ofAnnex 2 and Annex 3 entities under the GPA; or in otherwords, procurement is concentrated at the central level,subjected to the GPA.

When one considers overall EU procurement, the tablereveals procurement tilted in favour of Annex 2 entities, whichaccount for over 51 percent share in 2007. At the countrylevel too, there are 18 countries where procurements by Annex2 entities are larger than Annex 1 and Annex 3 entities. Italyand Finland are two such countries in which shares of Annex2 entities are more than 86 percent of the total procurementof these countries. In most of the other countries, shares ofAnnex 2 entities are in excess of 50 percent of the total


procurement (Table 2.4(c). In terms of procurements by Annex3 entities, two countries � Greece and Finland � recorded thehighest shares.

In case of product-wise procurement, data comparison ischallenging primarily due to differing data presentation forthe year the two years 2000 and 2007. Data for 2000 as shownearlier presents country-wise aggregated procurementdistributed among different types of procurements � goods,services and works. Data for 2007 presents aggregatedprocurement of goods, services and works by type of Annexes,and not by country. This makes data inconsistent for makingany comparison with the 2000 data. However, the data for2007 makes it easy to understand overall procurementcomposition with respect to type of procurements � goods,services and works � at the aggregated (and also Annex-wise)EU level.

Product-wise government procurement and its percentageshare in total product procurement for 2007 has beenpresented in Table 2.4(d). The table clearly shows that in theoverall EU procurement, construction works account for thehighest share (over 31 percent). There are eighteen otherproducts/services which have a share of over one percent.For analysis purposes products with insignificant shares inthe total product procurement have been classifed as �others�,which account for 28 percent of the total.

At the individual product level, besides procurement ofconstruction works (31.24 percent), some other leadingservices with larger percentage of overall procurements were:computer and related services (11.47 percent); architectural,construction, legal, accounting and business services (6.81percent); chemicals, chemical products and man-made fibres(5.20 percent); electricity, gas, nuclear energy and fuels, steam,hot water and other sources of energy (4.75 percent); insuranceand pension funding services, except compulsory social


security services and insurance-related services (4.70 percent);medical and laboratory devices, optical and precision devices,watches and clocks, pharmaceuticals and related medicalconsumables (3.77 percent); repair, maintenance andinstallation services (3.65 percent). The table also reveals thatconstruction and computer and related services emerged astwo important sectors in government procurement in the EUin 2007.

JapanJapan is also one of the few early entrants � it entered the

GPA in January 1996 � and has been part of the GPA formore than one-and-a-half decades. Its experience might thusbe very useful for countries like India. To understand theprocurement trend, data for two years � 2000 and 2010 �have been analysed and presented in Table 2.5(a).

Analysis of overall procurement data for Japandemonstrates a 1.4 times increase in procurement in 2010over that of 2000. Considering the experience of othercountries, the trend appears to be relatively unimpressive.However, data also reflect that within this 1.4 times overallincrease, the trend is not uniform across three types ofprocurements � goods (supplies), construction and services.While the size of construction activities in terms of valueappears to have shrunk in 2010 compared to that of 2000;the goods procurement size has increased. Servicesprocurements are undoubtedly the most prominent, realisingan increase of almost three times. This is the segment whichappears to have contributed significantly to the 1.4 timesincrease.

From the analysis of 2010 data, we can derive: 1) status ofdifferent products and services on the one hand, and 2) valueof Annex-wise procurements on the other. Product-wisetrends in procurement for 2010 (value in thousand SDRs) are


shown in the table. Here it needs to be mentioned that thepercentage share of two annexes (Annex 1 and Annex 2) hasbeen derived based on aggregated value of procurements ofgoods, services and construction.

Annex-wise analysis of data shows that the share ofprocurement by Annex 1 entities is nearly 40 percent of thetotal procurements. In comparison, Annex 2 constitutesalmost three-fifth of the total procurement of Japan. Going abit deeper, analysis of procurement trend of Annex 1 showsthat there are five commodities in Annex 1 whose share intotal procurement is more than one percent. These fivecategories of products/services remain important even whenone extends the list to 15 product categories. Out of acombined share of 38 percent by top 15 categories of products,the top five accounts for nearly 90 percent. It is also observedthat 43 product categories in Annex 1 have a combined shareof 5.5 percent.

At the sector level in Annex 1, construction sector hasrecorded highest per cent value (16.12). This is followed byComputer and related services (8.97), office machines andautomatic data processing equipment (5.18),telecommunications and sound recording and reproducingapparatus and equipment (2.86), miscellaneous articles (1.28),and others.

Product-wise data of Annex 2 is not available, so sector-wise data of Annex 2 has been used to get the percentageshare of nnex 2. Analysis shows goods with the highest share,estimated at over 24 percent; followed by services (21.09)and construction (14.62). This is out of an overall percentageshare of Annex 2 estimated at over 60 percent (Table 2.5(b).

South KoreaSouth Korea is one of the very few developing countries

(joined GPA in January 1997) which have been a part of GPA


for a significant number of years from 1997. Its experiencewith the GPA, therefore, could be very important fromdeveloping countries� perspective. However, there are someserious limitations. It is observed that procurement data for alarge number of years are not available. S. Korea has submitteddata for only four years since becoming member. This restrictsthe analysis to the years for which data are available � 2003and 2010.

In the seven-year period for which procurement trend isanalysed, there is not much change in procurement, the overallincrease being marginal. However, what is important to noteis that there appears to be a complete reorientation ofprocurement activities over this period. While procurementof goods shrank significantly in 2010 and was valued at lessthan one-third of its 2003 level, procurement in theconstruction sector showed a positive trend, though quite low.Compared to both goods and construction, procurements bythe services sector realised an impressive growth. The valueof procurement by this segment more than doubled in 2010compared to 2003, showing the growing importance of theservices sector over the analysis period (Table 2.6 (a).

Product wise procurement of Korea along with itspercentage share for 2010 has been shown in Table 2.6(b). Itcan be observed from the data that out of the total value ofprocurement in 2010, there are four categories, whose sharein total procurement is more than one percent. Together thesefour products account for over 93 percent procurement, andout of these, procurement by the construction sector isobviously the most dominant with a share of 82 percent.Besides construction, some other sectors which appears quiteimportant are machinery and machinery appliance, electricalequipment, parts thereof, sound recorders, and reproducers,television image and sound recorders and reproducers, andparts and accessories of such article (8.1); legal, accounting,


auditing and book-keeping services, taxation services, marketresearch and public opinion, polling services management andconsulting services, architectural, engineering and othertechnical services (2.2); followed by others product categories.

United StatesUnited States is one of the most important countries in

terms of its overall contribution in the size of governmentprocurements and also for its contribution in global trade,both of which could be interrelated. In terms of itsperformance with regard to its obligation under the GPA, theUS is one of the few countries which have submitted theirprocurement data to the WTO from 1996 to 2008. For thepresent analysis, however, data for the year 2000 and 2008have been selected.

The data shows that during the analysis periods, overallprocurement in the US increased by over 10 times, muchhigher than many other GPA members. This translates to acompound annual growth rate (CAGR) of nearly 34 percentover the eight-year period. What is equally important is theobservation that while procurement of goods and servicesincreased by over 6.6 times; procurement as part ofconstruction activities increased much faster � over 44 times.The increase in the value of procurement over the eight yearspresents a CAGR of about 27 percent with respect to goods/services; and over 60 percent for construction.

Another important observation that could be made is thatoverall procurement appears to have undergone areorganisation over 2000-2008. Data clearly reflect that whilethe share of goods/services declined from over 90 percent in2000 to about 58 percent in 2010, the share of constructionsignificantly increased from less than 10 percent to over 42percent (Table 2.7 (a).


While making an assessment of the current status ofdifferent types of procurement � goods, services andconstruction � certain difficulties and discrepancies werefaced. The data for 2000 and 2008 were not consistent. Inparticular, while the procurement data for the year 2000 wasonly available agency-wise; for the year 2008, data wasavailable on the types of procurement. It means that forunderstanding product-wise status of procurement in 2008,major procurement agencies which procured a significant partin 2000 were to be first identified.

A review of procurement in 2000 by agencies shows thatless than 10 departments/agencies constituted more than 90percent share in total procurement. And extending the analysisto 2008 reflect that all the leading agencies in both the yearswere almost same, and included departments/agencies suchas Defence, Energy, Health and Human Services, andAgriculture. On this ground, it is assumed that goods andservices procured in 2008 are comparable with those of 2000.

To arrive at product-wise procurement, department/agency-wise procurement in 2008 of each of the productshave been put together to generate product-wise procurement.This in fact presents aggregated procurement of a product byall the departments/agencies. For example, the value ofprocurement of medical/dental/veterinary equipment is thesum of procurement of this product by all the departments/agencies.

For understanding the trend and status in constructionservices, a similar approach has been applied: majorprocurement agencies were identified for the year 2000. Asin the case of goods and services, it is observed that sixagencies, including Defence, Veteran Affairs, General ServiceAdministration, among others accounted for more than 96percent of total procurement in construction services in boththe selected years. Interestingly, the agencies which were


identified for highest procurement were the same for boththe years. Finally, to arrive at total procurement value of agiven type of construction activities, total procurement by allthe departments/agencies were aggregated. This implies thatthe value of major construction services is the sum ofprocurement of this product by all the departments/agencies.It was observed that the US uses PSC codes for the list ofproducts under the government procurement segment in theGPA. Therefore, these codes were used in identifying theproducts/services and construction in the GPA.

Going by the indicated criteria and methodology, the totalprocurement of goods in 2008 is estimated at over US$154bn.Out of this, there are nine products which have more thanone percent share in total procurement. Two productcategories with more than 20 percent share in total goodsprocurement include medical, dental, veterinary (38 percent)and hardware and abrasives (20 percent). It is also observedthat nine major products accounted for a share of over 90percent in 2008. The importance of different products in termsof value of procurement can be viewed from the Table 2.7(b).

In case of services procurement, it is observed that themaximum share is accounted by architect and engineeringservices (nearly 35 percent). Combining this with the shareof administration support services takes the share to over 66percent of total service procurement in the year 2008. Thedata on services procurement also reveals that there are anumber of services which could be of immense importanceto countries such as India, which have a significant share inoverall services procurement. These include services such asmedical services; telecommunication and related services; andothers. Category-wise importance of procurement in termsof value can be seen from Table 2.7(c).

For procurement in construction services, it is observedthat the PSC codes for the construction services are divided


into two basic categories withmultiple sub-categories. In orderto keep the data simplified for the analysis purpose, all thesub-categories were put together and added into two maincategories: construction of structures/facilities; andmaintenance and repair. From Table 2.7 (d), one can see thatconstruction of structures appears to be the most dominantand accounts for more than 72 percent of the totalconstruction services procurement. It is also observed thatthe second category of maintenance and repair servicesconstitute only about 28 percent of the total.

Trends in Public Procurement in Select Non-GPACountries

Owing to the fact that the procurement data of non-GPAcountries are almost non-existent or disorganised,understanding the trend in government procurement is quitedifficult. Data which are available for non-GPA countries arebased on estimates. Such estimates rely on use of nationaldatabase, especially national income accounts data of differentcountries. There are, however, certain issues and problemswhen using a single currency. This is because of lack ofharmonisation in data of different countries, which makesestimates inconsistent. Such issues, however, to a great extenthave been effectively addressed by the publication of IMF�sGovernment Finance Statistics, and the OECD and the UN�sStandardNational Accounts (SNA). SimilarlyWorld dataBankof the World Bank also provides national income statisticsfor most of the countries which can be used for suchestimates.19 At times, data from budget documents are alsoused.

National accounts data that might come from one or moresources are then imposed on an existing or specially-devisedmethodology.While some use general government expenditure


as a base for arriving at estimates for a country as a whole(implying coverage of procurements at all levels: central, state,and enterprises)20, there are other methodologies which relyon varying methods for estimating procurement at the central,state and enterprises levels.21

The present exercise makes an attempt to estimate andunderstand the size and dynamics of government procurementmarket of some selected countries in line with requirementsof the GPA. This implies that the estimates will reflect onlythose procurements which would have been subject to theGPA, had these countries joined the agreement. Morespecifically, it covers procurement above the threshold limits.Six countries have been identified � Australia, Brazil, China,Malaysia, Mexico, and the Russian Federation. Though nospecific criteria has been followed while selecting thesecountries, it is ensured that the estimate covers a significantpart of the global GDP and public expenditure. These sixcountries account for about 20 percent of the global GDP(2011), and also account for a major share in total publicexpenditure.

The estimate is based on the methodology devised and usedin a paper.22 To maintain consistency with respect to data,the World dataBook of the World Bank has been used as theprimary source of data for the selected countries and appliesadjusted general government (GG) expenses as a tool forarriving at the contestable procurement at the country level.Here, it might be noted that while the total governmentexpenditure includes GG final consumption expenditure aswell as gross fixed capital formation, to estimate contestablegovernment procurement market, net current transfers,compensation of employees and subsidies and other transfersare subtracted from the total government expenditure. Thefinal data generated through the use of this methodology isindicated by Adjusted GG expenses. The data of all variables


included in estimating the adjusted GG expenses are in currentUS dollars. There are two exceptions: it is observed that thedata of compensation of employee and subsidies and othertransfer are available only in local currencies. Such data hasbeen converted to US dollars by using average exchange ratefor the selected years of each country against the US dollar.As in the case of China andMexico, data are not available forthe compensation of employee and subsidies and otherstransfers.

To generate figures for the GG expenses, followingequation has been used:

Adjusted GG Expenses = GGFCE+GFCF-(COE + Subsdand others + NCT)

WhereGG= General GovernmentGGFCE = General Government Final Consumption

ExpenditureGFCF = Gross Fixed Capital FormationCOE = Compensation of EmployeeSubsd and others = Subsidies and OthersNCT = Net Current Transfer

Once figures for GG expenses have been generated, thecriteria of 10 percent and 30 percent of adjusted GGexpenditure has been applied to derive final contestable marketfor each of the countries. There are, however, exceptions inat least two cases. It is observed that in case of China andMexico, figures for subsidies and net capital transfers are notavailable; in such cases, the estimated contestable market couldbe subject to variations in the range of 10 to 20 percent.


Estimate of Government Procurement Market in Select Non-GPA Countries

Table 2.8 presents the final results of governmentprocurement estimation exercise for selected six countries �Australia, Brazil, China, Malaysia, Mexico and RussianFederation. Though, as indicated above, there is no specificcriterion for selection of these countries, but what makes thesecountries important from procurement point of view is thatsome of them either have observer status or are in the processof negotiation for their accession to the GPA. In addition,most of these are emerging economies, and perhaps couldsignificantly alter the course of the GPA, especially in termsof the size of the global procurement market, and moreimportantly for its implications for the developing world, ifthey accede to the GPA. The argument is reinforced by thefact that these six countries accounted for a share of overone-fifth in global GDP. If one adds India, another emergingeconomy and presently having observer status at the WTOGPA, to the list, the share increases to over 23 percent.

The assessment of government procurement for the sixcountries present procurement markets which are potentiallycontestable. It implies, firstly, that the estimate excludesexpenses, which might not be part of procurement (such ascompensation to employees, subsidies, and some others), andsecondly, that it also excludes procurements which might notpotentially fall within the purview of the GPA (procurementsbelow the threshold limits).

Contestable government procurement is, thus, much lowerthan total public expenditure. It is also lower than overallprocurement figures, as reflected by its coverage under theGPA. In the present exercise, contestable procurementestimates have been made at two different levels � at 10 and30 percent of the adjusted GG (general government) expenses.This implicitly but practically implies that 70 to 90 percent of


the overall government expenditure is not part of governmentprocurement. This leaves only 10 to 30 percent of expenditurewhich could be put in the category of contestable governmentprocurement.

Going by the methodology and what is argued above, thetotal contestable procurement market for the six countries isestimated in the range of US$486bn (10 percent of adjustedGG) to US$1458bn (30 percent of GG) in 2010. Theaggregated procurement figures might, however, give acomplete misrepresentation of facts: as revealed by the table,out of the six countries� total procurement, almost 70 percentis accounted for by China.

At the country level, a different trend is reflected. Thegrowth in government procurement in the five- year period isheaded by Brazil and China, with overall procurementestimated to have grown by almost three times. For four othercountries, the growth is much lower. It appears that it isbecause of significant growth in Brazil and China that theoverall procurement has increased by nearly two-and- a-halftimes during the five-year period.

A comparative compound annual percentage growth rate(CAGR) from 2005 to 2010 of the six countries vis-à-vis India,confirming to the overall trend, has been presented in Table2.9. Brazil has recorded highest percentage growth rate (23.7)followed by China (23.5), India (14.11), Russian Federation(13.48), Malaysia (9.77) and Mexico (5.17) during 2005 to2010. Brazil and China�s contestable market has grown moreas compared to the other five non-GPA member countriesduring the same period. In comparison, the procurementmarket in India is estimated to have grown by over 14 percentduring the period.


Opportunities for India if it Accedes to the GPAEstimating India�s Procurement Market

Emerging dynamics and the trends in governmentprocurement, as can be seen from growth in procurement inboth GPA-member and non-member countries, present apotential opportunity for both GPA members and non-members. The opportunity primarily emerges from bothhorizontal and vertical expansion realised in the procurementmarket over the last one decade. In the last over a decade, 15countries23 have been added to the list of GPAmembers, takingthe number to 42 countries in 2011. In terms of the marketsize of procurement, data show that government procurementhas increased at a significant rate in both member and non-member countries. In most of the member countries, exceptJapan, overall procurement size has multiplied many timesduring the analysis periods. This is especially true for twomajor economies of the world, and which are also GPAmembers: the EU and the United States.

Countries� attempts to make emerging opportunity a realityfor economic growth will depend on numerous factors, andfirst and foremost is acceding to the GPA. Accession is,however, just a necessary criterion, as acceding to the GPAwill not automatically lead to realisation of gains. Consideringthat access to market is guided by reciprocity amongstmembers, the size of the market and opportunities in thedomestic market for GPA members will also influence theactual level of benefits.

India, in terms of potential opportunities for GPAmember-countries, is much better placed than many other countries.Estimates using the same methodology as in the case of sixother non-GPA countries show that adjusted GG expensesin India were valued at US$482bn in 2010, compared toUS$392bn in 2005 and about US$250bn in 2000 (Table 2.10).


As far as the size of government procurement is concerned,based on the criteria of 10 percent of adjusted GG expenses,government procurement works out to US$48bn in 2010. Theestimated value of procurement increases three times(US$144bn) when the criteria of 30 percent of adjusted GGexpenses is used.

Out of the two criteria (10 and 30 percent of adjusted GGexpenses) used in case of India, and as far as contestablemarket is concerned, 10 percent appears to be more realistic.This is because India is a large country and procurementactivities are conducted by a large number of entitiesdistributed across various states which could take value ofprocurement below the GPA threshold. Going with the 10percent criterion, contestable government procurement couldbe argued to be about one-third of the overall procurementmarket. This is on the basis that a recent study (CUTS 2012)estimated government procurement valued at aboutUS$344bn.

Opportunities for India, if it Accedes to the GPAAWTO study25on the cost/benefit analysis from accession

to the GPA estimates the government procurement marketsof the current and possible future accession candidates to theagreement is between US$2.3 and US$3tn annually,representing between 3.8-5 percent of world GDP for 2008.The relevance of each of the benefits and costs in all caseswill be limited to the factual circumstances of the accessioncandidate. However, as existing literature on the topic states,the GPA can be accessed for two objectives � and whichobjective to aim for varies from country to country. The twoobjectives are: 1) To increase the market opportunity for thecountry�s exports, with the market assurance that annexes tothe agreement, and 2) To reinforce reforms to their owninternal market and administration, basically to benefit from


the good governance aspect of the GPA. A mixture of thetwo also presents an alternative to the enshrined objective.Overall, it depends on a country, and its understanding onwhich objective will lead to greater benefit. Importantly, inall the three cases, competition and competence come to thefore and become two important drivers that could help inachieving desired benefits � while acceding to the GPA unfoldssevere competition to domestic players in the procurementmarket, it also unfolds great opportunity for competentorganisations capable of facing international competition inboth domestic and global markets.

The present section of the study seeks to understand theimpact of competition and competence with respect toopportunities and challenges that could emerge from India�spossible accession to the GPA in future. More specifically, itexplores howmuch India can gain from accession to the GPA.As indicated above, there is no clear cut technique to assessand understand the scope and opportunities for India. In thelight of this limitation, the present analysis uses a proxy variable� India�s top product exports to the six identified GPAmember-countries and it has been kept in mind to see if thoseproducts also coincide with the top products procured by thosecountries. And to understand the competence of the Indianproducts exported to each of the country the change in theexports has been traced, with the assumption that in caseIndian exports have shown significant increment over a periodof time then the acceptability of the Indian products in thosemarkets are relatively high and India can effectively competefor that market, subject to its further opening through theGPA if India acceded to it. The assumptions that have beenmade in the analysis are as follows:� Export penetration and growth is considered as an indicator

of India�s strengths and competency in a given market (that


could benefit India in getting access to the governmentprocurement market, if India accedes to the GPA);

� The gap between India�s export and governmentprocurement in the GPA member-country is considered aproxy for the future opportunities for India in that market;and

� The composition of the government product procurementmarket at present has not undergone major rearrangement,and hence remained more or less comparable to the past.

It is understood that India�s gain from its possible accessionto GPA will be subject to intense competition vis-a-vis itsown competencies. It is also understood that there is no directindicator of benefits. In such a scenario, this analysis usesIndia�s export of different commodities to select GPAmember-countries as a potential measure of its competencies.More specifically, the following methodology has beenemployed for the purpose of analysis:� A list of products has been identified from India�s top

exports to each of the selected six GPA member-countries.� The list obtained is then compared with the products

procured by each of the country independently and theproducts which coincide with the list of top productsexported to each country are analysed in order tounderstand the acceptability and the standing of Indianproducts in each of these countries. Once products areidentified, data on export from India of these products areaccessed and analysed to assess emerging trends in India�sexport. Export for varying periods has been analysed forassessing the trend. For example, in case of EU export datafor two intervening years in a time span of four years havebeen analysed. The trend is assessed in terms of increasein export, implying that higher the growth, the higher the


potential for India to participate in the procurementmarket.

One important point to note is that since the data analysisis subject to data availability, and also its moderation by useof one tool or other24, analysis presents indicative figures,and it needs to be further analysed and explored to derive anyconcrete data showing real opportunities for India. The figures,however, give clear indications on the composition of theprocurement market in each country. Here, it is important tonote that the methodology used, as explained above, slightlydiffers for each country, subject to data availability andanalysis. It is independently explained as follows:

CanadaCanada accounted for almost one percent of India�s total

exports to the world in the year 2011. This looks like a smallfigure but accounting it to the market that it provides forIndia is significant and further increase in that marketopportunities is an encouraging dimension for India, subjectto its accession to the GPA. While there has been a consciousattempt to keep the analysis modest and simple, this can beindicative of the possible market opening for India in Canada.But as already explicitly stated above the market gain for anycountry is subject to multiple dimensions, and one of thedefining dimensions is the competence of the domesticproducts in the international market. And thus here theattempt is to understand that very dimension of competenceof the Indian products in the Canadian market.

The top Indian exports are identified on the basis that thoseproducts are also the part of government procurement list ofCanada. And the growth or change in the Indian exports inthose products is used as the indicative of the acceptance ofthose products in the Canadian market. Keeping with the


assumption that if the growth of the Indian exports to Canadahas been heartening then there are chances that India cansuccessfully compete for in those products, if Canadian GPmarket opens which is subjected to India�s accession to GPA.From the analysis one encouraging finding emerged: thatmineral products are credited with the maximum share in thetotal product procurement of Canada in 2009. Incidentally, italso accounts for the maximum increase in the imports fromIndia � increasing by over 18 times in 2011 over 2009. This isindicative of the Indian competence to compete for theUS$0.6bn market of mineral products in governmentprocurement. Indian exports have the capability to competefor 75.2 percent of total product procurement market ofCanada. This amounts to estimated US$1.2bn in the year 2009(Table 2.11 (a).

Chinese Taipei (Taiwan)Interestingly Chinese Taipei (or Taiwan) accounted for 1.11

percent of India�s exports to world in the year 2011; it ishigher than Canada and comparable to Korea. Thus it is clearthat it is a significant country for India to understand themarket opportunity it can present if India accedes to WTO-GPA.

The case of Chinese Taipei is slightly different, especiallyin terms of data analysis. As indicated above in section 3,Chinese Taipei was one of the last countries (next only toArmenia) to join the GPA. One change that has been made incomparison to the analyses of other countries is that theanalysis is confined to the assessment of trend in the share ofChinese Taipei in India�s total exports to the world for theyear 2011, in place of change in imports from India as done inother cases.. FromTable 2.11(b), one can observe that ChineseTaipei has a minor share in Indian exports. Its share stands at1.4 perecnt of total Indian exports to the world for the


products identified with a focus on India�s possibleopportunities that can open up if Chinese Taipei�s GP marketopens for it in those products.

Data shows that two major exports items from India toChinese Taipei are: (1) semi-finished products of copper,nickel, aluminium, lead, zinc and tin or their alloy accountingto 10.5 percent of India�s total export to the world in 2011and (2) gas generators; distilling plant; air conditioning andrefrigerating equipment; filtering machinery which accountfor approx. 4 percent of the same. And if one looks at theprocurement market that can open up, and for which Indiacan contest, it is valued at around US$0.4bn. Further, theanalysis shows that India has a competence to contest for52.92 percent of Chinese Taipei�s GP market which is furthersubject to other dimensions of the agreement which areexplained in detail in the other sections of this study. Overall,as noted by aWTO study, the size of the Chinese Taipei marketthat can be opened up for GPA member-countries comes toaround US$20bn, accounting for 5 percent of its GDP.

European UnionThe importance of the EU for India is self-evident from

the fact that it accounted for approx. 18 percent of India�stotal exports to the world in the year 2011. It is to be notedthat the analysis has been confined to 15 major countries ofthe EU, i.e. the UK, Italy, France, Spain, Germany, Greece,Poland, Sweden, Belgium, Netherland, Denmark, Ireland,Austria, Romania and Slovenia, which together accounted forapprox. 90 precent of the total GP market of the EU in theyear 2007 (which is the last year for which the GP data forthe EU is available on the WTO).

The analysis for India�s opportunities in the EU GPmarketis complex due to the sheer size of the data that had to beanalysed for each of these 15 countries in order to reach any


conclusion. The methodology that has already been definedabove has been used, but it would be beneficial if it is lookedat again. The top Indian exports to each of the 15 countrieswere identified, which were then compared to the productsprocurement data of the EU from Table 2.4(d). And theproducts which coincide with the top imports from India tothe EU were analysed independently for each of the 15countries of the EU and top importers were identified as canbe seen in Table 2.11 (c: 1). For instance the product�Petroleum, crude petroleum, coal products�, which accountedfor 4.76 percent in the total product GP market in the EU inthe year 2007, have seen the maximum increment in importsfrom India i.e. 2.84 times in 2011 over 2007. And the countryin the European Union which has the maximum share in thetotal imports from India is Netherlands, with 57.78 percentof total EU (15 selected countries) imports from India. Thisis indicative of the fact that if the EU GP market opens up forIndia subject to her accession to the GPA, then for �Petroleumand coal products� India should target Netherlands where theacceptability is high for that product. Indian products havethe acceptability and competence to effectively compete for55.55 percent of the EU product GP market.

Similarly, the product �Medical and laboratory devices,Optical and precision devices� which have 10.97 percent sharein the total EU GP market have seen increment in importsfrom India, approx. 2 times in 2011 over 2007, with Germanyaccounting for 34.66 percent of the total EU imports of thisproduct from India. Incidentally, from Table 2.11(c) it can beseen that Germany not only has maximum share in medicaland laboratory instruments� imports from India but also otherproducts like chemical products, electrical machinery andother consumables, textiles and clothing and footwear whichtogether account for 32.96 percent of total EU GP market,amouting to US$76.8bn (Table 2.11(c). But the actual gain is


restricted by multiple restrictions inherent in the agreementwhich we will look at in the following sections of the study.

Overall the analysis has shown that India has thecompetence to effectively compete for 55.5 percent of theEU GP market which amounts to US$76.8bn.

JapanIndia�s export to Japan accounted for 1.9 percent India�s

total export to the world in the year 2011. Though the figureappears to be quite small in comparison to the EU and the USthe fact remains that it is a huge market, and India can lookforward to further opening up of this market in order todeepen its roots in Japan. The data has been analysed inaccordance with the methodology as already explained above.In the present analysis it is observed that India, with its existingcompetence, has the potential to penetrate in 64.3 percent ofJapan�s total product procurement market, which amountedto US$2.2bn in the year 2010.

One striking fact observed in the analysis is that there weresome abnormal increases in exports of some products, whilein some others, there waw a fall. For example, while Japaneseimports of ships, boats and floating structures from Indiaincreased by more than 1,243 times in 2011 over 2010,imports of medical, technical and optical equipment andapparatus significantly declined in 2011 (Table 2.11(d).

South KoreaAnalysis of data for Korea presents a contrasting picture.

While in terms of value, exports to Korea accounted for 1.5percent of total exports from India to the world in 2011, interms of products coverage, India�s exports covered high-valueprocurement products. A comparison of India�s top exportitems with that of Korea�s top procurement itemsdemonstrates that most of products exported by India are


also present in Korea�s list of top government procurementitems. This implies that India�s exports cover a large numberof products which are also part of government procurementin Korea. This provides India a chance to penetrate somemajorproduct segments with high share in overall procurements.In fact, India appears to be in a position to compete for nearly93 percent of the total product procurement market whichamounts to nearly US$1.8bn. Interestingly, it is also observedthat export of some products, as shown in the table below,increased approximately two-fold in 2010 to 2011.

The product which saw the maximum improvement inimports from India include works of arts, collector�s piecesand antiques (over 5 fold in the span of two years); plasticand articles thereof (over two fold); machinery and electricalequipment with the maximum share in procurement (two-fold) which sheds light on Indian competencies in this productmarket. Table 11(e) shows that overall the market share forwhich India can effectively compete in the GPmarket of Koreais estimated at US$1.8bn.

United StatesThe US is one of the most important members of the GPA.

It accounted for 10.9 percent of India�s total exports in 2011.The results from the data analysis shows that the marketopportunity potential is nearly US$83.6bn in the USgovernment procurement market. India can effectivelypenetrate and be part of 54.2 percent of the total productprocurement market, which almost comes to aroundUS$0.08bn (2008). Out of the total potential, pharmaceuticalsaccount for the largest share (36.9 percent) amounting toUS$57mn approximately. It might be noted thatpharmaceutical exports from India to the US increased 2.4times in 2011, in the span of 4 years (Table 11 (f)).


In sum, the overall opportunities for India, as explainedand indicated by the above analysis, are with respect to thesix major GPA member-countries, and that too with respectto only India�s top export items to these countries. Theanalysis of the data shows that India has a competitiveadvantage to gain from the total product procurement marketestimated at US$166bn. This is corroborated by otherstatistics. The statistical reports submitted by GPA Partiesestimated that the EU and the US alone provided forapproximately 75 percent of the total value of existing marketaccess opportunities under the GPA, valued at US$1.2tn. Inthe present analysis, we see that the EU and the US were themajor importers from India with a share of 18.11 percentand 10.92 percent respectively of India�s total exports in 2011.Together, the EU and the US open up the opportunity oftapping into a US$160.4bn market. The figure also shows theimportance that these countries hold for India�s exports, andhelps us understand that, with further opening up of thesemarkets, India can gain more in exports (Table 12).

Table 2.13 presents a summary of opportunities in the sixcountries which have been analysed. The data has beencomplied from25 the above analysis of the opportunities forIndia in each of the six GPA member-countries. The productswhich were common among all the tables are added to get abetter picture of the overall GP market that can be accessedby Indian products. It is important to note that here the analysishas been confined to the products which have the exportpotential by India in each of the countries, thus �na� impliesthat India may not necessarily have the advantage in theconcerned product in the respective country even if thatproduct is present in the GP market of the country. The tableclearly reflects that in terms of opportunities, the largestpotential is offered by pharmaceutical, followed by optical,photographic, medical and surgical instrument; machinery,


nuclear reactors, boilers, etc.; and mineral products. In theGP market for the product �Textile,� the EU covers themaximum share of 90.9 percent of all six GPA member-countries, followed by Canada and Japan with shares of 4.4percent and 2.9 percent respectively. Opportunities also existin areas such as motor vehicles, trailers and vehicle parts; andelectrical machinery and electronic equipment.

Summing up the opportunities, India could achievesignificant gains by acceding to the GPA. This will be,however, subject to various issues that Indias need to address,as discussed in other sections of the report. At the countrylevel, Indian stands a good chance to gain in Canada intelecommunication, textile, articles of iron and steel, andpharmaceuticals. Similarly, India could gain in Chinese Taipeiin service categories such as management consulting.

In addition to what is indicated above for the selected sixcountries, there are some studies which present a more holisticpicture of potential government procurement market andresulting opportunities for GPA member-countries anddeveloping countries which could become part of the GPA.

A study (Assessing the Value of Future Accessions to theWTO Agreement on Government Procurement, 2011)presents the total value of additional market accesscommitments that would result from GPA accession by thefull range of WTO members. A total market in the range ofUS$380-970bn annually is estimated. It is further indicatedthat the accession of the five BRICS countries � Brazil, Russia,India, China and South Africa � has the potential to add in therange of US$$233bn to US$596bn annually. The estimatesprepared for different types ofWTOmembers are reproducedin Table 2.14. The paper establishes that the gains in marketaccess from future GPA accessions are likely to exceed thosefrom the ongoing negotiations within the existing membershipby a substantial margin.


In terms of sectoral opportunities and potential, Table 2.15presents the findings of a study.26 The two most importantsectors, after construction services, that provide the bestopportunities are pharmaceuticals and computer and relatedservices. The study also points out that most of theopportunities in these sectors will emerge from threecountries, namely the EU, Japan and the US.

Major Challenges for India, if it Accedes to the GPAAcceding to the GPA will not automatically open up

opportunities for new or existing GPA members. The realgains will depend on a number of factors, including but notlimited to, the ability to compete with other players and,equally importantly, market access opportunities provided byGPA members. Some of the major existing challenges thatwould emerge have been covered in other sections of thestudy. This section specifically focuses on understanding theimpact of restrictive practices deployed by the member-countries. There is evidence to suggest that a significant shareof country-specific procurement contracts are secured bydomestic firms. Four such cases covering Chinese Taipei, theEU, Japan and Korea are enumerated below.

In the case of Chinese Taipei, data reflects that more than95 percent of the total procurement contracts above thresholdare awarded to domestic firms.Whatmakes the case importantfrom a developing country perspective is that less than fivepercent of the total contracts go to firms outside the countryin value terms, and none of the countries with significantshares are from the developing world (Table 2.16).

The case of the EU is not much different. Out of the �292bnprocurement market, total contracts in value terms awardedto other GPA countries (foreign firms) amount to less than�13bn. This practically amounts to less than 5 percent of totalsize of procurement in the EU (Table 2.17).


Extending the analysis to understand the spread of awardof contracts in the EU, it is clear that developed countrieshave a major share of contracts, and also in terms of value ofcontracts. Five countries � the US, Switzerland, Canada, Japanand Norway � account for more than 99 percent of theprocurements awarded to firms outside the EU. This couldbe a major stumbling block for entry of new members in theGPA.

The balance in Japan is equally skewed. Nearly 95 percentof total contracts are awarded to firms in Japan, and only alittle over 5 percent in value goes to firms outside Japan. Evenout of this 5 percent, most of the contracts go to firms indeveloped countries such as Canada, the US and EU (Table2.18).

Korea, being considered a developing country, presents amuch better picture. It appears that nearly 12 percent of theoverall contracts in value terms have been awarded to firmsoutside Korea. More importantly, it shows a betterdistribution of awards of contracts, with the largest sharegoing to France (4.8 percent) followed by the US (3.8 percentof overall government procurement value). It is important tonote that there are a larger number of countries appearing onthe list of countries awarded contracts in Korea (Table 2.19).

Overall, developing countries in the GPA present arelatively better distribution of award of contracts ascompared to the developed countries.

ConclusionThe concept of public procurement owes its origin to public

expenditure. Public procurement, the world over, hasundergone significant changes over the last one-and-a-halfdecades. This is because of both vertical and horizontalexpansion in the size of government procurement. Continuousincrease in size presents a huge opportunity for the member-


countries in terms of accessibility to the governmentprocurement markets. There exist data and estimates to showthat non-member countries could also gain by acceding to theGPA. The gains will accrue through the ability of newmembersto access procurement market in other member-countries.They will also accrue through a natural increase inprocurement size in different countries.

It is, however, important to note that benefits to newmembers will not flow automatically; rather they will bedetermined by several factors. The include, firstly, themember-county�s ability to compete with other member-countries in the procurement market and, secondly, thewillingness of member- countries from the developed worldto open up their procurement markets to member-countriesfrom the developing world. Currently, there are indicationsthat government procurement contracts gomainly to domesticfirms. It should be recognised by the member-states that suchan approach might delay or even obstruct accession to theGPA by negotiating members.

WTOPlurilateralA

greement

onGovernm

entProcurem

ent91

Table 2.1: Top 40 GPA and non-GPA countries based on GDP1 and size of Government Expenditure2

GPA countries


(% of GDP) (US$mn)

1 United States 1,50,94,000 42.2 6369668

3 Japan 58,67,154 42 2464204.7

4 Germany 35,70,556 47.5 1696014.1

5 France 27,73,032 56.2 1558444

7 United Kingdom 24,31,589 51.2 1244973.6

8 Italy 21,94,750 51.8 1136880.5

11 Canada 17,36,051 44.1 765598.49

12 Spain 14,90,810 45.8 682790.98

15 Korea, Rep. 11,16,247 33.1 369477.76

17 Netherlands 8,36,257 51.4 429836.1

19 Switzerland 6,35,650 33.7 214214.05

21 Sweden 5,38,131 55.2 297048.31

22 Poland 5,14,496 44.6 229465.22

23 Belgium 5,11,533 54.1 276739.35

Non-GPA countries


(% of GDP) (US$mn)

2 China 73,18,499 23 1683254.8

6 Brazil 24,76,652 38.8 960940.98

9 Russian Federation 18,57,770 41.1 763543.47

10 India 18,47,982 29 535914.78

13 Australia 13,71,764 33.1 454053.88

14 Mexico 11,55,316 26.9 310780

16 Indonesia 8,46,832 16.7 141420.94

18 Turkey 7,73,091 37.2 287589.85

20 Saudi Arabia 5,76,824 45.7 263608.57

25 Argentina 4,45,989 37.9 169029.83

27 South Africa 4,08,237 30.6 124920.52

28 UAE 3,60,245 25.8 92943.21

29 Thailand 3,45,649 20.4 70512.396

31 Colombia 3,31,655 29.4 97506.57


GPA

coun

tries

Rank/Country

GDP

Govt.

Est.govt.

(2011)

(US$mn)

expenditure

expenditure

(%of

GDP)

(US$mn)

Non

-GPA

coun

tries

Rank/Country

GDP

Govt.

Est.govt.

(2011)

(US$mn)

expenditure

expenditure

(%of

GDP)

(US$mn)

24Norway

4,85

,803

46.4

2254

12.59

26Austria

4,18

,484

53.1

2222

15

30Den

mark

3,32

,677

58.4

1942

83.37

34Greece

2,98

,734

52.9

1580

30.29

36Finlan

d2,66

,071

56.2

1495

31.9

38Hon

gKon

g2,43

,666

17.3

4215

4.21

8SA

R,China

39Israel

2,42

,929

44.3

1076

17.55

40Sing

apore

2,39

,700

1740

749

Total

4,18

,38,32

045

.11,88

,75,34

9

32Iran

,Islamic

Rep

.3,31

,015

27.8

9202

2.17

33Ven

ezue

la,RB

3,16

,482

3310

4439

.06

35M

alay

sia

2,78

,671

30.3

8443

7.31

3

37Chile

2,48

,585

24.4

6065

4.74

Total

2,12

,91,25

829

.662

,97,57

3

Source:1WorldEconomicIndicators,WorldBankand

22012

Indexof

EconomicFreedom

Note:

Out

oftoprank

ed40

coun

triesin

term

sof

GDP,

18are

notGPA

mem

bers.GDPof

thesecoun

triesaremorethan

50percentof

combinedGDPof

22GPA

coun

tries.

More

interestinglygo

vernmen

tex

pend

itureco

nstitutesne

arly

30percentof

GDPan

dam

ountsto

morethan

one-thirdof

combinedgo

vernmentexpend

itureof

22GPA

mem

ber-coun

tries.


Table 2.2 (a): Trend in Government Procurement in Canada(value in th. Canadian Dollar)

Procurement 2000 2009 Increase intype over 2000

value: 2009Value Share (%) Value Share (%) (no. of times)

Goods 695783 50.12 1752055 59.08 2.5

Construction 75126 5.41 240572 8.11 3.2

Services 617248 44.47 973158 32.81 1.6

Total 1388157 100 2965784 100 2.1

Source: Authors� computation based of WTO data

Table 2.2(b): Trend in Canada�s Sector-wise GovernmentProcurement in Goods (value in th.Canadian Dollar)

Sector/product category 2000 2009 Increase(number of

Value Share (%) Value Share (%) times, 2009over 2000)

Mineral Products 8313.0 1.19 690479.2 39.41 83.06

Automatic Data Processing 258080.0 37.09 211139.3 12.05 0.82Equipment

Telecommunications 1128.1 0.16 49236.8 2.81 43.65

Textiles and textile articles 6359.3 0.91 30200.3 1.72 4.75

Electrical Machinery 30528.8 4.39 27703.8 1.58 0.91

Medical, dental surgical 4859.2 0.7 25803.5 1.47 5.31equipment and apparatus

Products of the Chemicals & 11637.2 1.67 15742.8 0.9 1.35Allied industries

Medicinal and Pharmaceutical 1989.7 0.29 15060.2 0.86 7.57Products

Power generating machinery 9366.3 1.35 11754.5 0.67 1.25and equipment

Iron and Steel Articles 2342.5 0.34 10200.6 0.58 4.35

Ships, Boats and Floating 5494.1 0.79 8806.5 0.5 1.6Platforms

Road Vehicles 97443.6 14 120981.7 6.91 1.24

Furniture and Parts thereof 69099.7 9.93 140334.8 8.01 2.03

Professional, Scientific 31155.8 4.48 150945.8 8.62 4.84


Aircraft and Associated 51070.7 7.34 69313.3 3.96 1.36Equipment

General industrial machinery 9106.0 1.31 50817.9 2.9 5.58and equipment

Photographic apparatus 13092.6 1.88 312.8 0.02 0.02

Products from agriculture 8845.9 1.27 19572.3 1.12 2.21

Machinery Specialised for 5081.7 0.73 9642.1 0.55 1.9Particular Industries

Artificial resins 16970.1 2.44 1085.8 0.06 0.06

Others 53818.9 7.74 92921.0 5.3 1.73

Total 695783.1 100 1752055.0 100 2.52

Source: WTO

Table 2.2(c) : Trend in Canada�s Sector-wise GovernmentProcurement in Services (value in th. Canadian Dollar)


Value Share (%) Value Share (%) times, 2009over 2000)

Professional Services 42543.2 6.89 425982.4 43.77 10.01

Environmental Services 14304.1 2.32 71137.2 7.31 4.97

Architect and Engineering 14407.9 2.33 71427.4 7.34 4.96Services � Related toconstruction

Custodial Services 31803.2 5.15 90887.4 9.34 2.86

Architect and Engineering 27191.3 4.41 69121.5 7.1 2.54Services � Not related toconstruction

Environmental Studies 7657.4 1.24 13902.9 1.43 1.82

Administrative and 47215.2 7.65 47210.7 4.85 1Management Support Services

Information Processing and 317882.1 51.5 147759.6 15.18 0.46Related TelecommunicationServices

Lease and Rental of Equipment 63388.8 10.27 12342.6 1.27 0.19

Maintenance. Repair, 44379.7 7.19 78.5 0.01 0Modifications, Rebuilding andInstallation of Goods/Equipment

Others 6474.7 1.05 23307.2 2.4 3.6

Total 617247.7 100 973157.5 100 1.58

Source: WTO


Table 2.2(d): Trend in Canada�s Sector-wise GovernmentProcurement in Construction (value in the. Canadian Dollar)


Value (%) Value (%) times, 2009over 2000)

Construction work for civil 880.0 1.17 126886.1 52.74 144.2engineering

Installation work 618.4 0.82 48307.3 20.08 78.1

Building completion and 575.0 0.77 1480.4 0.62 2.6finishing work

Construction work for 70026.4 93.21 63648.1 26.46 0.9buildings

Special trade construction work 3025.8 4.03 250.0 0.1 0.1

Total 75125.6 100 240571.9 100 3.2

Source: WTO

Table 2.3(a): Trend in government procurement in ChineseTaipei (value in th. TWD)

Procurement type 2009 2011 Increase in value:2011 over 2009

Value Share (%) Value Share (%) (no. of times)

Goods 11300062.3 8.86 23772528.9 17.44 2.1

Services 18691908.4 14.65 37183232.2 27.27 1.99

Construction 97609935.3 76.5 75373815.4 55.29 0.77

Total 127601905.9 100 136329576.4 100 1.07

Source: Author computation based of WTO data.

Table 2.3(b): Trend in Chinese Taipei�s Sector-wise GovernmentProcurement in Goods (value in th. TWD)

Sector/ Product Category 2009 2011 Increase invalue: 2011

Value (%) Value (%) over 2009(no. of times)

Electric filament or discharge 5594.9 0.05 431377.3 1.81 77.1lamps; arc lamps; lightingequipment; parts thereof

Motor vehicles, trailers and 35780.0 0.32 885245.7 3.72 24.7semi-trailers; parts and accessoriesthereof


Radio, television and communication 27120.0 0.24 633692.7 2.67 23.4equipment and apparatus

Medical and surgical equipment and 22560.0 0.2 284924.5 1.2 12.6orthopaedic appliances

Gas generators; distilling plant; air 16766.6 0.15 197494.0 0.83 11.8conditioning and refrigeratingequipment; filtering machinery

Pulp, paper and paper products; 332762.2 2.94 2391783.0 10.06 7.2printed matter and related articles

Computing machinery and parts 1013815.0 8.97 3919806.0 16.49 3.9and accessories thereof (for ADP)

Textiles articles other than apparel 71056.3 0.63 187495.7 0.79 2.6

Measuring, checking and testing 1175808.6 10.41 838796.3 3.53 0.7Instruments

Rolled, drawn and folded products 45915.7 0.41 26469.3 0.11 0.6of iron and steel

Office and accounting machinery, 4352844.0 38.52 2067420.4 8.7 0.5and parts and accessories thereof

Pump compressor, hydraulic and 243201.7 2.15 48077.9 0.2 0.2pneumatic power engines andvalves and parts thereof

other electric equipment and parts 1220693.9 10.8 87784.3 0.37 0.1thereof

Chemical products n.e.c 115777.5 1.02 7437.5 0.03 0.1

Pharmaceutical products N a N a 6034951.1 25.39 N a

Electric motors, generators and N a N a 36220.0 0.15 N atransformers, and parts thereof

Basic precious metals and metals N a N a 31796.8 0.13 N aclad with precious metals

Semi-finished products of copper, N a N a 21495.3 0.09 N anickel, aluminium, lead, zinc andtin or their alloy

Wearing apparel, except fur N a N a 57652.7 0.24 N aapparel

Others 2620366.0 23.19 5582608.6 23.48 2.1

Total 11300062.3 100 23772528.9 100 2.1

* Source: WTO

**The above data analysis is subjected to the limitation of data availability.And it should be noted that Chinese Taipei had revised its product codes andthe list in the year 2010. Therefore, in order to make data of the year 2009and 2011 comparable the, revised list has been considered and the productslist of 2009 is clubbed into the 2011 list wherever it could be, as per theunderstanding of the analyst.


Table 2.3 (c): Trend in Chinese Taipei�s Sector-wise GovernmentProcurement in Services (value in th. TWD)



Sewage and refuse disposal, 73826.0 0.39 1644845.2 4.42 22.28sanitation and other environmentalprotection services

Research and development services 66605.0 0.36 388675.8 1.05 5.84

Health and social services 91247.7 0.49 380861.5 1.02 4.17

Administrative services to the 377706.2 2.02 1300700.8 3.5 3.44government

Technical testing and analysis 181924.5 0.97 546740.8 1.47 3.01services

Education services 25661.3 0.14 75808.9 0.2 2.95

Supporting and auxiliary 374348.7 2 924711.5 2.49 2.47transport services

Telecommunication and 801064.7 4.29 372987.3 1 0.47related services

Photographic services 139922.3 0.75 44247.9 0.12 0.32

Building Cleaning services 762182.1 4.08 209666.8 0.56 0.28

Management consulting services 1950245.0 10.43 245621.9 0.66 0.13

Services to the community as 287304.3 1.54 8100.0 0.02 0.03a whole

Computer and related services 0.0 0 6316165.8 16.99 N a

Financial intermediation services, 0.0 0 873803.7 2.35 N aexcept insurance and pensionfund services

Insurance( including reinsurance) 0.0 0 279165.7 0.75 N aand pension fund services, exceptcompulsory social security services

Services auxiliary to financial 0.0 0 85752.0 0.23 N aintermediation, other than toinsurance and pension funding

Miscellaneous 13559870.7 72.54 23485376.7 63.16 1.73

Total 18691908.4 100 37183232.2 100 1.99

Source: WTO


Table 2.3(d): Trend in Chinese Taipei�s Sector-wise GovernmentProcurement in Construction Services (value in TWD)



For bridges, elevated highways, 3740000000 3.83 42895844600 56.91 11.47tunnels and subways

For highways 71325595357 73.07 15880128000 21.07 0.22

For other buildings 2552568514 2.62 7803619929 10.35 3.06

For waterways Dams, and 2537600000 2.6 4307300000 5.71 1.70other water works

Construction works n.e.c 2098349998 2.15 1553556000 2.06 0.74

Other special trade 1670800000 1.71 1126862031 1.50 0.67construction works

For multi dwelling building N a 0 851365000 1.13 na

Other building completion 10041132500 10.29 575139820 0.76 0.06and finishing work

For public entertainment 604888898 0.62 380000000 0.50 0.63buildings

For educational Buildings 3039000000 3.11 N a 0 na

Total 97609935267 100.00 75373815380 100.00 0.77

Source: WTO

Table 2.4(a): Country-wise procurement in EU by types ofAnnexes in 2000 (�mn)

Country Annex 1 Share Annex 2 Share Annex 3 Share Total Country(%) (%) (%) share (%)

United Kingdom 12785 53.4 11151 46.6 N/A N/A 23936 23.8

France 4066 20.4 13975 70.2 1876 9.4 19917 19.8

Germany 5082 31.8 10496 65.7 398 2.5 15976 15.9

Spain 7129 46.3 4409 28.7 3850 25.0 15388 15.3

Italy 336 4.0 6532 78.4 1459 17.5 8327 8.3

Sweden 966 17.6 3754 68.4 755 13.8 5475 5.4

Netherland 1244 49.0 491 19.3 803 31.6 2538 2.5

Belgium 431 19.1 1048 46.5 774 34.4 2253 2.2

Austria 58 3.4 1632 95.3 23 1.3 1713 1.7

Denmark 236 19.7 963 80.3 N/A N/A 1199 1.2

Finland 19 2.5 706 94.6 21 2.8 746 0.7


Portugal 257 51.8 53 10.7 186 37.5 496 0.5

Greece 277 69.1 124 30.9 N/A N/A 401 0.4

Ireland 30 7.6 342 86.8 22 5.6 394 0.4

Luxembourg 169 50.1 167 49.6 1 0.3 337 0.3

Total member 33086 33.4 55844 56.4 10169 10.3 99099 100.00states

Total Member 99098states

EU Institutions 1597

EU (15) Total 100695

Source: Author�s computation based of WTO data

Table 2.4(b): Country-wise procurement in EU by types ofcontract in 2000 (�mn)

Country Supplies Share Services Share Work Share Total Country(%) (%) % share (%)

United Kingdom 11615 48.5 7175 30.0 5148 21.5 23938 23.8

France 5806 29.2 5575 28.0 8536 42.9 19917 19.8

Germany 6506 40.7 3581 22.4 5890 36.9 15977 15.9

Spain 4012 26.1 5355 34.8 6022 39.1 15389 15.3

Italy 1985 23.8 3032 36.8 3310 39.8 8327 8.3

Sweden 2558 46.7 2671 48.8 246 4.5 5475 5.4

Netherland 1129 44.5 687 27.1 722 28.4 2538 2.5

Belgium 453 20.1 1013 45.0 787 34.9 2253 2.2

Austria 229 13.4 614 35.9 869 50.8 1712 1.7

Denmark 401 33.4 666 55.5 132 11.0 1199 1.2

Finland 472 63.4 121 16.2 152 20.4 745 0.7

Portugal 128 25.9 187 37.8 180 36.4 495 0.5

Greece N/A N/A 214 53.5 186 46.5 400 0.4

Ireland 60 15.3 37 9.4 295 75.3 392 0.4

Luxembourg 23 6.8 10 3.0 303 90.2 336 0.3

Total member 35375 35.7 30939 31.2 32780 33.1 99094 98.4states

EU Institutions 774 48.5 708 44.3 116 7.3 1597 1.6

Grand total 100695 100EU (15)

Share in total 35.9 31.4 32.7 100(%)

Source: WTO


Table 2.4 (c): Country-wise procurement in EU by types ofAnnexes in 2007 (�mn)

Member States Annex 1 Share Annex 2 Share Annex 3 Share Total Share% % % GPA %

United Kingdom 41644.5 40.3 41282.6 40.0 20352.5 19.7 103279.6 35.2

Italy 866.9 2.7 27190.4 86.2 3474.3 11.0 31531.6 10.7

France 11458.5 37.2 15346.6 49.9 3975.4 12.9 30780.5 10.5

Spain 9545.5 39.8 10202.0 42.5 4260.7 17.7 24008.3 8.2

Germany 7410.3 34.4 10691.1 49.6 3469.4 16.1 21570.7 7.3

Greece 3528.2 34.9 796.0 7.9 5786.2 57.2 10110.4 3.4

Poland 2897.7 29.9 5822.7 60.1 962.6 9.9 9683.0 3.3

Sweden 2320.8 24.6 5981.9 63.3 1149.0 12.2 9451.7 3.2

Belgium 345.7 4.5 5602.8 72.4 1786.6 23.1 7735.1 2.6

The Netherlands 2173.0 36.6 2712.0 45.3 1097.9 18.4 5982.9 2.0

Denmark 604.1 12.6 3906.2 81.8 265.6 5.6 4775.8 1.6

Ireland 634.1 14.9 2946.4 69.1 685.6 16.1 4266.1 1.5

Austria 151.5 3.7 3060.6 74.7 883.8 21.6 4095.9 1.4

Romania 403.6 10.6 2693.1 70.4 727.4 19.0 3824.1 1.3

Slovenia 499.1 14.6 2836.7 82.9 84.0 2.5 3419.9 1.2

Hungary 1192.3 35.9 1317.2 39.6 814.2 24.5 3323.7 1.1

Czech Republic 806.1 25.8 1458.1 46.8 854.4 27.4 3118.6 1.1

Portugal 28.4 1.0 2336.1 83.9 419.1 15.1 2783.6 0.9

Latvia 1312.7 58.6 769.6 34.4 157.0 7.0 2239.3 0.8

Finland 21.1 1.4 1363.4 87.6 172.7 11.1 1557.2 0.5

Lithuania 593.5 42.5 589.4 42.2 214.6 15.4 1397.5 0.5

Slovakia 361.8 35.5 269.7 26.5 387.2 38.0 1018.7 0.3

Bulgaria 305.4 43.8 297.0 42.6 94.1 13.5 696.5 0.2

Estonia 167.9 28.4 310.2 52.5 113.3 19.2 591.4 0.2

Cyprus 196.7 38.5 179.2 35.1 135.3 26.5 511.1 0.2

Luxembourg 177.6 60.1 98.5 33.3 19.6 6.6 295.7 0.1

Malta 76.6 87.9 N/A N/A 10.5 12.1 87.1 0.0

EU Institutions 1348.4 100 N/A N/A N/A N/A 1348.4 0.5

Total EU 27 89723.5 30.7 150059.3 51.4 52352.8 17.9 292135.7 100

Share (%) 30.7 51.4 17.9 100

Source: WTO


Table 2.4(d): Product-wise procurement in EU in 2007 (in �mn)Type of procurements Annex 1 Annex 2 Annex 3 Total Share (%)

Construction work 19144.6 56362.8 16170.3 91677.7 31.24

Computer and related services 30644.0 2585.2 429.9 33659.1 11.47

Architectural, construction, legal, 6068.3 13108.0 802.0 19978.3 6.81accounting and business services

Chemicals, chemical products and 3160.6 11938.4 162.0 15261.0 5.20man-made fibres

Electricity, gas, nuclear energy and 1056.9 2925.1 9966.7 13948.8 4.75fuels, steam, hot water and othersources of energy

Insurance and pension funding 943.4 12182.7 655.9 13781.9 4.70services, except compulsory socialsecurity services and insurance-related services

Medical and laboratory devices, 2383.3 8361.3 320.4 11065.1 3.77optical and precision devices,watches and clocks, pharmaceuticalsand related medical consumables

Repair, maintenance and 2809.4 4756.5 3144.2 10710.1 3.65installation services

Sewage- and refuse-disposal services, 374.5 6811.7 1304.9 8491.1 2.89sanitation and environmental services

Fabricated products and materials 561.7 1804.5 6077.8 8444.0 2.88

Office and computing machinery, 4131.6 2547.2 544.7 7223.4 2.46equipment and supplies

Transport equipment 1750.6 600.2 4642.3 6993.1 2.38

Machinery, equipment, appliances, 2331.7 1692.5 2458.8 6483.1 2.21apparatus and associated products

Land transport services and transport 427.3 3828.9 551.1 4807.4 1.64via pipeline services

Services auxiliary to financial 2452.9 1741.5 56.7 4251.2 1.45intermediation

Motor vehicles, trailers and vehicle 1323.6 1884.7 835.5 4043.8 1.38parts

Electrical machinery, apparatus, 331.1 1450.8 1966.5 3748.4 1.28equipment and consumables

Petroleum products and fuels 1088.6 1469.0 771.7 3329.3 1.13

Radio, television, communication, 1204.8 1637.6 118.2 2960.5 1.01telecommunication and relatedequipment and apparatus

Postal and telecommunications 1289.4 1592.8 31.2 2913.5 0.99services


Clothing and footwear 1784.5 967.4 14.6 2766.5 0.94

Food products and beverages 762.2 1975.5 8.7 2746.3 0.94

Manufactured goods, furniture, 309.3 1007.8 258.6 1575.7 0.54handicrafts, special-purpose productsand associated consumables

Crude petroleum, natural gas, oil 1109.5 209.9 74.8 1394.2 0.48and associated products

Printing, publishing and related 1040.4 292.5 9.8 1342.6 0.46services

Various types of printed matter and 238.6 580.7 56.8 876.1 0.30articles for printing

Rubber, plastic and film products 184.8 375.5 98.2 658.6 0.22

Basic metals and associated products 131.9 149.9 277.4 559.3 0.19

Air transport services 387.7 152.8 9.7 550.2 0.19

Various types of pulp, paper and 165.5 348.5 13.3 527.3 0.18paper products

Mining, quarrying and other 70.1 358.1 36.6 464.8 0.16associated products

Real estate services 19.2 380.9 29.4 429.6 0.15

Textiles and textile articles 158.3 244.1 0.8 403.2 0.14

Collected and purified water and 1.6 319.5 6.0 327.2 0.11water distribution

Leather and leather products 83.4 63.9 0.6 147.9 0.05

Wood, wood products, cork products, 25.5 96.2 20.3 142.0 0.05basketware and wickerwork

Uranium and thorium ores 88.6 21.9 0.4 111.0 0.04

Non-metallic mineral products 5.7 74.6 25.4 105.7 0.04

Agricultural, horticultural, hunting 1.8 80.8 82.5 0.03and related products

Coal, lignite, peat and other 13.0 22.5 45.1 80.7 0.03coal-related products

Products of the forestry and logging 1.5 32.3 7.3 41.1 0.01industry

Recovered secondary raw materials 10.0 2.9 0.4 13.3 0.00

Tobacco, tobacco goods and supplies 1.5 8.5 0.09 10.0 0.00

Fish, fishing products and other 0.4 8.8 9.2 0.00by-products of the fishing industry

Metal ores 0.2 0.6 0.9 1.7 0.00

Not covered in others 6.9 8.3 89.8 0.03

Others 991.4 2918.8 346.6 4256.8 1.45

Total 91071.9 150059.3 52352.8 293484.1 100

Source: WTO


Table 2.5(a): Trend in Japan�s government procurement(value in thousand SDR)

Types of 2000 (share % 2010 (share % Increase in 2010procurement in total) in total) over 2000 (No. of

times)

Goods 5153519 (38) 6992655 (36) 1.4

Construction 6043404 (45) 5502342 (29) 0.9

Services 2350908 (17) 6715096 (35) 2.9

Total 13547831 (100) 19210092 (100) 1.4

Note: Figures in parentheses indicate respective share in total procurement.Source: WTO

Table 2.5 (b): Japan government procurement status(2010, value in thousand SDR)

Annex 1 Amount Share intotal (%)

Construction work 28,13,413 16.12

Computer and related services 15,65,168 8.97

Office machines and automatic data processing equipment 9,04,007 5.18

Telecommunications and sound recording and reproducing 4,99,636 2.86apparatus and equipment

Miscellaneous articles 2,23,576 1.28

Medicinal and pharmaceutical products 1,39,169 0.80

Publishing and printing services 93,376 0.54

Electrical machinery, apparatus and appliances, and electrical 88,684 0.51parts thereof

Road vehicles 69,881 0.40

Mineral products 68,536 0.39

Architectural, engineering and other technical services 67,367 0.39

Advertising services 62,599 0.36

Aircraft and associated equipment 36,739 0.21

Repair services incidental to metal products, machinery and 36,399 0.21equipment

Professional, scientific and controlling instruments and apparatus 33,494 0.19

Share of top 15 in Annex 1 67,02,044 38.41

On-line information and/or data processing (including transaction 29,299 0.17processing)

Wood and articles of wood; wood charcoal, cork and articles of 24,084 0.14cork; paper making material; paper and paperboard and articles


thereof: manufactures of straw of esparto and of other plantingmaterials, basketwork and wickerwork

Building-cleaning services 23,163 0.13

Ships boats and floating structures 20,491 0.12

Power generating machinery and equipment 19,602 0.11

Market research and public opinion polling services 18,187 0.10

Other land transport services (except mail transportation by land) 12,573 0.07

On-line information and database retrieval 12,190 0.07

Machinery specialised for particular industries 11,956 0.07

Textiles and textile articles, footwear, headgear umbrellas; 11,334 0.06sunshades; walking sticks, whips, riding crops and parts thereof:travel goods; hand-bags and similar containers; articles of appareland clothing accessories, of leather or composition leather

Medical, dental, surgical and veterinary equipment 9,462 0.05

Sewage and refuse disposal, sanitation and other environmental 9,151 0.05protection services

Iron and steel and articles thereof, other than boilers and radiators 9,125 0.05for central heating, air heaters and hot air distributors notelectrically heated

General industrial machinery and equipment, and machine parts 7,473 0.04

Rental services of sea-going vessels with operator 6,207 0.04

Freight transport agency services 6,163 0.04

Photographic apparatus, equipment and optical goods; watches 6,132 0.04and clock

Furniture and parts thereof 5,425 0.03

Products from agriculture, and from agricultural and good 4,002 0.02processing industries

Products of the chemical and allied industries 3,528 0.02

Non-ferrous metals and articles, other than lamp and 2,693 0.02lighting fittings

Air transport services (except mail transportation by air) 2,552 0.01

Artificial resins and plastic materials, cellulose esters and ethers, 2,356 0.01and articles thereof rubber, synthetic rubber, factice, and articlesthereof; raw hides and skins, leather, furskins and articles thereof,other than articles of apparel and clothing accessories of leather,saddler and harness, articles of animal gut

Electronic data interchange (EDI) 1,538 0.01

Courier services 1,531 0.01

Maintenance and repair services of motor vehicles 859 0.00

Sanitary, plumbing, heating and lighting equipment 561 0.00

Enhanced facsimile services 430 0.00


Electronic mail 279 0.00

Armoured car services 260 0.00

Articles of stone, plaster, asbestos, mica and similar materials; 123 0.00ceramic products, other than sanitary fixtures; glass andglassware, other than illuminating and signalling glassware andoptical elements of glass, not optically worked nor of optical glass

Sub-total 69,64,773 39.91

Annex 2

Goods 4256200 24.39

Construction 2551657 14.62

Services 3680505 21.09

Sub-total 104,88,361 60.09

Grand Total 174,53,134 100.00

Note: The data included here is not exhaustive, and therefore it might nottally with the aggregate figure.

Source :WTO

Table 2.6(a): Trend in Korea�s government procurement(value in million Won)

Type of procurement 2003 2010 Increase(no. of times)

Goods 7163542 2177974 0.30

Construction 1,14,04,571 1,61,29,309 1.41

Services 6,57,383 13,82,558 2.10

Total 19225496 19689841 1.02Source: WTO


Table 2.6(b): Korea government procurement status(2010, value in million Won)

Type of procurement Total ShareAmount (%)

Construction work 16129309 81.9

Machinery and machinery appliance, electrical equipment, parts 1600977 8.1thereof, sound recorders, and reproducers, television image andsound recorders and reproducers, and parts and accessories ofsuch article

Legal, accounting, auditing and book-keeping services; taxation 441609 2.2services; market research and public opinion; polling servicesmanagement and consulting services; architectural, engineeringand other technical services

Base metal and article of base metals 261687 1.3

Computer and related services 166537 0.8

Optical, photographic, cinematographic, measuring, checking, 104862 0.5precision, medical and surgical instrument and apparatus, clocksand watches, musical instrument, parts and accessories thereof

Sewage and refuse disposal, sanitation and other environmental 102322 0.5protection services

Research and development services 96178 0.5

Public administration and other services to the community as a 64124 0.3whole; compulsory social security services

Miscellaneous manufactured articles 56798 0.3

vehicle, aircrafts, vessels, and associated transport equipment 44849 0.2

product of the chemical and allied industries 33077 0.2

Commission agents� and wholesale trade services, except of motor 31856 0.2vehicles and motorcycles

Sale, maintenance and repair services of motor vehicles and 31241 0.2motorcycles

Article of stone, plaster, cement, asbestos, mica or similar material,ceramic product, glass and glassware 19596 0.1

Land transport services, Air transport services 18538 0.1

Mineral product 16894 0.1

Education services 10068 0.1

Plastic and article thereof 8978 0.0

Vegetable product 7352 0.0

Post and telecommunications services 6290 0.0


Pulp of wood or other fibrous cellulosic material, waste and scrap 5972 0.0of paper or paperboard, paper and paperboard article thereof

Financial inter-mediation services and auxiliary services therefore 5265 0.0

Recreational, cultural and sporting services 4321 0.0

Publishing and Printing 3734 0.0

Lives animal 3316 0.0

Textile and textile article 2919 0.0

Health and social services 2584 0.0

Business services n.e.c. 2567 0.0

Leasing or rental services without operator 1603 0.0

Wood and articles of wood; wood charcoal, cork and articles of cork; 1130 0.0paper making material; paper and paperboard and articles thereof:manufactures of straw of esparto and of other planting materials,basketwork and wickerwork

Real estate services 1117 0.0

Works of arts, collectors pieces and antiques 1117 0.0

Animal or vegetable product fats and oil and their cleavage, 489 0.0prepared edible fats, animal or vegetable wax

Others 400565 2.0

Total 19689841 100.0

Source: WTO

Table 2.7(a): United States (value in USD billion)

Entity 2000 Share 2008 Share Increase in% % 2008 over 2000

(no. of times)

Goods/ Services 57.12 90.04 379.41 57.64 6.64

Construction 6.32 9.96 278.84 42.36 44.09

Total 63.50 100.00 658.25 100.00 10.37

Source: Authors� computation based on WTO data


Table 2.7(b): Total Goods Procurement in 2008(Value in USD billion)

Goods Name Value Share (%)

Medical/Dental/Veterinary Eqpt/Supp 58.64 38.0

Hardware And Abrasives 31.50 20.4

Fire/Rescue/Safety; Enviro Protect 14.46 9.4

Fuels, Lubricants, Oils, Waxes 12.21 7.9

Instruments And Laboratory Eqpt 8.84 5.7

Miscellaneous Items 7.67 4.9

Adp Eqpt/Software/Supplies And Eqpt 2.22 1.4

Chemicals And Chemical Products 2.21 1.4

Subsistence 1.76 1.1

Lighting Fixtures, Lamps 1.21 0.8

Motor Vehicles, Cycles, Trailers 1.13 0.7

Comm/Detect/Coherent Radiation 0.02 0.02

Photographic Eqpt 0.01 0.01

Furnace/Steam/Drying; Nucl Reactor 0.01 0.01

Electrical/Electronic Eqpt Compnts 0.01 0.01

Clothing/Individual Eqpt, Insignia 0.002 0.002

Electric Wire, Power Distrib Eqpt 0.0008 0.001

Others 12.26 7.9

Total 154.23 100.00Source: WTO


Table 2.7( c): Total Service Procurement in 2008(value in USD billion)

Service Name Value %

Architect/Engineer Services 65.45 34.6

Support Svcs (Prof, Admin,Mgmt) 59.85 31.7

Adp And Telecommunications 11.11 5.9

Operation of Govt Owned Facility 10.82 5.7

Utilities AndHousekeeping 5.15 2.7

Utilities AndHousekeeping 5.11 2.7

Special Studies/Analysis 4.68 2.5

Maint, Repair, Rebuild Equipment 3.49 1.8

Medical Services 3.22 1.7

Lease/Rent Facilities 1.94 1.0

Natural ResourcesManagement 1.83 0.9

Social Services 1.08 0.6

Purchase Of Structures/Facilities 0.034 0.02

Lease/Rent Equipment 0.032 0.02

Installation Of Equipment 0.02 0.01

Others 15.15 8.02

Total 189.01 100.00Source: WTO

Table 2.7(d): Total Construction Service Procurement in 2008(value in USD billion)

Construction Service Value %

Construction of Structures/Facilities 201.56 72.3

Maint, Repair, Alter Real Property 77.28 27.7

Total 278.83 100.00

Source: WTO


Table 2.8: Estimates of government procurement of selected sixnon-GPA countries (US$mn)

Countries Year

2005 2007 2010 2005 2007 2010

GP at 10 percent of adjusted GG GP at 30 percent of adjusted GG

Australia 15926.4 20571.7 26433 47779.2 61715.1 79298.9

Brazil 16744.8 26195.2 48485.1 50234.5 78585.5 145455.2

China 120420.4 180120.2 345949.4 361261.2 540360.6 1037848

Malaysia 3233.6 4369.901 5153.6 9700.8 13109.7 15460.8

Mexico 23905.9 30045.5 30765.3 71717.8 90136.6 92295.9

Russia 15556.8 26970.1 29278.9 46670.4 80910.2 87836.7

Total 195787.9 288272.601 486065.3 587363.9 864817.7 1458195.5

Source: Computed by the author based on databank, The World Bank,available at http://databank.worldbank.org/

Table 2.9: Growth Trend in Government Procurement ofSelected Countries vis-à-vis India

(CompoundAnnual Growth Rate in percent, 2005-2010)

Australia Brazil China Russian Malaysia Mexico IndiaFederation

10.7 23.7 23.5 13.5 9.8 5.2 14.1Source: Computed by the author based on World Bank data available athttp://databank.worldbank.org/

Table 2.10: Estimate of India�s contestable governmentprocurement market (USDmillion)

2005 2007 2010

GDP (current US$) 834216.9 1238700 1684324

General government final consumption 90713.21 127424.9 199884.8expenditure (current US$)

Gross fixed capital formation (current US$) 253039.1 407761 511692.2

Net current transfers (BoP, current US$) 23642.75 37143.83 52157.52

Compensation of employees (US$) 10549.37 12786.55 22927.93

Subsidies and other transfers (US$) 59992.47 93545.1 153748.2

Source: http://databank.worldbank.org/


Estimate of Government Procurement for IndiaAdjusted GG expenses 249567.7 391710.4 482743.4

10 percent 24956.77 39171.04 48274.34

30 percent 74870.3 117513.1 144823

GG as percent of GDP 29.92 31.62 28.66

Final consumption as percent of GDP 10.87 10.29 11.87

Final Consumption + Capital Formation as 41.21 43.21 42.25percent of GDP

Table 2.11 (a): Trend in Canada�s Sector-wiseGovernment Procurement in Goods

Sector/product category 2009

Value of Procurement % Increase in(USD billion) Imports fromexchange rate: India in 2011

1.0818 over 2009

Mineral Products 0.61 39.41 18.3

Furniture and Parts thereof 0.12 8.01 2.3

Road Vehicles 0.11 6.91 2

Aircraft and Associated Equipment 0.06 3.96 1.7

Textiles and textile articles 0.03 1.72 1.6

Electrical Machinery 0.02 1.58 1.9

Products of the Chemicals & Allied 0.01 0.9 2.3industries

Medicinal and Pharmaceutical Products 0.01 0.86 2.3

Power generating machinery andequipment 0.01 0.67 1.7

Iron and Steel Articles 0.01 0.58 2.9

Ships, Boats and Floating Platforms 0.01 0.5 na

Medical, technical, and optical 0.16 10.11 1.5equipment and apparatus

TOTAL 1.16 75.21 2.3

*Exchange rate source: http://www.oanda.com/currency/historical-rates/**Source: Indian export data has been extracted from ITC trade map data:http://www.trademap.org,***From table 2(b), the product procurement data for Canada is extracted.In order to estimate the opportunities for India in the Canadian GP marketthe focus has been on the products which also accounts for Indian majorexports to Canada.


Table 2.11(b): Trend in Chinese Taipei�s Sector-wiseGovernment Procurement in Goods (value in TWD)

Sector/Product Category 2011

Value (USD % Percentage sharebillion) exchange of Imports fromrate: 0.0339 India to India�s

total exports

Pharmaceutical products 0.205 25.39 0.06

Computing machinery and parts and 0.133 16.49 0.56accessories thereof (for ADP)

Motor vehicles, trailers and semi- 0.03 3.72 0.07trailers; parts and accessories thereof

Gas generators; distilling plant; air 0.007 0.83 3.76conditioning and refrigerating equipment;filtering machinery

Textiles articles other than apparel 0.006 0.79 0.08

other electric equipment and parts thereof 0.003 0.37 0.25

Wearing apparel, except fur apparel 0.002 0.24 0.04

Basic precious metals and metals clad 0.001 0.13 0.04with precious metals

Rolled, drawn and folded products of 0.001 0.11 0.07iron and steel

Semi-finished products of copper, nickel, 0.001 0.09 10.48aluminium, lead, zinc and tin or their alloy

Chemical products n.e.c 0 0.03 0.77

Measuring and medical apparatus 0.028 4.73 0.18

TOTAL 0.417 52.92 1.44

*Exchange rate source: http://www.oanda.com/currency/historical-rates/

**Source: The data on Indian exports to Chinese Taipei is sourced from ITCtrade map:http://www.trademap.org

*** The procurement data has been extracted from table 3(b) and focus hasbeen on the products which also accounts for major imports from India, inorder to understand the competence of the Indian product in the ChineseTaipei�s market.


Table 2.11 (c) : Trend in European Union Sector-wiseGovernment Procurement in Goods

Sector/Product Category 2007

Value in (USD % Increase inbillion) exchange Imports fromrate: 1.3702 India in 2011

over 2007

Chemical products and man-made fibre 20.9 15.13 1.74

Electricity, gas, nuclear energy and fuels, 19.1 13.83 1.51and other sources of energy

Motor vehicles, trailers and vehicle parts 5.5 4.01 2.15

electrical machinery, apparatus, equipment 5.1 3.72 2.58and other consumables

Petroleum, crude petroleum, coal products 6.6 4.76 2.84

Clothing and footwear 3.8 2.74 1.49

Textiles and textile articles 0.6 0.4 1.29

Fish, fishing products and other by- 0 0.01 1.33products of the fishing industry

Medical and laboratory devices, Optical 15.2 10.97 1.95and precision devices

Total 76.8 55.55 2.07


**Source: The data on Indian exports to European Union is sourced fromITC trade map:http://www.trademap.org, for the top 15 countries whichalmost account for 90 precent of total procurement amount of EU.

*** The procurement data has been extracted from table 4(d) the total ofAnnex 1, 2 and 3 and focus has been on the products which also accounts formajor imports from India, in order to understand the competence of theIndian product in the European Union�s market.


Table 2.11(c: 1) The Imports from India toEuropean Union for the year 2011

Products imported from India by Country with Highest shareEuropeanUnion*** maximum share in total EU�s

in imports from imports fromIndia. India (%)

Chemical products and man-made fibre Germany 19.85

Electricity gas, nuclear energy and fuels, and other Uk 23.06sources of energy

Motor Vehicles, trailers and Vehicle parts UK 4.78

Electrical machinery, apparatus, equipment and Germany 19.96other consumebles

Petroleum, crude petroleum, coal products Netherlands 57.78

Clothing and footwear Germany 17.75

Textiles and textile articles Germany 28.37

Fish, crustaceans, molluscs, aquatic invertebrates nes Spain 24.17

Medical and laboratory devices, Optical and Germany 34.66Precision devices

*Source: The above data has been extracted from ITC trade map : http://www.trademap.org

** 15 countries from European Union has been selected for which the datahas been compared, are : UK, Italy, France, Spain, Germany, Greece,Poland, Sweden,Belgium, Netherland, Denmark, Ireland, Austria, Romaniaand Slovenia, together they account for 90 percent of total productprocurement of European Union in the year 2007 for which the data hasbeen analysed.

*** These products are also part of EU-GP market as shown in table 11(c).


Table 2.11(d): Total Goods Procurement Japan (2010)Name of the goods 2010

Value % Increase in Imports(USD from India in 2011Billion) over 2010 (no. of times)

Mineral products 0.1 3.11 1

Medicinal and pharmaceutical products 0.2 6.32 2.76

Textiles and textile articles, 0.0 0.51 1.81

Iron and steel and articles thereof, 0.0 0.41 1.74

Power generating machinery and equipment 0.0 0.89 1.29

Electrical machinery, apparatus and 0.1 4.03 1.44appliances, and electrical parts thereof

Road vehicles 0.1 3.17 1.67

Aircraft and associated equipment 0.1 1.67 4.91

Ships boats and floating structures 0.0 0.93 1243.7

Medical, technical, and optical equipment 0.1 2.23 0.69and apparatus

Office machines and automatic data 1.4 41.05 naprocessing equipment

Articles of Stone, plaster, cement, asbestos, 0.0 0.01 1.26mica, etc articles

Total 2.2 64.34 1.12

*SDR/USD= 1.54003 on 30th Dec,2010

** Source: The data on Indian exports to Japan is sourced from ITC trademap:http://www.trademap.org

*** The procurement data has been extracted from table 5(b) and focus hasbeen on the products which also accounts for major imports from India, inorder to understand the competence of the Indian product in Japan�s market.


Table 2.11(e): Total Goods Procurement of Korea (2010)Name of the Goods 2010

Value (USD % Increase inbillion) exchange Imports fromrate: 0.000914 India in 2011

over 2010

Machinery and machinery appliance, 1.441 73.78 1.97electrical equipment

Base metal and articles of base metal 0.236 12.06 1.41

Optical, photographic, medical and 0.094 4.83 1.42surgical instruments

Articles of stone and plaster 0.018 0.9 1.21

Mineral products 0.015 0.78 1.53

Plastic and articles thereof, 0.008 0.41 2.09

Textile and textile articles 0.003 0.13 1.77

Works of arts, collectors pieces and 0.001 0.05 5.43antiques

animals or vegetable product, fats 0.000 0.02 1.71and oil and their cleavage

Total 1.816 92.97 1.56


**Source: The data on Indian exports to Korea is sourced from ITC trademap:http://www.trademap.org



Table 2.11 (f): Total Goods Procurement of United States(2008)Name of the Goods 2008

(USD million) % Increase inImports fromIndia in 2011over 2008

Aircraft, spacecraft, and parts thereof 0.02 0.01 0.84

Vehicles other than railway, tramway 1.13 0.73 1.46

Electrical, electronic equipment 0.01 0.01 1.18

Drugs and Biological 56.92 36.9 2.42

Optical, photo, technical, medical, 10.59 6.87 1.33etc. apparatus

ADP equipment/ software supplies 2.22 1.44 1.13

Office Furniture 0.17 0.11 1.84

Textile and Clothing 0.00 0 1.17

Bakery and cereal products 0.31 0.2 1.81

Fuels, lubricants, oils and waxes 12.22 7.92 5.96

Heat exchangers and steam condensers 0.01 0.01 na

Total 83.60 54.2 1.67

Exchange rate source: http://www.oanda.com/currency/historical-rates/

Source: The data on Indian exports to United States is sourced from ITCtrade map:http://www.trademap.org


Table 2.12: Total potential market opportunity for IndiaName of the Total Share of contestable Increase in the Imports fromCountry contestable market in Total product India, in Productsprocured,

market for procurement/Expected in 2011 over the last yearIndia (US$bn) market penetration considered for each country

(in percentage) (no. of times)

European Union 76.8 55.55 2.1

United States 83.6 54.2 1.7

Japan 2.2 64.34 1.1

Canada 1.2 87.26 2.3

Korea 1.8 93.02 1.6

Chinese Taipei 0.4 52.92 na

Total (USD) 166.0


Table 2.13: Estimating sector-wise opportunitiesProduct name European United Japan Canada Korea Chinese GP

Union States (%) (%) (%) Taipei (US$bn)(%) (%) (%) market

Textile and Textile articles 90.9 0.4 2.9 4.4 0.4 1.1 0.61

Optical, photographic, 58.1 40.6 0.3 0.6 0.4 0.1 26.11medical and surgicalinstrument

Pharmaceuticals na 99.2 0.4 0.02 na 0.4 57.35

Mineral Products 33.71 62.56 0.54 3.11 0.08 na 19.53

Electrical machinery and 76.1 0.2 2 0.4 21.3 0.04 6.75Electronic equipment

Machinery, Nuclear 99.72 0.07 0.16 0.05 na na 19.17reactors, Boilers etc

Motor Vehicles, trailers 80.11 16.36 1.56 1.54 na 0.43 6.92and vehicle parts

*Source: Computed by the author .The data has been compiled from theabove tables 11 (a),(b), (c),(d), (e) &11 (f), the products which werecommon among all the tables are compiled in order to assess the sector-wiseopportunity for India in each of the countries in each of the sectors, asshown in the table.

** It is to be noted that �na� implies that in GPA member-country, thatsector is not necessarily open for India. Even if the product is in the GP listof the concerned country Indian opportunity in the product relatively low.

Table 2.14: Estimate of Future GPMarket PotentialCountries GDP 2008 Estimated size of GP GP Market likely

(US$mn) market (US$mn) to be Covered bythe GPA (US$mn)

Lower Upper Lower UpperLimit Limit Limit Limit

A. If countries which have applied accede to the GPA

Albania 12,969 1,945 2,594 324 830

Armenia 11,917 1,788 2,383 298 763

China 45,21,827 6,78,274 9,04,365 1,13,046 2,89,397

Georgia 12,795 1,919 2,559 320 819

Jordan 22,697 3,405 4,539 567 1,453

The Kyrgyz Republic 5,140 771 1,028 129 329


Moldova 6,055 908 1,211 151 388

Oman 60,299 9,045 12,060 1,507 3,859

Panama 23,184 3,478 4,637 580 1,484

Ukraine 1,80,355 27,053 36,071 4,509 11,543

Sub-Total 48,57,238 7,28,586 9,71,448 1,21,431 3,10,863

B. If countries with commitments to join the GPA in their respective WTO accessionprotocols accede to the GPA

Croatia 69,333 10,400 13,867 1,733 4,437

The Former Republic 9,518 1,428 1,904 238 609of Macedonia

Mongolia 5,258 789 1,052 131 337

Saudi Arabia 4,75,093 71,264 95,019 11,877 30,406

Sub-Total 5,59,202 83,880 1,11,840 13,980 35,789

C. If countries/WTO members without GPA accession commitments accede to the GPA

Argentina 3,26,583 48,987 65,317 8,165 20,901

Australia 10,39,415 1,55,912 2,07,883 25,985 66,523

Brazil 16,37,924 2,45,689 3,27,585 40,948 1,04,827

Chile 1,70,850 25,628 34,170 4,271 10,934

Colombia 2,42,579 36,387 48,516 6,064 15,525

COMESA 5,31,390 79,708 1,06,278 13,285 34,009

India 12,14,212 1,82,132 2,42,842 30,355 77,710

Indonesia 5,10,502 76,575 1,02,100 12,763 32,672

Mexico 10,89,878 1,63,482 2,17,976 27,247 69,752

New Zealand 1,17,817 17,673 23,563 2,945 7,540

Peru 1,29,109 19,366 25,822 3,228 8,263

Russia 16,66,951 2,50,043 3,33,390 41,674 1,06,685

South Africa 2,76,451 41,468 55,290 6,911 17,693

Turkey 7,30,337 1,09,551 1,46,067 18,258 46,742

Vietnam 81,270 12,190 16,254 2,032 5,201

Sub-Total 97,65,268 14,64,790 19,53,054 2,44,132 6,24,977

D. Grand Total 1,51,81,708 22,77,256 30,36,342 3,79,543 9,71,629(A+B+C)


Table 2.15: Potential gains from acceding to GPA

Parties

Sector European Japan United TotalUnion (2007) (2008) States (2008)

Construction Services 125.7 11 287 423.7

Pharmaceutical Products, 15.1 1.46 120 136.56Health Services

Computer and Related 46.5 2.1 1.6 54.83Services

Telecommunication Services 4.1 0.531

Chemical Products 21 7.2 2.24 23.25

Fuels and Petroleum 4.5 � 12.3 16.8Products

Machinery and Associated 14 0.329 0.518 14.85Products

Textile, Clothing and 4.4 0.019 � 4.42Footwear

Plastic and Rubber Products 0.903 0.003 0.053 0.959

Wood Products 0.195 0.062 � 0.257

TOTAL 236.4 15.51 423.71 675.63

Source: Extracted from Robert D. Anderson, Philippe Pelletier, Kodjo Osei-Lah and Anna Caroline Müller, Assessing the Value of Future Accessions tothe WTO Agreement on Government Procurement, 2011

Table 2.16: Distribution of estimated procurement contractsawarded by Chinese Taipei to firms in other GPA parties (2011)

Countries Share (%)

Chinese Taipei (TPKM: Separate Customs Territory ofTaiwan, Penghu, Kinmen and Matsu) 95.1

USA 1.7

EU 2.1

Japan 0.4

Other Countries 0.7

Total 100

Source: WTO


Table 2.17: Distribution of estimated procurement contractsawarded by the EU to firms in other GPA parties (2007)

Countries Number of Share based on maxcontracts/lots estimated value (%)

Canada 105 7.1

Chinese Taipei 1 0.0

Hong Kong, China 2 0.3

Iceland 29 0.1

Israel 68 0.3

Japan 1247 7.0

Liechtenstein 5 0.0

Norway 47 5.2

Switzerland 1333 8.4

United States 11691 71.4

Total EU�s procurement 14,528 12,958awarded to other GPAparties (value in mn. Euro)Source: WTO

Table 2.18: Distribution of estimated procurement contractsawarded by Japan to firms in other GPA parties (2010)

Countries Share (%)

Japan 94.9

USA 1.0

Canada 3.0

EU 0.9

Switzerland 0.0

Other countries 0.1

Total 100.0

Source: WTO


Table 2.19: Distribution of estimated procurement contractsawarded by Korea to firms in other GPA parties (2003)

Countries Share (%)

USA 3.8

Japan 1.1

Austria 0.0

Canada 0.4

France 4.8

Switzer land 0.1

Belgium 0.4

Finland 0.0

Germany 0.5

Norway 0.5

Singapore 0.0

Sweden 0.1

UK 0.1

Israel 0.1

Others 87.9

Total 100.0

Source: WTO


Annexure 2.1: Total Goods Procurement(2008, value in US$)

Goods Name Value Share (%)

Medical/Dental/Veterinary Eqpt/Supp 58649350015 38.0

Drugs and Biologicals 56918424097

Medical And Surgical Instruments, Equipment, and 53,43,26,198Supplies

Dental Instruments, Equipment, and Supplies 14,35,46,505

X-Ray Equipment and Supplies: Medical, Dental, 1,05,30,53,215Veterinary

Hardware and Abrasives 31504728030 20.4

Bolts 30,46,59,99,988

Fastening Devices 1,03,87,28,042

Fire/Rescue/Safety; Enviro Protect 14,48,02,54,435 9.4

Fire Fighting Equipment 14,46,72,55,040

Heat Exchangers And Steam Condensers 1,29,99,395

Fuels, Lubricants, Oils, Waxes 12218344628 7.9

Liquid Propellants And Fuels, Petroleum Base 10,90,47,45,128

Liquid Propellant Fuels And Oxidisers, 56,15,710Chemical Base

Fuel Oils 1,30,79,83,790

Instruments and Laboratory Eqpt 8841785702 5.7

Physical Properties Testing and Inspection 14,96,833

Laboratory Equipment and Supplies 7321996713

Optical Instruments, Test Equipment, Componentsand Accessories 9,74,16,526

Liquid-Gas-Motion Measuring Instrument 1,42,08,75,630

Miscellaneous Items 7672017019 4.9

Adp Eqpt/Software/Supplies and Eqpt 2222439363 1.4

Adpe System Configuration 13,21,19,985

Adp Software 6,58,72,189

Adp Support Equipment 1,13,22,687

Adp Supplies 2,01,31,24,502

Chemicals and Chemical Products 2216418126 1.4


Gases: Compressed and Liquefied 1165798955

Miscellaneous Chemical Specialties 1,05,06,19,170

Subsistence 1768293580 1.1

Meat, Poultry, and Fish 1,05,69,04,652

Fruits and Vegetables 40,24,48,188

Bakery and Cereal Products 30,89,40,741

Lighting Fixtures, Lamps 1,21,10,06,093 0.8

Motor Vehicles, Cycles, Trailers 1131919785 0.7

Comm/Detect/Coherent Radiation 28833048 0.0

Photographic Eqpt 1,77,50,000 0.0

Furnace/Steam/Drying; Nucl Reactor 1,29,99,395 0.0

Electrical/Electronic Eqpt Compnts 1,05,84,843 0.0

Clothing/Individual Eqpt, Insignia 24,20,000 0.0

Electric Wire, Power Distrib Eqpt 8,90,500 0.0

Others 12,26,01,15,511 7.9

Total 1,54,23,71,50,678.75 100.00

Annexure 2.2: Total Service Procurement (2008, value in USD)

Service Name Value Share (%)

Architect/Engineer Services 65,45,00,42,669 34.63

Administrative and Service Buildings 12,89,000 0.00

Hospital Buildings 1,90,57,747 0.03

Research and Development Facilities 6,65,02,50,000 10.16

Architect - Engineer Services 55,02,85,53,180 84.08

Engineering Drafting Services 77,57,788 0.01

Other Architect and Engineering Services 3,74,31,34,954 5.72

Support Services (Prof, Admin, Mgmt) 59,85,58,70,308 31.67

Programme Management/Support Services 2,88,84,44,201 4.83

Systems Engineering Services 83,19,32,403 1.39

Technical Assistance 1,05,46,18,093 1.76

Engineering and Technical Services 3,37,08,86,728 5.63

Other Professional Services 11,84,68,52,054 19.79

Translation and Interpreting Services 4,71,07,27,225 7.87

Other Administrative Support Services 1,03,49,60,055 1.73

Advertising Services 2,45,41,58,527 4.10


Other Management Support Services 31,66,32,91,023 52.90

Adp and Telecommunications 11,11,25,26,184 5.88

Adp Facility Operation and Maintenance Services 58,66,22,094 5.28

Adp Systems Development Services 1,41,19,422 0.13

Other Adp and Telecommunications Services 10,51,17,84,668 94.59

Operation of Government owned Facility 10,82,34,94,660 5.73

Operation of Office Buildings 66,81,01,080 6.17

Operation of Restoration of Real Property 10,15,53,93,580 93.83

Utilities and Housekeeping 5,15,84,93,183 2.73

Vocational/Technical 1,37,82,621 0.27

Other Education and Training Services 5,14,47,10,562 99.73

Utilities and Housekeeping 5,11,08,90,658 2.70

Guard Services 86,04,49,947 16.84

Laundry and Drycleaning Services 2,25,26,943 0.44

Facilities Operations Support Services 1,69,85,52,658 33.23

Other Housekeeping Services 2,52,93,61,110 49.49

Special Studies/Analysis 4,68,76,00,000 2.48

Maint, Repair, Rebuild Equipment 3,49,07,35,144 1.85

Maintenance: Aircraft and Airframe Structural 84,03,73,428 24.07Components

Maintenance :Service and Trade Equipment 19,95,12,515 5.72

Maint-Rep of Communication Eq 1,18,54,70,357 33.96

Maint-Rep of Elect. Eq 1,23,71,70,194 35.44

Maint-Rep of Medical-Dental-Vet Eq 2,82,08,650 0.81

Medical Services 3,22,42,66,199 1.71

General Health Care Services 5,33,93,804 1.66

Laboratory Testing Services 77,03,186 0.24

Cardio-Vascular Services 1,16,30,446 0.36

Internal Medicine Services 93,62,373 0.29

Orthopedic Services 1,15,24,266 0.36

Radiology Services 3,05,43,264 0.95


Nuclear Medicine 77,43,405 0.24

Other Medical Services 3,09,23,65,454 95.91

Lease/Rent Facilities 1,94,31,48,101 1.03

Lease/Rental of Office Buildings 1,45,36,96,582 74.81

Lease/Rental of Hospitals and Infirmaries 10,81,25,959 5.56

Lease/Rental of Laboratories and Clinics 37,25,88,576 19.17

Lease/Rental of Other Residential Buildings 87,36,985 0.45

Natural Resources Management 1,83,16,31,902 0.97

Forest-Range Fire Suppression 35,82,77,117 19.56

Land Treatment Practices Services 33,52,400 0.18

Hazardous Substance Removal, Cleanup, and 1,09,96,70,825 60.04Disposal Services

Other Environmental Services 37,03,31,560 20.22

Social Services 1,08,24,28,858 0.57(Other Government Insurance Programmes)

Purchase of Structures/Facilities 3,40,00,000 0.02(Purchase of Unimproved Real Property)

Lease/Rent Equipment 3,17,44,935 0.02(Lease-Rent of Medical-Dental-Vet Eq)

Installation of Equipment 2,00,00,000 0.01(Installation of Furniture)

Others 15,15,15,17,607 8.02

Total 1,89,00,83,90,409 100.00

Source: WTO Article XIX statistics


Annexure 2.3: Total Construction Service Procurement(2008, value in USD)

Construction Service Value Share (%)

Construct of Structures/Facilities 2,01,55,77,88,392 72.28

Construct/Misc Bldgs 144086371639 71.49

Construct/Other Admin & Svcs Bldgs 25118749716 12.46

Construct/Other Residential Bldgs 15640984587 7.76

Contruct/All Other Non-Bldg Facs 4212519072 2.09

Construct/Troop Housing 2759994628 1.37

Construction of Office Buildings 2265879342 1.12

Construct/Other Hospital Bldgs 2210718071 1.10

Construct/Hospitals & Infirmaries 788114926 0.39

Others 4474456412 2.22

Maint, Repair, Alter Real Property 77,27,99,06,555.16 27.72

Maint-Rep-Alt/Other Hospital Bldgs 39034333109 50.51

Maint-Rep-Alt/Misc Bldgs 19824416442 25.65

Maint, Rep/Alter/All Other 5506942881 7.13

Maintenance, Repair or Alteration Of Other Utilities 4515556411 5.84

Maintenance, Repair or Alteration Of Water Supply 3841330314 4.97Facilities

Maint-Rep-Alt/Other Admin Bldgs 2503171714 3.24

Maint-Rep-Alt/Office Bldgs 598688935 0.77

Others 1455466749 1.88



Annexure 2.4: Estimating Government Procurement inSelectedNon-GPACountries

AustraliaAdjusted GG expenses increased with a current value ofUS$105065.5mn during 2005 to 2010. The value of GG expenses at10 and 30 percent level increased with a value of 10506.55 and31519.66 during the same period. It is observed that over the five-year period,GGexpenses, final consumption expenditure as percentageof GDP increased but at a slower pace. A similar trend is observed incase of other two variables: final consumption and capital formationas a percentage of GDP. This can be considered as indicative of nomajor shift in government procurement during the period.

Estimating value of government procurement in Australia

2005 2007 2010

GDP (Current US$) 696472 857056.6 1131623

General government final consumption expenditure(current US$) 120836.7 146723.7 206005.2

Gross fixed capital formation (current US$) 186630.6 240027.5 316843.4

Net current transfers (BoP, Current US$) -480.26 -288.13 -1387.69




Trend in Government Procurement for AustraliaAdjusted GG expenses 159264 205717.1 264329.5

10 percent 15926.4 20571.7 126432.95

30 percent 47779.2 61715.12 79298.86






BrazilBrazil�s GG expenses increased to US$484,850mn in 2010. This wasUS$317,402mnmore thanwhatwas recorded in 2005. It is also foundthat GG expenses as percentage of GDP increased to over 22 percent,recording an increase by 3.64 percentage points during the five-yearperiod. Correspondingly, the value of GG expenses at 10 and 30percent in 2010 increased to US$48,485 and US$1,45,455mnrespectively over 2005. This has resulted in about three times increasein value of procurement in the five-year period ending 2010.

ChinaThe result for China presents a slightly different scenario. This isbecause of inconsistency in data. It is found that data on compensationof employee and subsidies and other transfers are not available forChina with world databank, and therefore, the present estimate relieson other variables for arriving at government procurement figures.

Estimating value of government procurement in Brazil

2005 2007 2010

GDP (Current US$) 882185.3 1365983 2143035

General Government Final Consumption 175658.2 276683.3 453229.3Expenditure (current US$)

Gross Fixed Capital formation (current US$) 140606.8 238226.7 417065.6

Net Current Transfers (BoP, current US$) 3557.77 4028.99 2787.54

Compensation of Employees (US$) 38054.42 59873.38 94281.27

Subsidies and Other Transfers (US$) 107204.6 189056 288375.4


Trend in Government Procurement for Brazil

Adjusted GG expenses 167448.2 261951.5 484850.6

10 percent 16744.82 26195.15 48485.06

30 percent 50234.47 78585.46 145455.2





Based on the availability of data, China�s GG expenses during 2005to 2010 increased nearly three times toUS$3,459,494mn. Resultantly,GG share in GDP increased by an incremental 4.97 percent fromabout 53 percent in 2005 to over 58 percent in 2010. The resultantgovernment procurement in 2010 at 10 and 30 percent of adjustedGG expenses is estimated at US$345,949 andUS$1,037,848milllion.Incidentally, the latter figure (at 30 percent) coincides with otherestimates made for China which indicated government procurementin China to be over US$1tn.

Estimating value of government procurement in China

2005 2007 2010

GDP (current US$) 2256903 3494056 5930529

General government final consumption expenditure 322160.5 471908 788098.7(current US$)

Gross fixed capital formation (current US$) 905909 1366396 2712081


Compensation of employees (US$)

Subsidies and other transfers (US$)


Trend in Government Procurement for ChinaAdjusted GG expenses 1204204 1801202 3459494

10 percent 120420.4 180120.2 345949.4

30 percent 361261.2 540360.6 1037848



Final Consumption + Capital Formation as percent 54.41 52.61 59.02of GDP

MalaysiaTotal adjustedGGexpenses forMalaysia from2005 to 2010 increasedto US$51,536mn in 2010. This represents an increment ofUS$19,200mn current over 2005. Correspondingly, the adjusted GGexpenses at 10 and 30 percent level have increased to US$5,154 andUS$15,461mn. The estimates also show that while GG expenses as apercentage of GDP has decreased 1.77 percentage points, final


consumption expenditure and gross fixed capital formation aspercentage of GDP increased marginally by 0.18 percent during thesame time period. Overall the size of government procurementincreased by about 60 percent in the five-year period.

Estimating value of government procurement in Malaysia

2005 2007 2010

GDP (current US$) 137952.9 186777.3 237796.9

General government final consumption expenditure 17035.61 22806.03 30273.21(current US$)


Net current transfers (BoP, current US$) -4477.49 -4668.03 -6,782.70




Trend in Government Procurement forMalaysiaAdjusted GG expenses 32336.13 43699.01 51536.16

10 percent 3233.613 4369.901 5153.616

30 percent 9700.839 13109.7 15460.85




MexicoLike China, there is some inconsistency inmethodology for estimationof procurement for Mexico. Total adjusted general governmentexpenses ofMexico has been estimated by using only three variables,namely government final consumption expenditure, gross fixed capitalformation and net current transfers because the data for thecompensation of employee and subsidies and others transfers are notavailable. Total increment in the value of Mexico for adjusted GGexpenses is estimated atUS68593million. Estimates show that adjustedGGexpenses and final consumption expenditure and gross fixed capitalformation as percentage ofGDP increased by 1.54 and 1.01 percentagepoints respectively in 2010 compared to that of 2005. Governmentprocurement during the same periods is estimated to have grown by


about 30 percent, and was valued in the range of USD30765 toUSD92296million.

Estimating value of government procurement in Mexico2005 2007 2010

GDP (current US$) 848947.5 1035930 1035871




Compensation of employees (US$) na na na

Subsidies and other transfers (US$) na na na


Trend in Government Procurement forMexicoAdjusted GG expenses 239059.4 300455.4 307653.1

10 percent 23905.94 30045.54 30765.31

30 percent 71717.81 90136.61 92295.92




Russian FederationThe size of adjusted GG expenses of Russian Federation in 2010 isestimated at USD292,789 million. However, it is also observed thatadjusted GG expenses as a percent of GDP has marginally declinedin 2010. In comparison, data also reflect that final consumptionexpenditure and gross fixed capital formation as percentage of GDPhas increased by 6.51 percentage points from about 35 percent in2005 to 41 percent in 2010.Overall, government procurement appearsto have increased by over 90 percent in the five year periods, and ispresently estimated at $87,837 million, constituting 30 percent ofadjusted GG expenses.


Estimating value of government procurement inRussian Federation2005 2007 2010

GDP (current US$) 764000.91 299706 1487516


Gross fixed capital formation (current US$) 135651.4 272876.5 324148

Net current transfers (BoP, current US$) -1037.85 -3506.46 -3599.77




Trend in Government Procurement for Russian FederationAdjusted GG expenses 155568.1 269700.7 292788.9

10 percent 15556.8 126970.07 29278.89

30 percent 46670.43 80910.28 7836.68




Source: based on author�s estimate


Endnotes1 EconomicWeb Institute, http://www.economicswebinstitute.org/

glossary/pubexp.htm

2 See 2012 Index of Economic Freedom, The Heritage Foundation

3 Based on global GDP of US$69.99tn, as in World DevelopmentIndicators 2012.

4 As already described in other chapters.

5 Khi V. Thai, Public Procurement Re-Examined, Journal of PublicProcurement, Volume 1, Issue 1, 9-50 2001.

6 Frank Peck, Ignazio Cabras (2008), Public procurement andregional development: The impact of local authority expenditure onlocal economies, available at http://www.regional-studies-assoc.ac.uk/events/2008/may-prague/papers/Peck.pdf. Accessed on 6 November,2012.

7 As indicated at other places, the WTO Agreement on GovernmentProcurement (GPA) is a �plurilateral� agreement, and it does notapply to all Members. The GPA�s membership is limited to the WTOMembers that specifically signed the GPA or that have subsequentlyacceded to the Agreement.

8 Statistics reports under Article XIX:5 of the GPA: http://www.wto.org/english/tratop_e/gproc_e/gpstat_e.htm

9 EU�s Statistical Report of 2007 (see GPA/94/Add.4, dated 15 July2010)

10 European Commission, Annual Public Procurement ImplementationReview 2012

11 ibid.

12 Government Procurement in India, Domestic Regulations and Tradeprospects, CUTS International, 2012 (The report was based onfindings of the first phase of the current study, and was alsosponsored by the British High Commission, New Delhi).

13 Source: http://www.exchange-rates.org/Rate/INR/USD/3-31-2011

14 WTO, Thresholds in Annexes 1, 2 and 3 of Appendix 1 of theGovernment Procurement Agreement (expressed in SDR) availableonline at http://www.wto.org/english/tratop_e/gproc_e/thresh_e.htm

15 Europa Press Releases available at http://europa.eu/rapid/press-release_MEMO-11-922_en.htm?locale=en


16 While the selection of first year for analysis is also influenced byjoining year of GPA members; selection of the second year isinfluenced by latest available data as provided to the WTO bymember states.

17 The assumption is reinforced by the fact that 10 new membercountries accounted for less than 10 percent of total procurement ofthe EU in 2007, the latest available data.

18 Public Procurement in Europe, Cost and Effectiveness, A study onprocurement regulation. Prepared for the European Commission,March 2011, PWC, accessed on 15th November, 2012 and availableat: http://ec.europa.eu/internal_market/publicprocurement/docs/modernising_rules/cost-effectiveness_en.pdf

19 http://databank.worldbank.org/

20 Anirudh Shingal, Estimating market access in non-GPA countries: Asuggested methodology, 2012

21 Sangeeta Khorana and Sujitha Subramanian, Potential Accession tothe WTO Government Procurement Agreement: A case-Study onIndia, Journal of International Economic Law, 1�23, 2012; VivekSrivastava, India�s Accession to GPA: Identifying Costs and Benefits,National Council of Applied Economic Research, 2001

22 For details, see Anirudh Shingal, Estimating market access in non-GPA countries: A suggested methodology, 2012

23 Out of this total increase in GPA membership, 12 are from the EU.These countries joined GPA during 2004 to 2007. 25: R.D.Anderson, P.Pelletier, Kodjo Osei-lah & A.C. Miller �Assessing thevalue of future accession to the WTO Agreement on GovernmentProcurement (GPA)..� WTO�s working paper, 9 Oct 2011.

24 It is observed that in many cases, data are not consistent: while somedata are in SDR/USD/EURO, others are in local currencies. Toremove such inconsistency, data have been converted to USD byapplying exchange varying rates between different currencies.

25 The sector wise data is compiled from table 11 (a), (b), (c), (d), (e)&(f)..

26 Robert D. Anderson, Philippe Pelletier, Kodjo Osei-Lah and AnnaCaroline Müller, Assessing the Value of Future Accessions to theWTO Agreement on Government Procurement, 2011

3Understanding Limitationsto Market Access

The absence of the most-favoured nation principle in theAgreement on Government Procurement renders sculptingtrade relations based on reciprocity a seminal exercise duringthe process of negotiations. This is further accentuated by thefelt need of national governments to imbibe social objectivesinto their procurement strategy. The GPA itself contains afew exceptions which can be utilised � however, in practicemembers-countries have utilised extremely wide exceptionsand exclusions. It is critical to observe how welfare inducingprocurement objectives have been imbibed within theprocurement framework.

Chapter 2 quantified market access opportunities availablein member and non-member-countries for governmentprocurement. This chapter evaluates the GPA framework asa whole, and provides an assessment of country accessionexperiences.

A. Part A of this chapter provides further insights into thefollowing facets of the GPA framework: (i) Evaluatingan entity offer by a country � understanding howmarketaccess opportunities are sometimes qualified by the


entities which are listed by countries in their respectiveannexes read in conjunction with the exemptions andexclusions advanced by the countries; (ii) Exploringother policy instruments maintained by member-countries which may further erode market access; and(iii) the exclusions/exemptions advanced by themwithinthe scope of the GPA.

B. Part B of this chapter deals with the accessionexperiences of countries which have acceded to the GPAand those which are in the process of accession.

PART A: Assessment of the GPA FrameworkArticle I(1) of the 1994 GPA states that the agreement

applies to �any law, regulation, procedure or practice regardingany procurement by entities covered by Agreement, as specifiedin Appendix I�. The current GPA stipulates that the agreementapplies to any measure regarding covered procurement.1

Appendix I is constituted of Annex I (Central Entities), AnnexII (Sub-Central Entities), Annex III (Other Entities whichEngage in Procurement), Annex IV (Goods), Annex V(Services), Annex VI (Construction) and the General Notes.The General Notes set out the general derogations applicableto a Party�s coverage commitments in its annexes.2 Hencewhat constitutes a �covered entity� or a �procuring entity� forthe purposes of application of the disciplines of governmentprocurement3 is defined by the contours in these Annexes.

A plethora of factors individual to a country�s experiencedetermine as to which Annex (Annex I, Annex II, or AnnexIII) offers the best procurement opportunities.

In certain cases, maximum procurement activity may beundertaken by Annex I entities (central government entities),Annex II entities (sub-central government entities) or AnnexIII entities (other enterprises engaged in procurement)


depending on whether procurement is centralised ordecentralised, the constitutional devolution of powers on thecentre, state and local authorities, and public enterprisemanagement in a country. The impact of these facets is felt inthe following manner: the extent of decentralisation in acountry foretells the level to which the procurement isundertaken by sub-central or other government entities whichengage in procurement. Similarly, with respect to procurement,centre-state relations pertaining to devolution of finances, andadherence by the state to international treaty obligationsentered into by the Centre on behalf of the state will impacton the extent of obligations which will be undertaken by thestates/sub-central enterprises/federations. The publicenterprise management policy will determine the extant policypertaining to inducing competition resulting in privatisationin certain sectors (particularly the public sector entitiesengaged in providing utilities) in a country. Taken together,these factors determine the expectations other participantscan have with respect to the entity offer of a country.

As understood from the expectations of member-countriesto the GPA, countries are said to be negotiating in order toobtain an entity offer on the basis of �economic equivalence�.For this purpose, we seek to understand the �weight� or �value�of an entity offer in Annex I, Annex II, and Annex III. Weundertake this exercise by seeking to understand one amongstthe following factors (depending on data availability):� How is the allocation of finance to the entity which is

undertaking procurement channelled � does the entityengage in generating revenue, or is it allocated revenue basedon a budget? It is assumed that the source of finance is afactor which influences decision-making with respect toprocurement.

� In the case of Annex II entities, the primary question thatwe confront is whether the state in question is a federal


state or a unitary state? How are international treatyobligations implemented by the state governments inresponse to federal instructions in cases where statefinances are involved?

� In the case of Annex III entities, we seek to understand ifthe major entities which are engaged in providing utilitiessuch as water, transport, communications, energy etc. areincluded in the entity offer.

MethodologyThe approach taken in this chapter is as follows:

� Appraisal of an entity offer (the analysis is limited to AnnexI, Annex 2 and Annex 3) of a country, keeping in mind thefollowing:� Understand how commercial considerations pertaining

to economic strengths and reciprocity stands reflectedin the offers and commitments:� Countries sometimes exclude certain product

categories, or procurement pertaining to certainutilities based on economic considerations. Insightsfrom Chapter 2 on �Dynamics and Opportunities forIndia� inform and feed into this evaluation.

� Forging trade relations based on reciprocity gain anew dimension under the GPA negotiations in theabsence of the operation of Most-Favoured Nationprinciple. It is essential to study the reflection of thebilateral negotiations between countries in thecorresponding entity offers because countries exclude/include entities, conditions, sectors based on thesespecific bilateral negotiations. These are reflectedthrough the exemptions and exclusions advanced bycountries in their General Notes (which apply broadlyto the entire entity offer in Appendix I), annex-specific exemptions and entity-specific exemptions.


� Scrutinise the Integration of Social Objectives intoHorizontal Policies4 in Government Procurement:� Country governments, apart from fulfilling an

economic objective in procurement, are also requiredto implement welfare objectives pertaining toindustrial, social and environmental goals inprocurement. The Agreement on GovernmentProcurement contains limited flexibilities in its textto permit derogations based on welfare-objectives.It is essential to understand how these carve-outs havebeen integrated into the scope of the GPA bynegotiations between Parties.

While undertaking this evaluation, we are cognisant of thefact that the Agreement on Government Procurement is a newagreement, which is dynamically evolving to subsumemodalities which are being framed currently. Some of thereservations/exclusions taken up by themember-countries mayresult in distorting trade during their implementation. Theseidentified grounds should be addressed through the variousmechanisms present in the WTO such as requestingClarifications as an Observer to the Agreement onGovernment Procurement, and posing concerns in the TradePolicy ReviewMechanism of the respective member-countries.

Member-countries adapt and reflect reciprocalqualifications to market access in sectors and entities. Thisresults in changes to the commitments made by the member-countries which further limit market access for new entrants.Access to procurement in these restricted sectors or entitiesis subject to negotiation of extra market access within thescope of the GPA. This element will be covered in this chapterin the portion pertaining to reciprocity.5

Further, we are mindful that the value of the commitmentsunder member schedules are constantly changing owing to


state-specific actions like privatisation of entities, increasedcompetition in a sector, and conclusion of commitmentsoutside of the purview of the GPA in bilateral agreements andfree trade agreements.

Please Note:1. This chapter considers the amended text of the Agreement

on Government Procurement. The versions of the member-country annexes used are the versions which are availablein the public domain on the WTO website.

2. The chapter does not consider Annex 4, Annex 5 andAnnex6 in detail.

3. Reference to the entity offers of Switzerland are limitedbecause the documents are in French.

4. The Separate Customs Territory of Taiwan, Penghu,Kinmen and Matsu is referred to as �Taiwan� or �ChineseTaipei�.

Evaluation of Entity OfferWe seek to understand the value of an entity offer by

understanding certain critical facets of every Annex. Whileevaluating an entity offer, we attempt to understand whichgovernment entities procure the most, what they procure andwhether such procurement will benefit a new entrant withspecific strengths in production capacities. What is �coveredprocurement� and which entities are submitted to thedisciplines of the GPA?

ThresholdsThe thresholds indicate the value of the procurement

beyondwhich the disciplines of the Agreement onGovernmentProcurement are applicable. Even though the currentAgreement onGovernment Procurement allows for developingcountries to advance thresholds which will be reduced in


phases by allowing for the inclusion of a �threshold which ishigher than its permanent threshold�,6 thresholds are movingtowards being harmonised, indicating that flexibilities incoming up with different thresholds may be diminished inpractice.

Mode of Listing EntitiesParties can choose between a �list� approach and a �generic�

approach.List Approach: In the event the parties choose to utilise

the list approach, they can choose from between using thepositive list approach and the negative list approach.7

Generally, countries use the �positive list� approach in AppendixI. The United States has used the negative list in Annex IV onServices (outside the scope of this chapter). The advantage ofusing the list approach is that room for interpretation pertainingto contention on the entities is limited.

A �generic� approach does not list an entity explicitly, butlists it either through reference, or through a description.Including an entity through reference to legislation in caseswhere the organisational law of a listed entity enlists the entitiessubordinate to it reduces room for contention in cases whereprocurement is delegated, and control to procure is transferredto a body which is not listed under the GPA. Listing entitiesby using definition mentions certain conditions which wouldhave to be satisfied in order to consider the entity listed (�publicbody� definition).

In both approaches, listing through the �generic approach�provides room for interpretation.

The significance of using the generic approach is as follows:in the event a procurement is undertaken by an entity whichmay/may not be included under the generic approach, it isessential to first clarify as to whether the entity, for the purposeof the specific procurement, is a �covered entity� or not.


Exemptions/ExclusionsWe study the exemptions/exclusions from the following

perspectives: how do these exemptions and exclusions qualifythe market access available to a new entrant? And can similarexemptions and exclusions be advanced by a new entrant inorder to qualifymarket access opportunities to other countries?We are specifically interested in observing Horizontal Policieswhich have socialist objectives in enforcement of procurementpolicies. The analysis of experiences of countries which havealready acceded to the GPA have been presented separatelywith a focus on the flexibilities reserved by them to furthersocial objectives: we cover instances of Buy Nationallegislation, Green Procurement and preferences for Small andMedium Sized Enterprises.

Centre-State relations under the GPA with repercussionsfor GPA coverage and market access are dealt with in thecontext of understanding individual procurement experiencesin federations like the United States and Canada. Procurementin the utilities sector is presented as another facet with specificemphasis on the limitations on market access in this respect.

Country Accession ExperiencesThe analysis of experiences of countries which have

acceded to the GPA or which are in the process of accedingto the GPA or which have obligations to accede to the GPA inthe near future are covered in order to provide insights toeducate a new entrant on the process and techniques ofnegotiation.

Limitations: This chapter does not deal with �Trade inServices� of Construction Services. It dwells briefly on countryoffers in Annex V pertaining to Construction Services.

Assumptions: In cases where data is unavailable, increasedgovernment expenditure indicates increased opportunity forprocurement.


Significance of the Annexes in Appendix I of a Member�sGPA Commitments

As noted before, when engaging in bilateral negotiationswith a country, it is essential to first understand which levelof government (central, sub-central, public sector enterprises)undertakes the maximum procurement and the framework ofprocurement in that country. As mentioned earlier, the factorswhich determine whether Annex I, Annex 2 or Annex 3 entitiesmake themaximum procurement vary widely across countries.In the EU, as noted in Chapter 2 , Annex 1 procurement is thehighest in the UK, Spain, Netherland, Portugal, Greece andLuxembourg. However, in Italy and Finland, procurement byAnnex 2 entities accounts for more than 86 percent.Procurement undertaken by Annex 3 entities is most commonGreece and Finland.

Figures on central government expenditure varywidely fromcountry to country.While the central government spends upto90 percent in New Zealand, this comes down to a mere 15percent of total expenditure in Switzerland. Centralgovernments concentrate their expenditure in the fields ofgeneral public services, social protection and defence.Education, housing requirements, environmental protection,etc are the functions of sub central entities.8

Annex 1: Central Government Entities which Procurein Accordance with the Provisions of this Agreement

Generally, the ministries which feature most entity offersand which undertake a large quantum of procurement are: (i)Health; (ii) Education; (iii) Housing and Urban Development;(iv) Transportation; (v) Energy; (vi) Telecommunications; (vii)Infrastructure and Defence (even though defence is mostlyexcluded for the purposes of procurement, except for casesof non-sensitive items). Some entities account for the bulk of


the procurement � it has been mentioned earlier that in theUnited States, the departments and agencies engaged inDefence, Energy, Health and Human Services and Agricultureundertook more than 90 percent of the procurement. Apartfrom the procurement of goods, these entities are also engagedin the construction of various utilities.

Quantum of Central Government ExpenditureIn high-income countries, central government expenditure

is higher than those of state government entities or publicsector entities.9 This is represented in Table 3.1.

Proceeding on the assumption that in certain countries,increased central government spending creates opportunitiesfor increased procurement, we deduce that in countries likeFrance and Germany, the Annex I entity offer is of particularinterest.

Table 3.1: Central Government Expenditure Expressed as aPercentage in terms of the GDP

Country Central Government Expenditure: Share in GDP

France 46.6 percent

Germany 32.9 percent

US 21.1 percent

India 14.4 percent

China 8.1 percent

Turkey 20.9 percent

Source: Adil Khan, Reinventing Public Enteprises, in United Nations (2008)Public Enterprises: Unresolved Challenges and New Opportunities, Publicationbased on the Expert Group Meeting on Re-inventing Public Enterprise andtheir Management, 27-28 October 2005, New York, Department of Economicand Social Affairs, United Nations, New York.


Annex II: Sub-Central EntitiesThere are two questions pertaining to an offer which deals

in Sub-Central Entities. (i) does it have decision-makingauthority on whether the state/local government wishes tosubmit to GPA commitments? and (ii) in the event it doeshave the authority to decide, and the state entity decides toaccede to the GPA, can it then advance specific exclusionsand exemptions based on economic and social factors inoperation in the state?

David Collins states that regional procurement will besignificant in countries where procurement is highlydecentralised.10 He cites the population of a given city orprovince as an important indicator of tracing and determiningwhether the bulk of procurement activity is undertaken inthose cities or not. For example, the sub-central entities ofNew York, Michigan and Illinois had excluded procurementof structural grade steel and motor vehicles from Canada,indicating that this exclusion was sizeable and would have animpact on the market access available to Canada. Similarly, inCanada the provinces of Ontario, Quebec, British ColumbiaandAlberta have populations ofmore than threemillion each.11

These Canadian provinces can accept or reject the internationalagreements entered into by the central government.12

Considering the fact that procurement by state governmentsin aggregate is at least twice what is undertaken at the centralgovernment level, the volume of procurement undertaken bysub-central entities is sizeable.

The United States has not covered under its GovernmentProcurement commitments all of its 50 states (North Carolina,South Carolina and Virginia are notable exclusions) in itsAnnex II offer.


Annex III: Other Entities Engaged in ProcurementAnnex III deals with �Other Entities� dealing in

procurement. Generally, these �other entities� have beeninterpreted to include Public Sector Enterprises and StateOwned Entities. A large number of the entities list theseentities by focussing on the utilities that they provide. StateOwned Enterprises (SOE) burgeoned in both developed anddeveloping countries following World War II as an arm of thegovernment to address market deficits & capital shortfalls,promote economic development, reduce mass unemploymentand/or ensure national control over the overall direction ofthe economy, especially in developing countries. SOEs mainlyinvested in sectors which had a large investment requirementcoupled with risky returns, or a long gestation period.Examples of such industries include heavy industries,infrastructure, etc. These entities became plagued by obsoletetechnology, corruption and overstaffing.13 Disinvestments ofSOEs gathered momentum in the late 1990s � in developingcountries 49 percent of these came from the infrastructuresector, 19 percent from the primary sector, 16 percent frommanufacturing and 12 percent from financial services.14

Following the two world wars, UK and more generallyEurope embraced the socialist ideals of the state playing animportant role in education, infrastructure and health. Thisresulted in state ownership of �means of production in thepublic utilities.� Notable examples of state contributions inthe US are the Tennessee Valley Authority, and the role ofNASA and ARPA pertaining to the creation of the informationhighway in the 21st century. The state gradually reduced itsrole in the public sector and PPPs emerged as a form of stateparticipation.15


Assessing the inclusion of entities which undertakeprocurement pertaining to utilities in Annex III requires anunderstanding of the level of the country�s development. Thetable, which noted certain factors such as road density andnumber of sea and airports, is important because it can beused as an indicator of how much more activity is sought tobe undertaken in a particular area, and the resultant scope forprocurement, of materials pertinent for infrastructure, or ofconstruction services, or of the scope for public privatepartnerships.

Certain economic indicators pertaining to transport indicatethe level of infrastructure development in a country. Some ofthese indicators such as the number of airports and sea ports,the rail density (rail km/100 km sq) and road density (roadkm/100 km sq), have been noted in Table 3.3 on �IndicatorsInfluencing Infrastructure Development�.

Table 3.2: The Contribution of Public Entities to the GDP

Country Classified PE�s share PE�s share ofby Income ofGDP investment

High Income Countries 8 percent 13 percent

Middle Income Countries 9 percent 17 percent

Least Developed Countries 14 percent 28 percent

Source: Prahlad K. Basu, Reinventing Public Enteprises and TheirManagement as the Engine of Development and Growth, in United Nations(2008) Public Enterprises: Unresolved Challenges and New Opportunities,Publication based on the Expert Group Meeting on Re-inventing PublicEnterprise and their Management, 27-28 October 2005, New York,Department of Economic and Social Affairs, United Nations, New York.


Countries Undergoing No. of Ports and Rail Density Road Densitythe accession process/ Airports Terminals (rail km/100 (road km/100Countries with (2007) (2007) km(square)) km(square))Observer Status (2007) (2007)

Albania 3 4 1.6 65.7

China 403 7 0.8 20.7

Croatia 23 5 4.9 50.9

FYROM 10 0 2.7 n/a

Georgia 19 2 2.3 29.1

India 243 8 2.1 113.8

Jordan 15 1 0.6 9

Krgyz Republic 0 n/a 13.5 n/a

Table 3.3: Indicators InfluencingInfrastructure Development

Parties to the GPA No. of Ports and Rail Density Road DensityAirports Terminals (rail km/100 (road km/100(2007) (2007) km(square)) km(square))

(2007) (2007)

United States 5119 12 2.5 70

United Kingdom 334 8 6.8 160

South Korea 36 12 4.3 n/a

Singapore 9 1 n/a 463

Liechtenstein 0 0 5.6 n/a

Armenia 11 0 1.2 14.6

Canada 509 8 0.5 15.5

Germany 332 10 13.8 n/a

Hong Kong, China 3 1 n/a 186.5

Iceland 5 5 n/a 12.9

Israel 30 4 3.9 81

Japan 11 5 n/a 194

Switzerland 42 0 12.1 178

Taiwan, China 38 5 8 116

Source: World Development Indicators 2009


Goods-Annex 4 ProcurementCanada uses a positive list16 to limit the application of

Article III of the Agreement only to certain specified goods.The entities to which this limitation applies includes theDepartment of National Defence, Royal Canadian MountedPolice, Department of Fisheries and Oceans for the CanadianCoast Guard and Provincial police forces. Some members likethe EU have used Annex 4 to list products which constitutenon-sensitive procurement of non-warlike materials in the fieldof defence and security.17

Sensitive ProductsProducts pertaining to construction, like iron and steel,

shipbuilding, and repair, and products which form componentsof electrical appliances, such as electrical transformers, plugsand switches, office infrastructure and equipment and contractspertaining to communications, detection and coherentradiation equipment seem to be sensitive in terms ofnegotiation. The inclusion of these products may be motivatedby vastly different objectives, ranging fromwanting to achievebulk procurements from local/established office suppliers, toretaining control over bulk procurement in electricalappliances and components, to preserving confidentialitynorms in procurement pertaining to air traffic control

Moldova 6 0 3.5 39

New Zealand 45 5 1.5 35

Norway 67 8 1.4 30

Oman 6 2 n/a 11

Panama 53 3 0.5 16

Ukraine 193 8 3.9 29

Vietnam 26 2 0.8 72

Source: World Development Indicators 2009


equipment and communications, detection and coherentradiation equipment. The Sensitive Products which have beenexempted are listed in Table 3.4.

Table 3.4: Sensitive Products Subject to Exclusion under the GPA

Country

Canada

Canada

UnitedStates

Liechtenstein

EU

EU

EU

Other Countriesto Whom MarketAccess is denied

All .

E U

Japan

Canada

Canada

USA

Korea and Israel

Israel

Canada

Canada

USA

Product Categories which Market Access is denied

Shipbuilding and Repair

Urban Rail and Urban Transportation Equipment,systems, components and materials, project-relatedmaterials of iron and steel

Contracts dealing with communications, detection andcoherent radiation equipment

FSC 70, 74, 36 (special industry machinery, generalpurpose automatic data processing equipment, software,supplies and support equipment, office machines, visiblerecord equipment)

Procurement by National Aeronautics and SpaceAdministration

FSC 36,70, 74 (special industry machinery, generalpurpose automatic data processing equipment, software,supplies and support equipment, office machines, visiblerecord equipment)

Procurement of FSC 58 (communications, protection andcoherent radiation equipment)

Air traffic control equipment

The following products for Annex 3 procurement:HS Nos 8504, 8535, 8544 � electrical transformers,plugs, switches and insulated cables,

HS Nos 8501 (electric motors and generators), 8536(equipment for switching and protecting electricalequipment), 902830 (electricity meters)

FSC 70, 74, 36 (special industry machinery, generalpurpose automatic data processing equipment, software,supplies and suppor equipment, office machines, visiblerecord equipment)

Procurement of FSC 58 (communications, protection andcoherent radiation equipment)

Air traffic control equipment


The following products for Annex 3 procurement:HS Nos 8504, 8535, 8544 � electrical transformers,plugs, switches and insulated cables,

Procurement of dredging services, and procurementrelated to shipbuilding

Israel excludes the procurement of certain products by theMinistry of Health.18 These products include insulin andinfusion pumps, audiometers, intravenous solution,administration sets for transfusions, scalp vein sets,hemi-dialysis and blood lines, blood packs and syringeneedles.

FSC 70, 74, 36 (special industry machinery, generalpurpose automatic data processing equipment, software,supplies and suppor equipment, office machines, visiblerecord equipment) (except nr 7010 pertaining toconfigurations of automatic data processing equipment)

Products covered by FSC 58 (communications equipment,radiation detection equipment and emission of coherentradiation)

Air Traffic Control

Annex 3 procurement pertaining to 8504, 8535, 8537 and8544

HS Nos 8501 (electric motors and generators), 8536(equipment for switching and protecting electricalequipment), 902830 (electricity meters)

With respect to contracts of goods and services within themarkets which while being awarded by an entity withinthe scope of this agreement, are not themselves subject toit.

Korea and Israel

U S

Al l

Canada

Canada

USA

Korea and Israel

Israel

Canada and theUSA

EU

EU

Israel

Switzerland

By providing the list of goods which are either exempt forprocurement through a negative list, or which are availablefor procurement through a positive list, it does seem plausiblethat member- countries of the GPA are in a position to limitthe procurement of certain goods which are either sensitiveto the economy or which are procured loclly in large quantitiesby their ministries. These products are enlisted either in Annex4 (under the newGPA), or through exemptions and exclusionsin the General Notes.


If India considers the possibility of acceding to the GPA, itshould identify the products which are procured in bulk by itsministries which are mainly supplied by the domestic suppliers.These products could be listed in a negative list in Annex 4 ofa possible Indian offer.

Thresholds of Member�s GPA CommitmentsThresholds

In order to table an offer on central government entitieswhich engage in procurement, it is important to understandthe level of thresholds which India can advance, and todetermine the central government ministries which can beoffered for procurement. The Thresholds have been providedin figure 1.A. Notably, Canada and the United States maintain higher

thresholds than the other member-countries to the GPA inAnnex 2.

B. China has made use of the flexibility available to developingcountries to gradually phase out the reduction of thresholdsover a certain time frame.

C. In the event a party maintains higher thresholds than theothers, the other member-countries qualify that theirprocurement stands accordingly qualified: For example, theUnited States mentions that �For construction services ofthe Republic of Korea and suppliers of such services, thisAgreement applies only to procurement of the entities listedin Annexes 2 and 3 above a threshold of 15 millionSDRs.�19

WTO GPA thresholds have been provided herein for thethree Annexes20. It remains to be seen as to what theexpectations are with respect to thresholds for India � but itdoes seem very likely that the thresholds will be similar to the


thresholds maintained by a majority of the other countries. Incertain cases, India may be able to negotiate higher thresholdswith respect to Annex II procurement as has been the casewith Canada and the United States.

Table 3.5:Thresholds provided in Special Drawing RightsCOUNTRY ANNEX 1 ANNEX 2 ANNEX 3

Goods Services Construc- Goods Services Construc- Goods Services Construc-except tion except tion except tion

construction services construction services construction servicesservices services services

Armenia 130,000 130,000 5,000,000 200,000 200,00 5,000,000 400,000 400,000 5,000,000

Canada 130,000 130,000 5,000,000 355,000 355,000 5,000,000 355,000 355,000 5,000,000

EuropeanUnion (and itsmember States) 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Hong Kong,China 130,000 130,000 5,000,000 n.a n.a n.a 400,000 400,000 5,000,000

Iceland 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Israel 130,000 130,000 5,000,000 250,000 250,000 5,000,000 355,000 355,000 5,000,000

Japan 130,000 130,000 4,500,000 200,000 200,000 15,000,000 130,000 130,000 4,500,000Architectural Architectural or

services: services: services:450,000 1,500,000 15,000,000

450,000

Korea 130,000 130,000 5,000,000 200,000 200,000 15,000,000 450,000 15,000,000

Liechtenstein 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Netherlands-Aruba 130,000 130,000 5,000,000 n.a. n.a. n.a. 400,000 400,000 5,000,000

Norway 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

Singapore 130,000 130,000 5,000,000 n.a n.a n.a 400,000 400,000 5,000,000

Switzerland 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

ChineseTaipei 130,000 130,000 5,000,000 200,000 200,000 5,000,000 400,000 400,000 5,000,000

United States 130,000 130,000 5,000,000 355,000 355,000 5,000,000 250,000 250,000 5,000,000(USD) or (USD) or400,000 400,000

Annex 1: Central government entitiesAnnex 2: Sub-central government entitiesAnnex 3: All other entities which procure in accordance with the Agreement, in general public enterprises or publicauthorities such as utilities.

Source: http://www.wto.org/english/tratop_e/gproc_e/thresh_e.htm, accessed on10.12.2012.


Coverage of Entities in Annexes in Appendix I ofMember�s GPACommitments

Mode of Listing in the Entity Offer: The pros and cons ofusing the positive list approach, listing by reference to alegislation approach and listing by making a genericqualification such as �entities which do not engage incommercial activities� are noted herein in Box 1.

Box 3.1: An Analysis of Korea-Government Procurement

Korea- Government ProcurementFactsThe case dealt with the procurement practices undertakenfor the Inchon International Airport project in Korea. TheUnited States contended that the procurement practiceswhich included short bid deadlines, requirement that aforeign supplier should participate with a local supplier toin the bidding process, and that the foreign supplier shouldpossess a licence (which in turn required the purchase ofmanufacturing facilities in Korea) were in contravention ofthe provisions of the GPA.

IssuesThe issue which was considered by the Panel was whetheran entity which was not listed, either through a positivelist, or excluded specifically may be read/interpreted/inferred to inherit procurement obligations owing to itsrelationship with a covered entity.

ConsiderationsThe entities which were listed in Annex I of Korea�sAppendix I Schedule were as follows: (i) the Ministry ofConstruction and Transport (MOCT), and (ii) Office ofSupply. The procurement undertaken by theOffice of Supplywas noted as being limited to the procurement made forentities listed in Annex 1.


General Note to Annex I read as follows:

�The above central government entities include theirsubordinate linear organizations, special local administrativeorgans, and attached organs as prescribed in theGovernment Organization Act of the Republic of Korea.�

The United States contended that the Ministry ofConstruction and Transportation (MOCT), the NewAirport Development Group (NADG), under the MOCT,the Korea Airport Construction Authority (KOACA) andthe Inchon International Airport Authority (IIAC) wereunder the purview of Appendix I of Korea�s WTOCommitments. In furtherance of this, the United Stateshad proposed that the proper test should be the �control�test in order to determine whether a procuring entity iscontrolled by an entity listed in the GPA. The Panelconsidered this issue as an indicator of the broader questionas to whether other indicators (�exogenous criteria�) can beconsidered in the interpretation of a schedule.

DecisionIn this specific case, the authority which was sought to beread into the entity offer was concluded to not be a�subordinate linear organization� or a �local administrativeorgan� after the Panel perused legislation which had beenreferred to.

ObservationsThis decision cannot be read to be conclusively supportingthe view that listing entities through a positive list is a fool-proof manner in which enumeration of entities can beundertaken. Further, it is not definitive that external criteriawill not be considered while assessing and interpreting aschedule.


Is using a Positive List the safest approach?However, the Panel did observe that the GPA has alwaysbeen based on what is �affirmatively� included in the GPA,and extending the coverage in cases where apparent �unity�between entities is absent was not �warranted by thestructure and purpose of the GPA.� Perhaps this couldindicate that the GPA being a plurilateral agreementaffording immense flexibility to country governments to listor exclude entities in furtherance of their intention tocommit, the task of undertaking tests of identifying controlswhich was beyond the intention of the parties themselveswas not in keeping with the structure and purpose of theGPA.

Treatment of Affiliated EntitiesThe Panel also commented on entities which were�affiliated� to a certain listed entity in one Annex. This occursgenerally in cases where the central government ministrymay be affiliated to a certain �Other Entity� or a �PublicSector Enterprise�. In these cases it becomes especiallypertinent as to whether a control test can be applied in orderto press the application of the agreement where it may nothave been intended. The Panel noted that in cases wheresuch entities are expressly included, the intention of theparties is clear. However, in cases where such entry of anaffiliated entity is absent, the panel may be required toundertaken an analysis of whether the extent of affiliationbetween the two entities is so pronounced so as to indicatethat they could be legally considered to be the same entity.


Annex 1: Administrative Units under the CentralGovernment Entities

Under a certain central government ministry, there arevarious administrative units and subordinate units. Some ofthe units under the purview of a certain central governmentministry may undertake more procurement than the others.With respect to understanding the complete extent of thecoverage, it is essential to note whether the administrativeunits which may be said to be under the control of a listedentity is explicitly listed, or listed by reference to a law, orlisted by generic description, as noted before.

The number of entities listed differs widely: Korea lists 35entries, Taiwan 32, Singapore 23, Japan 24, Canada 82, USA79, Hong Kong 61, Israel 21, Netherlands 7, Norway 116 andArmenia 57 entities by using the positive list approach. Thenumber of entities listed by a country is a facile indicator ofthe actual weight of an entity offer � where governmentprocurement is centralised, the number of procuring entitieswill automatically be lower.

The modes through which administrative units andsubordinate units can be listed is a seminal issue. There aretwo ways in which the question of whether procurementundertaken by administrative units and subordinate entitiescan be said to come under the purview of procurementundertaken by a covered entity. One is by leaving open toscrutiny the question of whether �control� over theprocurement undertaken by the subordinate unit is exercisedby the covered entity, and the second approach is to limit theapplication of the disciplines of the Agreement on GovernmentProcurement to those entities which have been explicitly listedthrough a positive list. This facet on the mode of listing gainsspecial importance when understanding the application of theagreement to the departmental sub-units of a ministry, or in


cases where listing is done by using a qualification, entitiesnot having an �industrial or commercial character.�

Iceland deploys both the positive list approach, and listingthrough reference. Four entities have been explicitly listed asbeing in charge of government procurement. Further, centralpurchasing entities not having an industrial or commercialcharacter governed by Act No. 63/1970 on arrangement ofpublic works contracts, and Act no. 52/1987 on governmentprocurement are also included. Iceland indicates by referenceto its internal law that purchasing entities which do not havean industrial or commercial character are excluded. Thisresults in having to decide on a case-by-case basis, as to whichprocurement undertaken by a certain entity is of an �industrialor commercial� character.

Korea21 and Chinese Taipei have made references to theadministrative organs, and subordinate local organs throughlegislation. Referencing through legislation reduces room forinterpretation by a judicial body, and ensures certainty onwhether the entities are included within the purview of theGPA or not. Chinese Taipei also includes the new entitieswhich are transferred to the central government under itsProvisional Statute on the Reorganisation of the Chinese TaipeiProvincial Government.22

Annex 2: Unitary States and Federal StatesIn the European Union, the �regional� and �local contracting

authorities� are defined through references to NUTS 1 andNUTS 2 as defined by the Regulation 1059/2003 - the NUTSRegulation.

Iceland: The mode of listing used in Annex II has beengeneric to include the Contracting local public authorities,inclusive of all municipalities, and the public bodies at thelocal level not having an industrial or commercial character.The six constituencies of Iceland are Reykjavik North and


Reykjavik South, Southwest, Northwest and Northeast, andSouth. Iceland has included the local public authorities at thecentral level, the municipalities and the local level. Thequalification of the entities listed is on the basis of whetherthey have an industrial or commercial character.

Israel consists of six administrative districts � Center,Haifa, Jerusalem, North, Southern, Tel Aviv, plus Judea andSamaria in the West Bank. While the Municipalities ofJerusalem, Tel-Aviv and Haifa have been explicitly listed inAnnex II of Israel�s GPA, Samaria in theWest Bank, and Judeahave not been listed. It is essential to determine whether theomission of Judea and Samaria have been addressed by themembers of the GPA.

Liechtenstein consists of 11 municipalities: Ruggell,Schellenberg, Gamprin, Eschen, Mauren, Schaan, Planken,Vaduz, Triesenberg, Triesen, Balzers. The entities under thedifferent municipalities have been listed through the Genericapproach � it includes the �public authorities at local level,and bodies governed by public law not having an industrial orcommercial character at the local level.� The Agreement willnot apply to the contracts awarded by contracting authoritiesfor drinking water, energy, transport or telecommunications.

Norway: Through a generic listing, the contractingauthorities of all the regional or local public authorities [19counties and 435 municipalities] are provided.

Japan: �To� (the capital, Tokyo), �Do�(the circuit,Hokkaido), �Fu� (Osaka, and Hiroshima), �Ken� (47prefectures) and �Shitei-Toshi�(cities which have a populationover a certain limit) covered by the Local Autonomy Lawinclude all the internal sub-divisions, the attachedorganisations, and branch offices of the governors or themayors, committees, and other organisations provided for inthe Local Autonomy Law. Japan consists of 47 prefecturesand Shitei-Toshis. Fiftynine subnational units have been


provided, in which all the 47 prefectures and 12 shiteitoshihave been listed. Saitama, Shizuoka, Sakai, Niigata,Hamamatsu,Okayama and Sagamihara (cities which have beennewly identified as Shitei-Toshis following 2003) have beenincluded through modifying the Annex II offer.23

Korea uses a positive list approach and lists 15 entities.The subordinate organisations under direct control areincluded through reference in the Local Autonomy Law ofthe Republic of Korea.

Norway lists the following entities24: contracting authoritiesof the regional or local public authorities. Bodies governed bypublic law, or associations formed by one or more authoritiesgoverned by public law. A list of entities � the NorwegianBroadcasting Corporation, Norges Bank, Statistics Norway,Research Council of Norway, Norwegian Public ServicePension Fund and Norwegian Guarantee Institute for ExportCredit � is included by explicit reference. However,considering the elements are listed as indicating the entitieswhich are included, the scope of entities included should bewider that the listed entities.

Iceland is universal in its coverage stating that contractinglocal public authorities, including all municipalities and publicbodies at the local level not having an industrial or commercialcharacter are included.

Singapore and Hong Kong have no Annex II entities.In Chinese Taipei, three entities under Chinese Taipei

Provincial Government, thirty-nine under the Taipei CityGovernment and forty under the Kaohsiung City Governmenthave been included through explicit listing. However, theadministrative units which are included under the sub-centralgovernmental entities are included by reference to theorganisation laws of the entities.

The Federal States of importance are Canada and the UnitedStates. Canada has ten provinces and three territories. The


content of the Annex II offer for Canada includes all of tenprovinces and territories � Alberta, British Columbia,Manitoba, New Brunswick, Newfoundland and Labrador,Northwest Territories, Nova Scotia, Ontario, Prince EdwardIsland, Quebec, Saskatchewan and Yukon. However, theypresent individual sector-specific exemptions and exclusions.

Thirty-seven out of the fifty states have been included inthe United States offer25 -- Alabama, Alaska, Georgia, Indiana,Nevada, New Jersey, North Carolina, North Dakota, Ohio,South Carolina, Virginia, West Virginia are not included.

Annex 3: Other Entities: Prioritising UtilitiesProviders

While evaluating the entities in Annex III, it is importantto note whether Annex III entities have been listed based ontheir provision of utilities or not.� Korea has listed 17 entities, Hong Kong has listed 5 entities,

Iceland had listed 8 entities, Singapore has listed 24 entities,Aruba has listed 5 entities, Israel has listed 14 entities, andSingapore has listed 24 entities using the positive listapproach.

� EC has listed public authorities or public undertakings listedin Annex I (production, transport or distribution of drinkingwater), Annex II (production, transport, or distribution ofelectricity), Annex VII (urban railway, tramway, trolley busfacilities), Annex VII (airport facilities), Annex IX (maritimeor inland port or other terminal facilities) of Directive 93/38/EEC. The EU further provides �indicative lists� ofcontracting authorities and public undertakings which fulfilthe criteria laid down in Annex 3 for the production andprovision of the following utilities: (i) water; (ii) Electricity;(iii) Airport Installations (iv) Maritime or Inland Port orOther Terminal Facilities; (v) Contracting Entities engaged


in the field of urban railway, tramway, trolley bus or busservices; (vi) rail services.

� Iceland has listed the companies which provide thefollowing utilities by reference to internal laws: entitiesproducing, transporting or distributing electricity areincluded by reference to orkulog nr. 58/1967, portsoperating pursuant to Hafnalog nr. 23/1994, and publicentities which produce, distribute drinking water pursuantto log nr 81/1991.

� Israel states that entities operating in urban transport(except bus services) are open only for EC. It will be openedto other countries only following the satisfaction ofreciprocal conditions.

� Norway lists the entities which provide the followingutilities by reference to the local laws and regulations.Production, transport and distribution of electricity,transport by automated systems, urban railways, tramway,trolley bus, bus or cable, airport facilities, ports and entitieswhich produce water.26

� Armenia has provided a generic description for the entitieswhich will be included, of which the public services andutilities sector companies are referred through a referenceto the Law on Procurement: �All legal [persons governedby public law: (i) state or community non-commercial (non-profit) organizations. (ii) commercial organizations withover fifty percent of government or communityshareholding, (iii) public services including utilities sectorcompanies whose procurement is covered by Law onProcurement.�

� In Annex III, EC lists the Urban transport entities inRailway. This is however qualified by the entities listed inAnnex VI of Directive 93/38/EEC which are not included.


� Annex 4 (covered earlier)� Annex 5 (out of the scope of the chapter)

Annex 6 (Construction Services/ BOT Contracts)A construction services contract is a contract which has as

its objective the realisation by whatever means of civil orbuilding works, in the sense of Division 51 of the CentralProduct Classification.

Countries indicate their commitments in the followingmanner as demonstrated in Table 3.6.

Table 3.6: CPCProv Classification on Construction Services

Notation Description

512 General ConstructionWork for buildings

513 General ConstructionWork for Civil Engineering

514+516 Installation and AssemblyWork

517 Building completion and finishing work

511+515+518 Other

Division 5 deals with �Construction Work andConstructions; Land�. It has the following sub-classifications:51 dealing with �Construction Work�, 52 dealing with�Constructions� and 53 dealing with �Land�.27 �ConstructionWork� has been covered herein below in Table 3.7.

The sub-classes under division 51 have been furtherexpanded upon in order to present a more organised pictureof the exact scope of the commitments undertaken under 51(Table 3.8).

Inclusion of Build-Operate-Transfer Contracts: Korea hasincluded Build-Operate-Transfer contracts28 within thepurview of its construction contracts. A separate contract forSDR 5,000,000 applies for entities in Annex 1 and SDR


Table 3.7: Subclassifications underConstruction Services under CPCProv

Division Specification Explanatory Note(+as provided under CPCProv)

51 ConstructionWork

52 Constructions

53 Land

Pre-erection work; new construction andrepair, alteration, restoration andmaintenance work on residential buildings,non-residential buildings or civil engineeringworks. This work can be carried out either bygeneral contractors who do the completeconstruction work for the owner of theproject, or on own account; or bysubcontracting pa1rts of the constructionwork to contractors specialising, e.g., ininstallation work, where the value of workdone by subcontractors becomes part of themain contractor�s work. The productsclassified here are services which are essentialin the production process of the differenttypes of constructions, the final output ofconstruction activities.

15,000,000 for those entities in Annex 2. Korea maintains aset-aside for small and medium sized businesses29 as per itscurrent offer.30 The EU has included Works ConcessionContracts in cases of Iceland, Liechtenstein, Norway and theNetherlands.

Observations: Countries sometimes specify that the offerpertaining to construction services is subject to limitationsand conditions specified in the offer under the GATSnegotiations.31 This raises the essential question of whetherin the event of a conflict between the GATS Schedule and theGPA Schedules, would the GATS schedule immediatelysupersede the GPA? Or would the commitments which have


Table 3.8: Further Divisions of Construction Services51

511

512

513

514

515

Further Divisions of Sub-Class 511

Pre-erection work at construction sites

Includes Site investigation work,Demolition work, Site formation andclearance work, Excavating andearthmoving work, Site preparationwork for mining, Scaffolding work.

Construction Work and Buildings

For one- and two-dwelling buildings,For multi-dwelling buildings, Forwarehouses and industrial buildings,For commercial buildings, For publicentertainment buildings, For hotel,restaurant and similar buildings, Foreducational buildings, For healthbuildings, For other buildings.

Construction Work for CivilEngineering

For highways (except elevatedhighways), streets, roads, railways andairfield runways, For bridges, elevatedhighways, tunnels and subways, Forwaterways, harbours, dams and otherwater works, For long distancepipelines, communication and powerlines (cables), For local pipelines andcables; ancillary works, Forconstructions for mining andmanufacturing, For constructions forsport and recreation, For engineeringworks n.e.c.

Assembly and erection of prefabricatedconstructions

Special Trade Construction Work

Foundation work, incl. pile driving,Water well drilling, Roofing andwater proofing, Concrete work, Steelbending and erection (incl. welding),Masonry work, Other special tradeconstruction work.

Countries which haveincluded this sub-section inAnnex 5

Singapore, EU, ChineseTaipei, USA, Japan, HongKong, Armenia, Liechtenstein,Israel, Korea, Canada


[Aruba [this is the only entryfor Aruba] ]

Singapore, EU. ChineseTaipei, USA, Japan, HongKong, Armenia, Liechtenstein,Israel, Korea, Canada




been undertaken most recently supersede the othercommitment? Would the procurement of services undergovernment procurement be governed explicitly by theAgreement on Government Procurement?

It is interesting to note that Aruba has made commitmentspertaining to only �Construction Work for Buildings�.

In certain countries like Canada, procurement for thepurpose of construction increased drastically for constructionworks for civil engineering, construction work for buildingsdeclined from 2000 to 2009.

Procurement of construction services as it related tobridges, elevated highways, tunnels and subways increasedsharply in Chinese Taipei.

516

517

518

Installation Work

Heating, ventilation and air conditioningwork, Water plumbing and drain layingwork, Gas fitting construction work,Electrical work, Insulation work(electrical wiring, ater, heat, sound),5166 - Fencing and railing constructionwork, Other installation work.

Building Completion and Finishing Work

Glazing work and window glassinstallation work, Plastering work,Painting work, Floor and wall tilingwork, Other floor laying, wall coveringand wall papering work, Wood andmetal joinery and carpentry work,Interior fitting decoration work,Ornamentation fitting work, Otherbuilding completion and finishing work.

Renting services related to equipment forconstruction or demolition of buildings orcivil engineering works, with operator

Singapore, EU, ChineseTaipei, USA, Japan, HongKong, Armenia,Liechtenstein, Israel,Korea, Canada

Singapore, EU, ChineseTaipei, USA, Japan, HongKong, Armenia,Liechtenstein, Israel,Korea, Canada

Singapore, EU, ChineseTaipei, USA, Japan, HongKong, Armenia ,Liechtenstein, Israel,Canada (Not Korea)


Box 3.2 outlines a few suggestions pertaining to listingentities while drafting an offer.

Box 3.2: Observations Pertinent to Listing Entities in anInitial Offer for a New Entrant

Market access opportunities are sometimes qualified by theentities which are listed by countries in their respectiveannexes. Hence, owing to the positive list approach (in mostcases) apart from performing a cost-benefit analysis, it isessential to identify if the entities which undertake themaximum procurement of a commodity/service in a countryhave been listed. In cases where entities are listed byreference, or where there is room for interpretation, it isideal to obtain clarity onwhether the coveted entity is indeedincluded within the scope of procurement prior to accessionto the GPA.

While making an entity offer with respect to the threeAnnexes, it is essential to declare the channel through whichprocurement by the administrative, or sub-ordinate unitsunder the control of the covered entity can be brought underthe disciplines of the GPA.Making a reference to legislationgoverning the organisation decreases uncertainty. Makinga generic reference to entities which are engaged in�commercial activities� gives room for interpretation andfor precluding those entities.

Exclusions/Derogations/Exemptions under the GPAThe common types of exceptions and exclusions include

the following: (i) Reference to Other Agreements: for example,under Annex IV, now Annex V of Appendix I, multiplecountries make a reference to their GATS Schedules and statethat any obligations which are made under the GPA remainsubject to the obligations already concluded under the GATS.


The following discriminatory measures and derogationswere identified by Robert Anderson and OseiLah in 201132 :1. General and national security exceptions set out in the text

of the Agreement;2. Derogations or notes in Appendix I designed to provide

clarity or precision to a Party�s coverage commitments;3. Derogations relating to a specific entity, product, services

sector or other item;4. Bilateral/reciprocal market opening;5. Linkage to GATs specific commitments pertaining to

services and construction services coverage)6. Derogations relating to certain domestic policy

considerations;7. Country-specific derogations

In the event an initial offer is slated by India in due courseof time, the said exemptions/exclusions should be taken intoaccount.With respect to entity-specific or generic exemptions/exclusions in Annex I, Annex II and Annex III � we areinterested in the following:� What is the impact of a derogation/limitation on market-

access?� What is the legal basis for including such an exemption/

exclusion? Can this exemption/exclusion be challengedbefore the WTO GPA dispute settlement body?

� What is the motivation behind the inclusion of such anexemption/exclusion? Common reasons may include thata major trading partner already has in place certainexclusions, owing to which new entrants routinely includecommon exclusions/exemptions.

� Following from the same concern is the question whetherIndia or a potential new entrant find the same or similarmotivation. Will such a scheme be potentially justifiable?What are the actions which should be taken in order torender such schemes justifiable?


� With respect to every one of the following exclusions, wehave the following considerations in mind: (i) can theseexclusions be applied to an initial offer for a new entrant?(ii) how can the application of these exclusions bemonitored? (iii) can these exemptions result in possiblederogations of the GPA? (iv) how do these exclusions orexemptions result in a quantitative reduction in the amountof market access originally offered by the GPA?

� Are developing countries such as India capable of enforcingreciprocal exclusions/exemptions or is an effectiveapplication of these exclusions limited to developedcountries with significant economic clout?

Exemptions and exclusions can operate at three levels: (i)Country level, if inscribed in the general notes; (ii) CentralGovernment, Sub-Central Government or �Other Entity�, ifincluded in one of the annexes; (iii) Entity level if inscribedagainst a certain specific entity in an Annex.

With respect to identifying the factors which directlyimpact on market access opportunities and impede the optionto even participate in procurement, we identify three importantissues � Sensitive Products, Key Sectors, and the ProminentExemptions and Exclusions.

Derogations/Exemptions in the General NotesThe earlier text of the Agreement on Government

Procurement did not contain a reference to �General Notes�.However, the current version makes a reference to GeneralNotes as constituting the information in Appendix I.33 TheGeneral Notes provide immense flexibility to countries indefining the boundaries withinwhich government procurementactivity can include/exclude the participants from othercountries. It is important to keep the following in mind whileassessing the possible impact of the General Notes: (i) The


extent to which government actions are subject to review bythe Committee on Government Procurement has not beenformalised; (ii) Further, the interpretation of the terms whichconnote the derogations/exceptions and exclusions in theappendices has not been crystallised.

The modalities in framing the General Notes have beenidentified. It remains to be considered whether newmodalitiescan be introduced into the framework while framing thegeneral notes. An analysis of the motivations behind resortingto a country-exclusion, or a sectoral exclusion has to beanalysed in order to understand two issues: (i) whether thesame exclusion would be relevant for India, and (ii) whetheran alternative exception can be pleaded for India, by subscribingto the same modality.

Common Exclusions Pertaining to International Agreementsand Funding

Common exclusions such as (i) Award under aninternational agreement which purports to include the jointimplementation or exploitation of a project by the signatorystates34 ; (ii) Award under an international agreement relatingto stationing of troops; (iii) Funded wholly or in part by, orawarded under the particular procedure of an internationalorganisation, where the applicable procedure would beinconsistent with the Agreement, have now been explicitlyincluded in the new text of the GPA as not falling under thepurview of the GPA. �Tied aid� refers to aid which isconditional based on procurement of goods and services fromthe donor country.35 Currently, the GPA itself provides that�having regard to general policy considerations relating to tiedaid, including the objectives of developing countries withrespect to untying of such aid, this Agreement does not applyto procurement made in furtherance of tied aid to developingcountries so long as it is practiced by parties.�


A large number of the exceptions and exclusions whichhave been commonly advanced bymember-countries have nowbeen subsumed into the text of the new Agreement. Some ofthe other common qualifications advanced by membersfrequently which have been subsumed into the text of theAgreement on Government Procurement pertain toprocurement which is undertaken to provide internationaldevelopment assistance and development aid, stationing oftroops and conditions imposed by international grants.

Currently, Article III of the Annex to the ProtocolAmending the Agreement on Government Procurement inArticle II (3) excludes the following exceptions fromprocurement: Procurement conducted for the specific purposeof providing international assistance, including developmentaid; Under the particular procedure or condition of aninternational agreement relating to the stationing of troops orrelating to the joint implementation by the signatory countriesof project; or Under the particular procedure or condition ofan international organization, or funded by international grants,loan or other assistance where the application procedure orcondition would be inconsistent with this Agreement.

A. Appendix I wide Exemptions/Exclusion

Scope of Government Procurement

Definition of Government ProcurementCanada defines Government Procurement in its General

Notes: �Procurement in terms of Canadian coverage is definedas the contractual transactions to acquire property or servicesfor the direct benefit or use of the government. Theprocurement process is the process that begins after an entityhas decided on its requirement and continues through to andincluding contract award. It does not include non-contractualagreements or any form of government assistance, including


but not limited to cooperative agreements, grants, loans, equityinfusions, guarantees, fiscal incentives, and governmentprovision of goods and services, given to individuals, firms,private institutions, and sub-central governments. It does notinclude procurements made with a view to commercial resaleor made by one entity or enterprises from another entity orenterprise of Canada.�

The scope of government procurement is meant to belimited to those contractual services which are intended forthe �direct benefit or use of the government�. This can be readas whittling down the broad scope of governmentprocurement to exclude activities which do not directly benefitthe government or are directly used by the government. It isimportant to understand how this definition of governmentprocurement is different from the text in the GPA. In the eventof conflict between the two it does seem plausible that thedefinition advanced by Canadamay not override the definitionalready present in the Government Procurement Agreement.

Observations and Issues which Require Clarity on the scopeof Government Procurement� Products and services which are procured with a view to

resale or with a view to use in the production of goods forsale are not included.36

� The Agreement onGovernment Procurement does not applyto the contracts which are undertaken by entities for �daily-profit-making activities� which are exposed to competitiveforces in markets.

� Procurement with respect to investments outside thecountry.

� A similar qualification is the one undertaken by theEuropean Union exempting the Annex 3 procurementcontracts pertaining to the activities undertaken in a non-member-country.


� The EU also presents that contracts for the purposes of re-sale or hire to third parties, provided that the contractingentity enjoys no special or exclusive right to sell or hire thesubject of such contracts, and other entities, are free tosell, or hire are exempt from the purview of disciplines ofthe Government Procurement Agreement37

Interestingly, the EU maintains that contracts awarded toentities which enjoy exclusive rights pursuant to a law,regulation or administrative provision in Finland or in Sweden,are outside the scope of the Agreement. This could very welldeal with State Trading Enterprises.

Procurement made by a covered entity on behalf of a non-covered entity

Firstly, it is essential to identify the conditions in which acovered entity may make procurement on behalf of a non-covered entity. Which entity drives the procurement decisionmay be determined by conditions similar to the SonarMappingcase: which entity makes the final decision on procurement,which entity the ownership of the procured item/service passesto, which entity provides the funds for the purchase of theitem/service.

It remains to be seen whether in cases where certainprocurement actions are centralised, and the entity whichundertakes the centralised procurement is not listed, or incases where the other entities are not listed, whether the entirebulk of procurement is in effect lost under the GPA.

Components of ContractsGenerally, the applicability of the GPA is supposed to

extend to those entities which have been listed by the member-countries. However, this leaves open the possibility that theremay be components of certain projects even by listed entities


which contain procurement which is excluded.38 Thisexclusion could be on the basis of exempted goods, servicesor other objectives. In certain cases, splitting the contractsmay reduce the threshold value of the contract, and relegate itoutside of the purview of the GPA � in these cases it is essentialto seek clarity on whether the thresholds decided upon includethe exempted value of procurement or not.

Territorial Exclusions�Norway reserves its positionwith regard to the application

of this Agreement to Svalbard, JanMayen Island andNorway�sAntarctic possessions�

Comment: Under the provisions of Article XXII (3) of thecurrent GPA, the GPA does not allow for reservations. Itclearly states that no Party may enter a reservation in respectof any provision of this Agreement.

There are no geographic limits defined by any of the Partiesto the GPA. The obligations are transferred to the procuringentities for procurement which is undertaken over a certainthreshold. Hence, it is unclear how a territorial exclusion willoperate under the scope of the GPA.

This raises the question of whether a new entrant cansimilarly exempt procurement in certain states where theCentre has limited authority to enforce an international treaty.An apt example in the case of India would pertain toprocurement undertaken with respect to Jammu and Kashmir.

Exemptions/Exclusions in the Annexes in Appendix Iof a Member�s GPA CommitmentsPrinciples of Non-Discrimination in the Agreement onGovernment Procurement

The principle of national treatment is contained in ArticleIV of the Agreement on Government Procurement. Currently,


it seems that horizontal policies are accommodated byderogations,39 without subjecting them to any test orevaluation like the �necessity test� under GATT Article XX.

Article IV1. With respect to any measure regarding covered

procurement, each Party, including its procuring entities,shall accord immediately and unconditionally to the goodsand services of any other Party and to the suppliers of anyother Party offering the goods or services of any Party,treatment no less favourable than the treatment the Party,including its procuring entities, accords to:a. Domestic goods, services and suppliers; andb. Goods, services and suppliers of any other Party.

2. With respect to any measure regarding coveredprocurement, a Party, including its procuring entities, shallnot:a. Treat a locally established supplier less favourably than

another locally established supplier on the basis of thedegree of foreign affiliation or ownership; or

b. Discriminate against a locally established supplier onthe basis that the goods or services offered by thatsupplier for a particular procurement are goods orservices of any other Party.

Deviations from national treatment: Procurement whichmay impair national policy objectives may result in deviatingfrom the national treatment discipline. A decision to deviateis generally taken by a government body (the Executive Yuanin Chinese Taipei and the Cabinet Level at the EU) or theNorwegian Cabinet.40 �National policy objectives� have notbeen defined.


The following are the examples of deviations from nationaltreatment as advanced by certain countries: (i) Procurementof agricultural products in furtherance of an agriculturesupport programme and human feeding programme41 ; and (ii)Set-asides for small and minority businesses42 .

Horizontal PoliciesAn �offset� is defined as any condition or undertaking that

encourages local development or improves a Party�s balance-of-payments accounts, such as the use of domestic content,the licensing of technology, investment, counter-trade andsimilar action or enforcement.43 Article IV(6) states that withregard to covered procurement, a Party, including its procuringentities, shall not seek, take account of, impose or enforceany offset. However, it could be argued that the very definitionof covered procurement stands qualified at the very outset bythe entities listed in Appendix I coupled with the horizontalpolicies which operate in that behest.44

Set-Asides for Small and Medium-Sized Businesses andSingle Tendering Procurement45

This Agrement does not apply to any set aside on behalf ofa small-or minority-owned business. A set-aside may includeany form of preference, such as the exclusive right to providea good or service, or any price preference.46

The Agreement is excluded from applying to contractswhich apply single tendering for the purpose of procurement,and the set-asides for small and medium-sized businesses.47

(Korea, Annex I)Set-asides have been reserved for single tendering

procurement for small and medium sized businesses underthe provisions of the Act Relating to the Public Entities�Operation and Rules Relating to the Public Enterprises andQuasi-Government Entities� Contracting Matters.48 (Korea,Annex III)


Contracts Awarding Disadvantaged Groups: Germany hasmaintained certain laws which allow it to award contracts tocertain groups to �remove difficulties caused by the last war�.

Contracts awarded to Co-operatives or Associations: ThisAgreement shall not apply to contracts to be awarded to co-operatives or associations in accordance with laws andregulations existing at the time of the entry into force of thisAgreement (for Japan).49

An alternative is to follow a documentation approach andrecord the relations with cooperatives or associations in theform of legislation in order to advance a similar exemption.

The National Security ExceptionArticle III deals with Security and General Exceptions:

Article III (1) outlines the scope of the �National Security�Exception: �Nothing in this Agreement shall be construed toprevent any Party from taking any action or not disclosing anyinformation that it considers necessary for the protection ofits essential security interests relating to the procurement ofarms, ammunition or war materials, or to procurementindispensable for national security or national defencepurposes.�

Canada deploys the national security recourse in two ways:(i) national security exemptions which may include oilpurchases related to strategic reserve requirements, and (ii)the national security exemptions including procurements madein support of safeguarding nuclear materials or technology.50

Armenia includes the Ministry of Defence, National SecurityService, State Security Service and the Police of the Republicof Armenia. Similarly Singapore lists contracts made by theInternal Security Department, the Criminal InvestigationDepartment, Security Branch and Central Narcotics Bureauof the Ministry of Home Affairs as well as procurement thathas security considerations made by the Ministry. National


Security Exceptions include procurements made in support ofsafeguarding nuclear materials or technology and entered intounder the authority of the Atomic Energy Act. Countriesinclude within the purview of this exception not onlyprocurement related to defence purposes, but also policeprocurement, air transportation security, oil purchases relatedto the Strategic PetroleumReserve, nuclear safety, coast guard,etc.

Article III of the GPA notes that information pertaining tonatural security does not have to be disclosed, and that partiesmay take actions essential to protect their security interests.This exception has found wide application by member-countries. Items for procurement have been divided into�sensitive� and �non-sensitive� items. The National SecurityExemption has been expanded and applied for entities otherthe defence departments . The application has been extendedto cover the Coast Guard and other entities which mayundertake defence functions.

Huawei and ZTE, two Chinese telecom giants, weresidelined for procurement purposes by the United States afterthe release of a report stating that telecom equipment ingovernment procurement could be used for the purposes ofspying. It is pertinent to note that other countries faced with asimilar dilemma have put in place surveillance mechanismsinstead of outright rejectiion of supplies.51

The national security exception under the GPA has notbeen tested by the WTO Dispute Settlement mechanism untilnow. Article III (2) of the GPA and Article XX of the GATTqualifies the application of the measures taken in furtheranceof one of the exceptions mentioned as per the conditions notedin its chapeau. The measures should be applied in such amanner so as to not constitue an �arbitrary� or �unjustifiablediscrimination� or a disguised restriction on international trade.This condition in the chapeau has been interpreted to check


the trade distortive effects of a measure. It remains to be seenif the absence of this qualification in the WTOGPA can resultin instances of such wide application of the exception.

Article III (2) provides the basis for a few other exceptions.Subject to the requirement that such measures are not

applied in a manner that would constitute a means of arbitraryor unjustifiable discrimination between Parties where the sameconditions prevail or a disguised restriction on internationaltrade, nothing in this Agreement shall be construed to preventany Party from imposing or enforcing measures:

(a)Necessary to protect public morals, order or safety;(b)Necessary to protect human, animal or plant life or

health;(c)Necessary to protect intellectual property; or(d)Relating to goods or services of persons with disabilities,

philanthropic institutions or prison labour.

Defence ProcurementDefence procurement has been split into sensitive and non-

sensitive procurement. Some countries disclose specifically asto which goods fall under the purview of non-sensitiveprocurement. Some members advance items for non-sensitiveprocurement by the Ministry of Defence. The treatment of�Dual-Use products� which can be used for both defence andcivilian purposes under the disciplines of procurement remainsto be explored.

Human Feeding or Agriculture Support Programmes�Agriculture Products which have been procured for the

purpose of human feeding or agriculture support programmeshave been excluded by certain participants.�

The procurement of agricultural, fishery and livestockproducts under the provisions of the Foodgrain Management


Law, the Law Concerning Marketing and Price Stabilizationof Agricultural Fishery Products and the Livestock Law52

(Korea)� There is no legal basis in the GPA which justifies this

exemption or exclusion unless Article III (2)(a) or ArticleIII(2)(b) are advanced as possible exemptions. Hence, thisexemption or exclusion obtains its validity from beingpresent in Appendix I following negotiations betweenmember-countries permitting this exemption or exclusion.It qualifies the procurement which is undertaken by anyentity based on the purpose.

� Products which are procured for the purpose of �humanfeeding� or �agriculture support programmes� are excludedfrom the disciplines of procurement.

� The objective of the procurement has to be disclosed eitherprior to the procurement itself or through any other meansthat procurement undertaken for this specific purpose(human feeding, and agricultural support) is excluded.

� India/any other new entrants can include this exemptionor exclusion in its General Notes/Notes to Annex I in aplausible initial offer. Measures undertaken for pricemaintenance under the Essential Commodities Act. Anyother measures taken to control prices in India may beadduced under a similar exception/exemption.

Safety Related ExceptionsSafety-related exceptions can find a justification in Article

III(2) of the current text of the GPA pertaining to the protectionof safety and measures essential to protect human, animal orplant life or health.

Nuclear Activities: Procurement pertaining to safety-related activities aiming at utilisation and management ofradioactive materials, and responding to emergencies ofnuclear installation is not included. (Japan, Annex III)


Transportation: Procurement pertaining to theOperationalSafety of Transportation is excluded (Japan-Annex III)

Telecommunications: Procurement of electricaltelecommunications equipment and services pertaining to theoperational safety of telecommunications is not included.53

� As per the provisions of Article XXII(8)(a)(v) of the currenttext of the GPA, �safety standards in internationalprocurement� will be made the subject of workprogrammes in order to facilitate the implementation ofthe agreement.The �Operational Safety� exception at thisstage has not been interpreted, and can be said to operatewidely in relation to all procurement undertaken by an entityengaged in the transportation industries.

� It may be essential to identify the extent to which safety isa concern in procurement, similar to how disciplines haveevolved to accommodate �non-sensitive procurement� indefence.

� India/any other new entrant can include this exemption orexclusion in its General Notes/Notes to Annex I in aplausible initial offer.

For Furthering Science DevelopmentKorea exempts the procurement of satellites under the

Aviation and Space Industry Development Promotion Lawfor five years.54

It is unclear as to whether the reason behind this exemptionis that procurement of satellites is procurement of a sensitivenature, or if it is a form of encouraging local production ofsatellites for a period of five years.

There is no legal provision in the WTO GPA under whichthis exemption has been pleaded. Nevertheless this exemptionis being maintained by South Korea. This could be because ofone of two reasons: (i) this exemption could have beenpresented by South Korea, and accepted by the other parties


to the GPA owing to the market access opportunities in SouthKorea � and it now constitutes an exemption which is legallyenforceable; or, (ii) this exemption has been maintainedbecause no member-country has challenged it until now � ifthis exemption is challenged, it may not stand owing to anabsence of a legal justification in the text of the WTO GPA.

If the basis of such extra-textual exemptions is not clarifiedby the WTO panel or appellate body, or by the Committee onGPA, India will be free to maintain similar exemptions forfurthering development in scientific fields.

Annex I: Entity Specific Exemptions and ExclusionsProcurement undertaken by certain central government

entities in Annex I is qualified by the ConfidentialityExemption and the National Security Exception.

National Security ExceptionAs noted before, the application of the National Security

Exception has been extended to the Department of Transport(Canada), Department of Homeland Security (United States)and Department of Energy (United States) with respect tosafeguarding nuclearmaterials or technology, and oil purchasesmade under the Strategic Petroleum Reserve. The NationalSecurity Exception has been discussed above.

Confidentiality ExemptionProcurement by the Department of Transportation does

not include the procurement undertaken by the FederalAviation Administration in the United States. TheConfidentiality Exemption has been discussed above.

Maintenance Expenditure for Government OfficesIt is essential to understand the pattern of government

expenditure encompassing both purchases made in furtherance


of the objectives of the state, and the purchases made for thepurpose of general operations of the governments.

Government offices employ a large number of people,purchase real estate as assets for their multiple offices, andmake expenditure in order to render their office spacesfunctional. Typically many governments make purchasespertaining to office machines, software supplies, photocopiersand office equipment. Canada exempts the procurement ofgoods like special industry machinery, automatic dataprocessing equipment, software suppliers and supportequipment, photocopiers etc by certain ministries.55 Forphotocopiers, computers and office equipment (FSC groups36,70 and 74) Certain has identified producers namely theMERIT Partner under the MERIT Partnership Programme,CIRCLE Canada Companies, and companies certain otheridentified companies.56

The revised text of the GPA includes a specific annex for�Goods�. Indiamay be in a position to identify specific productswhich are procured in large quantities and apply such anexemption by using a negative list for the annex on �Goods�.

Limited Access to Centralised Procurement Conducted byan Agency Designated for the Purpose of Procurement

In some countries, generic procurement may be centralisedand undertaken by one entity. For example, Korea has listedpublic procurement services as an entity in Annex I, and limitedits purchases to include the purchases made only for the entitieswhich have been listed in Annex I. This qualification limitsthe application of the activity of the entity whichmay undertakecentralised procurement in certain cases to only listed entities.It is essential to clarify the application of this exception toamalgamated purchases which are made by the publicprocurement service for entities � both listed entities, andentities which are not listed. It can be applied in a possible


Indian offer by restricting the application of the provisions ofDGSND, for instance to procurement undertaken only forcovered entities.

Maintaining Public Order (Article XXIII of the Earlier GPA,Article III of the Current GPA)

Korea has listed the National Police Agency and qualifiedit stating that purchases for the purpose of maintaining publicorder, as provided in Article XXIII of the Code are exempt. Itis our opinion that purchases undertaken for the purposes ofmaintaining public order are not essentially excluded underthe scope of Article XXIII of the earlier GPA. The exceptionunder the erstwhile Article XXIII is meant to apply to theimposition and enforcement of measures which are necessaryto protect public morals, order or safety. Hence, it can besurmised that it is only the imposition of discriminatorymeasures in the process of procurement in order to maintainpublic order which may be exempt, and not all purchaseswhich are undertaken to maintain public order.

However, since the use of this exception by Korea has notbeen challenged until now, India can consider making thebroadest use of this exemption, if it joins the GPA.

OtherEconomic Activity: Shipbuilding by the National Oceanic

and Atmospheric Administration has been excluded by theUnited States.

Interrelation with GATS: Certain countries state that theprocurement procedures and conditions governing theprovision of certain services, including construction serviceswill be subject to the conditions and qualifications for marketaccess and national treatment as stated by those countries intheir commitments under the GATS regime.57


Positive Commitments: Apart from exemptions andexclusions, certain countries (like Singapore) have also madepositive commitments. Singapore has stated that it will reviewits registration system, and limited tendering in its open tendersystem and remove the unintended effects of discriminationwithin three years of its accession.58

Central Government EntitiesMinistry of Foreign Affairs

Procurement for construction contracts for chanceries,consulates and headquarters made by the ministry of foreignfffairs59 is exempt in certain cases. Even though it may becontended that this exemption is applied owing to limiting theprocurement activities of the governments to procurementwhich is undertaken locally, there is no justification for suchexemption in the text of the Agreement itself.

Ministry of HealthIsrael used to exclude the procurement of certain products

by theministry of health60 such as insulin and infusion pumps,audiometers, intravenous solution, administration sets fortransfusions, scalp vein sets, hemi-dialysis and blood lines,blood packs and syringe needles. Currently they are limited tointravenous solution, administration sets for transfusions andhemi-dialysis and blood lines.61

Central Bank FunctionsThe procurement or acquisition pertaining to sale,

redemption and distribution of public debt, including loansand government bonds, notes and other securities is notincluded.62 This exemption/exclusion by Armenia has nowbeen incorporated into the new text of the GPA.63

There are two aspects which we are interested in drawingfrom every conclusion in order to add value while engaging in


a bilateral negotiation: (i) an informed assessment of the valueof an entity offer; (ii) how best to present an entity offer.

Centre-State Relations Debate: Pertinent to Annex IIWe are interested in two key facets of state-government

procurement. One, how much of the state government�srevenue is earned by the activities of the state governmentitself, and whether the central government can dictate as tohow that revenue should be spent. The second question is onthe items which fall within state government jurisdiction �one item is that of procurement itself � and other alternativeitems related to a specific subject-matter in procurement. Thetension between the sub-central entities and the state entitieson matters pertaining to international trade have resulted instate-government specific exemptions/exclusions.

The objective in undertaking the following analysis is inorder to consider the following options:1. Can the state-governments opt out of the GPA?2. Do state governments have the leeway to determine the

extent of the procurement markets which they willindividually open up and restrict certain sectors or certainentities?

3. Can state governments enforce social objectives ofprocurement through their procurement actions?

Disparity in Centre-State RelationsIn Canada, the provinces can accept or reject the

international agreements entered into by the centralgovernment.64 The Supreme Court of Canada in AGC v.Northrop Grumman65 held that international tradeagreements, unless enacted into domestic law, were merelypolitical statements, and not enforceable legal regime.

However, courts in the United States, when dealing withdisputes pertaining to procurement undertaken by the state


government which is in dissonance with the internationalcommitments made by the federal government, have observedthat the courts have used either the Commerce Clause, or thePresidential Foreign Affairs Power of the Supremacy clauseto invalidate state laws which interfere with interstatecommerce or foreign trade.66 Generally, governmentprocurement disciplines do not apply to state governmentprocurement, provided the procurement is not connected tofederal funding.67 The Court in National Foreign TradeCouncil v. Baker68 , noted that the Congress has the power topre-empt state law. With respect to the State law dealingwith Burma (dealt with in Box[3]), the court observed that itconflicted with the federal motive to diplomatically concludea comprehensive strategy to resolve disparities with Burma.The federal law had delegated the effective discretion to thePresident to control economic sanctions against Burma. Thecourt observed that owing to the operation of the SupremacyClause, the operation of the State Act was unconstitutionalfollowing the express delegation of the Congress to thePresident to develop a strategy to administer the sanctions.

In India, under Article 253 of the Constitution, theParliament possesses the power to make law for the whole orany part of the territory of India for implementing any treaty,agreement ro convention with any other country or countriesor any decision made at any international conference,association or other body. However, as regards procurementby the government, if we considered procurement to simplybe included under the heads �Acquisition and Requisition ofproperty� and �contracts� (items covered in entries 42 and 7respectively of the concurrent list), both the central and stategovernments can be said to possess the power to legislate onthe subject. This could have constituted the basis of the state-specific laws dealing with procurement by Tamil Nadu andKarnataka. In light of these seminal provisions, India would


Box 3.3: Massachusetts� Act Regulating State Contractswith Companies Doing Business in or with Burma of 25

June 1996

The Massachusetts Act of 25 June 1996 regulating statecontracts with companies doing business69 with or in Burma(Myanmar) barred the state from contracting with thecompanies which undertake business with Burma(Myanmar). In September 1996, the Congress passed astatute pertaining to the imposition of sanctions on Burma.70

The State of Masachusetts was included in the list of sub-central entities presented by the United States. In UnitedStates - Measures Affecting Government Procurement71 theEU contended that the Act constituted a violation ofArticles VIII(B) because it imposed conditions on a tenderingcompany which were not essential to ensuring the firm�scapacity to fulfil the contract; Article X because thequalification criteria which was cited was based on politicalrather than economic considerations; and Article XIIIbecause the statute allowed the award of contracts to bebased on political instead of economic considerations.72 Thiscomplaint was withdrawn following the domestic ruling inNational Foreign Trade Council v. Baker.

TheNational Foreign Trade Council (34 of whose memberswere on the Massachusetts restricted purchase list) filed asuit in the United States District Court for the District ofMassachusetts against the State. The main contention wasthat the state law infringed on the federal foreign affairspower. In National Foreign Trade Council v. Baker73 , theDistrict Court permanently enjoined the enforcement ofthe state Act, stating that it unconstitutionally �impingedon the federal government�s exclusive authority to regulate


need to negotiate opportunities under the GPA to its bestadvantage.

Debate on Inclusion of Annex II Entities in Federal States

US-Canada and Sub-Central EntitiesThe United States had not committed to providing state-

level entities in 1993 stating that it required the consent ofthose entities. It was claimed that a direction from the USfederal government on state procurement would amount toan intrusion on how the states spend their revenues, apartfrom on state jurisdiction.75

Similarly, Canada had refused to include sub-central entitiesin its GPA commitments. In response to this, the United States(despite a provision in the operation of the �Buy American�requirement in the American Recovery and Reinvestment Act,2009, which stated that provisions were to be implemented�in amanner consistent with US obligations under internationalagreements�) implemented a specific provision against Canadalimiting its access to certain critical markets. Following Canadaoffering certain entities under Annex 2, this was reconciledthrough a bilateral agreement between Canada and the UnitedStates. Though the terms of this revised offer were applicableonly between Canada and the United States, they were laterextended to GPA parties contingent on whether they offeredreciprocal terms.76

An example of an interesting negotiating strategy deployedby Canada was to offer to present the list of sub-central entitiesin return for members opening up steel and transportation, toensure that in set-asides for small businesses, there would stillbe allowed an �acceptable security of access� for the membersof the committee.77 However, it is thought that this strategydid not succeed.78 It is noteworthy that Canada did notnegotiate to obtain a set-aside for small businesses owing to


which there was no means to recover the corresponding lostmarket in the United States.

Annex II: State Specific Exemptions/ExclusionsExclusion Pertaining to Funds (United States)

The Agreement is inapplicable to the restrictions attachedto Federal Funds for mass transit and highway projects.

Exemptions-Japan� The products and services which are procured with a view

to resell, or to use in the production of goods for sale arenot included.

� Procurement �related to operational safety oftransportation� is not included.

� The Agreement is inapplicable to contracts awarded byentities for furtherance of their daily profit-making activitiesas exposed to competitive forces in the markets.

Exemptions/Exclusions pertaining to Social Policies� Japan: The Agreement is inapplicable to contracts which

are to be awarded to co-operatives or associations inaccordance with the laws and regulations in Japan.

� Canada: Procurement which is intended to �contribute toeconomic development� in the provinces of territories ofManitoba, Newfoundland and Labrador, New Brunswich,

foreign affairs�. This was appealed by the State in Crosby v.National Foreign Trade Council.74

This case and the manner in which it was handled helps usunderstand how courts handle cases where sub-centralobjectives conflict with central objectives.


Prince Edward Island, Nova Scotia, Yukon or NorthwestTerritories is excluded.

� Canada: The rights of the Aboriginal Peoples in Canadaunder the auspices of section 35 of the Constitution Act,1982 are preserved.

� Canada: Programmes which promote the development ofdistressed areas are excluded.

� Canada: A provincial or territorial entity is permitted toapply restrictions which promote the general environmentalquality in that province or territory.

� Canada: In Quebec, Procurement pertaining to cultural orartistic goods and services, or measures adopted ormaintained with respect to culture or cultural industries isprotected.

� Canada: In Quebec, Procurement from a non-profitorganisation is exempted.

Canada - General Exclusions/Exemptions� Preferences or restrictions pertaining to highway projects

are excluded.� Crown Corporations of Canada are not included in Annex

II.� Benefit of School Boards, Academic Institutions: The

Agreement is not applicable to procurement of goods,construction or services which is purchased for the benefitof school boards, publicly funded academic institutions,social services entities, or hospitals (except Ontario andQuebec).

� Promotional Purposes: For goods, services, or constructionwhich are purchased for representations or promotionalpurpose in certain areas, the Agreement is not applicable.


Canada - State Specific Exemptions and Exclusions� An extensive analysis of Canada�s Annex II exclusions and

exceptions pertaining to its sub-central entities has beenundertaken byDavidCollins. Currently, Canada has openedup all ten of its provinces79 and two of its three territories.

� The thresholds maintained by the sub-central entities inCanada amount to SDR355,000 ,which though comparableto the United States, are still more than the thresholdsmaintained by the sub-central entities in Japan, Switzerlandand the European Union.80

� The three largest provinces have included exceptionspertaining to road projects. Ontario and Quebec are thetwo largest provinces, and while Ontario excludes urbanrail and urban transportation equipment, systems,components and materials, all project related materialspertaining to iron, or steel, and highway construction,Quebec presents varied priorities ranging from theprotection of seedling procurement to cultural goods andservices.81

� David Collins identifies that two plausible reasons for theseexclusions: it could either be that the predominant suppliersmay be local firms which may risk losing out to foreigncompetition, or alternatively, that Canada has sought tomirror the exclusion posed by the United States.82 Quebec,on the other hand exempts seeding (tree production),production of construction grade steel, and procurementof cultural or artistic goods. David Collins attributes thecultural exemption to the aspiration of theQuebec domesticeconomy to conserve its French heritage.83

� The Northwest Territories, the largest region has listed allthe departments and agencies. But it has excluded contractswhich emanate from a policy to attract investment into thenorth. Nova Scotia excludes procurement by EmergencyHealth Services. Prince Edward Island, the smallest province


excludes the procurement of construction materials for usein highway construction and maintenance.84

United States

Table 3.9: States Presenting Sector Specific Exemptions/Exclusions in the United States in Annex II

State

Wyoming,Pennsylvania, NewHampshire, Oklahoma,New York, Maine,Maryland, Florida,Delaware, Connecticut,Illinois, Iowa

New York

South Dakota

Washington

Sectors/products exempted from procurement

Construction-grade steel (including sub-contracts),motor vehicles, and coal.

Procurement pertaining to transit cars, buses andrelated equipment is exempted.

Beef (beef production is specialised in SouthDakota).85

Fuel, paper products, boats, ships and vessels

Exclusions pertaining to Social Policies in Annex II� The Agreement will not apply to preferences and restrictions

which apply to the development of distressed areas andbusinesses owned by minorities, disabled veterans andwomen.86

� Restrictions which promote the �general environmentalquality� in the state are permitted in so far as they do notconstitute a restriction on international trade.87

On Centre-State RelationsThe vastly different experiences of Canada and the United

States on the issue of the state governments adoptinginternational trade experiences lead us to undertake an analysison the possible interpretations of the Indian federal experiencein the same context.


On Horizontal PoliciesPolicies designed with a socio-economic purpose, though

not reflected in the text of the Agreement on GovernmentProcurement, may have found general acceptance amongst themembers. Certain elements of development activity may beundertaken predominantly by the state governments. In thosecases it remains to be seen whether individual stategovernments can advance state-government specificexemptions and exclusions to advance those social purposes.

Cultural ExemptionQuebec�s exemption of procurement pertaining to cultural

or artistic goods and services, and the measures maintainedwith respect to culture/cultural industries have not found directgrounds for justification in the Agreement. Considering thefact that this exemption has not found its basis in any provisionof the Agreement, it is essential to consider whether the sameor similar exemptions/exclusions can be modelled to protectthe vibrant handicrafts and small scale industry sectors in India.An alternate route for considering the inclusion of theseexemptions/exclusions could be under the provision availableto protect intellectual property where the know-how involvedin such industries could be represented as traditional culturalknowledge.

Box 3.4 enlists a few observations dealing with Annex IIentity-specific exemptions and exclusions.


Box 3.4: Observations Pertaining to Annex IIEntity-Specific Exemptions and Exclusions

� The above data leads us to surmise that exceptions andexclusions based on economic and social rationale canbe imposed independently by a state government incertain cases in federal states.

� Certain functions (like electricity, transport,construction) may be undertaken largely by the stategovernments, and not the central government.

� The economic exemptions seem to apply broadly to twotypes of goods/services: one is based on products whichare competitively produced by the suppliers in a specificstate government; the second is based on the state ofinfrastructure development. For example, consideringthe population density in New York, it can perhaps beinferred that infrastructure development in mass transitwill be undertaken seriously, owing to which theexemption dealing with the procurement pertaining totransit cars, buses and related equipment may have beenexempt for New York.

� With respect to any new entrant, a mapping of theavailable infrastructure juxtaposed against the needs ofthe population should be undertaken to understand thesectors in which maximum procurement may beundertaken by the state. Further analysis should beconducted on whether there are adequate capacitieswithin the country, or whether preferences have beengranted to any other supplier from other countries inthe past (which may be reflected either currently, or inthe future through a bilateral agreement). The decisionto open up the infrastructure sector for procurementshould be made accordingly.


� Inputs for Infrastructure: The procurement ofconstruction-grade steel, and coal and fuel have beenexempt by Washington and various other states in theUnited States.

� Economic exemptions and exclusions can be advancedto create an environment which promotes sustainedgrowth in sectors where the state is competitive inproducing/providing (as in the case of South Dakota�sbeef production).

� Social Exemptions/Exclusions: As noted earlierexemptions/exclusions advanced over goods/serviceswhich relate to persons with disabilities, philanthropicinstitutions or prison labour have already been reflectedin the text of the agreement.88 An exercise should beundertaken to gain better knowledge of the goods/servicesproduced in a state which are highly competitive orlabour-intensive, which are procured by that stategovernment/other state governments or the centralgovernment, and these goods/services can be advancedas exemptions by the states to preserve the positiveconditions for inducing growth in that sector.

� Environment-protection related exceptions: Restrictionswhich operate to protect the general environment qualityin the state as distinct from country-level exemptionscan be channelled through a state-level exception.

� The economic, and environment-protection relatedexceptions are subject to interpretation by aWTO panelin the future. If India commits different stategovernments to the WTO GPA, it can undertake anassessment to make environment-protection relatedexceptions and economic exemptions in the GPA afteradvancing a sound rationale for the same.


Annex III: �Other Entities� which Procure inAccordance with this AgreementPublic Enterprise Management

Negotiations pertaining to the conclusion of the Appendices:It is essential to equip oneself with knowledge of the country�sprocurement systems and government organisation in orderto effectively evaluate the commitments made by a member-country.89

We are interested in understanding how obligations can betransferred to public enterprises by the central governmentwhen it subsumes a treaty obligation. For example, in theUnited States, there are three options which a public enterprisehas with respect to being subject to legislation, depending onthe extent of government control: (i) The public enterprisecould be subject to a particular Act; (ii) It couldadministratively adopt the provisions of the Act; and (iii) Itmay not be subject to, and may not administratively adopt theprovisions of the Act.90

United StatesThe forms of public enterprise management in the United

States are as follows:Government Corporations (fully owned, and partially

owned), which are established through legislation, operate atthe federal level. Under the Government Corporation ControlAct, 1945, these enterprises are considered agencies of thefederal government.91

- Wholly-owned government corporations: CommodityCredit Corporation, Export-Import Bank of the UnitedStates, Federal Crop Insurance Corporation, TennesseeValley Authoriy, U.S Postal Service

Mixed-Ownership government corporations: FederalDeposit Insurance Corporation and National RailroadPassenger Service (Amtrak). .92


- Government-Sponsored Enterprises: Not governmententities under law, and lacking the authority to makefinancial commitments on its behalf. Generally, thecharters of these corporations proclaim that theseentities �will not be an agency or establishment of theUnited States Government�. The CommunicationsSatellite Corporation (Comsat), established in 1962, wasincorporated under the District of Columbia with 3 outof 15 directors being presidential appointees.Government involvement is limited to the governmentguaranteeing the loans. Examples include theCorporation for Public Broadcasting, the Legal ServicesCorporation, the Federal NationalMortgage Associationand the Federal Home Loan Mortgage Association.

Special Districts: Local government units which haveindependent taxing authority, but are still subject toconstitutional law. They provide services such as education,sanitation, and electrical power. Management of theseenterprises occurs through an elected board.

Public Authorities: Though governed by constitutional law,they can be said to be �insulated� from electoral politics, andmanagement of issues pertaining to budgeting, personnel etc..They have the power to raise finances by issuing debt. In someinstances, they may have the power of eminent domain.

JapanThe three forms of public enterprise management in Japan

are as follows93 :1. A public corporation (Kosha) � provides services which

serve a public purpose with a commercial basis (examples� Japan National Railways, Nippon Telephone andTelegram (NTT)

2. Special Company (Tokushu Kaisya) � Joint stock companywhich the government has invested in � though this entity


is more commercial in its orientation, the public purpose isapparent. Example, Electric Power Development Company.

3. Non-commercialised public corporation (Kodan) � Leansmore towards the fulfilment of a public purpose. However,the organisation is distinct from the government body andit asserts independence in management and financial self-support. Example, JapanHousing and Urban DevelopmentCorporation.

CanadaA tabular representation of the corporations in Canada is

provided herein below in Table 3.10.

General Features:Control and Standards, Usage, Functionality

Subject to rules pertaining to management,staffing, classification, remuneration, benefits,promotions, procurement, leasing of premises.

The Crown Corporations are used for activitieswhich are independent of the activities of thegovernment.They are permitted to resort to the usage ofprivate-sector management tools and practices.

Their functions may deal with the fulfilmentof a public policy objective.

Operates in a non-competitive environment.Is partially dependent on governmentalfunding for operating purposes.Is not expected to generate a profit.

Functions are commercial.They operate in a competitive environment.Independent of appropriations for operatingpurposes.Generally pays dividends, and provides areturn on equity.

Corporations

Schedule ICorporations

Schedule IICorporations

Schedule IIICorporations

Table 3.10: Classification of Corporations in Canada

CanadianGovernmentDepartmentsand Ministries

DepartmentalCorporations/CrownCorporations

DependantCorporation

ProprietaryCorporations

Source: �A Taxonomy for Budgetary Control of State-Owned Enterprises�Prepared by the Canadian Team for the Russian Public Expenditure Project,February 2002.


�Provision of Public Goods�The �other entities� which engage in procurement include

central level and state level public sector enterprises. Theseshareholding of these enterprises can be wholly owned by thestate, and in certain cases, it can be a portion of the shareholdingwhich is held by the state. The extent of control which thestate government exercises over the entity can differ from entityto entity. In certain cases, these entities undertake commercialfunctions, and in other cases the entities undertake to fulfilsocial purposes. Even in cases where the entities may undertakecommercial functions, they may be required to fulfil themkeeping in mind a larger social purpose (fulfilling the UniversalService Obligation in Post).

An area of focus is on public sector enterprises which dealin the provision of utilities. Three sectors of interest are theelectricity industry, the water industry and infrastructuredevelopment in transport (Table 3.5).

The electricity industry has components pertain togeneration, transmission and distribution. The electricitytransmission grid is a publicly-owned monopoly in mostcountries in Europe. In some other cases, suppliers of electricityattempt to take over distribution channels in order to guaranteeoutlets for their power.94 There are certain country membersof the GPA who suffer from water-scarcity. For example,water supply in Israel is critical because Israel receives rainfallonly in the winter. Israel relies on unconventional waterresources through reclaimed water and desalination. Waterinfrastructure is a critical concern for them. It is essential tonote criteria such as the extent to which water supply isprovided and supply of the water utility in a certain territoryin order to grasp the extent of its coverage.Water (significantly,Mekorot) and other state utilities which deal in water supplyhave been provided in the table. Technology transfer in thearea of water infrastructure should be aimed for.95


In Europe the state regional water companies weremunicipalised over time. It resulted in the burgeoning of manysmall entities to replace large entities. Network utilities arepublic utilities which are transmitted through a fixed network.These include gas, water, electricity and telecom. The networksof utilities create monopolies owing to which rents are foughtover. 96

While water and gas are regulated at a more local level,rail, telegraph and telephone are operated at the regional orcountry-level.97

Elements of CompetitionThe competitive advantages enjoyed by some state-owned

enterprises are as follows: (i) subsidisation; (ii) concessionaryfinancing and guarantee; (iii) preferential treatment bygovernment; (iv) monopolies; (vi) captive equity; and (vii)exemption from bankruptcy rules.98 Public sector enterprisesare frequently subject to cross-subsidisation or directsubsidisation. Hence competitive interests arise pertaining totheir inclusion/exclusion.

In the case of United States Postal Service v. FlamingoIndustries, the Supreme Court was posed with the questionof whether the US postal service enjoyed antitrust immunity.Flamingo Industries contended that the postal service haddeclared a fake emergency in the supply of mail snacks in orderto allocate no-bid contracts to �cheaper foreignmanufacturers�without allowing U.S. companies an opportunity to competewas anti-competitive. However, the Supreme Court ruled thatthe postal service could not be sued for antitrust violationsbecause the Postal Reorganisation Act did not subject the entityto antitrust liability. This was based on the court�s analysisthat US Post did not base its activities on recovering profits,but was entrusted with the responsibility of delivering mail toall classes of people.99 Postal services and certain other utilities


providers deal with the provision of a Universal ServiceObligation.

Decentralisation/Corporatisation/PrivatisationThe earlier Article XXIV (6)(b) contained certain

allowances for a country facing �market-opening effects ofthe removal of government control or influence�. This allowanceis no longer present in the current version of the GPA. In1997, privatisation referred to the cases where there is atransfer of undertakings from public sector ownership andcontrol to partial or total private ownership and control.Privatisation also includes the cases where a separate tradingbody is created on its own accounts, and in cases where thebody remains 100 percent owned and controlled by a publicauthority.100

� Decentralisation occurs in the cases where local authoritiesown and control functions which were previously stateowned.101

� Corporatisation occurs where the local authorities separatethe trading functions of utilities while retaining 100 percentownership.102

� Privatisation occurs through the sale of shares, or in caseswhere public authorities may grant licenses or concessionsfor a company to run a utility.103

MovingAway fromMonopolisation in Post:There aremanycontenders who support the privatisation of Canada Post104 ,the crown corporation which serves the largest area in theworld. The reason for urging the privatisation is that it is labourintensive, and is engaged in deficit spending. The UnitedKingdom, Finland,NewZealand and Sweden have transitionedto exposing their monopoly mail providers to competition.All 27 EU member-states have decided to end governmentmonopolies on mail delivery.105 However the Canada Post


Strategic Review106 notes that even during the transformationof the Department of Post to Canada Post, the entireshareholding was retained by the state to aid it in fulfilling itspublic service obligations.

One of the important under-researched areas of the GPArelates to the question of �modification�107 of an Entity Offerby withdrawing an entity or through any other alterationwhich may alter the �mutually agreed coverage�. This elementof the GPA is important to India with respect to the entities itsubmits under Annex 3. The policy on privatisation of theCentral Public Sector Enterprises may lead to reducing thecontent of a possible offer advanced by India. In the event aParty objects to a proposed modification, consultations arearranged between the Party which is proposing themodification and the Party which asserts that its interests aredenigrated through such modification. Consultations arearranged if: (i) the objection is regarding the withdrawal of anentity which is not withdrawn because of an agreement on�indicative criteria� which connote the �effective eliminationof government control or influence over the entity�or, (ii) ifthe objection deals with compensatory adjustments that arenot concluded in the case of any other proposed modification.A rectification under Article XIX of the Agreement includesa change in the name of the entity, a merger of two or moreentities in an Annex, and the separation of an entity in anAnnex into two or more entities which are all added to theentities listed in the same Annex.108

Japan engaged in large scale privatisation in order to obtainfunds for redeeming reconstruction bonds after the Great EasyJapan Earthquake. Japan has categorised some of its companieswithin certain Groups (Group A and Group B) in response tothe EU and the US voicing objections to the delisting of thecompanies.


Annex 3: Qualifications Based on Reciprocity(Limiting Market Access Further in Utilities)

Specific exclusions operate against certain countries(sometimes in a specific sector) until the country imposingsuch an exclusion admits that the Parties concerned accord�comparable and effective access� for the undertakings of thecountry imposing the exclusion in their market. This couldoperate as per the level of exclusion (services, sub-centralgovernments, etc). These exclusions are sometimes closely tiedto sectoral exclusions.

A few common exclusions pertaining to infrastructureinclude excluding electricity, urban transport, airports, ports,and water to suppliers and service providers of Canada,Singapore and Japan.

It has been observed that these derogations are in place inorder to persuade further access to the markets of thecountries which have not provided reciprocal coverage. Anexample presented by Robert Anderson and OseiLah dealswith the exceptions maintained by the European Union withrespect to the utilities sectors: the European Union hasassented to opening up utilities sectors for procurement atthe negotiation stage, but had limited reciprocal access to thosecountries which did not provide a similar level of access tothe negotiated-upon utilities.109

An example of such an exclusion as maintained byLiechtenstein110 and Norway111 is provided in the footnotesbelow. It is important to note the thorough extent to whichthemapping of reciprocal market access obligations is reflectedin the qualifications made by the two countries. It is critical tomirror reciprocal market access derogations in order toevaluate the actual number of sectors which have been openedup.


Qualification of Market Access in Certain SectorsTable 3.11 details those sectors to which market access is

denied to either all or select members in the GPA. The sectorexclusions in Table 10 can be said to be GPA compatiblebecause they have been concluded after negotiations betweenparties. However, the table indicates a significant qualificationof market access with respect to the entities which are engagedin the provision of certain utilities such as drinking water,energy, transport, telecommunications and electricity.

Table 3.11: Details of Sectors in which Market Access isDenied or Limited by Country Members in the GPA

Country

Canada

Canada

United States

United States

United States

United States

Korea

Countries toWhom MarketAccess is denied

All.

EC

All

Japan

Japan

Korea

All

Sectors in which Market Access is denied(Applies to various annexes as specified. Inthe event the sector exclusion in mentionedin the general notes, it will apply to allannexes)

Procurement by Annex 2, and Annex 3entities, subject to negotiation of mutuallyacceptable commitments

Drinking Water, Energy, TransportTelecommunications

Mirrors the exact coverage in Annex 4pertaining to Services (as advanced by theother member-country)

Entities in Annex 3 responsible forgeneration or distribution of electricity

Procurement by National Aeronautics andSpace Administration

Mirrors the thresholds in Annex 2 and 3 toallow access to procurement above 15million SDRs (as advanced by the othermember-country)

Mirrors the exact coverage in Annex 4pertaining to Services (as advanced by theother member-country)


Korea

Korea

Liechtenstein

Liechtenstein

Liechtenstein

Liechtenstein

Japan

EC

EC

EC

EC

EC

EC, Austria,Norway, Sweden,Finland,Switzerland

Canada

Canada, and theUnited States

Canada and theUnited States

Canada, Japan,USA

Canada, Israel,Japan, Korea,USA

Canada

All

Canada

USA

Canada and USA

Canada andJapan

Contracts by National RailroadAdministration, Procurement by Airports,Procurement for Urban Transportation(including subways) in entities in Annexes1 and 2 [unless comparable and effectiveaccess is provided]

Procurement by entities in Annex 2 andAnnex 3

Annex 2 entities

Procurement pertaining to Water, byAnnex 2, and Annex 3 entities(until comparable and effective access isprovided)

Electricity contracts in Annex 3

Urban Transport, Annex 3

Entities in Annexes 2 and 3[Except Japan Post in Group A, andentities in Group B in Annex 3

Contracts undertaken by Annex 3 entitiesfor the following purposes:- Purchase of water- Supply of energy or fuels- Production of energy- Pursuit of such activities in a non-

member-country

Annex 2 contracts [unless comparable andeffective access is provided]

Contracts other than contracts for suppliesto USA suppliers and Service providers[unless comparable and effective access isprovided]

Water[unless comparable and effectiveaccess is provided]

Electricity [unless comparable andeffective access is provided]


EC

EC

EC

EC

EC

EC

Switzerland

Switzerland

Switzerland

Switzerland

Canada, Koreaand USA

Canada

Canada, Japan112,Korea and USA

Israel

Canada andUSA

All

All

Canada

USA, Israel, japan,Korea, HongKong, China,Singapore andAruba

Canada, USAand Singapore

Canada, Japanand Singapore

Canada, Koreaand the USA

Canada

Canada, Israel,Japan, Korea andthe USA

Airports [unless comparable and effectiveaccess is provided]

Ports [unless comparable and effectiveaccess is provided]

Urban Transport [unless comparable andeffective access is provided]

Bus Services [unless comparable andeffective access is provided]

For contracts for goods and services componentsof contracts which although awarded by anentity covered by this Agreement, are notthemselves subject to this Agreement.

Mirrors commitments pertaining tocontracts in services in Annexes 1-3, andcategories in 4-5.

Procurement pertaining to activities in thesectors of water, energy, transport andtelecommunications (for Annex 2 entities) (untilcomparable and effective access is provided)

Annex 2 suppliers (until comparable andeffective access is provided)

Organisations under public law establishedat the cantonal level not having anindustrial or commercial nature (Annex 2entities) (until comparable and effectiveaccess is provided)

Water (Annex 3) (until comparable andeffective access is provided)

Electricity (Annex 3) (until comparable andeffective access is provided)

Airports (Annex 3) (until comparable andeffective access is provided)

Ports (Annex 3) (until comparable andeffective access is provided)

Urban Transport (Annex 3) (untilcomparable and effective access is provided)


Annex 3: General ExceptionsContracts Between Affiliated Entities:The following service

contracts awarded between contracting entities, or by acontracting entity to an affiliated undertaking are excluded inNorway GPA, Annex III: �Service contracts awarded by acontracting entity to an affiliated undertaking; A servicecontract which is awarded by a joint venture by a number ofcontracting entities for carrying out an activity to anundertaking affiliated with one of the entities�. One of theconditions is that the affiliated undertaking should have derivedat least 80 percent of its turnover in three preceding yearsfrom the provision of such services to the undertakings towhich it is affiliated. In the event more than one undertakingwhich is affiliated with the contracting entity is taken intoconsideration for the provision of the same service or similarservices, the total turnover deriving from the provision of thoseservices in those undertakings is taken into account.

Procurement of ships to be jointly owned with privatecompanies is not included:This indicates a possible exclusionof all procurement undertaken by a government entity inpartnership with private entities. This raises the questionwhether procurement under any public-private partnershipcan be open under the disciplines of the Agreement onGovernment Procurement considering some assets may bejointly owned.

This question is of increased significance in the largercontext where chapters pertaining to commitments pertainingto Government Procurement in Regional Trade Agreementsdeal with Explicit Coverage of BOTs/public works andconcessions. Examples include the US-Singapore GPA.113

Buy American in Annex III entities: Prior to the Final Offerfiled by the United States, the Buy American legislation wasutilised as a bargaining chip for additional procurement.Contrary to the perception that Buy American legislation


contains a waiver that warrants access to all procurementundertaken under the Buy American Act, another use of thelegislation is to further the market access opportunities forthe United States. This was done through allowingprocurement of Canadian iron, steel and manufacturedproducts by the entities listed in List C. List C has beenremoved from the current Final offer of the United States.114

Further the use of any domestic purchase requirement inorder to render financing of power generation ortelecommunication projects has been limited in case of RuralUtilities Services.115

Limited Application of the Buy American Programme toPower Generation Projects: Rural Utilities Service Financing� a waiver of the Buy American restriction operates onfinancing for all power generation projects.

Protecting Confidentiality of Information:Canadian AnnexIII entities, St. Lawrence Seaway Authority and the RoyalCanadian Mint (both listed in Annex III) state that theprovisions of Article XIX:4116 , respecting the protection ofthe commercial confidentiality of information provided applyto procurements undertaken by them. The provisions of ArticleXIX:4 pertaining to confidentiality deals with restricting thecirculation of information which may prejudice the interestsof fair competition, impede law enforcement, and infringe onpublic interests. Its scope may not be meant to extend toexempting procurement from the disciplines of the GPA. Thescope of the application of this provision is unclear � it mayindicate that procurement in uncertain cases will not beconducted through open tendering, and may be conductedthrough limited tendering. It is essential to seek clarity on theoperation of this exception.

Confidentiality in Nuclear Procurement: Any procurementwhich could lead to disclosure of information incompatiblewith the purpose of the Treaty on the Non Proliferation of


Nuclear Weapons or with international agreements onintellectual property rights is not included.117

Confidentiality in procurement pertaining to geological andgeophysical survey is not included118 : This activity ofundertaking geological and geophysical surveys could beundertaken by departments which deal in urban, ruraldevelopment, natural resources, climate change, poverty andsocial change. The procurement opportunities which are beinglost out may deal with products and specialist equipmentpertaining to geological and geophysical surveying. Themotivation behind including this exception could be to protectconfidential information on identifying natural resources etc.

Limited Scope of Activity Opened up for Procurement:Theonly procurement activity opened up by the Royal CanadianMint is the minting of Canadian Legal Tender. It is plausiblethat minting of tender for other jurisdictions is undertaken asa commercial activity, and is hence outside of the purview ofthe GPA.

US Annex III entity, the Port Authority of New York andNew Jersey, excludes the following activities: maintenance,repair and operating materials and supplies (e.g. hardware,tools, lamps/lighting, plumbing). South Korea Annex III entity,the Korea Electric Power Corporation exempts procurementin products in the categories of HS No.s 8504, 8535, 8537,and 8544.

Exclusion of Procurement which uses Federal Funds inAnnex III Entities: The United States qualifies the applicationof federal funds for airport projects as a general exemption/exclusion under Annex III. The Agreement is inapplicable tothe restrictions pertaining to federal funds for airport projects.

This exclusion could be based on the premise thatprocurement which uses federal funds by Annex III entitieswill not be submitted to the disciplines of the WTO GPA.There is no provision in the GPA under which this exclusion


could be justified. This may be particularly interesting becauseof the use of government expenditure norms to justify someprocurement activity.

Procurement Involving overlap of AuthoritiesUS Annex III entity, the Port Authority of New York and

New Jersey also exempts procurement which is undertakenpursuant to contracts which have initially been awarded byother jurisdictions. Hence procurement which may beundertaken by Central, or state entities, or pertaining to inter-state activities with possibilities of overlapping of authoritiesmay be exempt in certain cases.

Annex III: Entity Specific Exemptions(Other Entitiesengaged in Procurement)Requiring Local Production of Goods in Annex III entities

This exemption adduced by the United States presentspossibilities for advancing delegation of management functionsin public-sector enterprises as a possible reason for achievingsocial objectives/economic objectives through requiring theregional production of goods.

United States Annex III entity, the Port Authority of NewYork andNew Jersey, note that in exceptional cases, individualprocurements may require certain regional production ofgoods if authorised by the Board of Directors. There is noprovision in the GPA which explicitly permits resort to thisexception. This exclusion is present in the US GPAnevertheless. There is no reference to any statute whichgoverns the possibility of according to the Board of Directorsthe right to require regional production of goods, owing towhich identifying the cases in which regional production ofgoods may be produced is difficult to identify. However, it ispossible that management of this state-owned entity, and


possible inclusion/exclusion of these conditions in procurementactivity has been delegated to the Board of Directors. It ispossible that this exception/exemption can be adduced in thecases of PSEs and SLPEs (State Level Public Enterprises) inIndia in cases where management of the PSE is dealt withthrough MoUs.

Clarity on the basis resorting to this exception has to besought in the Committee on Government Procurement byObservers and member-countries. The GPA is an evolvingdiscipline, and it is essential to understand the exact scope ofoperation of these exemptions/exclusions which operateoutside the scope of the GPA.

In the event this exception is founded on the rationale ofhaving delegated management functions to the Board ofDirectors, including procurement functions (which in this casehas been used to require local production of goods), and if itfinds acceptance amongst members in the GPA, it can beexpanded to include within its scope other acts pertaining todevelopment.

Details of Annex III EntitiesWe are interested in understanding the weightage of the

offered entity � this can be understood by noting whether theentity operates in a monopoly, and whether it will movetowards privatisation, or noting if it is a loss-making entityand any other factors which aid us to evaluate the economicvalue of an offer, in order to ascertain the �economicequivalence� of an offer.

Table 3.12 provides sector-specific information on theutilities listed in Annex 3. The utilities covered in Table 7include the following: (i) Water; (ii) Post; (iii) Electricity; (iv)Energy; (v) Electricity; and (vi) Transportation. The informationpresented in this table enlists the information tabled by thecountry annexes.


Table 3.12: Entities enlisted in Annex 3 engaged in theprovision of Utilities

Utility/Infrastructure

Water

Japan

Aruba

ChineseTaipei

Israel

Post

Japan

Canada

Listed Entity[Note onany exemption/exclusion]

Japan Water Agency119

Water enEnergiebedrijf N.V.121

Taipei WaterDeparment (TWD)

Bureau of TaipeiFeistsui ReservoirAdministration

Mekorot Water Co.Ltd.124

Japan Post

Canada PostCorporation (FederalEnterprise)

Comments

Operates under the Japan Water Agency(Independent Administrative Institution) toconstruct dams, estuary barrages, canals. Itsupplies bulk water to other entities whichdistribute it to end users. Subsidies are granted forthe provision of Domestic Water, IndustrialWater, and Agricultural Water.120

Aruba suffers from scarcity of water. WEB ArubaNV has invested US$250mn (approx.) to expandits water production and electricity generation.

TWD supplies drinking water to places within andoutside of the Taipei County, including Banqiao,Tamsui, Zhuwei, Luzhous and Xizhi under theadministration of the Taipei County Government.122

Meets the water usage requirement in the TaipeiMetropolitan area123

National water company of Israel, responsible forwater management, and supplies Israel with 80percent of its drinking water requirements.125

Japan Post was privatised in 2007126 andrestructured to form Japan Post Holdings Co. Ltd,Japan Post Service Co. Ltd., Japan Post NetworkCo. Ltd., Japan Post Bank Co. Ltd. and JapanPost Insurance Co. Ltd.

A Canadian crown corporation (owned 100percent by the Government of Canada)127 which ismainly responsible for handling post. Governed bythe Canada Post Corporation Act, it operatesunder the Ministry of Transport. The Canada PostGroup includes the following companies: (i)


Israel

Electricity

Korea

ChineseTaipei

Israel

Petroleum

ChineseTaipei

Energy

AtomicEnergy

Japan

Hydropower

Israel Post CompanyLtd.

Korea Electric PowerCorporation:[EXEMPTION:Except on purchasesof products incategories of HS No.s8504129, 8535130, 8537131,and 8544]

TaiwanPowerCompany

The Israel ElectricCorp. Ltd

Chinese PetroleumCorporation, Taiwan

Japan Atomic EnergyAgency

Canada Post Segment, (ii) Purolator CourierLtd,(iii) SCI Logistics and (iv) Innovapost, Inc.The Corporation has the sole and exclusiveprivilege of collecting, transmitting and deliveringletters to recipients within Canada.128

The government-owned corporation which ownspostal services in Israel which had around 700branches in the country.

Involved in the generation, distribution andtransmission of electricity132 � involved in fourbusiness segments including electricity sales,nuclear power, thermal power and otherbusinesses.

The TaiwanPower Company133 deals with all thepower facilities in Taiwan134. It is a public utilityand the sole integrated power company in ChineseTaipei. It is a state-owned enterprise under theMinistry of Economic Affairs..135

The Company is a licensed essential serviceprovider.136 It is the sole integrated electric utilityin the State of Israel, and it generates, transmitsand distributes almost all the electricity in Israel.

Is currently a loss-making entity137 because of theoil and gas price adjustment mechanism owing tothe high costs of procurement of oil.138

Was promulgated under the Japan Atomic EnergyAgency Act of 2005 and deals with research innuclear energy.139


The TVA is a corporation owned by the USgovernment. It is not a profit-making entity andis not funded through taxpayers� money. Itprovides flood control, navigation and landmanagement for the Tennessee River system.140

Largest public power utility in the United Stateswhich is powered by 29 hydroelectric dams, 11coal powered plants, 3 nuclear. plants.

Despite not having access to a natural source ofwater, WEB Aruba has assured the citizens ofAruba of access to water.141

The Public Transport Council is an independentbody which regulates bus services, bus serviceoperators, ticket payment services, bus, and,rapid transit system fares which has beenconstituted under the Public Transport CouncilAct.142

The (basic) bus services are provided by SBSTransit Ltd and SMRT Buses Ltd which arelicensed by the PTC. The bus service operatorsare required to fulfil the Universal ServiceObligation (USO) and operate the servicesregularly.The Fuel Equalisation Fund143 requires an annualcontribution to be made by public transportoperators in order to ensure that increases in fueland energy prices do not impact public transportfares.

Israel is currently revamping its light railsystems: The Jerusalem light rail, Carmelit inHaifa, Metronit, The mass transit system for TelAviv (Tel Aviv Metropolitan Area Mass-TransitSystem) are projects which are currentlyunderway.

Tennessee ValleyAuthority

Water enEnergiebedrijif N.V

Public TransportCouncil

Urban transport(except busservices):Appliesonly to the EuropeanCommunities, opento negotiation ifreciprocityconditions aresatisfied.

Arubus N.V.

United States

Aruba

Transporta-tion

Singapore

Israel

Aruba


Airport

Japan

Singapore

Israel

Hong Kong

Aruba

Railways

Japan

Japan

Narita InternationalAirport Corporation

Civil AviationAuthority ofSingapore

Israel AirportsAuthority

Airport Authority

Airport AuthorityN.V.

Hokkaido RailwayCompany, East JapanRailway Company,Central JapanRailway Company,West Japan RailwayCompany, ShikokuRailway Company,Kyushu RailwayCompany, JapanFreight RailwayCompany:Procurementrelated to operationalsafety oftransportation is notincluded.

Japan RailwaysConstruction PublicCorporation

The Narita International Airport Corporation wasestablished on April 1, 2004. It is responsible forthe management of Narita International Airport inJapan.144

A Statutory Board under the Ministry ofTransport.145

A public corporation founded by the IsraelAirports Authority Law, it is a Ministry ofTransport Corporation, and it is possible that theboard directors have been appointed by theMinister of Transport and Road Safety.146

A statutory body wholly owned by the Hong KongGovernment and governed by the AirportAuthority Ordinance.147

A large number of the entities noted under Japan�scoverage are privatised entities. The sevencompanies were formed after the privatisation ofthe government-owned Japanese NationalHighways. JR Hokkaido places a high premiumon safety of procurement.148

The construction of some of the railway lines aregoverned by the Nationwide Shinkansen RailwayDevelopment Law � following completion of theconstruction, the operation of these facilities areleasedd to the Japan Railway Companies. Theconstruction projects are funded by the nationaland local governments and the revenue generatedfrom the sale of the existing shinkansen lines.149

Japan Railway Construction, Transport andTechnology Agency is a new agency which resultedfrom the integration of Japan RailwayConstruction Public Corporation and Corporationfor Advanced Transport and Technology. It is


unclear as to whether the new entity has replacedthe earlier entity in the entity offer.150

The main player in inter-city, commuter andfreight transport in Israel, Israel RailwaysCorporation Limited earlier operated as a unit inthe Ports and Railways authority.151 IsraelRailways Corporation Limited was established in2003. Railways is undergoing constant expansion.The network is 1,001 kilometres. A lot of theheavy rail lines are yet to be electrified.

The Kowloon Canton Railways Corporation wasmerged with MTRCL in 2007 following which ithas attained the status of an asset holdingcorporation.152

Comments

The Central Nippon Expressway CompanyLimited, the East Nippon Expressway Companyand West Nippon Expressway Company wereestablished after the privatisation of the JapanHighway Public Corporation. The privatisation ofthe Japan Highway Public Corporation occurredon account of debt. Similarly, the Honshu-Shikoku Bridge Authority, the MetropolitanExpressway Public Corporation and the HanshinExpressway Public Corporation gave rise to theHanshin Expressway Company Limited, Honshu-Shikoku Bridge Expressway Company Limited.The Japan expressway system consists mostly oftoll roads, unlike the US and EU where usage ofthe roads is mostly free of cost.153

The LTA154 plans and maintains Singapore�s landtransport infrastructure and systems. Itsubsidiaries include Transit Link PTE Ltd whichprocesses transit transactions (a subsidiary of

Taiwan RailwaysAdministration

Israel RailwaysLimited

Kowloon CantonRailwaysCorporation

MTR CorporationLimited

Entity Offer

Central NipponExpresswayCompany Limited,the East NipponExpresswayCompany and WestNippon ExpresswayCompany, HanshinExpresswayCompany Limited,Honshu-ShikokuBridge ExpresswayCompany Limited

Land TransportAuthority ofSingapore

ChineseTaipei

Israel

Hong Kong

Highwaysand Roads

Country

Japan

Singapore


Israel

Ports

ChineseTaipei

United States

Singapore

Israel

Public TransportCouncil

n/a

Keelung HarbourBureau

Taichung HarbourBureau

Kaohsiung HarbourBureau

Hualien HarbourBureau

Port Authority ofNew York and NewJersey:

Port of Baltimore

Maritime and PortAuthority ofSingapore

Israel PortsDevelopment andAssets Company Ltd.

Land Transport Authority on 30 April 2010),EZLink PTE Ltd (a wholly owned subsidiary of theLTA which is regulated by the Monetary Authorityof Singapore and the Public Transport council, MSIGlobal which provides consultancy services.155

The National Roads Company of Israel, agovernment owned company which is in charge ofplanning construction and maintenance of the roadinfrastructure in Israel has not been listed.

The Port of Keelung is operated byTaiwanInternational Ports Corporation.

Operated by TaiwanInternational PortsCorporation.156



A �public authority�, it was established in 1921,and was responsible for building the World TradeCenter, the bridges, tunnels and otherinfrastructure in New York.159

The exception: In exceptional cases, theindividual procurements may require certainregional production of goods if authorised by theBoard of Directors. Has been dealt with in detail.

Subject to conditions specified for New York inAnnex 2

Israel Ports and Railway Authority, thegovernmental agency which operates and managesthe Haifa, Ashdod and Eilat airports is not listedin Annex III of Israel�s Offer.


Aruba

Telecommuni-cations

Aruba

Korea

Japan

EconomicServices

Canada

Ashdod PortCompany Ltd.

Haifa Port CompanyLtd.

Eilat Port CompanyLtd.

Aruba PortsAuthority N.V.

Setar

Korea Telecom(withdrawn)

Nippon Telegraphand Telephone Corp

Royal Candian Mint

The Port of Haifa, the Port of Eilat and the Port ofAshdod are the three major ports in Israel.

The Port of Ashdod is one of Israel�s two maincargo ports � the Ashdod Port Company is aMinistry of Transport Corporation meaning thatthe Board of Directors was appointed by theMinister of Transport.160

Described as the largest and most veteran port inIsrael, the Haifa Port Company Ltd. Is a Ministryof Transport Corporation meaning that the Boardof Directors was appointed by the Minister ofTransport.161

The Port of Eilat allows Israel to reach the IndianOcean without having to traverse through the SuezCanal. Currently, it is not well connected to thecentre of Israel. Plans are underway to improveaccess.

A leader in the telecommunications area in Aruba,SETAR is a 100 percent Aruba run company.162

Korea Telecom was privatised under the basis ofthe Act on Restructuring and Privatization of StateEnterprises.

Nippon Telegraph and Telephone PublicCorporation was established in 1952, and in 1985,Nippon Telegraph and Telephone Corporation(NTT) was incorporated as a private company.163

A for-profit Canadian Crown Corporation, whichproduces all of Canada�s circulation coins. It alsoundertakes production on behalf of other nations.164


General ObservationsIn certain GPA member-countries, despite the large

contestable market, a majority of the contracts are awardedto domestic suppliers. This is as much as more than 95 percentin the case of Chinese Taipei (as noted in Chapter 2). In othercases, developed country members seem to focus a bulk oftheir procurement purchase activities from other developedcountry markets. It may be postulated that this imbalancecould occur owing to a significant proportion of theprocurement being based in high technology goods. (Refertable 3.13).

However, South Korea does award contracts to foreignsuppliers.

It remains to be explored if developing countries or newlyindustrialised countries are less capable of discriminatingbetween domestic and foreign tenderers in their tenderingprocedures because of incipient infrastructure and evolinginstitutions to cater to trade. A similar examination should beundertaken on the capacity of countries to use non-tariffbarriers to impede access to procurement markets.

DefenceInfrastructure

Canada DefenceConstructionCanada

A crown corporation engaged in building massivedefence infrastructure, which reports to theCanadian Federal Government through theMinister of Public Works and GovernmentServices. The sole client is the Department ofNational Defence.165 The areas of its operationinclude construction, construction contractmanagement, environmental, commissioning andfacilities management services. It built theDistant Early Warning Line.166


Table 3.13: Trading Profile ofMember-CountriesParties to the Total Share of Exports of Imports of Manufactured HighGPA/Countries Trade as tradewith Merchandise Merchandise exports TechnologyUndergoing the share of neighbouring (millions of (millions of (percentof exportsAccession GDP countries dollars, dollars, total (percentofProcess (2005-06) (percentof 2007) 2007) merchandise) manufactured/Interested in total trade) (2006) exports)Accession (Average2000-05)

Armenia 58.5 10.4 1,219 3,282 56 1

Canada 72 12.4 4,18,493 3,89,670 56 15

United 61.6 50.2 4,35,615 6,17,178 77 34Kingdom

United States 26.8 30.7 11,63,183 20,16,978 79 30

Hong Kong, 399.4 49.1 3,49,663 3,70,733 91 11China

Iceland 83.1 0.7 n/a n/a n/a n/a

Israel 88.4 0.9 54,065 58,950 82 14

Japan 27.3 0 7,12,839 6,20,967 91 22

Germany 84.7 63.6 1326521 1059439 83 17

Singapore 473.5 14.7 2,99,271 2,63,150 80 58

South Korea 85.3 n/a n/a n/a n/a n/a

Switzerland 89 61.4 1,71,621 1,60,798 91 22

Chinese 134 10.8Taipei, China

Norway 75 18.8 1,39,424 80,347 16 19

Croatia 104.6 50 12,360 25,830 66 10

FYROM 118.3 45.8 n/a n/a n/a n/a

Albania 74.2 71.9 1,072 4,196 27 13

Georgia 89.9 39.4 1240 5217 48 16

China 72.4 15.4 1217939 955845 92 30

India 43.8167 9.9 145228 216682 70 5

Jordan 146.6 31.8 5,760 13,310 71 1

Krgyz 115.7 35.8 1,105 2,475 46 3Republic

Moldova 139.2 39.7 1,370 3,720 31 5

New Zealand 58.2 0 26,950 30,890 27 11

Oman 99.2 32.1

Panama 144.5 9.7 1,200 7,010 10 0

Ukraine 97.3 40.6 49,100 60,440 73 3

Vietnams 150.3 11.7 48,387 60,830 50 5

Source: World Development Indicators, 2009


However, as noted before, certain markets like Koreapresent opportunities for foreign suppliers. It can be surmisedthat countries which do not have very sophisticated tradesystems, in which discrimination between domestic and foreignsuppliers through non-tariff barriersor through the use of singletendering can be easily effected, may present increasedprocurement opportunities.

The pharmaceuticals and IT sectors present multipleopportunities for procurement in the EU, Japan and the US.Particularly in the US, pharmaceutical procurement accountedfor the largest amount. This could be owing to procurementunder Medicaid and other government sponsored/supportedhealth insurance programmes. Generally, construction andprocurement of computer related services accounted for thelargest procurement in most procuring governments,particularly the EU.

Denying Challenge Procedures under the GPAAnother facet of altering commitments pursuant to

reciprocity is the case where membe-countries deny challengeprocedures under the GPA in the absence of removal of set-asides for small and medium sized enterprises, or notsubmitting Annex 2 entities for procurement.

The EC168 , Iceland, Liechtenstein and Norway indicate thatthe suppliers of Israel, Japan and Korea cannot resort to thechallenge procedures under Article XX when their suppliersengage in procurement by sub-central entities.

The EC, Iceland, Liechtenstein andNorway state that smalland medium sized enterprises from Japan and Korea will notbe permitted to resort to the challenge procedures until thosecountries cease discriminating in favour of their own smalland medium sized enterprises.

Challenge procedures will not be available in cases wherethe threshold applied for the same category of contracts


awarded by the parties is higher than the one by the countrywhich seeks to deny the challenge procedure.

Observations with respect to the Operation of Article XX:in the event any new entrantmaintains discriminatorymeasuresin favour of small andminority businesses, or refuses to submitits sub-central entities to the disciplines of governmentprocurement, it is likely to be refused access to challengeprocedures under Article XX (of the earlier version) andArticle XVIII of the current GPA pertaining to DomesticReview Procedures.

Apart from the reciprocity norms which are commonlypresent in the country entity offers, the concepts of denyingchallenge procedures under Article XX169 � unless certaincountries improve the content of their offer � is one whichneeds further analysis. This provision has not been interpretedby any Panel or Appellate Body, and there is no clarificationfrom the Committee on Government Procurement on whetherthe flexibilities which are offered by the agreement includewithin their purview the denial of challenge procedures underArticle XX. The current text of the GPA with respect toDomestic Review procedures is contained in Article XVIIIentitled �Domestic Review Procedures�.170

Denying the use of Article XX (of the earlier text) seemsto be a response to the following: (i) higher thresholds thanthe one committed by the party denying the application ofArticle XX; (ii) not covering sub-central entities; (iii)discriminating in favour of small andmedium sized enterprises.India can include similar provisions in its draft offer; however,it is important to note that the same recourse under challengeprocedures may be denied to Indian suppliers in foreignmarkets in the event small and medium sized enterprises arepositively discriminated for, or if a possible Indian offer doesnot include sub-central entities. This further derides thealleviatory provisions which had been included in the


Agreement in favour of developing countries. It is furtherinteresting to note that Japan reciprocally denies its challengeprocedures to the countries which deny the application ofchallenge procedures to the participants from Japan. Theunbridled exercise of this flexibility by the members of theGPA demonstrates that the GPA is far from being a rule-basedregime. This could be read as constituting a concrete reasonfor why developing countries like India should not accede tothe GPA.

Interestingly, under Article XXII (3) of the current, aprovision entitled �Reservations� states that �No party shallenter a reservation in respect of any provision of thisAgreement�. There is no legal basis for denying access tochallenge procedures under a party�s domestic challengemechanism. It remains to be seen whether member-countrieswill continue to advance this qualification pertaining to accessto their dispute settlement procedures.

Observations on the Evaluation of Entity Offer(Annex I) Even in certain countries where procurement is

decentralised, procurement of items like stationery,information technology products, etc. is sometimesundertaken by a centralised entity in order to obtain bettervalue by amalgamating demand. In those cases it is importantto note whether that centralised entity is listed, and whetherthe scope of procurement by that entity extends beyond thecovered entities, or is restricted to the procurement made onbehalf of the covered entity.

(Annex III) Japan has privatised a large number of its AnnexIII entities. It is essential to understand whether these entitieswill continue to procure under the purview of the GPA, orwhether a modification/updation of the Annexes is required.

Presence of horizontal policies in member-countries�Appendices: Appendix I of a member�s offer defines the scope


of procurement which has been submitted for the purpose ofapplication of the disciplines of Government Procurement.Appendix I has been derived following bilateral negotiationsand plurilateral negotiations. Hence, it may be possible forany countrymember to include set-asides and offsets pertainingto procurement.

Factors Inhibiting Market AccessA country has the sovereign authority to maintain certain

laws in times of emergencies and financial distress. Howeverthese may conflict with the established principles of theefficient conduct of international trade. �BuyNational� policieswere put in place by certain countries owing to the need toprocure domestically in order to limit procurement by domesticbuyers to products of domestic suppliers to tide over a domestic& global recession. It is thought �Buy National� policies areonly going to multiply and increase in operation. One reasonfor this, as identified by John Linarelli, is that these policiesresult in the players of that market obtaining a free-ridingadvantage in those markets where a similar provision is notmaintained.171

Buy National/Buy LocalBuy National/Buy Local policies may sometimes operate

outside of the scope of the GPA. We view the content of theUS Buy National Policy in the context of it being based in theprotection of the interests of its SMEs. The European Unionon the other hand, has promulgated a proposal on buying fromonly thosemembers who do not denigrate its reciprocal marketaccess opportunities. We consider the Buy Local laws ofcountries which are not party to the GPA yet, such as China,in order to view and understand the various facets of theselaws. Strikingly, the motivation of the Buy National Policy inChina is to foster innovation.


Interestingly, a Buy National law is implemented throughregulations pertaining to Rules of Origin. Though thepredominant test for Rules of Origin under GovernmentProcurement has been the test of �Substantial Transformation�,views abound that the products are required to bemanufactured in the country identified.

We are interested in noting how the operation of the BuyNational laws can present newmarket opportunities for Indiain the production of intermediate goods in manufacturingprocesses. We note the process of judicial review, and pre-dispute holdings and findings in those member-countries inorder to come up with accurate strategies to build capabilitiesto tap those markets.

American Recovery and Reinvestment Act, 2009The US Buy America Act was passed in 1933.172 The earlier

legislation was entirely different from Section 1605 of theAmerican Recovery and Reinvestment Act, 2009 (hereinafter�ARRA, 2009�) which prohibits the use of funds by the USCongress on �construction, alteration, or repair of publicbuildings or public works unless all of the iron, steel, andmanufactured goods used in the project are produced in theUnited States.�173 The conditions under which this requirementmay be waived are as follows: (i) It would be �inconsistentwith the public interest� to apply the Buy Americanrequirement; (ii) Iron, steel and manufactured goods are notproduced in the US in sufficient and reasonably availablequantities and of a satisfactory quality; (iii) Using iron, steeland manufactured goods produced in the US will increase theoverall project costs by more than 25 per cent.174

Under the Federal Acquisition Regulation 25.602, theconditions for using the funds allocated under the RecoveryAct for a project for construction, alteration, maintenance, orrepair of a public building or public work are as follows:


1. The public building or public work is located in the UnitedStates; and

2. All of the iron, steel, and other manufactured goods usedas construction material in the project are produced ormanufactured in the US.

3. The question that was dealt with by the CBP was whetherthe product was substantially transformed into a productof the United States: the test which was outlined waswhether the parts lose their identity to merge into the newproduct and the extent of operations which were involved.

A provision in Section 1605 of the ARRA 2009 states thatthe Buy American Act states that the application will beconsistent with the United States� obligations underinternational agreements.175 The Trade Agreements Act of1979 permits exemptions from the Buy American Act forcertain countries under the GPA and certain FTAs.176

Countries like Brazil, China, India and Russia, which exportsteel to the United States and are neither party to the GPAnor have FTAs with the United States, may encounter a limitedmarket for procurement of steel under the ARRA, 2009.177

Determining Product Origin: Substantial Transformation TestWhile dealing with the implementation of Buy Local

policies, it is vital to understand how Rules of Origin aspertaining to these products are implemented. An article is aproduct of a country or instrumentality only if (i) it is whollythe growth, product of manufacture of that country orinstrumentality, or (2) in the case of an article which consistsin whole or in part of materials from another country orinstrumentality, it has been substantially transformed into anew and different article of commerce with a name, character,or use distinct from that of the article or articles from whichit was so transformed.178


Country-of-origin rulings179 and final determinations forthe grant of waivers under Buy American restrictions in USlaw are dealt with under 19 CFR 177.21. The Customs andBorder Protection (CBP) issues rulings and determination ofwhether an article which is produced in a designated countryof instrumentality is capable of being granted a waiver of BuyAmerican restrictions in US law, where the products/articlesare offered for sale to the US government. The CBP appliessubpart B of Part 177 of 19 CFR.

The Federal Procurement Regulations define �USmade end-product� as �� an article that is mined, produced, ormanufactured in the United States or that is substantiallytransformed in the United States into a new and differentarticle of commerce with a name, character, or use distinctfrom that of the article or articles from which it wastransformed.� Mere assembly operations which are minimalor simple, as opposed to complex or meaningful, will not resultin a substantial transformation.The CBP makes adetermination on a case-by-case basis on whether a substantialtransformation has occurred. The factors which are taken intoconsideration are: (i) country of origin of the article�scomponents; (ii) Extent of processing in a given country; (iii)Does the processing result in a product obtaining a new name,character or use; (iv) Are such resources expended on productdesign and development; (v) Extent and nature of post-assemblyinspection procedures; (vi) Worker skill in the manufacturingprocess.

The Electric Mini-Trucks Headquarters Ruling deals withthe application of the Buy National waiver in the case ofassembly of certain components in the United States (Box3.5).180


Box 3.5: A United States Customs and BorderProtection Ruling: Electric Mini-Trucks

The Electric Mini-Trucks Headquarters Ruling deals withthe application of the Buy National waiver in the case ofassembly of certain components in the United States. GlobalElectric Motorcars had submitted information pertainingto electric mini-trucks. GEM asserted that the electricmotor (Canada), batteries (United States), charger (Canada)gear box (United States) and brakes (India) were assembledin the United States, and the identity of the glider was alteredinto a mini truck. The process by which the electric mini-truck was produced was as follows:

A mini-truck glider (consisting of frame, finished cab,axles andwheels in the unit) was imported from India. GEMwas required to submit detailed information (in the form ofa costed bill of materials with a country of origin for electricdrive conversion components) pertaining to the componentsused in the initial assembly, and the number of componentswhich were of US origin.

The authority noted that the glider did not include thecritical components of an electric vehicle or an internalcombustion vehicle. Further, the glider could not be sold inits imported state. The original brake assembly which isprovided with the glider was to be removed and replaced.A truck bed was to be imported separately from the gliderand installed after importation as an electric vehicle. GEMwould fit an electric motor to the mini truck to create energyefficient, zero emissions mini-truck for sale to USgovernment agencies.

The question that was dealt with by the CBP waswhether the product was substantially transformed into aproduct of the United States: the test which was outlinedwas whether the parts lose their identity to merge into the


All the manufacturing processes involving refinement ofsteel additives are required to be undertaken in the UnitedStates.181 Only �domestic unmanufactured constructionmaterial� is to be used.182 The author, John Linarelli identifiesthat there is no requirement that the components used in themanufacturing process should also be domestic.183

Suggestion for Improving Participation Despite the BuyNational Laws: The rules of origin determination throws opena large number of questions for analysis and future researchwhich could prove significant while dealing with the BuyNational requirement in America. The first is significantly,from an operations research point of view, to identify a certainproduction process, list of raw materials, the steps in theassembly process, and prepare a feasibility report on whetherit is possible to undertake trade in the specific commoditieswhich are not present in the United States, or where assemblycan be undertaken in the United States.

Proposed EU Regulation on Buy LocalThe �Buy National� regulation introduced by the European

Union characterises a trend of protectionist policies whichhave arisen as a response to the other protectionist policieswhich inhibit access to certain markets.184 Where the US BuyNational law finds its basis in encouraging local production,the EU Buy National regulation is founded in investigatingwhether there is �reciprocity� in government procurementmarkets worldwide or not. �Covered goods and services� are

new product and the extent of operations which wereinvolved. The CBP noted that the glider underwent asubstantial transformation and became an electric truck,and further noted that a substantial number of thecomponents which were added to the glider were of USorigin.


treated equally as goods and services originating in theEuropean Union.185

�When assessing whether a lack of substantial reciprocityexists, the Commission should examine to what degree publicprocurement laws of the country concerned ensuretransparency in line with international standards in the fieldof public procurement and preclude any discrimination againstUnion goods, services and economic operators. In addition, itshould examine to what degree public authorities and/orindividual procuring entities maintain or adopt discriminatorypractices against Union goods, services and economicoperators.�186

�Covered goods and services� means a good or serviceoriginating in a country with which the Union has concludedan international agreement in the field of public procurementincluding market access commitments and in respect of whichthe relevant agreement applies. Annex I to this Regulationcontains a list of relevant agreements.187 A list of internationalagreements concluded by the European Union have beenprovided in the Annex 1 to the Regulation.188

�Non-covered goods or services� means a good or serviceoriginating in a countywithwhich the Union has not concludedan international agreement in the field of public procurementincluding market access commitments or a goods or serviceoriginating in a country with which the Union has concludedsuch an agreement, but in respect of which the relevantagreement does not apply.189

A �lack of substantive reciprocity� is presumed in the caseswhere restrictive procurement measures result in serious andrecurring discriminations of Union economic operators, goodsand services.190 If the finding following the conduct of theinvestigation is that the procurement measures which aremaintained by a certain third country result in a lack of�substantial reciprocity in market opening between the Union


and the third country� the acts which can be taken by theCommission, on a �temporary� basis are as follows191 : (i)Exclude the tenders for which more than 50 percent of thetotal value is made up of non-covered goods or servicesoriginating in the country adopting or maintain the restrictiveprocurement practice;192 (ii) Mandatory price penalty193 onthe part of the tender consisting of non-covered goods orservices which originate in the country adopting the restrictiveprocurement practice.194

A �lack of substantial reciprocity� is found after making thefollowing assessment: (i) the degree to which the publicprocurement laws in the country ensure transparency in linewith international standards in the field of public procurement,and preclude any discrimination against Union goods, services,and (ii) the degree to which public authorities or individualprocuring entities maintain or adopt discriminatory practicesagainst Union goods, services and economic operators.195

Rules of Origin of a Good are provided in Article 22 to 26of Regulation (EC) No 2913/1992 of the European Parliamentand Council of 12 October 1992 establishing the CommunityCustoms Code, whilst the Rules of Origin of a Service aredealt with as following: (i) The origin of a service will bedetermined based on the origin of the natural or legal personproviding it. In the case of a natural person, this determinationwill be made on the basis of the nationality of the person, orthe permanent residence of the person:196 (ii) In case of a legalperson where the service is provided other than through acommercial presence, the determination will be made basedon where the legal person has been constituted, or where thelegal person is engaged in substantive business operations;197

(iii) If the service is provided through a legal person through acommercial presence in the Union, the Member- State wherethe legal person is established and where it is engaged in


substantive business operations and where it has a direct andeffective link with the economy of aMember State concerned.

Exemption for Parties engaged in Substantive NegotiationsEven in the event a country has engaged in substantive

negotiations with the European Union pertaining to marketaccess in the field of public procurement, the Commissionmay provide that the country need not be excluded fromprocedures for the award of contracts pursuant to Article 6.

ExceptionsThe Contracting authorities/entities may decide against the

application of themeasures pertaining to adoption of measureswhich limit access of non-covered goods and services to theEU public procurement market in the following cases.(i) There are no Union goods, or goods available under the

covered goods or services which meet the requirementsof the contracting entity, or

(ii) The application of the measure would result in adisproportionate increase in the price or costs of thecontract. What amounts to a disproportionate increase inthe price, or which circumstance would result in thecontracting entity not finding a supplier amongst thecovered goods or services which would meet itsrequirements are both abstract terms which would benefitfrom interpretation on a case by case basis.

Investigation and ProcedureThe assessment of whether restrictive procurement

measures are maintained by the third country are to be madeon the basis of information supplied by interested parties,member-states, facts collected during the investigation duringa term of nine months after the initiation of the investigation.


In the event it is found that restrictive procurementmeasures are maintained by a third country, the EuropeanUnion will extend an invitation to the third country to engagein consultations. In the event the third country does not engagein those consultations the Commission will proceed on �factsavailable�.

ObservationsThe Impact AssessmentWorking Document (IAWD)which

formed the basis of the proposal systemically whittled downthe market access represented as being available. It took intoaccount the general notes and other derogations which alsoserve to diminish the market access opportunities available.Beyond the commitments which are made at the GPA, theIAWD also considered the protectionist measures which weremaintained in the procurement markets. However the studyby Partrick Messerlin, noted that the derogations maintainedby EU on a bilateral basis have not been considered in thisanalysis thereby overestimating how open its market is.198

Criticisms have been voiced against the methodologydeployed to arrive at a the conclusion that the EU markets aremore open than the other markets. The proposal has beentermed a �paper tiger� because, as certain studies estimate, theEU may lose more than it may gain by closing off its internalmarkets to countries like Japan, China and Taiwan.199

A few concerns have been raised with respect to theimplementation of the proposal. One or two firms may assertthat the markets of a certain country are not closed, and resultin closing off that market to other private parties in the EUmember states.200

This is the first envisaged procedure for investigatingwhether �restrictive procurement measures� are maintainedby any country. The following points are of significance:


� The term of the investigation is ninemonths. This effectivelymeans that the economic operator who is participating inthe procurementmay be excluded by the governmentmerelyinitiating the challenge.

� The restrictive procurement measure investigation is notlimited to a certain sector. It encompasses discovering ameasure which is not perceived to be entirely transparentin any sector, in any procurement. There is no reference asto whether procurements which have been justified underany other trade agreement or horizontal policy exemptionare admissible.

� In the event of such a restrictive procurement measurebeing maintained by a WTO member-country, theCommission will resort to the Dispute Settlement Systemunder theWTOGPA. This is additional incentive to accedeto the Agreement on Government Procurement � being ableto contest that a lack fo substantive reciprocity does notexist.

China: Buy National to Foster InnovationThe Chinese version of a �Buy National� policy was

implemented in 2007.201 TheNationalGuidelines onMedium-and Long-term Programme for Science and TechnologyDevelopment (2006-2020)202 issued by the State Council waspromulgated to promote indigenous innovation throughgovernment procurement. Generally, the price preference thatis allocated to indigenously produced products is 5-10 percent.203 A product would be eligible as an �indigenousinnovation� in the following cases: it should have been producedby an enterprise which owns the Intellectual Property in Chinathrough its own innovation activities, or by having obtainedtitle to the China IP rights or the usage rights; the trademarkis owned by the Chinese company and is registered in China;the level of innovation � the product should �master core


technologies� or enhance the functions of a product throughthe application of new technologies (this also indicates thatadd-on patents may not qualify to gain an edge in theprocurement process in China); have obtained Certificationfrom the local body, the China National CertificationAdministration. These accredited products will then be listedand used for the purpose of procurement by the variousgovernment bodies.

The State Council Legislative Affair Office (SCLAO) inChina released draft regulations stipulating that priority willbe accorded to indigenous innovation products which will beplaced on a priority list to be used for government procurement.The Ministry of Science and Technology, and the Ministry ofCommerce released Circular 618 which envisaged thecompilation of a catalogue of �accredited� indigenousinnovation products. The sectors which were identified in thecircular were computers, clean power, communication, officeequipment, software, and energy-efficient products.

The Trial Measures for the Administration of theAccreditation of National Indigenous Innovation Productslisted the products which were eligible for the preferentialpolicies in government procurement as �indigenous innovationproducts�. The Parties to the GPA expressed concern at theIndigenous Innovation Initiative.204

Further, as per Article 11 of the Ministry of FinanceMeasure on the Administration of Contracts on GovernmentProcurement of Indigenous Innovation Products provides thatpreference will be given to those foreign producers whoundertake to transfer technology. This measure mandates thatimported products can be procured only after obtaining theapproval of competent authorities, and in accordance withcertain requirements and independent expert opinion, and thatpreference should be given to foreign suppliers regardingoffsets like transfer of technology.205


ObservationsIt was noted that though Circular 618 did not exclude

foreign-invested firms, foreign firms had not found it easy toobtain the accreditation which would facilitate access togovernment procurement markets. Out of 523 productsstudied in the US-China Business Council�s Review, only twohad been manufactured by foreign-invested enterprises.Interestingly, the review notes that even in these two foreigninvested enterprises, there was a majority Chinese ownershipin the Chinese foreign joint ventures.206 It is important to note,however, that President Hu Jintao had made the statementthat innovation policies would be delinked from governmentprocurement during his 2011 trip to the United States.207

Factors Inhibiting Market Access: Maintenance ofHorizontal Policies

A crucial facet of examining country experiences in theGPA includes the exercise of the sovereign authority of acountry through policies which pertain to the use ofprocurement as policy tool to promote other goals (social,environmental) which are delinked from the economic motiveof procurement of goods, works or services is known as�secondary�, �collateral� or �horizontal� policies. Example ofsuch policies include reserving set-asides for small businesses,limiting procurement from small andmedium sized enterprisesfor certain products, etc.

The exercise of sovereign power further spills into theoperation of Non-Tariff Barriers: The World Trade Report2012 categorises Non-tariff barriers into three types: (i) thosethat serve public policy (non-economic issues), (ii) those whichhave an economic focus based on a national welfare-increasingcalculus and (iii) those that have a political economymotivationthat serves particular interests and may not increase national


welfare.208 We are interested in those measures which operateunder the sovereign duty of a country to protect its populace,and which may result in eroding market access under theAgreement on Government Procurement.

We examine three sets of measures: (i) Set-Asides for SmallBusinesses; (ii) Buy National Policies and (iii) GreenProcurement Initiatives.

Box 3.6 deals with Canada�s Procurement Strategy onAboriginal Businesses.

Box 3.6: Canada: Procurement Strategy onAboriginal Business209

The responsibility to set aside a procurement under theProcurement Strategy on Aboriginal Businesses210 is vestedin the client department. There are two types of set-asidesavailable for aboriginal businesses: (i) the Mandatory Set-Asides and (ii) Voluntary set-asides.

Mandatory Set-Asides:Where operational requirements,prudence, probity, best value, and sound contractingmanagement are assured, If an Aboriginal population211 isthe primary recipient or end user of goods or services whichare being procured;212 and When the value of theprocurement exceeds US$5,000, then it is mandatory to set-aside a procurement under the PSAB.

Voluntary Set-Asides: In cases where it is known thatqualified Aboriginal suppliers exist in the marketplace, afterthe contracting officers indicate such presence to the Clientdepartments, the client departments may voluntarilydesignate a procurement to qualified Aboriginal Suppliers.If an aboriginal business has more than six or more than sixemployees, atleast 33 percent of them should be aboriginalpersons213 , and this should be maintained throughout theduration of the contract


Small Business Set AsidesThe definition of a small/medium sized enterprise will differ

from country to country. Within one country, the definitionmay vary from industry to industry. The tenets of an SMEpolicy of specific importance are as follows: (i) What formsthe basis of determining that an enterprise in an industry issmall or medium-sized?; (ii) What measures are taken duringthe procurement process to accord specific preferences to theseentities/; (iii) Are these measures in compliance with the GPA?;(iv) What are the country-specific policies on sub-contracting,contract-bundling, and how are these reconciled with the GPAprovisions on Valuation?; (v) A compulsory procurementobjective, or percentage that should be procured from SMEs;(vi) Measures taken to induce innovation in SMEs.

SME Encouragement Policies in the EUEarlier, policies which support procurement from SMEs

were impeded by multiple factors: the European Union Treatylay down principles which denounced discrimination againstfirms from any of the member-states. It was contended thatthough the Treaty prohibited SME prime contracting set-asides, it allowed for transparency measures andsubcontracting set-asides. However, in the recent past, theEU Public Procurement Directive, 2004 and the DefenseProcurement Directive, 2009 recognise and pronounce thatthey support SMEs as part of the contracting process.214 TheThink Small First: A Small Business Act for Europe inscribesthe principles to aid SME. One of the principles directs thatSME participation in public procurement and the use of stateaid for SMEs should be encouraged and facilitated.215 The ECcategorises SMEs under three categories: (i) SMEs; (ii) smallenterprises and (iii) microenterprises. France sometimesprovides assistance for high-tech SMEs with upto 1,000employees. (Table 3.14)


Sometimes, the definitions are supposed to perform afunction of preventing against manoeuvring by large businessesthrough rules concerning SME connection or affiliation withother business entities, venture capitalists and governmentauthorities. The affiliation rules distinguish between threetypes of SMEs: (i) autonomous, (ii) partner and (iii) linkedenterprises.

Facilitating SME ParticipationIt has been noted that SMEs sometimes do not participate

in contracts which are very large. Even though Europe hasnot had a unified policy on contract size reduction,Think SmallFirst: A Small Business Act for Europe suggests that statesshould encourage their contracting authorities to subdividecontracts into lots in order to make available opportunitiesfor small andmedium sized enterprises.218 The EuropeanCodeof Best Practices suggests the following measures: (i)Subdividing contracts into lots; (ii) Teaming small contractors;(iii) Concluding framework agreements (known in the UnitedStates as multiple award contracts) with SMEs.

Subcontracting in the EC: In the EC, however, there is asubcontracting obligation imposed on certain prime219

contractors (especially by the European Space Agency or ESA).Kidalov and Snider opine that an example of this is where the

Table 3.14: Representation of Categorisation of SMEs

SMEs Employees216 Annual Turnover217

SMEs >250 persons >EUR 50 million turnover, orannual balance sheet total notexceeding EUR 43 million

Small Enterprises � 50 persons Annual turnover or balance sheetnot exceeding EUR 10 million

Microenterprises � 10 people Annual turnover and/or balancesheet not exceeding EUR 2 million


ESA had reserved certain subcontracts for non-primecontractors and SMEs.

The ESA conceptualised certain clauses �C1-C4 clauses�pertaining to certain types of procurement in order to accordaccess to SMEs. Examples of areas where these clauses areused include SME participation in technology researchactivities and the development of equipment, components orinstruments. These clauses find application in cases wherefavouring the entities would result in an efficient use of funds.220

Main contractors are requested to include participation ofSMEs under both clauses. In the event SMEs are not includedin the offer, the bidder is required to provide evidence ofefforts made and the reasons for lack of success in includingthe SMEs.

A mandatory sub-contracting provision was also insertedinto the Defense Procurement Directive221 which states amaximum of 30 percent of the total contract value may besubcontracted in order to promote SME participation. Theminimal value will be determined by the contracting authority.

Promoting Innovation in SMEsUK�s Small Business Research Initiative imposes an SME

procurement set-aside of at least 2.5 percent of agency R&Drequirements.

The United StatesThe United States in its General Notes makes the following

qualification with respect to its small businesses.�Notwithstanding the above, this Agreement will not applyto set asides on behalf of small and minority businesses.�222

This operates as a legal valid exemptionwhich has been allowedto the United States.

In the United States, the Small Business Act was enacted in1953 by an impetus from President Eisenhower. A small-


concern is defined as �[I]ncluding but not limited to enteprisesthat are engaged in the business of production of food andfibre, ranching and raising of livestock, aquaculture, and allother farming and agricultural related industries, shall bedeemed to be one which is independently owned and operatedand which is not dominant in its field of operation: Provided,that notwithstanding any other provision of law, an agriculturalenterprise shall be deemed to be a small business concern if it(including its affiliates) has annual receipts not in excess ofUS$750,000�. The Small Business Act propounded two mainprinciples, the Principle ofMaximum Practicable Opportunityand the Principle of Fair Proportion. The Principle ofMaximum Practicable Opportunity states that procurementopportunities are made public, and smaller firms are allowedaccess to information on procurement laws and regulations,larger contracts are unbundled, and procurement chances aresometimes set aside for small firms. The Principle of FairProportion is implemented by contracting and subcontractinggoals which are established by the Congress, the President,federal buying agencies, and the Small Business Administration,and accountability reporting. However, inherent conflicts existin policies which prefer Small and Medium SizedEnterprises.223

Definition of Small and Medium EnterprisesThe United States generally considers dynamic economic

indicators such as employment or revenue of different levelsfor each industry. The North American Industry ClassificationSystem (NAICS) contains information pertaining to industryclassification of US industries as of January 1, 2007. TheCensusmodifies the information in theNAICS every five years,and these revisions are incorporated by the SBA.

The structure in an industry is examined through analysingfive factors: (i) average firm size, (ii) degree of competition


within the industry, (iii) start-up costs, (iv) entry barriers, (v)distribution of the firms by size, and (vi) small business sharein Federal contracts. Some of the other factors which haveguide and inform this analysis include given due weightage ofthe interests of small businesses, inducing technological change,the state of competition between industries, the industrygrowth trends and the effect on the Small BusinessAdministration programmes.

A few benchmarks are identified based on the receipts, thenumber of employees in both manufacturing and wholesaletrade industries. The SBA Size Standards Methodology224

(Table 3.15) reiterates that the benchmarks do not amount tominimum standards, but form the base for future analysis andupdation based on inflation and other economic indices. TheSBA uses four measures to study business size: the first twoare used commonly � the size of the receipts of the businessand the number of employees: the latter two are applicable tovery few industries � the output/production capacity andfinancial measures. Using receipts as an indicator of the sizeof the business is an option where the industry is highly capitalintensive, whereas the number of employees is used a factorwhere the industry is labour intensive. The �output� criterionis applicable to producers of electric power and is measured

Table 3.15: Size Standards in the SBA SizeStandardsMethodology

Base of the Size Industries that the Size The SizeStandard Standard is Applicable to Standard

Receipt-Based Services, Retail Trade, US$7mnSize Standard Construction and Other

Industries

Employee-Based Manufacturing, Mining 500 employeesSize Standard and other Industries

Employee-Based Wholesale trading industry 100Size Standard


in megawatts hours of electric output, while the �productioncapacity� criterion is utilised for petroleum refiners and ismeasured in barrels/days of petroleum refining.

Contract Consolidation or BundlingThe Small Business Reauthorizsation Act of 1997 defines

contract bundling as �consolidating two or more procurementrequirements for goods or services previously provided orperformed under separate, smaller contracts into a solicitationof offers for a single contract that is unlikely to be suitable foraward to a small business concern. In cases of contractconsolidation or �bundling�, smaller procurement componentsare consolidated into a larger contract. Contracts of very largevolume sometimes result in reducing or eliminating the chancesfor effective participation of SMEs.

Legislation to reduce bundling in the United States:Competition in Contracting Act (CICA) of 1984. Explicit anti-bundling legislation was enacted by the Small BusinessReauthorisation Act of 1997. This legislation stipulated thatfederal agencies should avoid bundling contracts which donot results in savingswhich areworthmore than 5 to 10 percentof the contract value.225

SubcontractingIn the US, the Small Business Act states that large prime

contracts should indicate that maximum practicableopportunity should be made available for subcontracts toSMEs, and agencies should be offered incentives forsubcontracting to small firms.

Promoting Innovation in SMEsThe Enhancing Small Business Research and Innovation Act

of 2009 reauthorises the Small Business Innovation Researchand Small Business Technology Transfer programmes into


2011.226 The Administrator of these programmes is requiredto attribute high priority to the small business concerns whichdeal in energy efficiency/renewable energy system researchand development projects.

JapanIn the 2012 White Paper on Small and Medium Sized

Enterprises in Japan: Small and Medium Enterprises MovingForward Through Adversity227, the initial address by YukioEdano, the Minister of Economy, Trade and Industry statesthat SMEs in Japan are currently functioning in an economywhich has been severely debilitated by the Great East JapanEarthquake, and the crisis at the TokyoElectric PowerCompanyFukushima Daiichi Nuclear Power Plant. Small and MediumSized enterprises in Japan are defined as those which hire fewerthan three hundred employees, and which have a marketcapitalisation of less than 100 million yen in Japan inmanufacturing, construction, and transportation industries. Theservice businesses are said to have different criteria.228 Table3.16 deals with the size-wise categorisation of enterprises.

Table 3.16: Size-wise Categorisation of Enterprises

Industry Small and Medium Enterprises Small Enteprises

Capital No. of Regular No. of RegularEmployees Employees

Manufacturing, Up to ¥300 Up to 300 Up to 20construction, milliontransport,other industries

Wholesale Up to ¥100 Up to 100 Up to 5million

Services Up to ¥50 Up to 100 Up to 5million

Retail Up to ¥ 50 Up to 50 Up to 5million


The Act on Ensuring the Receipt of Orders from theGovernment andOther Public Agencies by Small andMedium-Sized Enterprises stipulated that the government shouldendeavour to expand opportunities for SMEs to receive ordersfrom the government.229 The Contract Policy of theGovernment Regarding Small and Medium Enterprises in FY2011 was adopted in June 2011. The target set was that theproportion of contracts awarded to SMEs should be increasedto 56.2 percent. The measures which were taken in this regardincluded requesting companies to be considerate to the SMEswhich were situated in areas affected by the Great East JapanEarthquake, and, interestingly, through the enhancement ofanti-dumping measures.230

Observations1. We are eager to understand whether the size of an SME in

any of the afore-mentioned countries, or any country whichmaintains SME preference policies, is comparable to anormal market participant from India.

2. Will unbundling of a contract result in multiple contractswhich do not meet the threshold requirement? Cancontract-aggregation be permitted as a justification to thesepolicies which violate the terms of the provision onValuation under the GPA?

3. As noted from the Japan approach document, countries doinitiate trade remedies (such as anti-dumping) to free uptheir market for domestic participation.

4. From the point of view of absorbing best practices, theapproach of categorising SMEs per industry based on thecore factors of production is an approach which could beadopted by multiple developing countries.


Green ProcurementThe objective of Green Procurement Policies most often

deals with requiring recycled content, or efficiency in energy-using devices, water conservation, integrated pestmanagement, and less-pollutingmanufacturing technologies.231

Green procurement may create market opportunities forenvironmental goods and services. Sometimes the GreenProcurement Policies may be implemented through pricepreference policy where the government may attribute a 5 to15 percent price preference for suppliers who meet recycledcontent standards.232 A set-aside may require that a certainpercentage of the product to be delivered contains recycledcontent, or it is powered through renewable sources, etc.233

United StatesUnder E.O. 13423 on �Strengthening Federal

Environmental, Energy, and Transportation Management,�federal agencies are mandated to deploy practices which aresalutary to the environment.234 Federal Agencies are requiredto �lead by example�. Green Procurement includes theacquisition of the following: (i) recycled content products, (ii)environmentally preferable products and services; (iii) bio-based products, energy and water-efficient products; (iv)alternative fuel vehicles and alternative fuels; (v) products usingrenewable energy, and (vi) alternatives to hazardous or toxicchemicals.235

Canada - Policy on Green Procurement236

The policy notes the importance of the federal governmentas a purchaser capable of influencing the demand for�environmentally preferable� goods and services, and the abilityof the industry to copewith the increasing use of environmentalstandards internationally. �Environmentally preferable goodsand services� are defined as those which have a lesser or


reduced impact on the environment over the life cycle of thegood or service, when compared with competing goods orservices serving the same purpose.

The performance considerations which are also taken intoaccount include the following: (i) reduction of greenhouse gasemissions and air contaminants; (ii) improved energy andwaterefficiency; (iii) reduced waste and support re-use and recycling;(iv) use of renewable resources; (v) reduced hazardous waste;and, (vi) reduced toxic and hazardous substances.237

It indicates that in order to use Green Procurement, theprocuring entity has to be equipped with understandingimplications of life cycle assessment of goods or services.Deputy heads are required to set Green Procurement Targetsafter taking into account the mandates, the departmentalbuying patterns, and the nature and the risks associated withthe assets and services. The Green Procurement Targets canbe met through any of the following channels: (i) government-wide commodity management initiatives; (ii) procurement bythe Public Works and Government Services Canada; and (iii)the activities of the department itself.

Green Procurement in the EUThe 10 sectors which were identified for the Green

Procurement Policy (GPP) on the basis of factors such as scopefor environmental improvement, public expenditure, potentialimpact on the supply side, market availability and economicefficiency are as follows: construction, food and cateringservices, transport and transport services, energy, officemachinery and computers, clothing, uniforms and othertextiles, paper and printing services, furniture, cleaningproducts and services, and equipment used in the healthsector.238 Table 3.17 deals with green procurement targets ofcountries in the European Union.


The Commission has recently proposed that by 2010, 50percent of all tendering procedures should be compliant withthe core Green Procurement criteria. The core criteria designedfor procurement is required to allow for the easy applicationof Green Procurement, with attention being paid to theenvironmental performance of the product, and in keepingadministrative costs for companies low.239

Some of the notable features of the policy are as follows:95 percent of the new contracts are required to be energy-efficient (these are required to be so designated under theEnergy Start, or Federal Energy Management Programme(FEMP), water efficient, biobased, and environmentallypreferable under the Electronic Product EnvironmentalAssessment Tool (EPEAT) certified.240

Table 3.17: Green Procurement Targets of Countries in the EU

Country Target to be reached by 2010 Comments

Netherlands 100 percent SustainableProcurement Target to bereached by 2010

Austrian IT: 95 percentPaper: 80 percentCleaning Products: 95 percentVehicles: 20 percent

France Vehicles: 20 percent The standardConstructions: 20 percent prescribed for cleanWood: 50 percent (legally sourced constructions areand sustainable) contained in HQE

standards

UK To be carbon neutral by 2012,and to reduce carbon emissionsby 30 percent by 2020

Source: Communication from the Commission to the European Parliament,the Council, the European Economic and Social Committee and theCommittee of the Regions, �Public Procurement for a Better Environment�,Brussels, 16.07.2008.


While dealing in procurement of electronic goods whichare Energy Star and FEMP designated electronic equipment,preference is registered for EPEAT registered electronicproducts.241

Policy on Promoting Green Purchasing in JapanThe Basic Policy on Promoting Green Purchasing242

(February 2012), in furtherance of the Law Concerning thePromotion of Procurement of Eco-Friendly Goods and Servicesby the State and Other Entities sets out the policy for theprocurement of Eco-Friendly Goods243 . It applies to thenational government, and the corporations identified in theordinance specifying Independent Administrative Institutions.The policy notes that to ensure the enforcement of the KyotoProtocol Target Achievement Plan244, green purchasing ingovernment procurement has to be prioritised.

Every fiscal year, the entities covered under this policy arerequired to implement a green purchasing policy taking intoaccount its budget, planned projects and activities. Followingthat, each institution is required to establish procurementtargets to meet the evaluation criteria for certain procurementitems identified in the policy as �specified procurement goods�.Evaluation criteria are specified for a host of products, alongwith a host of �factors for consideration�.

The policy also notes that Green Purchasing should not beused to derogate the principles of the WTO Agreement onGovernment Procurement. The policy suggests that becauseof the critical nature of procurement in public works, apartfrom the proper utilisation of materials, construction methodswith low environmental impact have to be used throughoutthe lifetime of the project.


Trade Barriers (SPS and TBT)The World Trade Report 2012 categorises Non-tariff

barriers into three types: (i) those that serve public policy (non-economic issues), (ii) those which have an economic focusbased on a national welfare-increasing calculus and (iii) thosethat have a political economymotivation that serves particularinterests and may not increase national welfare.245 Policysubstitution where Non-Tariff barriers are deployed in placeof tariff barriers or other apparent measures impeding tradeoccurs in cases where alternative less opaque policies are nolonger available.246 A number of studies quantify the effect ofNTMs on international trade by estimating an �ad-valoremtariff equivalent� (AVE).247 Here, we identify a few tradeconcerns maintained by countries under the SPS and TBTAgreement that India has an interest in (Table 3.18). Box 3.7covers specific trade concerns under the SPS Agreement andBox 8 covers specific trade concerns under the TBT agreement.

Box 3.7: Specific Trade Concerns under the SPS Agreement

� China�s notification on �Provisions on the Administrationof the Registration of Foreign Manufacturers ofImported Foods�248 stipulated that manufacturers offoods would be unable to export food to China withoutregistration. It is interesting to note that the applicationprocess and the specific verification requirements aremeant to differ between the food enterprises and theircategorization as based on their risk levels. The EC hadsimilar concerns and stated that the measures were notin accordance with what was stipulated by the SPSAgreement.

� The EUNovel Foods regulation classified novel foods asthose foods (traditional exotic products) which had notbeen consumed in the EU, even if they have been


customarily used by developing countries. Peru statedthat it was essential that the EU demonstrate theconcordance of these provisions with the SPS Agreement� India also shared these concerns.249

� India raised concerns on the three EU notifications onthe adoption of Maximum Residue Levels of pesticideswhich were being set at the Level of Detection (the levelat which they could be detected using analytical methods/testing procedures available in Europe). These levels werelower than the level suggested by CODEX. This wasespecially difficult for India to meet because differentclimatic conditions required the use of different levelsof pesticides. Further, because there was no scientificjustification to set the SPS requirement at the Level ofDetection provided by the EU, India alleged that the EUMRLS violated Articles 2.2, 2.3, 3.1, 5.1, and 5.4 of theSPS Agreement. The EU had also suggested that Indiacould apply for a higher Maximum Residue Level �however India noted that private labs in the EU wereconducting the assessment of the products, and EU wasmerely transferring the burden of proof to India.

� ECRegulationNo. 1099/2099 dealing with the �HumaneTreatment of Animals at the Time of Slaughter� stipulatedthat the import of meat from other countries must beaccompanied by a certificated to the effect that therequirements �at least equivalent� to the requirementsspecified in the regulation had been met with. India wasconcerned on how EU experts could ensure that animalsin India had been slaughtered in humane conditions inIndia, and enquired about how equivalence may beassessed.

� India also expressed concern over Japan�s withdrawalof 80 food additives under the Japanese Food SanitationLawwhich stipulated that additives required the approval


of theMinistry of Health, Labour andWelfare. This wassupposedly not in accordance with Article 2 of the SPSAgreement, because it had not been proven that theadditives were hazardous to human health, and a properrisk assessment had not been undertaken in this regard.

� India is currently involved in studying the provisions ofthe US 2009 Food Safety Enhancement Act. The USCongress had proposed several new measures such asfollow up inspections, compulsory certification for highrisk imported products and the expansion of FDAauthority. The Indian industry may raise concernspertaining to the registration process, whether the foreigngovernment or sector association would be notifiedbefore or after a food facility was inspected etc.

� India also raised issue with an import alert raised by theUS on the import of Basmati rice owing to havingdetected the presence of a fungicide (tricyclazone). TheUS rejected consignments which contained more than0.01 ppm, resulting in losses to the exporter. India notedthat no risk assessment under Article 2.2 and 5.1 of theSPS agreement had been undertaken while setting thedefault limit. Further setting a default limit without ascientific justification resulted in violating the principleof harmonisation of Article 3 of the SPS Agreement.


Box 3.8: Specific Trade Concernsunder the TBT Agreement

The concerns raised ranged from requisitions foradditional information, for providing a time to adapt, a�reasonable interval�, special and differential treatment,technical standards and clarifications which demanded therationale, and alleged that the measures constituted anunnecessary barrier to trade, and resulted in discriminatedetc.250

� European Union � Registration, Evaluation,Authorization and Restriction of Chemicals(REACH)251 : The �number of labourers� aspect of thedefinition of small and medium enterprises in theregulation did not account for the customary head countin developing countries like India owing to which theseentities were sometimes classified as �large� despite theannual turnover and the balance sheet ceiling. Indiaalleged that this application impeded developing countryexports in a manner which was opposed to Article 12.3of the TBT Agreement. India has also soughtclarifications on the logic of registration of monomersbecause the lifecyle of a monomer ended once it reactedinto a polymer. The requirement of having an EU-basedOnly Representative (OR) also increased the cost ofcompliance with REACH for SMEs. The SMEsencountered problems on being associated withSubstance Information Exchange For SIEFS and consortiawhich included the opaque functioning, high-joining fees,maintenance fees etc.

� European Union � Directive 2004/24/EC on TraditionalHerbal Medicinal Products (THMP)252 : India alsorequested that the EU should consider those applicantswho had 30 years of traditional use in their country of


origin rather than 15 years of traditional use in the EUfor the purpose of establishing the efficacy of themedicinal product. Further the technical document whichdetailed the information was required to be providedpertaining to traditional formulations was inappropriatefor multi-component traditional medicine formulations.India has been requesting the EU to recognize the GoodManufacturing Practices certificates as issued in India.Further the scope of the products of mineral and animalorigin was unclear, and Ayurveda, Siddha and Unaniproducts were covered under the regulation. The Indianmonograph was to be accepted as an authentic source ofinformation for traditional use evidence while assessingapplications for registration.

� Italy - Law on �Provisions concerning the marketing oftextile, leather and footwear products�: India noted thatthe law could have linkages with trade and labour, andtrade and environment, and hence constituted non-product related processes and productionmethods whichwere not covered within the scope of the TBTAgreement.253

� EuropeanCommunities �Napropamide: India had earlierraised concerns about the non-inclusion of napropamidein Annex 1 of the Council Directive which authorisedthe protection of plant products which contained thissubstance.

� Similarly, the US had fixed the tolerance limit forcontamination by Cobalt 60 in fuel containers at zero,which India believed was more trade restrictive thanessential.


Table 3.18: Non-Tariff Measures254Country

UnitedStates

UnitedStates

UnitedStates

UnitedStates

Argentina

Canada

China

EC

EuropeanCommunities

EuropeanCommunities

Japan

Korea

Norway

Ukraine

Sector

Marine Products

Paper Products

Tobacco

Food Products(generally)

Paper products

Agricultural Products

Bovine Meat

Marine Products

Engineering andElectronics

Footwear

Chemicals,pharmaceuticals,computer and medicalequipment

Marine products

Bovine Meat, Coffee,Tea, Spices,Pharmaceuticals,Spices, Textiles andclothing

Specifications

Inspections under the Bio-terrorism Act, CustomsBond requirement, Mandatory labelling, �farmraised� and �wild� with punitive fines, and non-recognition of EIC certification.

Quarantine restrictions, customs surcharges, eco-labelling stipulations, food safety, health standardswhich exist on paper products exports.

TRQ regime which restricts imports.

Extensive labelling requirements

Minimum Import PriceIf the invoiced value is less than the minimum importprice, the Argentine Customs Authorities can ask for avalidation of Indian customs invoice.

Quarantine restrictions, eco labelling, food safety/health standards

General Level of Opacity in administering clearances

Standards which have been stipulated are morestringent than those prescribed by the WorldOrganisation for Animal Health (OIE).There is a prolonged delay in upgradatino of India�sstatus to GBR1.

The rejection and destruction of consignments withchloramphenicol/nitrofuran residues.This rejection is done without any confirmatory tests.

Stipulation of CE (ConformiteEuropeene) is supposedto indicate conformity with the essential health andsafety requirements increases the cost for small andmedium enterprises.

Tariff Rate Quota

Certification requirements which add on to the cost ofthe exports.

Pathogen analysis is undertaken by the NordicCommittee on Food Analysis (NMKL) method whichis not accepted internationally

A compulsory certification with the option of eitherproviding a certificate of acceptance of foreigncertification by Derzh Standards or (b) Conformancecertificate by Ukrainian Agency.


Box 3.9 deals with a complaint presented to the WTODispute Settlement system about the procurement of anavigation satellite by Japan.

Box 3.9: Japan-Procurement of a Navigation Satellite

TheMinistry of Transportation (MoT) had been enlistedby Japan under Annex I of Appendix I of Japan�scommitments under the GPA. TheMoT had issued a tenderto purchase a multi-functional satellite for the installationof a Global Navigation Satellite System for air trafficmanagement. EC noted that the specification released bythe MoT had mentioned specifications which explicitlyreferred to the US WAAS. EC contended that this limitedinteroperability and would curtail participationopportunities for EC suppliers � hence this provisionoperated in violation of the principles of non-discriminationand the stipulation in the GPA that technical specificationsshould be stated by posing requirements pertaining to�performance rather than design�.255 A mutually agreedsolution was reached between EC and Japan thatrequirements for interoperability would be mentioned infuture tender documents if the parties determine thatinteroperability is feasible.256

Observations Pertaining ToMaintenance of Policieswhich Impact Market Access

The functioning of developed countries in the GPA addscomplexity to the market that we are attempting to assess.The operation of these preference policies may result insubstantially lost markets in Government Procurement forparticipants from other countries irrespective of whether theyhave been operating under the Green Procurement Law orthey have been motivated by social justice. The conclusionsand observations specific to the operation of SMEs, and Buy


National Policies have been provided under the pertinentheads.

SMEs: Maintaining Similar FlexibilitiesWith respect to a new entrant to the GPA maintaining

similar preferences, it is noteworthy that Dischendorferobserves that the availability of derogations is not unfetteredbecause of the reciprocity requirement and it may be difficultfor potential members without significant economic mighttoachieve concessions to derogations�.257 It is important to beable to offer substantial markets in order to be able to closeoff substantial markets on account of social justice.

Buy National PoliciesIt is evident that the Buy National policies will increase in

operation � we should look for opportunities to understandthe Rule of Origin requirement under the BuyNational policiesin order to explore newer markets.

The proposed European Union approach to Buy National,motivated by limiting reciprocity to markets which ensuresimilar access through investigations mirroring trade-remedies, has immense consequences. Ideally the operationof a Buy National requirement may result in an individualsupplier losing access to a market. The investigations underthe EU proposal may result in providing opportunities for theEU to encourage countries to join the GPA because they arefound to be maintaining measures which inhibit theparticipation of EU suppliers in any market/sector.

Green ProcurementDeveloped country markets are increasingly motivated by

the need to reduce emissions, and procure environmentallyfriendly products in order to satisfy their pressing internationalcommitments in that regard.


The goods which have been identified by those countrymarkets, and the standards expected of those goods have beendisclosed. These specifications should guide producers indeveloping country markets in order to tap the GovernmentProcurement demand in those countries.

It is critical to negotiate an understanding establishingequivalence on measures (like the EPEAT- Electronic ProductEnvironmental Assessment Tool) at the very outset. Or else,we may encounter a lost market in those countries despitebuilding capacities to manufacture environmentally-friendlyproducts.

Non-Tariff BarriersIt is essential to build capacities to be able to accurately

calculate the impact of trade barriers (through the applicationof Ad Valorem Equivalent) studies to estimate the impact ofthese non-tariff barriers on the size of the available market.The exercise of a sovereign power on moral/health conditionsmay sometimes be misused and result in operating as a tradebarrier. These disputes may be actively pursued at the WTODSM.

With respect to Non-Tariff Barriers, the need fornegotiating agreements on recognising equivalence in certaincases is clearly felt. Furthermore, detection of certainsubstances using advanced technology seems to be increasinglyused as a means to create trade barriers. After the calculationof the economic impact of a non-tariff barrier on an itemwhichis increasingly procured by governments in which India has acompetitive advantage , we could negotiate for the removal ofthose tariff barriers in return for opening up our substantialmarkets.

Views abound that only rich countries can effectivelydeploy social preference policies as a function of their �MarketPower�.258 It is said that even though the United States closes


off substantial markets under social preference programmes,it also opens up substantial markets for access. The onesolution for a country which seeks to apply social preferenceprogrammes and policies, is for it to open up substantialprocurement markets in other sectors. We seek to understandwhat the determinants of �Market Power� are.

In order to demonstrate the actual impact of a certain non-tariff barrier on trade, it is important to demonstrate the effectof the NTBs on trade flows. This calls for accurate informationabout prices, transport and distribution costs, tariffs, taxesand/or subsidies at the product-specific level, and qualitydifferences amongst the products.259

Other International Commitments on ProcurementBilateral Agreements

The Canada-Korea Procurement of TelecommunicationsEquipment Agreement (CKTEA) deals with federalgovernment procurement of telecommunications goods andincidental services (defined as the services which are includedin the goods contracts) which amount to more thanUS$261,216. In the event a procurement is covered under thepurview of the CKTEA, preference may be accorded tosuppliers of Canadian and Korean goods. In the event aprocurement is covered by both the CKTEA and the GPA, itshould follow the procedures in the GPA.260

Part B: Analysis of Experiences of Countries accedingto the GPAState of Negotiations

An analysis of the structural framework of negotiationspreceding accession, during accession and post accession hasbeen undertaken. As per the Decision on the Committee onGovernment Procurement, negotiations are currently


underway to address issues of coverage and to induceelimination of discriminatory measures and practicesparticularly on the following issues:(i) Whether further harmonisation of thresholds should be

aimed for;(ii) Whether there should be a uniform level of coverage of

entities as per the terms of the Agreement;(iii) Whether the entities listed in Annex 1 should have a

positive or negative list approach;(iv) Whether commonality of presentation is desirable and

feasible taking into account the coverage and presentationunder the GATS;

(v) Whether General Notes in the Annex can be simplifiedand made more easily understandable, etc.261 The futureof the agreement may be moving towards the gradualelimination of exclusions and restrictions in futurenegotiations.262

(vi) A Committee is meant to initiate a Work Programme onSafety Standards in International Procurement. The workis meant to focus on technical specifications under ArticleX, and the objective to protect public safety as enshrinedin Article III of the Agreement, and the correspondingreflection of these provisions in the Annexes of the Partiesin Appendix 1. It is meant to represent the best practiceswhich will be adopted to protect public safety in tenderdocumentation and technical specifications.263

(vii)As per the Decision of the Committee on GovernmentProcurement on a Work Programme on SMEs, it is to benoted that in the future, the parties to the GPA arediscouraged from introducing discriminatory measureswhich only favour domestic SMEs, and acceding partiesare discouraged from introducing such measures andpolicies.


Hence, it is important to note that the flexibilities whichhave been made currently available under the negotiationprocess may not be available over a longer period of time.

In practice, the negotiations for entry into the GPA havebeen known to extend over a decade in certain cases. Thenegotiations are multi-stage negotiations, where the newentrant initially tables an offer, and the other members of theGPA table requests for improvement which are reflectedsubsequently in �revised offers�. There is no upper limit on thenumber of �revised offers� which may be tabled by a newentrant.

Four WTO members have committed to acceding to theAgreement in their respective Protocols of Accession to theWTO: Croatia, Former Yugoslav Republic of Macedonia,Mongolia and Saudi Arabia. A commitment regarding GPAaccession was included in the Report of the Working Party onthe WTO Accession of Russia.264 The developing countrieswhich have provisions pertaining to accession in theirrespective Protocols of Accession to the WTO are: Croatia,the Former Yugoslav Republic ofMacedonia,Mongolia, SaudiArabia and Ukraine.

Eight WTO Members have committed to accede to theGPA and are currently going through the process: ChineseTaipei, Albania, Jordan, Oman, Krgyz Republic, Moldova,Panama and Georgia.265 The developing countries which haveacceded/or in the process of undertaking accession to theWTO Agreement on Government Procurement are: Albania,Armenia, China, Georgia, Jordan, the Krygyz Republic,Moldova, Oman and Panama. Apart from these Ukraine andNew Zealand are currently negotiating entry into the GPA.India and Vietnam are understood to be currently evaluatingtheir possible interests in acceding to the Agreement.266

Apart from the losses which may be incurred by localsuppliers when domestic procurement is exposed to the


disciplines of the GPA, the other costs which may be incurredby new entrants to the GPA include the costs of aligning theGPA with domestic legislation, the costs of �adjustment� withthe GPA system, and the costs for creating/maintaininginstitutional mechanisms for recording the statistics requiredto be maintained under the the GPA.

The countries which are in the process of undergoingaccession, or which are being mandated to accede to theAgreement on Government Procurement can be broadlycategorised in the following manner: (i) Countries which areproximate to the European Union and which may either benegotiating entry into the European Union, or those whichare attempting to achieve deeper trade ties with the EuropeanUnion � these countries may conclude a Stabiliation andAssociation Agreement with the European Union whichmandates harmonisation with the EU directives onprocurement; (ii) Countries which are negotiating termspertaining to government procurement in their Free TradeAgreements with current players of the GPA (like the UnitedStsates); and (iii) countries which have been mandated/pressurised to accede to the Agreement on GovernmentProcurement owing to their accession commitments.

We look at three types of experiences which are pertinentto our understanding of country participation in the GPA: (i)the countries which have already acceded to the GPA (the in-depth experiences of developed countries are coveredseparately); (ii) the countries which are undertaking accessioncommitments, and (iii) the countries which have commitmentsto accede to the GPA in their Protocols of Accession, or whichare currently tabled as observers in the GPA� What is the value of procurement undertaken by the

governmental entities in a certain country? In some casesthis information is presented as a fraction or percentage ofthe GDP.


� Is the procurement undertaken by a central entity? Or isprocurement decentralised? Does an entity overseeprocurement actions by different ministries in the event itis decentralised?

� The options available for procurement: particularly, are thecircumstances for limited tendering defined?

� Are offsets used by the country in question? What are theconditions governing the use of offsets?

� For example, the GCC states sometimes allow for a pricepreference of 10 percent for their own country-participants,and 5 percent for participants from the GCC countries.

� With respect to a few countries we have managed toidentify the core sectors in which procurement takes place.This would aid us in negotiating for access to procurementin those sectors in the event procurement opportunitiesopen up.

� With respect to the procurement process itself, it isinteresting to note whether a country allows access toreview and challenge procedures to participants from othercountries.

Country Profile: We seek to answer the following questionswith a motive to uncovering a few key tenets: (i) what is thevalue of the market a new entrant opens access to in the GPA?;(ii) is their procurement market a highly regulated market,meaning their costs of accession may be significantly lesserthan a country which has nascent procurement regulation?;(iii) are these countries likely to require pleading of offsetsbecause of their use of price preferences?; and (iv) do theyallow equal participation for foreign participants in areas suchas accessing their challenge procedures, and equal access toparticipate in sectoral procurement?


Countries which have acceded to the GPA

IsraelIsrael is an interesting example of a country which invoked

developing country status in order to implement offsetarrangements. Procurement in Israel amounts to US$25bnannually. The procurement by central government entities,government authorities and statutory corporations is regulatedby the Mandatory Tenders Law, 1992.267

Israel advanced that the vast majority of firms in Israel wereSMEs which were excluded from the procurement activitiesundertaken by other members. Hence, Israel represented thatoffsets were a means to �facilitate industrial cooperationbetween world-class foreign bidders and the capable localindustry�.268 The Committee on Government Procurementconsidered these submissions and noted the followingsubmissions: (i) Israeli participation in the GPA had not ledIsraeli companies to greater participation or to win publiccontracts in other Parties� markets; (ii) The offset provisionsneither hindered nor discouraged the foreign suppliers fromcompeting and winning public tenders in Israel; (iii) The onlydirect benefits from Israel�s participation in the GPA wouldbe through the use of offsets which would be implementedthrough direct business contracts, transfer of technology,know-how, creation of long-term business relations and otherforms of benefits.

The parties to the GPA allowed as an exceptional measure,that Israel may be allowed to maintain offsets upto 35 percentof the contract. It will be interesting to understand if�exceptional measures� such as this are envisaged under thecommitments which can be made between parties. Secondly,considering the current state of S&D provisions in the revisedGPA, it is important to understand whether such terms canbe negotiated over time. The details of Israel�s offset policyare provided in the �Note on Offsets� provided by Israel.


Themanner in which the offset requirement may be fulfilledincludes subcontracting to local companies, investing in localindustries, research and development, transferring know-how,purchasing goods made in Israel, and in any other mannerwhich may be devised by the Industrial Co-operationAuthority.

In its GPA offer, Israel presented the qualificationspertaining to its purported inclusion of offsets in itsprocurement policy. Israel stated that it may include certainprovisions which require one or more of the following: (i)limited incorporation of domestic content; (ii) offsetprocurement and (iii) transfer of technology. These provisionswould be noted in the form of objectives, would be clearlydefined, andwill not result in discrimination between the otherparties.269

Israel also noted that the suppliers will not be required topurchase goods which are not offered on competitive termswith respect to price and quality. The upper limit on the useof offsets could be up to 35 percent of the contract (this wouldbe reduced to 30 percent in five years, 28 percent after tenyears, and 20 percent after 13 years). Israel further submittedthat it would submit reports pertaining to the implementationof the offset policy. The use of offsets would be reviewedafter the level of offsets reaches 20 percent following whichIsrael would consult with the parties to the agreement onextending the use of offsets: this would take into considerationgeneral and economic developments in Israel, the trade balanceand the performance within the framework of the Agreement.

The offset policy has been gradually implemented in Israel�sprocurement policy. Since 2007, apart from governmentagencies and state-owned companies, local authorities havealso been required to follow the offset policy. An internationalpublic tender which amounts to a value more than US$5mn isrequired to include a clause on industrial cooperation with


Israeli entities. The undertakings must be valuable at 35percent of the value of the contract;

Concomitant with its commitments, Israel has beengradually phasing out the offset, In 2009, Israel notified theCommittee on Government Procurement, that offsets havebeen reduced from 28 percent to 20 percent for the tenderscovered by the GPA. Israel undertook to eliminate the offsetsentirely in 15 years. Israel has also undertaken to reduce thenumber of entities whichwill apply the offsets. Contracts belowSDR 3 million will not attract the application of offsets.270

Currently, after the revised GPA has come into force, thefollowing qualifications have been introduced into the text ofIsrael�s General Notes.� For procurement which is valued beyond the threshold of

3 million threshold, offsets upto 20 percent of the contractmay be required.

� Six years after the revised agreement comes into forceoffsets will not be applied by Annex 1, Annex 2 and Annex3 entities. The entities which are exempted from thisobligation include Annex 1 entities271 , Annex 2272 andAnnex 3 entities.273

� This is further phased out after eleven years following thecoming into force of the Agreement. The entities whichcontinue to be exempted include some Annex I274 , Annex2275 and Annex 3 entities276 .

� Offsets are completely eliminated sixteen years after therevised agreement comes into force for coveredprocurement.

Observations: It is critical to note that there was no explicitmention that the use of offsets was not granted to Israel owingto it being a developing country, and there was no referenceto the pertinent provisions in the GPA. Instead, it is notedthat the GPA parties granted the imposition of offsets as an


�exceptional measure�. It also remains to be seen if thepermission to use offsets will be granted only as a result ofprior participation in the GPA.

Chinese TaipeiWhen the Chinese Taipei negotiated its accession to the

WTO it was bound to accede to the GPA � it was considereda condition.277 However, a positive result of Chinese Taipei�saccession to the GPA was that it obtained open procurementbids worth a total of US$440mn in 2010.278 One of theadvantages that were identified post-accession was thatChinese Taipei suppliers could not legally be denied accessinto the market of any country. This resulted in allowingChinese Taipei suppliers market access to markets worthUS$390bn each year.279 It was observed that Chinese Taipeimay have been strategic in acceding to the GPA in order toobtain access to the US market in light of the Buy Americalegislation. It was further noted that the Chinese Taipeicomputer makers Acer Inc. and Compal Electronics wouldhave an advantage over Chinese and Indian competitors inwinning US economic stimulus contracts. The other sectorsin which an advantage is expected include energy equipment,telecommunication parts and flat screen televisions.280

Certain elements of the offer and General Notes have beenprovided herein281 :� The initial offer was tabled on 17 March 1995. However,

it was only inDecember 2004 that Chinese Taipei concludedits negotiation of the bilateral agreements with the GPAsignatories.

� In Annex I of Appendix I, Chinese Taipei presented thethresholds of SDR 130,000 for goods and services and SDR5,000,000 for construction. Chang-Fa Lo points out thatthe central government system in Chinese Taipei is unique:there are five bodies which deal with five powers namely


the Executive Yuan, the Legislative Yuan, the Judicial Yuan,the Examination Yuan and the Control Yuan. Of theseentities the Executive Yuan is the only arm of thegovernment which has been listed under the Annex I offer.

� The Annex 2 coverage is supposed to contain all the sub-central government agencies. The thresholds are SDR200,000 for goods and services, SDR 15,000,000 forconstruction in the first year of application, SDR10,000,000 in the second year and SDR 5,000,000 in thethird year.

� The Annex 3 entities include state-owned enterprises,national universities, and public hospitals. The thresholdsare SDR 400,000 for goods and services, SDR 15,000,000for construction in the first year of application, SDR10,000,000 in the second year and SDR 5,000,000 in thethird year.

� Chang Fa Lo identifies that in order to further thedevelopment of science, Chinese Taipei included anexclusion which stated that the GPA would not apply toprocurement by the National Space Organization of theNational Science Council for five years. General Note 6exempts procurement of goods and services relating toelectricity and transport projects.

South KoreaSouth Korea�s initial offer was dated 25 June, 1990. In the

offer, South Korea had listed the entities which it advancedfor consideration under the GPA Agreement withoutcategorising the entities or specifying the thresholds.282

South Korea had attempted to become a member of theGPA under the GATT system. The South Korean governmentsubmitted three different offer lists with the value of the offerincreasing with every subsequent offer. The first offer list wasin 1979, the second was in 1980 and the third in 1982.283


There was a significant amount of difference between SouthKorea�s offer list and the expectations of the members whojoined the GPA. Under bilateral trade negotiations, the USbrought up the issue of government procurement, and SouthKorea revisited the idea of joining the GPA. This could besaid to be yet another example of bilateral trade negotiationswith the United States providing an impetus to a country toaccede to the GPA. After announcing its intention to join theGPA, the South Korean government submitted its initial offerlist of the government procurement committee of the GATTin June 1990.

Contents of the Initial Offer and Subsequent Offer: Theinitial offer list only covered purchases of goods by 35 centralgovernment agencies and two public corporations. After manychanges, the final offer list contained a coverage of 42 centralgovernment agencies, 15 sub-central government entities, and23 public corporations. This list was satisfactory to the partiesof the GPA, and South Korea finally signed the agreementunder the new system of the WTO on April 15, 1994, inMarrakesh.

Content of Requests for Improvement: South Koreareceived a request list from Japan on the names of the entitieswhich Japan wanted included. These bilateral consultationsgavemember-countries an opportunity tomap out the interestsof each country and narrow down the interests which wereshared in common by the other members.

The problems identified by other countries whilenegotiating with South Korea during its bilateral consultationswere as follows:� Countries pointed out that the coverage of entities was very

limited in comparison to the other countries� offer lists.� Services were not included in local governments and public

corporations.


� Exception and exclusion clauses needed clarifications andgreater transparency.

� A problemwhich was identified with the South Korea offerwas that it excluded the major public corporations � thiswas starkly noticeable considering the size of procurementsby public corporations in South Korea was very large �US$11bn in 1990 (almost 50 percent of total governmentprocurement excluding defence-related items)

� The South Korea Electric Power Corporation (KEPCO)was not included in the offer list. (This entity had the largesttotal procurement, and the GPA members were opposedto leaving it out of the list).

Some of the impediments encountered by South Korea withrespect to the exceptions and exclusions advanced by it are asfollows: (i) developing country status; (ii) national security;(iii) preference to small firms; (iv) regional development; (iv)measures taken to protect an infant industry; and (vi) culturaldifferences.

Effects of AccessionEven though South Korea signed the agreement in April

1994, the application of the agreement did not commence untilJanuary 1, 1997. Two years after the South Koreangovernment procurement system had imbibed GPAmembership disciplines, it was found that no particular typeof economic benefit was discernible. However, limitedtendering reduced from 27.2 percent to 22.5 percent, whichcould be interpreted as an improvement in the competitivenature of the procurement procedures.284

ArmeniaArmenia is an interesting case to study because it was

categorised as a �transition economy�. Armenia had a


procurement market of US$12bn which amounted to 15percent of its procurement, and procurement was centralised.The sectors of health and transport are significant forprocurement.285 The State Procurement Agency which isaffiliated to the Ministry of Finance conducts procurement incoordination with the different procuring entities. Theprocuring entities are only responsible for providing technicalspecifications, setting up tender committees, and supervisingcontract performance. The State Procurement Agency finalisesbidding documents.286

In April 2010, Armenia had submitted a Draft Final Offerand Replies to the Checklist of Issues to the Committee onGovernment Procurement. On 7 December 2010, thecommittee adopted a decision inviting Armenia to accede tothe Agreement.287 Armenia was required to adopt and bringinto force legislation in conformity with the provisions of theAgreement on Government Procurement (Article XXIV:5(a)).On 08 February 2011, Armenia provided the final text of itslegislation in English to the Committee. The Republic ofArmenia became a Party to the GPA on 15 September 2011.288

Armenia was pronounced to havemet the terms and conditionsfor its accession specifically with respect to its nationallegislation.

Observations: It was noted that the extent to whichArmenia met the standards of �adequacy� and the GPA-conformity of national legislation would be useful in futurenegotiations.289 This may well be an indicator that theArmenian Accession to the World Trade OrganisationAgreement on Government Procurement may foretell thestandards to come.


Members Currently Undertaking Government ProcurementAccession Negotiations

ChinaThe obligation to accede to the GPA was present in the

accession document of China. China has committed to�providing all foreign suppliers with equal opportunity toparticipate in that procurement pursuant to the principle ofMFN treatment� � this commitment has been stated to evengo beyond the requirements of the GPA which only requiresnon-discrimination between GPA parties apart from WTOmembers.290

The case of the ongoing accession of China to the Agreementon Government Procurement is extremely relevant to India.This is especially so considering the fact that the extent towhich Chinese exporters evince interest in GovernmentProcurement Markets is unclear (China is already a keyexporter in GPAmarkets). Furthermore, exports fromChinesestate enterprises are also directed to Asian and Africandeveloping countries� markets.

China, as part of its Accession commitments in 2001,undertook to negotiate its membership into the GPA bysubmitting an Appendix I offer. In 2006, as part of China-UStrade dialogue, China begun to work on its initial offer. On 28December 2007, China submitted its Appendix I offer and itsformal application to become a party to the GPA. This offerwas regarded as being �deeply disappointing� by the differentmembers.

After China�s initial offer, requests for improvementsthrough adding entities, reducing thresholds, and reducing theusage of exclusions in the submissions of the parties werereceived from Canada, European Communities, Japan, SouthKorea, Norway, Switzerland and the United States.


Annex I: Central Entities (Initial Appendix I offer)Thresholds: Though China listed all the central government

departments, the thresholds which were listed weresignificantly higher than those submitted by other member-countries. In order to provide a comparison Ping Wangjuxtaposes the thresholds submitted by China in its initial offerand the thresholds provided by the EU (Table 3.19).291

The coverage was limited to the following: (i) Certain typesof goods, such as office equipment and furniture; (ii) Theservices listed in Annex 4, included only rental and leasing ofequipment and overseas training; (iii) The scope of GPAcoverage would be only to �central entities proper�, whichindicated that the coverage would not be extended to localoffices, affiliated public bodies and state enterprises.292

Table 3.19: Thresholds committed by China and the EU

Country Supplies Services Works(In SDRs) (In SDRs) (In SDRs)

China 500,000 4,000,000 200,000,000

EU 130,000 130,000 5,000,000

Source: Adapted from Ping Wang, Accession to the Agreement onGovernment Procurement: The Case of China

Annex 2: Sub-Central Entities (Initial Appendix I offer)Annex 2 was regarded as being a �Non-existent offer�, and

it was noted that considering China does not have a federalstructure similar to the United States and Canada, the omissionto list sub-central entities was noted as being a seriousdenigration.293 As dealt with later, the adoption of internationallaw commitments into the management of the finances of theStates is a critical matter indeed.

Annex 3 entities (Initial Appendix I offer)China had restrained from listing state enterprises which

dealt with the provision of public utilities and provided


extremely high thresholds. The thresholds when juxtaposedagainst the content of the European Union offer demonstratedthe disparity.294 China was offered additional time till June2011 to include and incorporate sub-central governmententities and state-owned enterprises.

In its first revised offer, China was noted to have advancedthresholds which reduced over a given period of time. Chinadid not present any sub-central entities in its offer. In its secondrevised offer, the thresholds with respect to Annex 1, thoughsubstantially the same in comparison with the first revisedoffer, were altered with respect to the Construction thresholdsin the first year.

The use of �central government entities proper� withoutmaking a reference to legislation which would indicate whichentities, departments and other entities which may be directedto make a procurement on behalf of the central governmentexcludes any entities which have not been explicitly included.

Also, the restriction of the administrative offices of theCentral Governments to the departments which were locatedinside Beijing effectively includes any presence, oradministrative offices which may be located outside Beijing.

As noted before, the General Notes are an important toolin significantly qualifying coverage. China through the use ofits General Notes substantially excludes procurementundertaken in certain critical utilities like drinking water,electricity, energy, transportation, telecommunications orpostal services.

China has stated that it will table a new offer after takinginto account �all� the requests of parties made by parties forimproving upon the second revised offer.295 It will be interestingto note which areas have been highlighted as requiringimprovement by the current parties to the GPA, and the extentof the changes made by China in this regard.


Lessons Learnt from China�s Accession ExperienceThe experience of China in its current negotiations where

it reconciles the application of the disciplines of the WTOGPA to a country with a large percentage of state-ownedenterprises is instructive to any new entrant which undertakesmassive procurement through its state-owned enterprises.Similarly, Vietnam and Mongolia present similar concerns.Developed country-negotiators and representatives of tradeorganisations have opined that the standards set for Chinawill be different from the expectations for India, or for a leastdeveloped country.� As per the author Xinquan, the phased-in addition of

entities or sectors may be allowed after accession fordeveloping countries.296 Hence, this is an option which ispresent to a new entrant.

� Costs of Negotiation: Considering a country like China hasa large number of state owned enterprises, the costsinvolved in negotiating on coverage were expected to belarge for both China, and for the other parties. Yet anotherfactor which is to be considered is whether the authoritywhich is designated as the key authority in a certainnegotiating country to undertake negotiations has thecapacity to influence authoritatively the procurementactions of all of the other central, sub-central and stateenterprises.297

� Cost of Adaptation: Considering that countries withmatureprocurement systems entailed costs in adapting to the GPAsystem, countries like China and India which lack asystematic and efficient procurement system are likely toface high costs of adaptation. Another element of the GPAsystem which is likely to add to the costs is that the bidchallenge procedures are required to be adopted intodomestic law.298


� China had excluded procurement by state-owned and state-invested enterprises of goods and services for commercialsale, production of goods or supply of services forcommercial sale as not being subject to laws, regulationsand measures relating to government procurement.299 It isessential to understand whether it is possible to plead thisexclusion pertaining to �Commercial Sale� by state-ownedand state-invested entities under the GPA.

VietnamIn Vietnam, the presence of a large number of state-owned

enterprises adds to the complexity of the procurement whichis undertaken.300

MongoliaA transition economy, where procurement was largely

decentralised, the government had commenced privatisationof SOEs which were not engaged in providing exclusive andessential services to the government. A 10 percent preferenceis given to local bidders for goods and contracts of localMongolian Origin.301 Procurement in Mongolia amounts toroughly US$270mn (from 1995 to the time of the report in2005).302 Foreign bidders are not allowed to operate incontracts of value exceeding Tog 100 million.303 A pricepreference operates for domestic supplies of upto 10 percentin goods, and 7.5 percent in services.304

The state-owned entities are divided into either budget-funded enterprises or self-financing enterprises. The budget-funded enterprises engage in manufacturing, construction,supplying services solely for the state, whilst the latter arecommercially independent state-owned enterprises whichoperated by financing themselves. Procurement is decentralisedthrough about 4,000 budget entities. However, it is said thatprocurement which involves large amounts is controlled atthe centre in Ulaanbaatar.305


PanamaProcurement Profile: Central government expenditure on

goods and services equalled US$215mn in 2005. However,the public contract market of the Panama Canal Authoritywas US$236.6mn. It was noted that 80 percent of contractingunder the Panama Canal Authority involved PanamianParticipation. The Free Trade Agreement that is concludedwith the United States contains an indication that procurementunder the Panama Canal Authority is included in thegovernment procurement chapter.306 Procurement isdecentralised, and the participation of domestic and foreignsuppliers is encouraged.307

Panama�s government procurement regime allows for atransparent bidding regime. However, it contains exceptionsfor procurements pertaining to national defence. An exampleof the exercise of this exception, which came under fireinternationally, was in the case of the privatisation of the Portof Balboa in 1998 to Hutchinson-Whampoa, a Hong-Kongbased company.

Panama had agreed to accede to the GovernmentProcurement Agreement under the terms of its accessionagreement into the WTO. The key issue under Panama�saccession dealt with the inclusion of the Panama CanalAuthority. The Panama Canal expansion in the recent yearshas drawn, and will continue to draw, the attention ofnegotiating parties because it is the largest infrastructureproject of its kind in Latin America and is worth US$5.25bn.308

Even though Panama has asserted that the Panama CanalAuthority operates independently of the national government,Panama could be required to open separate negotiations forprocurement for this entity outside of regular governmentprocurement.

The Panama Canal Authority was not included in theaccession offer despite repeated requests. As a result of alleged


uncooperative behaviour by Panama in the process ofnegotiations, the United States in December suspended awaiver of the Buy America Act provisions which had earlierbeen accorded to Panama.

The US-Panama Free Trade Agreement includes provisionspertaining to the Panama Canal Authority. Panama hadnegotiated to maintain a separate dispute settlement systemfor the Canal Authority dispute settlement system within theFTA.309 For 12 years after agreement takes effect, Panamamay reserve contracts by the PCA to Panama firms if there isa notice signifying the intent to do so, and there are limitationson the size of contracts. Panama also negotiated to keep set-aside provisions for Panamian small business firms.

Observations: It may be important to enlist the largestinfrastructure projects and determine as to whether they willbe listed in our offer or not.

JordanJordan acceded to the World Trade Organization in 2000,

and signed the US-Jordan Free Trade Agreement310 and theJordan-European Union (EU) Association Agreement in 2001.Jordan is an example of a country which had includedcommitments in its Free Trade Agreements. Jordan�s accessionto the Agreement has been revisited currently by theCommittee on GPA.

Procurement in Jordan: The two central government entitieswhich deal with procurement are the Government TendersDirectorate of the Ministry of Public Works and Housing,and the General Supplies Department of the Ministry ofFinance. The sub-central government entities are governed byspecific procurement legislation. Procurement in public worksand engineering services is governed by the GovernmentTenders Directorate. Local contractors are required to be�classified� and local consultants are required to be �qualified�


for the purpose � this is not applicable to foreign contractors.There is a pre-qualification requirement for selecting foreigncontractors and consultants. In order for foreign suppliers toparticipate in GSD tenders, there is a requirement of localpresence through an established Jordanian company or localagents, or a regional office.

UkraineThe Ukraine accession into the WTO GPA has been

renewed recently. Five percent of the GDP of Ukraine wasspent on procurement (amounting to US$4bn) in 2006.311 TheCPAR by the World Bank indicates that Ukraine is in a high-risk situation pertaining to procurement. The functions ofprocurement as undertaken by the Department ofCoordination of State Procurement (DCSP) were reorganisedand redistributed amongst five other entities: (i) The TenderChamber � an NGO; (ii) the Special Control Commission(SCC) � under the Accounting Chamber; (iii) the AccountingChamber; (iv) Parliament; (v) the Antimonopoly Committee;and (vi) Central executive bodies, including the Cabinet ofMinisters.312

There was fragmentation of government authority overpublic procurement which created a �high risk� environmentfor procurement. Following certain amendments, publicprocurement functions were assigned to Tender Chamber,whichwas aNon-Governmental Authority. This authority wasallowed to publish tenders, approve single-source andrestricted tendering and to resolve bid-complaints.

Furthermore, with respect to the actual procedure ofconducting the procurement, Standard Bidding Documents arenot made freely available. The Country ProcurementAssessment Report by the World Bank suggests that in orderto alleviate the current �high-risk� situation in procurement, itmay be essential to finalise the standard bidding documents


and make them available without a charge to the differentprocuring entities. Ukraine has recently tabled an offer to theCommittee on GPA and it will be interesting to note how itsaccession process is carried out.

Krygyz RepublicThe Krygyz Republic is negotiating to join the GPA

following the commitment undertaken in its accessiondocuments. Thirty percent of the national budget is allocatedto government procurement. The government procurementsystem is centralised. The State Agency on GovernmentProcurement andMaterial Reserves supervises the applicationof the legislation and the purchase entity�s decisions.313

Foreign bidders can participate even in cases when domesticsuppliers are considered sufficient.314 State-owned entitiesmay specify that domestic suppliers should use local labourand materials in procurement � the same requirement is notextendable to foreign participants.315

Price Preference: Domestic suppliers are granted a 20percent price preference on goods and services, and 10 percenton works. A condition which may be applied in consonancewith this local requirement is that 30 percent of the materialsand some of the labour is required to be sourceddomestically.316

MoldovaThough a low-income country, health, education and

transport are core procurement sectors in Moldova. Eventhough procurement was decentralised, the Agency forMaterial Resources, Public Procurement and HumanitarianAid (AMRPPHA) reviews and approves bid evaluation reportsand contracts.317 Moldova tabled an initial offer with theWTOGPA Committee in November 2008. This accession has alsobeen revisited recently.


Countries/Observers with an Interest in Accession to the GPASaudi Arabia

The Kingdom of Saudi Arabia, pursuant to its commitmentin its working party report regarding its accession, joined asan observer in the Committee on Government Procurement.318

Though Saudi Arabia is an Observer to the GPA, it has notcommenced negotiations to join the Agreement.319

Procurement in Saudi Arabia is decentralised. Generally,procurement must be put up for public tendering, unless it isexempted by the Procurement Law.320

An offset requirement operates for large military projects(as sourced by USTR 2010). The allocation of this offset isdealt with on a case-by-case basis.321

It is interesting to note that pertaining to review andchallenge procedures which are available to the participantsof the tender process, unsuccessful bidders are informed ofthe grounds for exclusion and they are allowed to appeal tothe Board of Grievances.322 A 10 percent price preference forSaudi products and 5 percent price preference for GulfCooperation Council (GCC) products in all governmentprocurement is maintained.

OmanOman is an observer to the WTO Plurilateral Agreement

on Government Procurement. Government Procurement isundertaken by the Tender Board, which is an independentauthority, and unattached to any ministry or department anddeals with contracts over the value of RO 250,000. Over 2,000tenders were awarded by the Tender Board in 2003-2007 inthe sectors of construction of schools, health centres, medicalcare, electricity, water, water treatment, pavements andlanscapes.323 A price preference of 10 percent is granted forproducts of Omani Origin, and 5 percent to those whichoriginate from other GCC states.324


Stabilisation and Association Agreements with the EuropeanUnion

The European Union deploys Stabilisation and AssociationAgreements (SAA) in its relations with countries in theWesternBalkans region.325 The Thessalonki Summit concluded thatthe Stabilisation and Association Process would form the basisof the assessment of the reform process along with individualmerit for integration with the European Union. Theseagreements can be said to prepare the country for futureaccession into the European Union. SAAs have been concludedwith Bosnia and Hersegovina, Croatia, Federal Republic ofYugoslavia, FYROMand Albania. Though there is no chapteron Government Procurement akin to Free Trade Agreements,the SAAs contain provisions on �Public Contracts�.

The first SAA was concluded with FYROM. Publiccontracts are desired to be opened up on the basis of non-discrimination and reciprocity.326 The companies of the Partyto the agreement are allowed access to contract awardprocedures in the Community, and they are accordedtreatment which is no less favourable than the treatmentaccorded to the Community companies. This access tocontract awards does not include contract awards in theutilities sector. Access to contract awards in the Utilities sectorwill be opened up only once the treaty Party has adopted thelegislation introducing the Community rules.327 Reciprocally,the Community companies which have been established inthe other Party�s territory are to be allowed access to contractaward procedures under treatment which is no less favourableimmediately on entry into force of the Agreement, and theCommunity companies which are not established in the Party�sterritory will be allowed access to those markets after fiveyears following the entry into force of the agreement.328

A provision also notes that establishment, operations,supply of services and themovement of labour and employment


pertaining to such fulfilment of public contracts are dealt withseparately under the SAA.329 Similar to the GATS Agreement,this trend of making a reference to establishment andmovement of labour and employment under the SAAmay openup issues even more closely aligned with the movement ofhuman capital across borders, and the freedom to establishcommercial operations.

The SAA with Bosnia and Hersegovina introduces thenecessity to provide for effective judicial review of the decisiontaken in public procurement.330 The Stabilisation andAssociation Agreements concluded by the EuropeanCommunity with the countries (FYROM, Croatia,Montenegro and Albania) require that the laws pertaining tocertain subjects331 (including government procurement) shouldbe aligned to the laws of the Community.332 These obligationsare beyond �best-endeavour� clauses and adherence to adeadline is contemplated.

AlbaniaPublic procurement in Armenia is decentralised. However

the contracting authorities are subject to monitoring by thePublic Procurement Agency, the Public Procurement Advocateand the Supreme Auditing Office.333 Even though Albaniaapplied for accession in October 2001, negotiations have notprogressed until now. As noted before, Albania has governmentprocurement provisions in its SAA with the European Union,owing to which its international commitments supersededomestic law.334

CroatiaCroatia�s membership into the WTO GPA may occur

concomitantly with its entry into the European Union in 2013.Public Procurement in Croatia amounted to HRK 32.8 billion(as presented in the Trade Policy Review released in the year


2010). There are two governing legislation which deal withprocurement: (i) the Public Procurement Act, 2008 deals withprocurement of goods, services, works and utilities, and (ii) Aregulation which deals with defence and security, and (iii)procurement by entities abroad for the purpose of embassiesand consultancies is to be regulated separately.335 Thelegislative framework has been considerably revamped tofacilitate the process of harmonisation with EU rules.336 Thereare no price preferences for domestic bidders.337 Even thoughCroatia was formerly socialist, it is considered an openmarketin Europe, and procurement is decentralised. Every procuringentity in the public sector is required to undertakeprocurement in accordance with the regulations. It is notedthat national preference policies are sometimes calculated ascustom duties in the CIF price.338

GeorgiaGeorgia was categorised as a fast progressing transition

economy which was turning into a market economy in 2002.In 2002, it undertook large amounts of procurement throughits power ministry. It had signed the Partnership andCooperation Agreement with EU in 1996.339

ObservationsNew Indicators to Take into Account While ContemplatingAccession to the GPA

As is apparent from the accession obligations of certainLDCs and developing countries to the WTO, that accessionto the GPA is no longer entirely voluntary � the case of Russiaand Moldova under the Russia and Moldova Jackson VanikRepeal Act of 2012 is an apt example. Russia is required toaccede to theWTOGPA in order to be granted Normal TradeRelations status with the United States.340 There are many


other countries which, pursuant to SAA obligations with theEU, or FTA commitments with other members of the GPA,have accession obligations to the GPA.

Possibilities for Circumvention owing to �Positive List�Approach

Considering the GPA uses a positive list approach, wherethe only entities which are considered are the ones which havebeen listed, or the ones which have been included by reference(to legislation, or through a generic description), the case ofUnited States- Procurement of a Sonar Mapping System(despite being an unadopted panel report) clarifies theconditions pertaining to procurement which is undertaken bya private entity on behalf of a covered entity. However, quitea few systemic conditions remain to be addressed as notedearlier pertaining to procurement in emergency situations, andpossible loopholes permitting circumvention. We see that thecore difference between the Agreement on GovernmentProcurement and evolved European Union jurisprudence onprocurement is that the GPA places a premium on what themember-country has explicitly presented in its entity offer.Unless the procurement is conducted by an entity which islegally unified to the entity listed in the country offer, the panelmay not attempt to determine if there is an element of �control�between the two entities.

Use of Exemptions/ExclusionsA few select examples of the exemptions/exclusions drawn

out by certain member-countries have been mentioned. It isnoteworthy that an exception pleaded by one country (likethe EU excluding procurement between related entities) wouldresult in exempting the entire market if applied with stateswhich have large state sectors, or state-ownership. This resultsin having to quantify the value of every exemption and assess


against state-specific conditions (like the extent of state-ownership in a transition economy).

Accession ProcessThe importance of negotiating astute reciprocal

commitments during the process of accession is brought outgiven the modalities of negotiating. Putting forth an apt initialentity offer, and remaining prepared for modifications duringthe course of accession-negotiations, dealing with �requestsfor improvement�, checking against the WTO+ obligations inFTAs etc, and using reservation blocs (like Canada did withthe use of its sub-central entities) are crucial to any new entrantto extract the most benefits out of accession to the GPA.

India�s FTACommitments as a precursor: Considering thatcountries which have already concluded commitments outsideof the GPA under FTAsmay be required tomeet those minimalstandards while engaging in accessions under the GPA, it ispositive to note that India�s commitments in GPA chapters inFTAs have been limited to best-endeavour clauses. The EU-India FTA and any other future FTA commitments undertakenby India may create certain basic expectations in this regard.

Understanding the Profile of New Entrants into the GPA� The factors which should be taken into consideration while

understanding the motivation of a member-country whichexplores accession to theWTOGPA include the following:(i) whether it has earlier binding commitments with theEuropean Union (in the form of Stabilisation andAssociation Agreements), or the United States (throughFTAs); (ii) what is the extent of state ownership. Thesehelp in further identifying the sectors of interest in thosecountries and certain critical elements which are essentialto the procurement negotiations such as the opening up ofthe Panama Canal Authority under the US-Panama FTA.


� It has proven useful to categorise the countries into thosewith former commitments to harmonise their localprocurement laws with international instruments, or EUdirectives; those who are reluctant to join the WTO GPAowing to the operation of a large state sector and thosewho have commitments to join the GPA under their WTO-accession commitments in order to assess the motivationbehind the entry of the new entrants, andmore importantly,the ease of their accession and possible costs of accession.For example, countries which have already aligned theirlaws with EU directives do not have to undergo the cost ofadaptation when they determine their entry into the WTOGPA. The Western Balkan States may benefit from havingto align their laws to the EU directives in this regard.

� The difficulty in framing/assessing an entity offer has beenbrought out in this chapter: (i) The number of entitiesoffered by a country is no indication of the strength of anoffer, or the quantum of procurement undertaken by thatentity. It is apparent that the principles of public finance inoperation with the country-specific provisions in theConstitution which delineate in detail on the relationshipbetween the central and sub-central entities onprocurement coalesce to deepen our understanding of anentity offer.

� It is important to understand whether procurement in acountry is centralised, or decentralised (at least tounderstand the import of Annex I dealing with CentralGovernment Entities in Appendix I).

� It is noteworthy that countries with a large state sectorencounter difficulties with respect to both collecting andorganising data, and making commitments. China is anexample.


Content of Requests for ImprovementThe requests for improvement from the United States and

the European Union generally include the following: (i)lowering of thresholds; (ii) expansion of coverage of services;(iii) coverage of entities which were state-owned/controlledenterprises; reduction and elimination of the notes andderogations to coverage. The two parties further representedthat they expected coverage which was comparable to thatprovided by the European Union, the United States and otherGPA Parties.341

The dispute over the enlistment of the Panama CanalAuthority could serve as an indicator that countries may enlistthe largest PPPs in a country and demand that those PPPs orthe authorities which undertake work on those PPPs are listedin Annex III (other entities).

In some states where procurement is centralised the centralgovernment entities may make the largest procurement. Inother cases where the state government assumes authorityfor procurement under the federal government structure,Annex II entities (sub-central entities) may make the largestprocurement. In entities where procurement is entirelydecentralised, Annex III entities may be responsible for makingthe bulk of the procurement. In these cases, the parties to theGPAwill be alert and focussed on entities like the South KoreaElectric Power Corporation which had the largestprocurement.

Another approach which may be employed by parties willbe to note if certain groups of entities (Annex II on sub-centralentities) or Annex III entities are specifically left out, as in thecase of China.

Expectations on CoverageIn certain cases, the GPA parties sometimes assert that

coverage advanced by new entrants should be �comparable�


to that which is provided by the European Union, the UnitedStates and the other GPA Parties. Assessing the value of anEntity Offer is a complex exercise which requires anunderstanding of the procurement framework in a country,the procurement responsibilities of a certain listed entity, theprocurement capacity, the goods, and services being procured,and the common suppliers to that specific listed entity. Asmentioned before, an entity offer which lists a larger numberof ministries, sub-central entities, or other entities whichundertake procurement need not essentially indicate that thelargest procurers in a country have opened up their marketsfor non-discriminatory procurement.

Positive ExperiencesChinese Taipei is an example of a country which despite

mandatory accession to the GPA, benefited vastly from accessto those markets in the field of technology. Korea, on the otherhand, has benefited from a better framework in whichprocurement is undertaken. It remains to be seen whetherthis could translate into apparent economic benefit (as in thecase of Chinese Taipei) over a few years.

As has been mentioned before, considering the fact thatprocurement may be centralised or decentralised, procurementactivity may be supervised by a government entity or anindependent government body, and the coalescing impact ofmultiple economic indicators, it is a tenous activity to assessthe actual value of an Entity Offer, at any given point of time.The attempts of different states to privatise the entities whichmay be engaged in public procurement, and attempts tonationalise loss-making entities further add to the complexityof this issue. The attempt to harmonise thresholds, coverageof entities and requiring commonality of presentation willdefinitely aid the countries which are contemplating accessionto the GPA to present a better offer. It is important for any


country which is negotiating its accession to the GPA to remainprescient of the current values which the GPA is transitioningtowards: those of eliminating discriminatory measures whichfavour SMEs, mandating a uniform level of coverage, andremoving exclusions and exemptions.

In the next Chapter, the learning gleaned from accessionexperiences and the exemptions maintained by foundingmembers of the Agreement /other favoured parties, likeIsrael,will be applied in making recommendations in the caseof India�s interface with the WTO-GPA.


Endnotes

1 Article II(1), Annex to the Protocol Amending the Agreement onGovernment Procurement

2 Page 153, R. Anderson and KodjoOsei-Lah (2011). The CoverageNegotiations under the Agreement on Government Procurement:Context, Mandate, Process and Prospects. In S. Arrowsmith and R.Anderson (Ed.), The WTO Regime on Government Procurement:Challenge and Reform (pp.149-175), New York, NY: CambridgeUniversity Press.

3 The applicability of the Agreement on Government Procurementextends to covered procurement, whether or not it is conductedexclusively or partially by electronic means. The amended text of theAgreement on Government Procurement contains multiplereferences to the use of electronic means in the process ofprocurement. �Covered Procurement� is defined as follows:Procurement with a view to commercial sale or resale, or for use inthe production or supply of goods or services for commercial saleor resale are excluded from the scope of government procurement.This is one of the most commonly advanced qualifications to acountry member�s coverage under the Agreement on GovernmentProcurement.

4 Page 429, A. Davies (2011).The National Treatment andExceptions Provisions of the Agreement on GovernmentProcurement and the Pursuit of Horizontal Policies. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.149-175),New York, NY: Cambridge University Press.

5 For example, Canada states �With the exception of the UnitedStates of America, the offer by Canada, with respect to goods andservices (including construction) in Annex 2, is subject tonegotiation of mutually acceptable commitments (includingthresholds) with other Parties.�

6 Article V (3)(d) of the WTO-GPA.

7 Box 1, Page 153, R. Anderson and KodjoOsei-Lah (2011). TheCoverage Negotiations under the Agreement on GovernmentProcurement: Context, Mandate, Process and Prospects. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.149-175),New York, NY: Cambridge University Press.


8 OECD Library, �General Government Expenditure by Level ofGovernment�, http://www.oecd-ilibrary.org/sites/9789264075061-en/03/03/index.html?contentType=&itemId=/content/chapter/9789264061651-10-en&containerItemId=/content/serial/22214399&accessItemIds=/content/book/9789264075061-en&mimeType=text/html, last visited on 27.12.2012.

9 Adil Khan, Reinventing Public Enteprises, in United Nations (2008)Public Enterprises: Unresolved Challenges and New Opportunities,Publication based on the Expert Group Meeting on Re-inventingPublic Enterprise and their Management, 27-28 October 2005,New York, Department of Economic and Social Affairs, UnitedNations, New York.

10 Page 191. D. Collins (2011). Canada�s Sub-Central Entities and theAgreement on Government Procurement: Past and Present. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.175-196),New York, NY: Cambridge University Press.

11 D. Collins (2011). Canada�s Sub-Central Entities and theAgreement on Government Procurement: Past and Present. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.175-196),New York, NY: Cambridge University Press.

12 The Supreme Court of Canada in AGC v. Northrop Grumman[2009] 3 SCR 309 held that international trade agreements, unlessenacted into domestic law, were merely political statements, and notenforceable legal regime. (pg 184). D. Collins (2011). Canada�s Sub-Central Entities and the Agreement on Government Procurement:Past and Present. In S. Arrowsmith and R. Anderson (Ed.), TheWTO Regime on Government Procurement: Challenge and Reform(pp.175-196), New York, NY: Cambridge University Press.




15 Prahlad K. Basu, Reinventing Public Enteprises and TheirManagement as the Engine of Development and Growth, in UnitedNations (2008) Public Enterprises: Unresolved Challenges and NewOpportunities, Publication based on the Expert Group Meeting onRe-inventing Public Enterprise and their Management, 27-28October 2005, New York, Department of Economic and SocialAffairs, United Nations, New York.

16 Examples of the goods include, Railway equipment, motor vehicles,trailers and cycles, tractors, vehicular equipment components, tiresand tubes, engine accessories, mechanical power transmissionequipment, woodworking machinery and equipment, metalworking machinery, service and trade equipment, special industrymachinery, agricultural machinery and equipment, constructionmining, excavating and highway maintenance equipment, materialshandling equipment, rope, cable, chain and fittings, refrigerationand air conditioning equipment, furniture etc.

17 Note 4, Notes to Annex I, EU Final Offer, GPA/113.

18 Israel GPA, Annex 1.

19 US General Notes

20 http://www.wto.org/english/tratop_e/gproc_e/thresh_e.htm, accessedon 10.12.2012.

21 The subordinate linear organizations and special localadministrative organs are listed and included through the referenceto the Government Organization Act of the Republic of Korea.

22 The Statute �Provisional Statute on the Reorganization of theTaiwan Provincial Government� as amended on 6 December 2000.

23 As noted in Annex 2, GPA/113. To note: The existence of theseShitei-Toshis have been identified with reference to the paper S.Ohsugi (2011) �The Large City System of Japan�, Papers on theLocal Governance System and its Implementation in Selected Fields,Japan No. 20.

24 Norway GPA, Annex 2, Fn 1: A body is considered to be governedby public law when it:

- Is established for the specific purpose of meeting needs in thegeneral interest, not being of a commercial or industrial nature,

- Has legal personality, and

- Is financed for the most part by the State, or regional or localauthorities, or other bodies governed by public law, or is subject


to management supervision by those bodies or has anadministrative, managerial or supervisory board more than halfof whose members are appointed by the State, regional or localauthorities, or other bodies governed by public law.24

25 Arizona, Arkansas, California, Colorado, Connecticut, Delaware,Florida, Hawaii, Idaho, Illionois, Iowa, Kansas, Kentucky,Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota,Mississippi, Missouri, Montana, New York, Nebraska, NewHampshire, Oklahoma, Oregon, Pennsylvania, Rhode Island, SouthDakota, Tennessee, Texas, Utah, Vermont, Washington, Wisconsin,Wyoming.

26 Public entities producing, transporting or distributing electricitypursuant to LOV 1969-06-19; public which have as one of theiractivities the operation of networks providing a service to the publicin the field of transport by automated systems, urban railways,tramway, trolley bus, bus or cable (LOV 1993-06-11100); Publicentities providing airport facilities pursuant to LovomLuftfart (LOV1960-12-16); Public entities ports operating pursuant to LOV1984-06-08 51; Public entities which produce or distribute waterpursuant to FOR 1951-09-28.

27 CPCprov (Provisional Central Product Classification) availableonline at http://unstats.un.org/unsd/cr/registry/regcst.asp?cl=9&lg=1.

28 A build-operate-transfer contract is any contractual arrangementthe primary purpose of which is to provide for the construction orrehabilitation of physical infrastructures, plants, buildings, facilities,or other government-owned works and under which, asconsideration for a supplier�s execution of a contractualarrangement, a procuring entity grants to the supplier, for aspecified period of time, temporary ownership or a right to controland operate, and demand payment for the use of such works forthe duration of the contract.

29 Act on Private Participation in Infrastructure

30 Note to Annex 6, Annex 6, Korea�s Final Appendix I Offer.

31 Singapore GPA, Annex 5.

32 Page 157-158, R. Anderson and KodjoOsei-Lah (2011). TheCoverage Negotiations under the Agreement on GovernmentProcurement: Context, Mandate, Process and Prospects. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime on


Government Procurement: Challenge and Reform (pp.149-175),New York, NY: Cambridge University Press.

33 Article II (4): Each party shall specify the following information inits annexes to Appendix I:

(a) In Annex I, the central government entities whose procurementis covered by this Agreement;

(b) In Annex 2, the sub-central entities whose procurement iscovered by this Agreement;

(c) In Annex 3, the other entities whose procurement is covered bythis Agreement;

(d) In Annex 4, the goods covered by this Agreement;

(e) In Annex 5, the services, other than construction services,covered by this Agreement;

(f) In Annex 6, the construction services covered by thisAgreement; and

(g) In Annex 7, any General Notes.

34 Canada, Norway GPA, General Notes

35 Page 390, A. Chimia (2011). Untying Aid Through the Agreementon Government Procurement: A Means to Encourage DevelopingCountries� Accession to the Agreement and to Improve AidEffectiveness? In S. Arrowsmith and R. Anderson (Ed.), The WTORegime on Government Procurement: Challenge and Reform (pp.390-425), New York, NY: Cambridge University Press.

36 Also Korea GPA, Annex 3.

37 EU GPA.

38 Refer to Table [3] on countries which stipulate that contracts ofgoods and services which fall within the scope of otherwiseexempted procurement are exempted as well.

39 Pg 431, A. Davies (2011). The National Treatment and ExceptionsProvisions of the Agreement on Government Procurement and thePursuit of Horizontal Policies. In S. Arrowsmith and R. Anderson(Ed.), The WTO Regime on Government Procurement: Challengeand Reform (pp.149-175), New York, NY: Cambridge UniversityPress.

40 Norway, Chinese Taipei, EU GPA Schedules

41 Armenia GPA, Norway GPA Schedules


42 Canada GPA Schedules

43 Article I(l), Annex to the Protocol Amending the Agreement onGovernment Procurement.

44 Article I(1) of the 1994 GPA states that the agreement applies to�any law, regulation, procedure or practice regarding anyprocurement by entities covered by Agreement, as specified inAppendix I�. Appendix I is constituted of by Annex I (CentralEntities), Annex II (Sub-Central Entities), Annex III (Other Entitieswhich Engage in Procurement), Annex IV (Goods), Annex V(Services), Annex VI(Construction) and the General Notes. TheGeneral Notes set out the general derogations applicable to a Party�scoverage commitments in its annexes.44 Hence what constitutes a�covered entity� or a �procuring entity� for the purpose ofapplication of the disciplines of government procurement44 isdefined by the contours in these Annexes.

45 EU denies the operation of Article XVIII/Article XX of the erstwhileGPA to those suppliers and service providers of Japan, Korea andthe United States until they cease operating discriminatory set-asidesfor domestic small and minority businesses.

46 USA GPA, Annex 7 on General Notes.

47 Korea GPA, Annex 1.


49 Japan GPA, Annex 1.

50 Canada GPA Schedules.

51 Huawei and ZTE: Put on Hold. The Economist Print Ed. Issuedated October 13th 2012, Page 73.


53 Japan GPA, Annex 3. .

54 Korea GPA, Annex I.

55 Canadian Food Agency, Department of Canadian Heritage,Department of Fisheries and Oceans, Department of Industry etc,Department of Public Works and Government Services, Departmentof Transport etc.

56 3.6 �Canadian Content Policy� accessed on 10.12.2012, availableonline at https://buyandsell.gc.ca/policy-and-guidelines/supply-manual/annex/3/6,


57 Liechtenstein, EC, and Chinese Taipei.

58 Singapore GPA, General Notes

59 Singapore GPA, Annex I, Note 1

60 Israel GPA, Annex 1. These products include insulin and infusionpumps, audiometers, intravenous solution, administration sets fortransfusions, scalp vein sets, hemi-dialysis and blood lines, bloodpacks and syringe needles.

61 Israel, Note to Annex 1, Final Annex 1 Offer, GPA/113.

62 Armenia GPA, Annex I.

63 In Article II (3)(c), the procurement or acquisition of fiscal agency ordepository services, liquidation and management services forregulated financial institutions or services related to the sale,redemption and distribution of public debt, including loans andgovernment bonds, notes and other securities.

64 (pg 184). D. Collins (2011). Canada�s Sub-Central Entities and theAgreement on Government Procurement: Past and Present. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.175-196),New York, NY: Cambridge University Press.

65 [2009] 3 SCR 309

66 A. Mehra (2008), �Federalism and International Trade: TheIntersection of the World Trade Organization�s GovernmentProcurement Act and State �Buy Local� Legislation� InternationalLaw &Management Review 4, 179-200

67 Committee on Government Procurement- Checklist of Issues,General Elements I.2.See Also, Relations Between the Centre and theStates: K. Cooper (1998), �To Compel or Encourage: SeekingCompliance with International Trading Agreements at the StateLevel�,Minnesota Journal of Global Trade, 2, 166; E. Hayes (2005),�A Comparative Analysis of the Regulation of State and ProvincialGovernments in NAFTA and GATT/WTO, Chicago Journal ofInternational Law 605- 621; Office of the U.S. TradeRepresentative, State Government Procurement and TradeAgreements: The Facts, http://ustr.gov./Document_Library/Fact_Sheets/2004/State_Government_Procurement_Trade_greements.html;Memorandum from Tracy Taylor, Legal Counsel for the Office ofProgramme Research on The Legislature, The Governor & Int�lTrade Agreements: An Analysis of Washington Law to th House


Comm. on Trade 7 Econ. Dev. 6 (Dec. 2004), available at http://www.leg.wa.gov/documents/OPR/2005/JLOCTP.pdf

68 26 F. Supp. 2d 287, 291 (Mass, 1998).

69 �Doing business with Burma� covered the following: (i) having aprincipal place of business, incorporation, or headquarters inBurma or having any operations, leases, franchises, majority-ownedsubsidiaries, distribution agreements, or similar agreements inBurma; (ii) providing financial services to the government of Burmaincluding the provision of direct loans, underwriting governmentsecurities, acting as a trustee or escrow agent pursuant to acontractual agreement; (iii) promoting the importation or sale ofgems, timber, oil, gas or other related products, commerce in whichis largely controlled by the government of Burma; (iv) providing anygoods or services to the government of Burma.

70 The Foreign Operations, Export Financing, and RelatedProgrammes Appropriations Act, 1997.

71 United States- Measure Affecting Government Procurement, DS 88,withdrawn on account of having reached a mutually agreedsolution on 11 February 2000.

72 Unite States- Measure Affecting Government Procurement, Requestfor Consultations by the European Communities, WT/DS88/1,GPA/D2/1, dated 26 June 1997.

73 26 F. Supp. 2d 287, 291 (Mass, 1998).

74 530 U.S. 363 (2000) 181 F. 3d 38.


76 Pg 172. R. Anderson and K. Lah (2011). The CoverageNegotiations under the Agreement on Government Procurement:Context, Mandate, Process and Prospects. In S. Arrowsmith and R.Anderson (Ed.), The WTO Regime on Government Procurement:Challenge and Reform (pp.149-174), New York, NY: CambridgeUniversity Press.

Page 185. D. Collins (2011). Canada�s Sub-Central Entities and theAgreement on Government Procurement: Past and Present. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime on


Government Procurement: Challenge and Reform (pp.175-196),New York, NY: Cambridge University Press.


79 Alberta, British Columbia, Manitoba, New Brunswick,Newfoundland and Labrador, Nova Scotia, Ontario, PrinceEdward Island, Quebec and Saskatchewan.

80 Op. Cit Note D.Collins

81 Ibid.

82 Ibid.

83 Pg 194. D. Collins (2011). Canada�s Sub-Central Entities and theAgreement on Government Procurement: Past and Present. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.175-196),New York, NY: Cambridge University Press.

84 Pg 194. D. Collins (2011). Canada�s Sub-Central Entities and theAgreement on Government Procurement: Past and Present. In S.Arrowsmith and R. Anderson (Ed.), The WTO Regime onGovernment Procurement: Challenge and Reform (pp.175-196),New York, NY: Cambridge University Press.

85 Cattle production is specialised in Missouri, South Dakota, NorthDakota, Nebraska, Kansas, Kentucky, Montana, Tennessee, andOklahoma. Environmental Protection Agency, �Beef Production�,available online at http://www.epa.gov/agriculture/ag101/printbeef.html, accessed on 10.12.2012.

86 United States GPA, Annex II

87 United States GPA, Annex II

88 Article II (2)(d) of the GPA.

89 An extract of para 7.121 of Korea-Government Procurement statesas follows: �The negotiations between the Parties under the GPAdo not benefit from a generally accepted framework such as theHarmonized System with respect to goods or even the CentralProduct Classification in services. The Annexes to the GPA whichcontain the entities whose procurement is covered by the Agreement


are basically self-styled Schedules whose interpretation may requireextensive knowledge of another country�s procurement systems andgovernment organization.� Korea- Measures Affecting GovernmentProcurement, WT/DS163/R, DSR 2000, Panel report adopted onJune 19, 2000.

90 GAO (1988) �Profiles of Existing Government Corporations: AStudy Prepared by the U.S. General Accounting Office for theCommittee on Government Operations� , U.S Government PrintingOffice, Washington.

91 Under the Government Corporation Control act, 1945, theComptroller General heading the General Accounting office wasrequired to audit wholly owned and mixed-ownership federalcorporations.

92 GAO (1988) �Profiles of Existing Government Corporations: AStudy Prepared by the U.S. General Accounting Office for theCommittee on Government Operations� , U.S Government PrintingOffice, Washington.

93 Available online at www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa06/papers/226.pdf, dated 18.12.2012.

94 David M. Newbery �Privatisation and Liberalization of NetworkUtilities� Page 5, European Economic Review 41 (1997)

95 Ibid.

96 Ibid.

97 Page 6, David M. Newbery �Privatisation and Liberalization ofNetwork Utilities� Page 5, European Economic Review 41 (1997)

98 Capobianco, A and H. Christiansen (2011), �CompetitiveNeutrality and State-Owned Enterprises: Challenges and PolicyOptions�, OECD Corporate Governance Working Papers, No. 1,OECD Publishing. http://dx.doi.org/10.1787/5kg9xfgjdhg6-en

99 Capobianco, A and H. Christiansen (2011), �CompetitiveNeutrality and State-Owned Enterprises: Challenges and PolicyOptions�, OECD Corporate Governance Working Papers, No. 1,OECD Publishing. http://dx.doi.org/10.1787/5kg9xfgjdhg6-en.

100 Page 8, David Hall (1997) Restructuring and Privatisation thePublic Utilities � Europe, Published as: �Restructuring andPrivatisation in the Public Utilities � Europe� by David Hall, in�Labour and Social Dimensions of privatisation and restructuring �public utilities (water, gas, electricity)� ed Loretta de Luca (ILO,Geneva, 1998).


101 Page 8, David Hall (1997) Restructuring and Privatisation thePublic Utilities � Europe, Published as: �Restructuring andPrivatisation in the Public Utilities � Europe� by David Hall, in�Labour and Social Dimensions of privatisation and restructuring �public utilities (water, gas, electricity)� ed Loretta de Luca (ILO,Geneva, 1998).

102 Ibid.

103 Ibid.

104 Edward M. Iacobucci and Michael J. Trebilcock, �How to PrivatizeCanada Post� March 26,2012, Special to Financial Post, availableonline at http://opinion.financialpost.com/2012/03/26/how-to-privatize-canada-post/, accessed on 08.12.2012.

105 �EU set to approve deal to approve postal monopolies� New YorkTimes, July 10, 2007, available online at http://www.nytimes.com/2007/07/10/business/worldbusiness/10iht-mail.4.6594909.html?_r=0, accessed on 08.12.2012.

106 Canada Post Strategic Review �Report, dated 2010-04-12, availableat http://www.cpcstrategicreview-examenstrategiquescp.gc.ca/finalreport/intro-eng.html, accessed on 08.12.2012.

107 Article XIX: Modification and Rectifications to Coverage

Notification of Proposed Modification

1. A Party shall notify the Committee of any proposedrectification, transfer of an entity from one annex to another,withdrawal of an entity or other modification of its annexes toAppendix I (any of which is hereinafter referred to as�modification�). The Party proposing the modification(hereinafter referred to as �modifying Party�) shall include inthe notification;

a. For any proposed withdrawal of an entity from its annexesto Appendix I in exercise of its rights on the grounds thatgovernment control or influence over the entity�s coveredprocurement has been effectively eliminated, evidence of suchelimination; or

b. For any other proposed modification, information as to thelikely consequences of the change for the mutually agreedcoverage provided for in this Agreement.

108 Annex A, Appendix 2, Decision of the Committee on GovernmentProcurement on Notification Requirements under Articles XIX andXXII of the Agreement, Decision of 30 March 2012, GPA/113.


109 Page 159, R. Anderson and KodjoOsei-Lah (2011). The CoverageNegotiations under the Agreement on Government Procurement:Context, Mandate, Process and Prospects. In S. Arrowsmith and R.Anderson (Ed.), The WTO Regime on Government Procurement:Challenge and Reform (pp.149-175), New York, NY: CambridgeUniversity Press.

110 Liechtenstein General Notes

The Principality of Liechtenstein will not extend the benefits of thisAgreement:

- as regards the award of contracts by entities listed in Annex 2 tothe suppliers and service providers of Canada and the UnitedStates of America,

- as regards the award of contracts by entities listed in Annex 3 inthe following sectors:

- water: to the suppliers and service providers of Canada and theUnited States of America;

- electricity: to the suppliers and service providers of Canada,Japan and the United States of America;

- urban transport: to the suppliers and service providers ofCanada, Israel, Japan, Korea and the United States of Americauntil such time as the Principality of Liechtenstein has acceptedthat the Parties concerned give comparable and effective accessfor undertakings of the Principality of Liechtenstein to therelevant markets;

- to service providers of Parties which do not include servicecontracts for the relevant entities in Annexes 1 to 3 and therelevant service category under Annexes 4 and 5 in their owncoverage.

Until such time as the Principality of Liechtenstein hasaccepted that the Parties concerned provide access for suppliersand service providers to their own markets, the Principality ofLiechtenstein will not extend the benefits of this Agreement tosuppliers and service providers of:

- Canada, as regards procurement of FSC 36, 70 and 74 (specialindustry machinery; general purpose automatic data processingequipment, software, supplies and support equipment (except7010 ADPE configurations); office machines, visible recordequipment and ADP equipment);


- Canada, as regards procurement of FSC 58 (communications,protection and coherent radiation equipment) and the UnitedStates of America as regards air traffic control equipment;

- Korea and Israel as regards procurement by entities listed inAnnex 3, paragraph (B) as regards procurement ofHS Nos 8504, 8535, 8537 and 8544 (electrical transformers,plugs, switches and insulated cables); and for Israel,HS Nos 8501, 8536 and 902830;

- Canada and the United States of America as regards contractsfor good or service components of contracts which, althoughawarded by an entity covered by this Agreement, are notthemselves subject to this Agreement.

111 Norway General Notes

Until such time as Norway has accepted that the Parties concernedprovide access for Norwegian suppliers and service providers totheir own markets, Norway will not extend the benefits of thisAgreement to suppliers and service providers of:

- Canada as regards procurement of FSC 36, 70 and 74 (specialindustry machinery; general purpose automatic data processingequipment, software, supplies and support equipment (except7010 ADPE configurations); office machines, visible recordequipment and ADP equipment);

- Canada as regards procurement of FSC 58 (communications,protection and coherent radiation equipment) and the USA asregards air traffic control equipment.

- Israel and Korea as regards procurement by entities listed inAnnex 3, paragraph 1, as regards procurement of HS Nos8504, 8535, 8537 and 8544 (electrical transformers, plugs,switches and insulated cables); and for Israel, HS Nos 8501,8536 and 902830;

- Canada and the USA as regards contracts for good or servicecomponents of contracts which, although awarded by an entitycovered by this Agreement, are not themselves subject to thisAgreement.

112 The procurement of the following goods undertaken by entitiesoperating in the field of urban transport for suppliers from Japanuntil the EU accepts that Japan has fully opened its procurement ofurban transport to EU suppliers, supplies, service providers andservices.


- Railway or tramway sleepers of cross-ties wood;

- Railway or tramway sleepers of concrete and concrete guidetrack sections for hovertrains;

- Railway or tramway track construction material of iron or steelof the following:

o Rails, check-rails, rack-rails, switch blades, crossing frogs,point rods, other crossing pieces, sleepers, fish-plates, chairs,chair wedges, sole plates, rail slips, bedplates, ties and othermaterial for jointing or fixing rails;

- Electrical signalling, safety or traffic control equipment forrailways, tramways;

- Railway or tramway locomotives, rolling stock, railways ortramway track fixtures, fittings and parts thereof;

- Construction work for civil engineering for railways;

- Construction work for civil engineering for railway tunnels andsubways (CPC prov. 51320);

- Repair and maintenance services of locomotives, rolling stock(CPC prov. 88680).

113 Table 3, �Overview of coverage commitments in RTAs as comparedto the GPA�, Page 620-621, R. Anderson et al. GovernmentProcurement Provisions in Regional Trade Agreements: A SteppingStone to GPA Accesion? In S. Arrowsmith and R. Anderson (Ed.),The WTO Regime on Government Procurement: Challenge andReform (pp.175-196), New York, NY: Cambridge University Press.

114 See GPA/113.

Content of USA�s earlier commitments under the GPA

List C entities and the Buy American Exemption

Prior to the final offer filed by the United States, for theprogrammes listed in List C, entities shall not impose, through30 September 2011, the domestic purchasing requirement of section1605(a) of the American Recovery and Reinvestment Act of 2009(ARRA) as a condition of ARRA financing of those programmeswith respect to Canadian iron, steel, or manufactured goods inprocurement above the threshold for construction applicable to thisAnnex. The United States undertakes no other commitments withrespect to these programmes. Hence, in this case the Buy AmericanExemption ceases to apply selectively only to Canadian iron, steel or


manufactured goods. Currently, the final offer of the United Statesdoes not list List C entities.

115 Notes to Annex 3, Final Appendix I Offer of the United States,GPA/113.

116 Article XIX 4 of the earlier version of the GPA. Confidentialinformation provided to any Party which would impede lawenforcement or otherwise be contrary to the public interest orwould prejudice the legitimate commercial interest of particularenterprises, public or private, or might prejudice fair competitionbetween suppliers shall not be revealed without formalauthorisation from the party providing the information.

117 Japan GPA, Annex 3, Notes to Annex 3.

118 Japan GPA, Annex 3, Notes to Annex 3.

119 Japan Water Agency (Independent Administrative Institution)Accessed on 08.12.2012, available at www.mof.go.jp/english/filp/filp_report/zaito2008e-exv/12.pdf,

120 Japan Water Agency (Independent Administrative Institution)Accessed on 08.12.2012, available at www.mof.go.jp/english/filp/filp_report/zaito2008e-exv/12.pdf,

121 Accessed on 08.12.2012, available at http://www.webaruba.com/

122 �About Us� Accessed on 08.12.2012, available at http://english.twd.gov.tw/ct.asp?xItem=994214&CtNode=23969&mp=114012

123 Taipei Fetsui Reservoir Administration August 2012, Policyaddress, available at http://english.fra.taipei.gov.tw/ct.asp?xItem=33704309&ctNode=43023&mp=122012, accessedon 08.12.2012.

Has concluded anMoU with Jain Irrigation Systems, and is engagedin multiple operations abroad, See Also, http://www.jains.com/Company/News/Jain percent20Irrigation percent20signspercent20MoU percent20with percent20Mekorot.htm, accessed on08.12.2012.

125 Ibid.

126 Promulgation of �Act for Partial Revision of the Postal ServicePrivatization Act and Others�, Available at www.jp-bank.japanpost.jp/en/aboutus/pdf/en2012_12.pdf,accessed on08.12.2012.


127 �Minister Responsible for Canada Post Corporation� Available athttp://www.canadapost.ca/cpo/mc/aboutus/corporate/governance/default.jsf#Minister, accessed on 08.12.2012.

128 Section 14, Canada Post Corporation Act, R.S.C. 1985, c C-10.

129 Electric Transformers, Static Converters, Rectifiers

130 Electrical Apparatus Switching Protecting Circuits

131 Boards, Panels, Consoles, Caninets

132 �Korea Electric Power Corporation� Available online at http://topics.nytimes.com/topics/news/business/companies/korea-electric-power-corporation/index.html, accessed on 08.12.2012.

133 Available at http://www.taiwan.gov.tw/ct.asp?xItem=25604&ctNode=1957&CtUnit=549&BaseDSD=17&mp=999,accessed on 08.12.2012.

134 2011 Annual Report, Taiwan Power Company

135 �Introduction�, Available at http://www.taipower.com.tw/indexE.htm, accessed on 08.12.2012.

136 http://www.iec.co.il/investors/Pages/ActivityLandscape.aspx (Pagetranslated from Hebrew).

137 CPC Corporation, Taiwan, Financial Statements 2012.

138 �Introduction�, available at http://www.cpc.com.tw/english/content/index.asp?pno=54, accessed on 08.12.2012.

139 �About�, Japan Atomic Energy Agency, available at http://www.jaea.go.jp/english/about/index.shtml, accessed on 08.12.2012.

140 Available at http://www.tva.com/abouttva/index.htm, last accessedon 08.12.2012.

141 Available at http://www.webaruba.com/, last accessed on11.12.2012.

142 Annual Report (2011-2012), Public Transport Council, Availableat http://www.ptc.gov.sg/newsandpub/annualReport.htm, accessedon 10.12.2012.

143 Page 23, Annual Report (2011-2012), Public Transport Council,Available at http://www.ptc.gov.sg/newsandpub/annualReport.htm,accessed on 10.12.2012.

144 Accessed at http://www.naa.jp/en/company/index.html, accessed on11.12.2012.


145 �About CAAS�, accessed at http://www.caas.gov.sg/caas/en/About_CAAS/?__locale=en, accessed on 11.12.2012

146 Ministry of Transport Corporations, available online at http://en.mot.gov.il/index.php?option=com_weblinks&view=category&id=8&Itemid=6,last accessed on 11.12.2012.

147 Introduction-Hong Kong Airport, available at http://www.hongkongairport.com/eng/business/airport-authority/introduction.html, accessed on 11.12.2012.

148 20 Years After JNR Privatisation Vol. 2 �Increasing Efforts toStrengthen Position as Leading Transportation Provider inHokkaido� Japan Railway & Transport Review 49, March 2009.

149 �For the Future Transportation Networks� Japan RailwayConstruction, Transport and Technology Agency

150 Railway Assistance Toward Tomorrow: 2012

151 Israel Railways, available at http://www.rail.co.il/EN/About/Pages/about.aspx, accessed on 10.12.2012.

152 KCRHome, available at http://www.kcrc.com/en/engtxt/corporate_profile/history.html, accessed on 10.12.2012.

153 F. Mizutani and S. Uranishi �Privatization of the Japan HighwayPublic Corporation: Policy Assessment�, Paper for the 46thCongress for the European Regional Science Association

154 Available at http://www.lta.gov.sg/content/ltaweb/en/about-lta.html,accessed on 10.12.2012

155 Singapore, Land Transport Authority, available at http://www.lta.gov.sg/content/ltaweb/en/about-lta/our-organisation/our-subsidiaries.html, accessed on 10.12.2012.

156 Available at http://www.tchb.gov.tw/En/about01.aspx, accessed on13.12.2012

157 Available at http://www.khb.gov.tw/En/about01.aspx, accessed on13.12.2012

158 Available at http://www.hlhb.gov.tw/english/about/about3.htm,accessed on 13.12.2012.

159 Hon S. Chan and David H. Rosenbloom (2009), �Public EnterpriseReforms in the United States and the People�s Republic of China: ADrift toward Constitutionalization and Deparmentalization of


Enterprise Management� Public Administration Review. SpecialIssue, s38-s45, Blackwell Publishers.

160 Available online at http://en.mot.gov.il/index.php?option=com_weblinks&view=category&id=8&Itemid=6,accessed on 11.12.2012.

161 Available online at http://en.mot.gov.il/index.php?option=com_weblinks&view=category&id=8&Itemid=6,accessed on 11.12.2012.

162 �About Us-Setar� available online at http://setar.aw/about.html,accessed on 08.12.2012.

163 NTT Facts, Corporate Data, available online at www.ntt.co.jp/about_e/index.html, accessed on 08.12.2012.

164 Royal CanadianMint, available at http://www.mint.ca/store/mint/about-the-mint/policies-1300006, accessed on 10.12.2012.

165 Defence Construction Canada � Corporate Information, Accessedat http://www.dcc-cdc.gc.ca/english/corporate_info.html, accessed on08.12.2012.

166 A radar system which could detect incoming Soviet bombers duringthe Cold War as a measure against aerial bombing attacks. Built bythe joint research efforts of the US and Canada.

167 The Trade to GDP ratio is 48.1 as per WTO statistics in the monthSeptember 2012.

168 The provisions of Article XX shall not apply to suppliers andservice providers of:

- Israel, Japan and Korea in contesting the award of contracts byentities listed under Annex 2 paragraph 2, until such time as theEC accepts that they have completed coverage of sub-centralentities;

- Japan, Korea and the USA in contesting the award of contractsto a supplier or service provider of Parties other than thosementioned, which are small or medium sized enterprises underthe relevant provisions of EC law, until such time as the ECaccepts that they no longer operate discriminatory measures infavour of certain domestic small and minority businesses;

- Israel, Japan and Korea in contesting that award of contracts byEC entities, whose value is less than the threshold applied for thesame category of contracts awarded by these Parties. [EC,General Notes]


169 Article XX Challenge Procedures (Earlier Version of the GPA)

Consultations

1. In the event of a complaint by a supplier that there has been abreach of this Agreement in the context of a procurement, eachParty shall encourage the supplier to seek resolution of itscompliant in consultation with the procuring entity. In suchinstances the procuring entity shall accord impartial and timelyconsideration to any such complaint, in a manner that is notprejudicial to obtaining corrective measures under the challengesystem.

Challenge

2. Each Party shall provide non-discriminatory, timely, transparentand effective procedures enabling suppliers to challenge allegedbreaches of the Agreement arising in the context ofprocurements in which they have, or have had, an interest.

3. Each Party shall provide its challenge procedures in writing andmake them generally available.

4. Each Party shall ensure that documentation relating to allaspects of the process concerning procurements covered by thisAgreement shall be retained for three years.

5. The interested supplier may be required to initiate a challengeprocedure and notify the procuring entity within specified time-limits from the time when the basis of the complaint is known orreasonably should have been known, but in no case within aperiod of less than 10 days.

6. Challenges shall be heard by a court or by an impartial andindependent review body with no interest in the outcome of theprocurement and the members of which are secure fromexternal influence. During the term of appointment. A reviewbody which is not a court shall either be subject to judicialreview or shall have procedures which provide that:

a. Participants can be heard before an opinion is given or adecision is reached;

b. Participants can be represented and accompanied;

c. Participants shall have access to all proceedings;

d. Proceedings can take place in public;

e. Opinions or decisions are given in writing with a statementdescribing the basis for the opinions or decisions;


f. Witnesses can be presented;

g. Documents are disclosed to the review body.

7. Challenge procedures shall provide for:

a. Rapid interim measures to correct breaches of the Agreementand to preserve commercial opportunities. Such action mayresult in suspension of the procurement process. however,procedures may provide that overriding adverseconsequences for the interests concerned, including thepublic interest, may be taken into account in decidingwhether such measures should be applied. In suchcircumstances, just cause for not acting shall be provided inwriting;

b. An assessment and a possibility for a decision on thejustification of the challenge;

c. Correction of the breach of the Agreement or compensationfor the loss or damages suffered, which may limited to costsfor tender preparation or protests.

8. With a view to the preservation of the commercial and otherinterests involved, the challenge procedure shall normally becompleted in a timely fashion.

170 Article XVIII Domestic Review Procedures (Current Version of theGPA Text)

1. Each Party shall provide a timely, effective, transparent and non-discriminatory administrative or judicial review procedurethrough which a supplier may challenge:

a. A breach of the Agreement; or

b. Where the supplier does not have a right to challenge directlya breach of the Agreement under the domestic law of a Party,a failure to comply with a Party�s measure implementing thisAgreement, arising in the context of a covered procurement,in which the supplier has, or has had, an interest. Theprocedural rules for all challenges shall be in writing andmade generally available.

2. In the event of a complaint by a supplier, arising in the contextof covered procurement in which the supplier has, or has had aninterest, that there has been a breach or a failure as referred to inparagraph 1, the Party of the procuring entity conducting theprocurement shall encourage the entity and the supplier to seekresolution of the complaint through consultations. The entity


shall accord impartial and timely consideration to any suchcomplaint in a manner that is not prejudicial to the supplier�sparticipation in ongoing or future procurement or its rights toseek corrective measures under the administrative or judicialreview procedure.

3. Each supplier shall be allowed a sufficient period of time toprepare and submit a challenge, which in no case shall be lessthan 10 days from the time when the basis of the challengebecame known or reasonably should have become known to thesupplier.

4. Each Party shall establish or designate at least one impartialadministrative or judicial authority that is independent of itsprocuring entities to receive and review a challenge by a supplierarising in the context of a covered procurement.

5. Where a body other than an authority referred to in paragraph4 initially reviews a challenge, the Party shall ensure that thesupplier may appeal the initial decision to an impartialadministrative or judicial authority that is independent of theprocuring entity whose procurement is subject of the challenge.

6. Each Party shall ensure that a review body that is not a courtshall have its decision subject to judicial review or haveprocedures that provide that:

a. The procuring entity shall respond in writing to thatchallenge and disclose all relevant documents to the reviewbody;

b. The participants to the proceedings (hereinafter referred toas �participants�) shall have the right to be heard prior to adecision of the review body being made on the challenge;

c. The participants shall have the right to be represented andaccompanied;

d. The participants shall have access to all proceedings;

e. The participants shall have the right to request that theproceedings take place in public and that witnesses may bepresented; and

f. The review body shall make its decisions orrecommendations in a timely fashion, in writing, and shallinclude and explanation of the basis for each decision orrecommendation.


7. Each Party shall adopt or maintain procedures that provide for:

a. Rapid interim measures to preserve the supplier�sopportunity to participate in the procurement: Such interimmeasures may result in suspension of the procurementprocess. The procedures may provide overriding adverseconsequences for the interests concerned, including thepublic interest, may be taken into account when decidingwhether such measures should be applied. Just cause for notacting shall be provided in writing; and

b. Where a review body has determined that there has been abreach or a failure as referred to in paragraph 1, correctiveaction or compensation for the loss or damages suffered,which may be limited to either the costs for the preparationof the tender or the costs relating to the challenge, or both.

171 Pg 777, J. Linarelli (2011).Global Procurement Law in Times ofCrisis: New Buy American Policies and Options in the WTO LegalSystem. In S. Arrowsmith and R. Anderson (Ed.), The WTORegime on Government Procurement: Challenge and Reform (pp.429- 433), New York, NY: Cambridge University Press. See Alsoother examples of procurement which favours HistoricallyDisadvantaged Individuals (HDIs) includes Broad-Based Blackempowerment in South Africa. Malaysia maintains a preferenceprogramme which awards government contracts to people from theBumiputera (Malay descent).171 This preference programme is saidto operate against the Chinese minority in Malaysia whonevertheless dominate the market.171 It may be useful to take intoconsideration the most dominant market participant in a marketwhere purchase preferences operate in order to identify directly lostmarket-opportunities in a certain sector/territory. The GPA itselfexempts policies pertaining to prison procurement etc.

172 Page 778, J. Linarelli (2011). Global Procurement Law in Times ofCrisis: New Buy American Policies and Options in the WTO LegalSystem. In S. Arrowsmith and R. Anderson (Ed.), The WTORegime on Government Procurement: Challenge and Reform (pp.773-802), New York, NY: Cambridge University Press.

173 Page 779, Op Cit Note J Linarelli


175 Section 1605(d), American Recovery and Reinvestment Act, 2009.Op Cit Note




178 19 CFR 177.22

179 Country of origin rulings in government procurement are either (i)advisory rulings which expounds an interpretation or principle oflaw pertaining to country or origin without applying it to a factsituation, which is non-binding and non-reviewable or (ii) finaldeterminations which are binding and judicially reviewable.Procurement Ruling requests may be submitted to the followingaddress: Office of Regulations and Rulings, U.S. Bureau of Customs& Border Protection, 1300 Pennsylvania Avenue, N.W., MintAnnex, Washington, DC 20229.

180 U.S. Government Procurement; Final Determination; Country ofOrigin of Electric Mini-Trucks; Substantial Transformation; 19CFR Part 177, dated 05.02.2008, HQ H022169 [see also similarrulings at http://rulings.cbp.gov �U.S. Customs and BorderProtection�, last visited on 14.11.2012]

181 FAR 25.602 (a)(2), as cited on page 784, Op Cit Note J Linarelli

182 As per FAR 25.602(b), as cited on page 784, Op Cit Note JLinarelli


184 K. Dawar (2012). The Proposed �Buy European� ProcurementRegulation: An Analysis. Global Trade Alert, Chapter 5. See alsoDirective 2004/17/EC deals with the procurement procedures ofentities operating in the water, energy, transport and postal servicessectors, while Directive 2004/18/EC184 deals with the coordinationof procedures for the award of public works contracts, publicsupply contracts and public service contracts. Directive 2009/81/ECdeals with certain works, supply contracts and service contracts bycontracting authorities or entities in the fields of defence andsecurity.

185 Article 4, 2012/060 (COD) Proposal for a Regulation of theEuropean Parliament and of the Council on the Access of Third-Country Goods and Services to the Union�s Internal Market inPublic Procurement and Procedures Supporting Negotiations onAccess of Union Goods and Services to the Public ProcurementMarkets of Third Countries�. Adopted on March 21st 2012.Certain least developed countries are listed in Annex I to theRegulation EC No 732/2008 which are also treated as coveredgoods and services.


186 Recital 16. 2012/060 (COD) Proposal for a Regulation of theEuropean Parliament and of the Council on the Access of Third-Country Goods and Services to the Union�s Internal Market inPublic Procurement and Procedures Supporting Negotiations onAccess of Union Goods and Services to the Public ProcurementMarkets of Third Countries�. Adopted on March 21st 2012.

187 Article 2(d), Recital 16. 2012/060 (COD) Proposal for a Regulationof the European Parliament and of the Council on the Access ofThird-Country Goods and Services to the Union�s Internal Marketin Public Procurement and Procedures Supporting Negotiations onAccess of Union Goods and Services to the Public ProcurementMarkets of Third Countries�. Adopted on March 21st 2012.

188 The Agreement on Government Procurement is the only PlurilateralAgreement. The Bilateral Agreements concluded by the EuropeanUnion which contain disciplines pertaining to procurement are thefollowing: Free Trade Agreement between the EuropeanCommunity and Mexico; Agreement between the EuropeanCommunity and the Swiss Confederation on Certain Aspects ofGovernment Procurement; Free Trade Agreement between theEuropean Community and Chile; Stablisation and AssociationAgreement concluded between the European Community and itsMember States and Former Yugoslav Republic of Macedonia,Stablisiation and Association Agreement concluded between theEuropean Community and Croatia; Stabilisation and AssociationAgreement concluded between the European Community and itsMember States and Montenegro, Stablisation and AssociationAgreement concluded between the European Community andAlbania, Free Trade Agreement by the European Union and SouthKorea

189 Article 2 (e), Recital 16. 2012/060 (COD) Proposal for a Regulationof the European Parliament and of the Council on the Access ofThird-Country Goods and Services to the Union�s Internal Marketin Public Procurement and Procedures Supporting Negotiations onAccess of Union Goods and Services to the Public ProcurementMarkets of Third Countries�. Adopted on March 21st 2012.

190 Article 4 COD Proposal on Access of Third Country Goods andServices

191 Article 10 COD Proposal on Access of Third Country Goods andServices

192 Article 10(2)(a) COD Proposal on Access of Third Country Goodsand Services


193 Article 2(2)(e). A �mandatory price penalty� shall refer to anobligation for contracting entities to increase, subject to certainexceptions, the price of services and/or goods originating in certainthird countries that have been offered in contract awardprocedures.

194 Article 10(2)(b) COD Proposal on Access of Third Country Goodsand Services

195 Article 6(5), COD Proposal on Access of Third Country Goods andServices

196 Article 3(2), 2012/060 (COD) Proposal for a Regulation of theEuropean Parliament and of the Council on the Access of Third-Country Goods and Services to the Union�s Internal Market inPublic Procurement and Procedures Supporting Negotiations onAccess of Union Goods and Services to the Public ProcurementMarkets of Third Countries�. Adopted on March 21st 2012.

197 Article 3(2)(b)(1) 2012/060 (COD) Proposal for a Regulation ofthe European Parliament and of the Council on the Access of Third-Country Goods and Services to the Union�s Internal Market inPublic Procurement and Procedures Supporting Negotiations onAccess of Union Goods and Services to the Public ProcurementMarkets of Third Countries�. Adopted on March 21st 2012.

198 Messerlin, P (2013) �Openness in Public Procurement Markets:Time for a Reality Check�, European Centre for InternationalPolitical Economy.



201 The Ministry of Finance Measure on Government Procurement ofImported Products.

202 www.gov.cn/jrzg/2006-02/09/content_183787.htm. Also seewww.gov.cn/zwgk/2006-02/26/content_211553.htm.

203 P. Wang (2011). Accession to the Agreement on GovernmentProcurement: The Case of China. In S. Arrowsmith and R.Anderson (Ed.), The WTO Regime on Government Procurement:Challenge and Reform (pp.92-116), New York, NY: CambridgeUniversity Press.


204 Robert D. Anderson, China�s Accession to the WTO Agreement onGovernment Procurement: Procedural Considerations, PotentialBenefits and Challenges, and Implications of the Ongoing Re-negotiation of the Agreement (as reprinted from PublicProcurement Law Review, Issue 4, 2008).


206 Page 3, The US-China Business Council (2011), China�s DomesticInnovation and Government Procurement Policies.

207 The US-China Business Council (2011), China�s DomesticInnovation and Government Procurement Policies.

208 World Trade Report 2012: Trade and public policies: A closer lookat non-tariff measures in the 21st century.

209 �Decision to Set Aside a Procurement under the ProcurementStrategy for Aboriginal Business� available online at https://buyandsell.gc.ca/policy-and-guidelines/supply-manual/section/9#section-9.40.1, last visited on 19.11.2012.

210 An aboriginal business can be either a band (as defined by theIndian Act), a sole proprietorship, a limited company, a limitedcompany, a co-operative, a partnership, a not-for-profitorganisation in which Aboriginal persons have at least 51 percentownership and control. Similarly, in cases of joint ventures betweentwo or more aboriginal businesses, or an aboriginal business and anon-aboriginal business, in the event the aboriginal business has atleast 51 percent ownership and control of the joint venture.

211 Supply Manual, 9.40.1 b (i) (D) �Aboriginal Population� means (a)an area, or community in which Aboriginal people make up at least80 percent of the population and (b) a group of people for whomthe procurement is aimed in which Aboriginal people make up atleast 80 percent of the group, available online at https://buyandsell.gc.ca/policy-and-guidelines/supply-manual/section/9#section-9.40.1, last visited on 19.11.2012.

212 Supply manual 9.40.1 b (i) (B) Delivery of the product/service doesnot have to be directly to the Aboriginal population itself. If thegoods are initially delivered at a government site, and then laterdistributed to Aboriginal communities, groups or individuals, it stillfalls under the purview of procurement which is primarily received


by an Aboriginal Population, available online at https://buyandsell.gc.ca/policy-and-guidelines/supply-manual/section/9#section-9.40.1, last visited on 19.11.2012.

213 An aboriginal person is an indigenous Indian, Metis or Inuitordinarily resident in Canada.

214 Kidalov, Max V. and Snider, Keith F. (2011) �US and EuropeanPublic Procurement Policies for Small and Medium-SizedEnterprises (SME): A Comparative Perspective,� Business andPolitics: Vol. 13: Iss. 4, Article 2.

215 Refer European Code of Best Practices Facilitating Access of SMEsto Public Procurement Contracts

216 Employees in EU are calculated for in terms of Annual Work Units(AWU), which is similar to the US Concept of Full Time Equivalents(FTE).

217 Annual turnover, (as defined in this article), is the annual incomethat an enterprise receives for sales and services after rebates, notincluding value-added and other indirect taxes, and annual balancesheet refers to the value of a firm�s assets.

218 Kidalov, Max V. and Snider, Keith F. (2011) �US and EuropeanPublic Procurement Policies for Small and Medium-SizedEnterprises (SME): A Comparative Perspective,� Business andPolitics: Vol. 13: Iss. 4, Article 2.

219 �Non-Primes� are defined as all companies and organisations, withthe exception of �Large System Integrators� (LSIs) e.g. Alcatel-Alenia Space, EADs.

220 �Procurement Policy on Fair Access for SMEs � The C1-C4 Clauses�available online at http://www.esa.int/About_Us/Industry/SME_Small_and_Medium_Sized_Enterprises/SME_Business_Opportunities/Procurement_policy_on_fair_access_for_SMEs_-_the_C1-C4_Clauses, accessed on 18.12.2012.

221 Guidance Note on Directive 2009/81/EC on the Award ofContracts in the Fields of Defence and Security, available at http://ec.europa.eu/internal_market/publicprocurement/docs/defence/guide-subcontracting_e, accessed on 18.12.2012.

222 US General Notes

223 Kidalov, Max V. and Snider, Keith F. (2011) �US and EuropeanPublic Procurement Policies for Small and Medium-Sized


Enterprises (SME): A Comparative Perspective,�Business andPolitics: Vol. 13: Iss. 4, Article 2.

224 Office of Government Contracting & Business Development (April2009), prepared by the Size Standards Division, available online atwww.sba.gov/sites/default/files/size_standards_methodology.pdf.

225 Refer: Office of Federal Procurement, (2002)Contract Bundling, AStrategy for Increasing Federal Contracting Opportunities for SmallBusiness, Executive Office of the President Office of Managementand Budget Office of Federal Procurement Policy.

226 �Small Business Innovative Research (SBIR) Programme, available athttp://www.hhs.gov/about/smallbusiness/Small percent20Businesspercent20Program percent20Manual/chapter13.html, Last accessedon 22.11.2012,

227 �2012 White Paper on Small and Medium Sized Enterprises inJapan: Small and Medium Enterprises Moving Forward ThroughAdversity�, available online at http://www.chusho.meti.go.jp/sme_english/whitepaper/whitepaper.html, last visited on20.11.2012.

228 Nayabayashi, Jun (2009) Small Business Set-Asides in ProcurementAuctions: An Empirical Analysis, Tsukuba Economics WorkingPapers, available online at http://ideas.repec.org/p/tsu/tewpjp/2009-005.html, accessed on 20.11.2012.

229 �Contract Policy of the Government regarding Small and MediumEnterprises in FY 2011� http://www.meti.go.jp/english/press/2011/0628_04.html, accessed on 20.11.2012.

230 Page 198, �2012 White Paper on Small and Medium SizedEnterprises in Japan: Small and Medium Enterprises MovingForward Through Adversity�, available online at http://www.chusho.meti.go.jp/sme_english/whitepaper/whitepaper.html,last visited on 20.11.2012.

231 D. Marron (2003) �Green Public Purchasing as an EnvironmentalPolicy Instrument� OECD Journal of Budgeting, 3 4, page 73.

232 D. Marron (2003) �Green Public Purchasing as an EnvironmentalPolicy Instrument� OECD Journal of Budgeting, 3 4, page 78.

233 D. Marron (2003) �Green Public Purchasing as an EnvironmentalPolicy Instrument� OECD Journal of Budgeting, 3 4, page 78. page79.

234 Issued on October 5, 2009


235 (2008) Department of Defence Green Procurement ProgrammeStrategy: Promoting Environmental Stewardship Throughout theDepartment of Defense.

236 Effective from April 1, 2006, available online at http://www.tpsgc-pwgsc.gc.ca/ecologisation-greening/achats-procurement/politique-policy-eng.html. The Policy was issued pursuant to the FinancialAdministration Act (section 7), Department of Public Works andGovernment Services Act, Department of the Environment Act, andDepartment of Natural Resources Act.

237 Section 5, �Definitions� Policy on Green Procurement.

238 Communication from the Commission to the European Parliament,the Council, the European Economic and Social Committee and theCommittee of the Regions, �Public Procurement for a BetterEnvironment�, Brussels, 16.07.2008.

239 Communication from the Commission to the European Parliament,the Council, the European Economic and Social Committee and theCommittee of the Regions, �Public Procurement for a BetterEnvironment�, Brussels, 16.07.2008.

240 1(h), Communication from the Commission to the EuropeanParliament, the Council, the European Economic and SocialCommittee and the Committee of the Regions, �Public Procurementfor a Better Environment�, Brussels, 16.07.2008.

241 1(i), Communication from the Commission to the EuropeanParliament, the Council, the European Economic and SocialCommittee and the Committee of the Regions, �Public Procurementfor a Better Environment�, Brussels, 16.07.2008.

242 Basic Policy on Promoting Green Purchasing, available atwww.env.go.jp/en/laws/policy/green/2.pdf, accessed on 20.11.2012.

243 Materials, components, products and services which have a lowenvironmental impact.

244 Approved on April 28, 2005.

245 World Trade Report 2012: Trade and public policies: A closer lookat non-tariff measures in the 21st century.

246 World Trade Report 2012: Trade and public policies: A closer lookat non-tariff measures in the 21st century

247 Ninth Report on Potentially Trade Restrictive Measures: Identifiedin the Context of the Financial and Economic Crisis, September2011 � 1 May 2012


248 (G/SPS/N/CHN/472) of 19 August 2011

249 Peru also requested that the European Communities explain howspecial needs of developing countries had been taking into accountin accordance with Article 10 of the SPS Agreement (G/SPS/GEN/713)

250 Seventeenth Annual Review of the Implementation and Operationof the TBT Agreement, Note by the Secretariat, Committee onTechnical Barriers to Trade, G/TBT/31, issued on 2 March 2012.

251 Note by the Secretariat, Minutes of the Meeting of 20-21 March2012, Committee on Technical Barriers to Trade, G/TBT/M/56,issued on 16 May 2012.

252 Note by the Secretariat, Minutes of the Meeting of 20-21 March2012, Committee on Technical Barriers to Trade, G/TBT/M/56,issued on 16 May 2012.

253 Note by the Secretariat, Minutes of the Meeting of 15-16 June2011, Committee on Technical Barriers to Trade, G/TBT/M/54,issued on 20 September 2011.

254 Ministry of Commerce, Available online at http://commerce.nic.in/trade/international_ntm.asp?id=4&trade=i.Accessed on26.09.2012.

255 Japan-Procurement of a Navigation Satellite, Request forConsultations by the European Communities dated 26th March1997, WT/DS73/1, GPA/D1/1, dated 1st April 1997.

256 Joint Statement for Follow-Up to US Enquiry in the WTOCommittee on the Agreement on Government Procurement and theDispute Settlement Body Concerning Resolution of MSASComplaint by the European Communities and Japan, Japan-Procurement of a Navigation Satellite, Notification of Mutually-Agreed Solution, WT/DS73/5, dated 3rd March 1998.

257 See M. DIschendorfer, �The Existence and Development ofMultilateral Rules on Government Procurement under theFramework of the WTO�, Public Procurement Law Review, 9(2000), 27.

258 Pg. 446, J. Linarelli (2011).The Limited Case for Permitting SMEProcurement Preferences in the Agreement on GovernmentProcurement. In S. Arrowsmith and R. Anderson (Ed.), The WTORegime on Government Procurement: Challenge and Reform (pp.429- 433), New York, NY: Cambridge University Press.


259 Page 2, J. Dean et al (Rev. 2009), �Estimating the Price Effects ofNon-Tariff Barriers�, Unites States International TradeCommission, Office of Economics Working Paper, No. 2006-06-A(r).

260 Canada-Korea Procurement of Telecommunications EquipmentAgreement (CKTEA), policy effective date 2001-09-01. Availableonline at https://buyandsell.gc.ca/policy-and-guidelines/policy-notifications/PN-54, accessed on 17.12.2012.

261 Modalities for the Negotiations on Extension of Coverage andElimination of Discriminatory Measures and Practices, Decision of16 July 2004, GPA/79, Committee on Government Procurement.

262 Annex F: Decision of the Committee on Government Procurementon a Work Programme on Exclusions and Restrictions inParties�Annexes, Decision of 30 March 2012

263 Annex G: Decision of the Committee on Government Procurementon a Work Programme on Safety Standards in InternationalProcurement, Decision of 30 March 2012

264 (which was adopted by the Working Party on 10 November 2011).

265 Valeria Guimaraes de Lima e Silva (2008), The Revision of theWTO Agreement on Government Procurement: to what Extentmight it Contribute to the Expansion of Current Membership?,Public Procurement Law Review, Issue 2, 2008.

266 Robert D. Anderson, Philippe Pelletier, KodjoOsei-Lah, and AnnaCaroline Muller, Assessing the Value of Future Accessions to theWTO Agreement on Government Procurement GPA: Some NewData Sources, Provisional Estimates, and an Evaluative Frameworkfor Individual WTO Members Considering Accession, StaffWorking Paper ERSD-2011-15, dated 06.10.2011.

267 International law obligations will supersede the provisions of theMandatory Tenders Law, 1992.

268 Minutes of the Meeting Held on 14 March 2005, GPA/M/26,Committee on Government Procurement.

269 Israel GPA, Note on Offsets

270 Israel, Trade Policy Review, Report by the Secretariat, WT/TPR/S/272, issued on 25 September 2012, Trade Policy Review Body.

271 Ministry of Agriculture and Rural Development, Ministry ofConstruction and Housing, Ministry of National Infrastructures


excluding Fuel Authority, Ministry of Finance, Ministry of Health,Ministry of the Interior, Ministry of Transport

272 Local Government Economic Services Ltd.

273 Israel Airports Authority, Israel Ports Development and AssetsCompany Ltd. Association of Better Housing, Ashod PortCompany Ltd., Haifa Port Company Ltd., Eilat Port Company Ltd.,Arim Urban Development Ltd., Eilat Foreshore DevelopmentCompany Ltd., Old Acre Development Company Ltd., IsraelRailways Ltd., Israel Postal Company Ltd., Israel Electric Corp.Ltd., Mekorot Water Co. Ltd and all entities operating in the field ofurban transport, except those operating in the field of bus services.

274 Ministry of National Infrastructures excluding Fuel Authority,Ministry of Finance, Ministry of Health, Ministry of Transport

275 Local Government Economic Services Ltd.

276 Israel Airports Authority, Israel Ports Development and AssetsCompany Ltd. Association of Better Housing, Ashod PortCompany Ltd., Haifa Port Company Ltd., Eilat Port Company Ltd,Israel Railways Ltd., Israel Electric Corp. Ltd., Mekorot Water Co.Ltd.

277 C. Lo (2011). The Benefits for Developing Countries of Accessionto the Agreement on Government Procurement: The Case ofChinese Taipei. In S. Arrowsmith and R. Anderson (Ed.), The WTORegime on Government Procurement: Challenge and Reform(pp.140-148), New York, NY: Cambridge University Press, p 141.

278 Focus Taiwan (2011) �Taiwan�s accession to WTO GPA expectedto help local businesses� 14 July, available at http://focustaiwan.tw/ShowNews/WebNews_Detail.aspx?Type=aECO&ID=201107140035. See also,Office of the United States Trade Representative: DeterminationRegarding Waiver of Discriminatory Purchasing Requirements withRespect to Goods and Services of Taiwan (effective from July 15,2009). The United States agreed to waive discriminatory purchasingrequirements for eligible products and suppliers of Taiwan.

279 P. 146. The Benefits for Developing Countries of Accession to theAgreement on Government Procurement: The Case of ChineseTaipei.

280 Cherniak, C (2009) �Significance of Chinese Taipei joining WTOagreement on Government Procurement� Available online at http://www.lexology.com/library/detail.aspx?g=c49da96b-1761-4c4c-b421-932df5e1bedc, accessed on 17.10.2012.


281 P, 144, The Benefits for Developing Countries of Accession to theAgreement on Government Procurement: The Case of ChineseTaipei.

282 Choi, Inbom (2003) �The Long and Winding Road to theGovernment Procurement Agreement: Korea�s AccessionExperience� in Will Martin and Mari Pangestu, Options for GlobalTrade Reform: A view from the Asia-Pacific (Cambridge UniversityPress)

283 Ibid.

284 Choi, Inbom (2003) �The Long and Winding Road to theGovernment Procurement Agreement: Korea�s AccessionExperience� in Will Martin and Mari Pangestu, Options for GlobalTrade Reform: A view from the Asia-Pacific (Cambridge UniversityPress).

285 World Bank. 2009. Armenia - Country procurement assessmentreport. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2009/06/11160234/armenia-country-procurement-assessment-report.

286 Ibid.

287 GPA/105 reflected the terms of that Agreement.

288 (WT/Let/821 � dated 13 September 2011).

289 Minutes of the Formal Meeting of 9 March 2011, Committee onGovernment Procurement, GPA/M/43, issued on 22 March 2011.

290 As per Para 339 of the Report of the Working Party Report, ascited in Xinquan, Tu (2011) Organizational Aspects of China�sGPA Accession Negotiation and their Implications, Working PaperNo. 6, Indiana University Research Center for Chinese Politics andBusiness


292 Op CitNote 263.

293 Op Cit. Note 263

294 Op CitNote 263.


295 �China announces next step in joining Government ProcurementAgreement�, dated 18th July 2012, available at http://www.wto.org/english/news_e/news12_e/gpro_18jul12_e.htm, accessed on26.11.2012.

296 Xinquan, Tu (2011) Organizational Aspects of China�s GPAAccession Negotiation and their Implications, Working Paper No.6, Indiana University Research Center for Chinese Politics andBusiness.

297 P. Wang (2011). Accession to the Agreement on Governmentrocurement: The Case of China. In S. Arrowsmith and R. Anderson(Ed.), The WTO Regime on Government Procurement: Challengeand Reform (pp.92-116), New York, NY: Cambridge UniversityPress.

298 Ibid.

299 Ibid.

300 World Bank. 2002. Vietnam - Country procurement assessmentreport : transforming public procurement. Washington D.C. - TheWorld bank. http://documents.worldbank.org/curated/en/2002/10/4663107/vietnam-country-procurement-assessment-report-transforming-public-procurement.

301 World Bank. 2003. Mongolia - Country procurement assessmentreport. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2003/09/2696157/mongolia-country-procurement-assessment-report.

302 Mongolia, Trade Policy Review, Report by the Secretariat, WT/TPR/S/145, issued on 15 February 2005, Trade Policy Review Body.

303 Op Cit Note 274.


305 Page 16-17, World Bank. 2003. Mongolia - Country procurementassessment report. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2003/09/2696157/mongolia-country-procurement-assessment-report.

306 Panama, Trade Policy Review, Report by the Secretariat, WT/TPR/S/186/Rev.1, issued on 3 December 2007, Trade Policy Review Body


308 United States Trade Representative, �Government Procurement inthe U.S. Panama Trade Promotion Agreement�, available at http://www.ustr.gov/about-us/press-office/fact-sheets/2011/may/


government-procurement-us-panama-trade-promotion-agreemen,visited on 15.10.2012.

309 Hornbeck, J (2012) The U.S.-Panama Free Trade Agreement,Congressional Research Service.

310 US-Jordan RTA, Article 9 states thus: Pursuant to Jordan�s July 12,2000, application for accession to the WTO Agreement onGovernment Procurement, the Parties shall enter into negotiationswith regard to Jordan�s accession to that Agreement.

311 World Bank. 2007. Ukraine - Country procurement assessmentreport 2006. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2007/03/7931572/ukraine-country-procurement-assessment-report-2006.

312 World Bank. 2007. Ukraine - Country procurement assessmentreport 2006. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2007/03/7931572/ukraine-country-procurement-assessment-report-2006.

313 Krygyz Republic, Trade Policy Review, Report by the Secretariat(Revision), WT/TPR/S/170/Rev. 1, issued on 12 January 2007,Trade Policy Review Body, p 58-59.



316 Krygyz Republic, Trade Policy Review, Report by the Secretariat(Revision), WT/TPR/S/170/Rev. 1, issued on 12 January 2007,Trade Policy Review Body p 58-59.

317 World Bank. 2010. Moldova - Country Procurement AssessmentReport (CPAR). Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2010/06/14310070/moldova-country-procurement-assessment-report-cpar.

318 Para 231 of the Working Party Report on Saudi Arabia�sAccession.

319 Saudi Arabia, Trade Policy Review, Report by the Secretariat, WT/TPR/S/256/Rev.1, issued on 14 February 2012, Trade PolicyReview Body p 36-37.

320 Ibid.

321 Ibid.

322 Ibid.


323 Oman, Trade Policy Review, Report by the Secretariat, WT/TPR/S/272, issued on 25 September 2012, Trade Policy Review Body.

324 Ibid.

325 http://ec.europa.eu. �Summary of Treaty�� http://ec.europa.eu/world/agreements/prepareCreateTreatiesWorkspace/treatiesGeneralData.do?step=0&redirect=true&treatyId=158.Theaccession of the Republic of Bulgaria and Romania to the EuropeanUnion are accounted for in Council Decision of 15 December 2008on the signing of a Protocol to the Stabilisation and AssociationAgreement between the European Communities and their MemberStates, of the one part, and the Republic of Albania, of the otherpart, to take account of the accession of the Republic of Bulgariaand Romania to the European Union, 2009/330/EC, OfficialJournal of the European Union, dated 28.4.2009, L 107/1,Protocol to the Stabilisation and Association Agreement betweenthe European Communities and their Member States, of the onepart, and the Republic of Croatia, of the other part, to take accountof the accession of the Republic of Bulgaria and Romania to theEuropean Union, Official Journal of the European Union, dated29.10.2008, L 286/46, Protocol to the Stabilisation andAssociation Agreement between the European Communities andtheir Member States, of the one part, and the former YugoslavRepublic of Macedonia, of the other part, to take account of theaccession of the Republic of Bulgaria and Romania to the EuropeanUnion, Official Journal of the European Union, entered into forceon 01.11.2008,L99.

326 Article 72(1), Stabilisation and Association Agreement concludedbetween the European Community and its Member States andFormer Yugoslav Republic of Macedonia, published in the OfficialJournal of the European Union on 20.03.2004, L84/13.

327 Article 72(2), Stablisation and Association Agreement concludedbetween the European Community and its Member States andFormer Yugoslav Republic of Macedonia, published in the OfficialJournal of the European Union on 20.03.2004, L84/13.

328 Article 72(2), Stablisation and Association Agreement concludedbetween the European Community and its Member States andFormer Yugoslav Republic of Macedonia, published in the OfficialJournal of the European Union on 20.03.2004, L84/13.

329 Article 76(6), �Public Procurement� Council and CommissionDecision of 29 March 2010 on the conclusion of the Stabilisationand Association Agreement between the European Communities


and their Member States, of the one part, and the Republic ofMontenegro, of the other part, entered into force on 01.05.2010, L108.

330 Article 74(5), Stablisation and Association Agreement concludedbetween the European Community and its Member States andBosnia and Hersegovina. The Stabilisation and AssociationAgreement between the European Communities and their MemberStates, of the one part, and Bosnia and Hersegovina on the otherwas signed on 16.06.2008. However it is yet to enter into force.

331 Competition law, intellectual property law, standards andcertification law, public procurement law, and data protection law.

332 Article 68, Stablisation and Association Agreement concludedbetween the European Community and its Member States andFormer Yugoslav Republic of Macedonia, published in the OfficialJournal of the European Union on 20.03.2004, L84/13. Also,Article 70, Stabilisation and Association Agreement between theEuropean Communities and their Member States, of the one part,and the Republic of Albania, 28.04.2009, L 107/166, OfficialJournal of the European Union.Article 72, Stabilisation andAssociation Agreement between the European Communities andtheir Member States, of the one part, and the Republic of Croatia,28.01.2005, L 26/3, Official Journal of the European Union.

333 Albania, Trade Policy Review, Report by the Secretariat, WT/TPR/S/229/Rev.1, issued on 5 May 2010, Trade Policy Review Body, p 66.

334 Ibid.

335 Croatia, Trade Policy Review, Report by the Secretariat, WT/TPR/S/227/Rev. 1, issued on 14 April 2010, Trade Policy Review Body.

336 Ibid.

337 Ibid.

338 World Bank. 1999. Croatia - Country procurement assessmentreport. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/1999/08/3345211/croatia-country-procurement-assessment-report.

339 World Bank. 2002. Georgia - Country Procurement AssessmentReport. Washington D.C. - The Worldbank. http://documents.worldbank.org/curated/en/2002/06/7716913/georgia-country-procurement-assessment-report


340 Russia and Moldova Jackson-Vanik Repeal Act of 2012, U.S.Government Printing Office, available at http://www.gpo.gov/fdsys/pkg/CRPT-112hrpt632/html/CRPT-112hrpt632.htm, last accessedon 15.12.2012.

341 Minutes of the Formal Meeting of the Committee on GovernmentProcurement of 15 November 2011.GPA/M/44, issued on 11 April2011, Committee on Government Procurement.

4Recommendations forNew Entrant into ExtantGPA Framework:India Case Study

Government Procurement in India is critical at the centralgovernment level, state-government level, and at the level ofthe central public sector enterprises. There are 51 centralgovernment ministries, and 247 central public sectorenterprises (CPSE). The ministries have separate entities whichreport to it: for example, the Ministry of Environment andForests has four sub-ordinate offices, seven autonomousbodies, eight divisions/units/wings/branches, three statutorybodies and 11 other entities.

In the event India accedes to the GPA, amendments mayhave to be effected to reflect negotiated provisions pertainingto the GPA and other FTA provisions concluded with the EU.The following factors have to be kept in mind: a separateprovision has to be entered amending the Bill in order toincorporate and reflect the negotiated conclusions pertainingto bilateral negotiations on thresholds, coverage, etc. under


the GPA. Amendments can be suggested to the Bill in the eventit is an Act. Suggestions can bemade to the standing Committeeon Finance to incorporate and reflect the negotiated provisionsif India negotiates an FTA which includes substantivecommitments about Government Procurement.

The objective of this chapter is to provide a frameworkthroughwhich an entity offer for Annex I, Annex II and AnnexIII entities can be formulated. It also identifies certain broadareas in which horizontal policies can be maintained whileadvancing an entity offer.

Recommendations for Approaching the Negotiation

Annex I Entities: Central Government Entities

Mode of Listing EntitiesAs discussed, there are three options available to list

entities: (i) Positive list; (ii) Listing through reference to a law/regulation/rule which is published; (iii) Listing by making ageneric reference.

The central ministries and departments can be identifiedusing a positive list approach in order to reduce room forinterpretation.

Ministries/Departments to be includedAs observed from the conclusions of Chapter III, the

governments of most countries include the ministries ordepartments pertaining to health, defence, transportation andtelecommunications in Annex I of the GPA. The inclusion ofthese entities may be persistently required through the variousstages of negotiation owing to the reciprocity basis.

As noted from the conclusions pertaining to Annex I inChapter III, it is important to identify the ministries whichincur the most expenditure. In the absence of furtherinformation, we assume that those ministries which get the


largest share of budget allocations also undertake the mostprocurement.

Approach for listing the departments, secretariats and officesThe options for listing the departments, secretariats and

offices include the following:1. Explicit listing of the departments under a ministry: This

allows the government the choice to exempt certaindepartments under a ministry.

2. By reference to a law/regulation/schedule: This reducesroom for interpretation.

3. Generic Listing: Listing by stating that �departments underthe control of a ministry will be included� � this leaves roomfor interpretation.As noted earlier and in furtherance of option 2, if India

does contemplate entry into the GPA, it could list theministries, departments, secretariats by reference to the FirstSchedule of The Government of India (Allocation of Business)Rules, 1961 as provided in Table 4.9.

Exemptions/Exclusions

Annex I wide Exemptions/ExclusionsThe categorisation in Box 1 on distinctions between Service

Departments and Commercial Departments or Undertakings(the categorisation in the Government Accounting Rules isfor the limited purpose of governing interdepartmentaladjustments) can form the basis of exemptions adduced bythe GOI in the event it enters into accession negotiations underthe GPA to exempt the following:� Commercial activities undertaken by the government under

categorisation B, because they constitute goods which arepurchases for the purpose of resale


� The agreements between departmental undertakings (if any)to purchase from each other can be advanced as anexemption.

Box 4.1 Service Departments v. CommercialDepartments or Undertakings

Under the Government Accounting Rules, 1990, adistinction is drawn between service departments andcommercial departments or undertakings for the limitedpurpose of governing interdepartmental adjustments, whichcan be extended into determining a categorisation of thecentral government entities into those which undertakecommercial functions and those which undertake thefunctions of the Government.

A. Service Departments: These are constituted for thedischarge of those functions which either (a) areinseparable from, and form part of the idea of Govt. or(b) are necessary to, and form part of the general conductof the business of Government.

Examples of category (a) are: the departments ofAdministration of Justice, Defence, Jails, Medical, Police,Public Health, Education, Forest. Examples of category(b) are : the departments of Survey of India, Printing andStationery, Public Works (Building and Roads Branch),Central Purchase Organisation under Director Generalof Supplies and Disposal, New Delhi.

B. Commercial Departments or Undertakings: These areconstituted mainly for purposes of rendering services orproviding supplies, of certain special kinds, on paymentfor the services rendered or for the articles supplied. Theyperform functions which are not necessarily Governmentfunctions. They are required to work to a financial resultdetermined through accounts maintained on commercialprinciples.


Annex I: Specific Entities/Ministries which shouldbe excluded

As discussed above, the Second Schedule on �Distributionof Subjects Among the Departments� (pursuant to Rule 3)details the distribution of subjects among the departments.For example, the Department of Space deals with theprocurement of space-based systems, stores and equipmentrequired by the Department of Space.1 Examples of suchspecific expenditure are provided in Table 4.10. These entitiesmay be advanced as entity exemptions for Annex I.

Given the systemic importance of the pharmaceuticalsector, the Ministry of Health, Family Welfare & Ayush mayalso be advanced as exemptions in order to provide protectionto the pharmaceutical companies. Alternately, consideringIndia has a strong offensive interest in the pharmaceuticalindustry, it may use opening up procurement by this Ministryas a bargaining chip to negotiate for greater market accessopportunities.

Further, ministries and departments which undertakeprocurement for the purpose of commercial resale, which mayencompass all the commercial departments, should beexcluded. The departments which supply public goods, suchas theMinistry of Food�s supply of foodgrains through �rationshops,� can also be considered for exemptions.

Annex II: Sub-Central EntitiesState governments have been ranked based on the

expenditure made by them (capital expenditure- both plan andnon-plan expenditure) in order to rank the states which couldbe assumed to make the most procurement (Refer Tables 4.5,4.6 and 4.7).


Annex III: Other EntitiesCurrently we are confronted with the question of whether

we need to reform CPSEs to create a strong manufacturingbase in defence, nuclear power, specialised capital goodsindustries, green technologies, etc. The flow and transfer offinances and resources from the centre to the state governmententities, the revenue earned by public sector entities and statepublic level enterprises is traced. One of the objectives of thischapter is to understand whether the disciplines pertaining toprocurement can be imposed on state government entities orpublic sector enterprises.

CPSEs likely to be Identified for the Purpose of NegotiationsIndian CPSEs, graded by performance, are divided into four

categories �Maharatna, Navratna andMiniratna I and II. TheMaharatna CPSES are: (i) Indian Oil Corporation Limited, (ii)NTPC Limited, (iii) Oil & Natural Gas Corporation Limitedand (iv) Steel Authority of India Limited; (v) Bharat HeavyElectricals Limited; (vi) Coal India Limited and (vii) GAIL(India) Limited.2 The Navratnas are given in Table 4.11. ACPSEwhich has obtainedNavratna status3 will not be requiredto obtain government consent/permission for investments ofupto Rs 1,000 crore in a JV or a wholly-owned subsidiary. Atotal of 138 CPSEsmade profits continuously over 2005-2008.Making continuous profits is one of the factors for moving upthe status � from Miniratna II to Miniratna I to Navratna toMaharatna.

CPSEs in certain sectors have been ranked as per theirturnover and listed in Table 4.12. The sectors which areconsidered are (i) agriculture; (ii) mining; (iii) manufacturing;(iv) electricity; and (v) services.

State Trading Enterprises (STEs) include the following:� Andhra Pradesh State Trading Corporation (APSTC)


� AP MARKFED (Andhra Pradesh State CooperativeMarketing Federation Ltd.)

� Gujarat Agro Industries Corporation Ltd.(GAIC),Ahmedabad

� Indian Oil Corporation Limited (IOCL)� Indian Sugar Exim Corporation Limited. (ISEC)� Karnataka State Agricultural Produce Processing and

Export Corporation (KAPPEC).� Kudremukh Iron Ore Company Limited (KIOCL)� Madhya Pradesh State Agro Industries Development

Corporation Ltd.� Madhya Pradesh State Co-operative Oil Seeds Growers

Federation Limited (MPSCOGFL)� Maharashtra State Agricultural Marketing Board

(MSAMB)� Manganese Ore India Limited (MOIL)� Minerals and Metals Trading Corporation Limited

(MMTC Ltd.)� National Agricultural Cooperative Marketing Federation

of India Ltd (NAFED)� National Cooperative Consumers� federation of India Ltd

(NCCF)� Spices Trading Corporation Ltd (STCL)� The Karnataka State Cooperative Marketing Federation

Limited (KSCMF)� TheNorth KarnatakaOnionGrowers Co-operative Society

(NKOGCS)� Tribal Cooperative Marketing Development Federation of

India Limited (TRIFED)� West Bengal Essential Commodities Supply Corporation

Ltd (WBECSC)


State-Level Public EnterprisesAs per CAG reports on the states, it was estimated that

roughly 837 SLPEs operated in the country. A sector-wiserepresentation of the SLPEs is provided in Table 4.13. TheSLPEs with the maximum investment have been listed in Table4.13. SLPEs may be constituted in the following ways: (i)�Statutory Corporations� through Acts enacted in the StateLegislatures; (ii) Joint Stock Companies under the CompaniesAct, 1956; (iii) Co-operatives under the Societies Act, 1912where the state government has themajority share.4 The SLPEswhich have had the maximum investment are representedherein below in Table 4.14.

Recommendations for Listing Other EntitiesEntities can be listed with the objective of enforcing social

policies or promoting economic growth through technologytransfer, etc.

The three types of entities which could fall under the scopeof Other Entities include Central Public Sector Enterprises(CPSE), SLPEs and State Trading Enterprises.

Recommendations for Listing CPSEsCountries have listed loss-making CPSEs and Public Sector

Enterprises (PSE) which are privatised/undergoing privatisationand engaged in the provision of utilities in their Annex IIIoffers.

An approachwhich could be followedwith respect to listingPSEs is as follows:� To list PSEs which are loss-making;� List PSEs which have been identified for Initial Public Offer

and other forms of decentralisation;� It may be advantageous to list entities which may be

privatised shortly in order to expose them to procurementdiscipline prior to their privatisation.


Possible Exemptions/Exclusions� Technology transfer must be an objective while engaging

in procurement in the renewable energy sector.� Some of the SLPEs in public utilities are required to fix

prices under the �controlled/administered� price system, asare the other PSEs. It can be noted that these price fixationsystems are outside the scope of the GPA.

� Purchasing Agreements between PSEs: A concern forprocurement regulation is whether purchasing agreementsbetween public sector entities fall under the scope ofprocurement. These are important in cases where the publicentity is the exclusive provider as per law, or where thereis a close organisational link between the two entities.5

� Labour intensive policies for certain industries can soughtto be maintained.

� Certain sectors have their products subject to price control6

and in certain cases farmers are subject to minimum assuredprices.7

� The food and agro-processing sector, small and mediummanufacturing industries, textiles and garments and leathersector have to advance specific reasons for claimingexemption, taking into consideration the requirements ofsuppliers and the procuring entities.

SuggestionIndia could consider opening up procurement under the

PPPs as a channel to access extra funds. Another option coulddeal with negotiations outside the scope of the GPA: thoughnegotiations outside of the scope of the GPA are outside ofthe purview of this chapter, it is suggested that FTAcommitments could be forged with certain countries in thearea of Build-Operate-Transfer and Concession Agreements,similar to the obligations made by and US and Singapore intheir FTA.


Annex 4 (Goods)The central government, through administrative

instructions, has reserved certain products for procurementfrom specific sectors such as MSMEs, KVIC etc. and thesehave been allowed price preference to a specified level. Forexample, 358 products belonging to respective industry sectorsare reserved for procurements from Micro and SmallEnterprises (MSEs) by state/central ministries/departments/PSUs. Instructions relating to price preference/reservation forprocurement of certain items/categories of suppliers are issuedby certain ministries/departments such as the Department ofPublic Enterprises and Ministry of Micro, Small and MediumEnterprises.

Table 4.1: Sectoral Allocation � Tenth Plan and Eleventh PlanS.No Sectors Tenth Plan Eleventh Plan

(in crore at 2006-07 (in crore at 2006-07prices) prices)

BE % to Total Projected % to TotalAllocation

1. Education 62461 7.68 274228 19.29

2. Rural Development Land 87041 10.70 190330 13.39Resources and Panchayati Raj

3. Health Family Welfare and 45771 5.62 123900 8.71Ayush

4. Agriculture and Irrigation 50639 6.22 121556 8.55

5. Social Justice 36381 4.47 90273 6.35

6. Physical Infrastructure 89021 10.94 128160 9.01

7. Scientific Departments 29823 3.66 66580 4.68

8. Energy 47266 5.81 57409 4.04

Total Priority Sector 448403 55.10 1052436 74.03

Others 365375 44.90 369275 25.97

Total 813778 100.00 1421711 100.00

Source: �Financing the Plan: Financial Resources: Centre and States�available at http://planningcommission.nic.in/plans/planrel/fiveyr/11th/11_v1/11v1_ch3.pdf, last visited on 18.11.2012.


Union List

� Entry No. 10:Foreignaffairs, allmatterswhich bringthe Unioninto relationwith anyforeigncountry;

� Entry No. 11:Diplomatic,consular andtraderepresentation

� Entry no. 14:Entering intotreaties andagreementswith foreigncountries andimplementingof treaties,agreementsandconventionswith foreigncountries

� Entry No. 41:Trade andcommercewith foreigncountries;import andexport acrosscustomsfrontiers�;definition ofcustomsfrontiers

State List

� Entry No. 1 onPublic Order(but notincluding the useof any naval,military or airforce or anyother armedforce of theUnion in aid ofcivil power)

� Police (includingrailway andvillage police,subject to entry2A in List 1)

� Entry 4: PrisonsandReformatories

� Entry 5: Localgovernment

� Entry 6: Publichealth andsanitation,hospitals anddispensaries

� Entry No. 35:Works, landsand buildingsvested in, or inthe possession ofthe Stat

� Entry No. 44:Treasure Trove

� Entry No. 59:Tolls

Concurrent List

� Entry No. 20: Economic andSocial Planning

� Entry No. 21: Commercial andIndustrial Monopolies, combinesand trusts;

� Entry No. 33: Trade andcommerce in, and theproduction, supply anddistribution of, (a) the productsof any industry where thecontrol of such industry by theUnion is declared by Parliamentby law to be expedient in thepublic interest, and importedgoods of the same kind as suchproducts; (b) foodstuffs,including edible oilseeds and oils;(c) cattle fodder, includingoilcakes and other concentrates;(d) raw cotton, whether ginnedor unginned, and cotton seed,and (e) raw jute.

� Entry 34: Price Control

� Entry No. 23: Social Securityand Social Insurance;Employment and Unemployment

� Entry No. 38: Electricity

� Entry No. 40: Archaeologicalsites and remains other thanthose declared by or under lawmade by Parliament to be ofnational importance8

� Entry No. 45: Inquiries andstatistics for the purposes of anyof the matters specified in List IIor List III

Table 4.2: Items pertaining to procurement in theSeventh Schedule of the Indian Constitution

Source: Adapted from the seventh schedule of the Constitution.


Table 4.3: Ministry-wise Expenditure onCentrally Sponsored Schemes

Programme Ministry/Department 2007-08 2011-12 Under the(Actual (BE) EleventhExpenditure) Plan(In Crore) (In Crore) (In Crore)

MGNREGA Rural Development 12,661 40,000 156,301

Indira Awas Yojana Rural Development 3,886 10,000 41,486

National Social Rural Development 3,104 6,158 23,536Assistance Programme(NSAP)

Pradhan Mantri Gran Rural Development 6,500 20,000 65,002Sadak Yojana

NRHM Health & Family 10,509 18,115 69,214Welfare

ICDS Women & Child 5,193 10,000 38,980Development

Mid Day Meal (MDM) School Education & 5,832 10,380 38,602Literacy

Sarva Siksha Abhiyan School Education & 11,477 21,000 77,576Literacy

JNNURM Urban Development 5,508 13,700 48,485

Accelerated Irrigated Water Resources 5,446 12,650 46,622Benefit Programme andother Water ResourcesProgramme

Rajiv Gandhi Gramin Power 3,913 6,000 25,913Vidyuti Karan Yojana(RGGVY)

Rajiv Gandhi Drinking Drinking Water 7,320 11,000 46,722Water Mission � SupplyNRDWP and TotalSanitation

Rashtriya Krishi Vikas Agriculture & 1,200 7,811 18,550Yojana Cooperation

Source: GOI (2011) �Report of the Committee on Restructuring of CentrallySponsored Schemes� Draft Report, Planning Commission, Government ofIndia. URL


Table 4.4: Items under Government Expenditure

Items under Government Expenditure

A. General Services

a. Organs of State

b. Fiscal Services

c. Interest Payment and Servicing of Debt

d. Administrative Services

e. Pensions and Miscellaneous General Services

f. Defence Services

B. Social Services

a. Education, Sports, Arts and Culture

b. Health and Family Welfare

c. Water Supply, Sanitation, Housing and Urban Development

d. Information and Broadcasting

e. Welfare of Scheduled Castes, Scheduled Tribes andOther Backward Classes

f. Labour and Employment

g. Social Security and Nutrition

h. Others

C. Economic Services

a. Agriculture and Allied Activities

b. Rural Development

c. Special Areas Programmes

d. Irrigation and Flood Control

e. Energy

f. Industry and Minerals

g. Transport

h. Communications

i. Science, Technology and Environment

j. General Economic Services.

D. Grants-in-Aid and Contributions

Source: Adapted from State Government Capital and Revenue Expenditureaccounts.


Table 4.5: State-Wise Capital Expenditure in Crore of Rupees(2009-2010)

Capital ExpenditureTOTAL CAPITAL DISBURSEMENTS

(I to XII) 2009-2010

PLAN NON-PLAN TOTAL

Sikkim 87,914 2,21,127 3,09,041

Goa 1,02,232 2,26,011 3,28,243

Himachal Pradesh 1,81,260 3,02,760 4,84,020

Nagaland 1,33,494 4,99,926 6,33,421

Mizoram 39,703 6,18,821 6,58,524

Jammu and Kashmir 6,79,679 2,52,820 9,32,499

Jharkhand 3,90,576 8,41,232 12,31,807

Meghalaya 84,501 12,05,173 12,89,673

Uttarkhand 2,23,515 12,33,859 14,57,374

Bihar 8,15,645 7,41,217 15,56,862

Tripura 1,56,132 15,27,500 16,83,632

Manipur 1,35,743 15,72,680 17,08,423

Arunachal Pradesh 76,622 16,79,393 17,56,015

Orissa 3,58,960 28,45,347 32,04,307

Karnataka 10,44,561 22,52,804 32,97,365

Chattisgarh 4,10,538 38,24,095 42,34,633

Andhra Pradesh 18,70,991 29,45,864 48,16,855

Haryana 5,50,950 56,26,025 61,76,975

Gujarat 8,17,326 56,90,890 65,08,215

Kerala 2,31,400 68,26,646 70,58,046

Assam 4,58,457 80,96,143 85,54,600

Punjab 3,27,117 1,02,13,061 1,05,40,178

Madhya Pradesh 7,74,226 1,01,50,649 1,09,24,875

Maharashtra 17,33,136 99,01,555 1,16,34,691

Tamil Nadu 10,42,124 1,33,28,847 1,43,70,971

West Bengal 5,00,878 1,90,02,833 1,95,03,711

Uttar Pradesh 22,86,679 2,16,01,459 2,38,88,138


Table 4.6: State Government Expenditure incurred in 2009-2010(ranked based on plan expenditure/capital expenditure)

Capital ExpenditureTOTAL CAPITAL DISBURSEMENTS

(I to XII) 2009-2010

PLAN (in crores) TOTAL (in crores)

Mizoram 39,703 6,58,524

Arunachal Pradesh 76,622 17,56,015

Meghalaya 84,501 12,89,673

Sikkim 87,914 3,09,041

Goa 1,02,232 3,28,243

Nagaland 1,33,494 6,33,421

Manipur 1,35,743 17,08,423

Tripura 1,56,132 16,83,632

Himachal Pradesh 1,81,260 4,84,020

Uttarkhand 2,23,515 14,57,374

Kerala 2,31,400 70,58,046

Punjab 3,27,117 1,05,40,178

Orissa 3,58,960 32,04,307

Jharkhand 3,90,576 12,31,807

Chattisgarh 4,10,538 42,34,633

Assam 4,58,457 85,54,600

West Bengal 5,00,878 1,95,03,711

Haryana 5,50,950 61,76,975

Jammu and Kashmir 6,79,679 9,32,499

Madhya Pradesh 7,74,226 1,09,24,875

Bihar 8,15,645 15,56,862

Gujarat 8,17,326 65,08,215

Tamil Nadu 10,42,124 1,43,70,971

Karnataka 10,44,561 32,97,365

Maharashtra 17,33,136 1,16,34,691

Andhra Pradesh 18,70,991 48,16,855

Uttar Pradesh 22,86,679 2,38,88,138


Table 4.7: State Government Expenditure incurred in 2009-2010(ranked based on non-plan expenditure (in capital expenditure)

State NON-PLAN TOTAL(in crores)

Sikkim 2,21,127 3,09,041

Goa 2,26,011 3,28,243

Jammu and Kashmir 2,52,820 9,32,499

Himachal Pradesh 3,02,760 4,84,020

Nagaland 4,99,926 6,33,421

Mizoram 6,18,821 6,58,524

Bihar 7,41,217 15,56,862

Jharkhand 8,41,232 12,31,807

Meghalaya 12,05,173 12,89,673

Uttarkhand 12,33,859 14,57,374

Tripura 15,27,500 16,83,632

Manipur 15,72,680 17,08,423

Arunachal Pradesh 16,79,393 17,56,015

Karnataka 22,52,804 32,97,365

Orissa 28,45,347 32,04,307

Andhra Pradesh 29,45,864 48,16,855

Chattisgarh 38,24,095 42,34,633

Haryana 56,26,025 61,76,975

Gujarat 56,90,890 65,08,215

Kerala 68,26,646 70,58,046

Assam 80,96,143 85,54,600

Maharashtra 99,01,555 1,16,34,691

Madhya Pradesh 1,01,50,649 1,09,24,875

Punjab 1,02,13,061 1,05,40,178

Tamil Nadu 1,33,28,847 1,43,70,971

West Bengal 1,90,02,833 1,95,03,711

Uttar Pradesh 2,16,01,459 2,38,88,138


Table 4.8: Ministry/Department wise Central Plan OutlayCentral Plan Outlay byMinistries/Departments

In Crore of RupeesSource: http://indiabudget.nic.in

Name of Ministry 2010-2011(Actuals)

Ministry of Rural Development 74673

Ministry of Petroleum and Natural Gas 60967

Ministry of Human Resource Development 43514

Ministry of Power 42945

Ministry of Railways 39857

Ministry of Health and Family Welfare 20726

Ministry of Road Transport and Highways 20031

Ministry of Steel 15095

Ministry of Agriculture 13825

Ministry of Communications and Information 13708Technology

Ministry of Women and Child Development 10617

Ministry of Drinking Water and Sanitation 10565

Ministry of Housing and Urban Poverty 10279Alleviation

Ministry of Finance 9497

Ministry of Urban Development 8366

Ministry of Civil Aviation 6223

Department of Atomic Energy 5452

Ministry of Coal 4906

Ministry of Shipping 4846

Ministry of Science and Technology 4650

Ministry of Textiles 4191

Ministry of Social Justice and Empowerment 4171

Department of Space 3603

Ministry of Commerce and Industry 2686

Ministry of Micro, Small and Medium Enterprises 2586


Ministry of Home Affairs 2542

Ministry of Chemicals and Fertilisers 2465

Ministry of New and Renewable Energy 2375

Ministry of Environment and Forests 2181

Ministry of Heavy Industries and Public 2116Enterprises

Ministry of Youth Affairs and Sports 2059

Ministry of Minority Affairs 2008

Ministry of Mines 1792

Ministry of Tribal Affairs 1205

Ministry of Labour and Employment 1080

Ministry of Tourism 997

Ministry of External Affairs 800

Ministry of Information and Broadcasting 790

Ministry of Earth Sciences 768

Ministry of Culture 729

Ministry of Water Resources 520

Ministry of Food Processing Industries 393

Ministry of Consumer Affairs, Food and Public 311Distribution

Ministry of Planning 311

Ministry of Law and Justice 271

Ministry of Personnel, Public Grievances and Pensions 195

Ministry of Panchayati Raj 139

Ministry of Statistics and Programme Implementation 119

Ministry of Corporate Affairs 87

Ministry of Development of North Eastern Region 85


Table 4.9: Ministries, Departments, Secretariats and Offices

No. Ministry

1. Ministry of Agriculture (Krishi Mantralaya)

(i). Department of Agriculture and Cooperation (Krishiaur Sahkarita Vibhag).

(ii). Department of Agricultural Research andEducation (Krishi Anusandhan aur Shiksha Vibhag).

(iii). Department of Animal Husbandry, Dairying andFisheries (Pashupalan, Dairy aur Matsyapalan Vibhag).

2. *****

3. Ministry of Chemicals & Fertilisers (Rasayan aurUrvarak Mantralaya).

(i). Department of Chemicals and Petro-Chemicals(Rasayan aur Petro-Rasayan Vibhag).

(ii). Department of Fertilisers (Urvarak Vibhag).

(iii). Department of Pharmaceuticals (Aushadh Vibhag).

4. Ministry of Civil Aviation (Nagar VimananMantralaya)

5. Ministry of Coal (Koyala Mantralaya)

6. Ministry of Commerce and Industry (Vanijya aurUdyog Mantralaya)

(i). Department of Commerce (Vanijya Vibhag)

(ii). Department of Industrial Policy and Promotion(Audyogik Niti aur Samvardhan Vibhag)

7. Ministry of Communications and InformationTechnology (Sanchar aur Soochana PraudyogikiMantralaya)

(i). Department of Telecommunication (DoorsancharVibhag)

(ii). Department of Posts (Dak Vibhag)

(iii). Department of Electronics and InformationTechnology (Electroniki aur Soochana PraudyogikiVibhag)


7A. *****

8. Ministry of Consumer Affairs, Food and PublicDistribution (Upbhokta Mamle, Khadya aur SarvajanikVitaran Mantralaya)

(i). Department of Consumer Affairs (UpbhoktaMamleVibhag)

(ii). Department of Food and Public Distribution(Khadya aur Sarvajanik Vitaran Vibhag)

8A. Ministry of Corporate Affairs (Korporate KaryaMantralaya)

8B. Ministry of Culture (Sanskriti Mantralaya)

9. Ministry of Defence (Raksha Mantralaya)

(i). Department of Defence (Raksha Vibhag)

(ii). Department of Defence Production (RakshaUtpadan Vibhag)

(iii). Department of Defence Research and Development(Raksha Anusandhan aur Vikas Vibhag)

(iv). Department of Ex-ServicemenWelfare (PoorvaSenani Kalyan Vibhag)

9A. Ministry of Development of North Eastern Region(Uttar Poorvi Kshetra VikasMantralaya)

9AA. Ministry of Drinking Water and Sanitation (Peya Jalaur Swachchhata Mantralaya)

10. Ministry of Earth Sciences (Prithvi Vigyan Mantralaya)

11. Ministry of Environment and Forests (Paryavaran aurVan Mantralaya)

12. Ministry of External Affairs (VideshMantralaya)

13. Ministry of Finance (Vitta Mantralaya)

(i). Department of Economic Affairs (Arthik KaryaVibhag)

(ii). Department of Expenditure (Vyaya Vibhag)

(iii). Department of Revenue (Rajaswa Vibhag)


(iv). Department of Disinvestment (Vinivesh Vibhag)

(v). Department of Financial Services (Vittiya SewayenVibhag)

14. Ministry of Food Processing Industries (KhadyaPrasanskaran Udyog Mantralaya)

15. Ministry of Health and Family Welfare (Swasthya aurParivar Kalyan Mantralaya)

(i). Department of Health and Family Welfare(Swasthya aur Parivar Kalyan Mantralaya)

(ii). Department of Ayurveda, Yoga&Naturopathy,Unani, Siddha and Homoeopathy (AYUSH) (Ayurveda,Yoga aur Prakratik Chikitsa, Unani, Siddha aurHomoeopathy (AYUSH) Vibhag)

(iii). Department of Health Research (SwasthyaAnusandhanVibhag)

(iv). Department of AIDS Control (AIDSNiyantranVibhag).

16. Ministry of Heavy Industries and Public Enterprises(Bhari Udyog aur Lok Udyam Mantralaya)

(i). Department of Heavy Industries (Bhari UdyogVibhag)

(ii). Department of Public Enterprises (Lok UdyamVibhag)

17. Ministry of Home Affairs (Grih Mantralaya)

(i). Department of Internal Security (Antarik SurakshaVibhag)

(ii). Department of States (Rajya Vibhag)

(iii). Department of Official Language (Raj BhashaVibhag)

(iv). Department of Home (Grih Vibhag)

(v). Department of Jammu and Kashmir Affairs (Jammutatha Kashmir Vibhag)

(vi). Department of Border Management (SeemaPrabandhan Vibhag)


18. Ministry of Human Resource Development (ManavSansadhan Vikas Mantralaya)

(i). Department of School Education and Literacy(School Shiksha aur Saksharta Vibhag)

(ii). Department of Higher Education (UchchatarShiksha Vibhag)

19. Ministry of Information and Broadcasting (Soochanaaur Prasaran Mantralaya)

20. Ministry of Labour and Employment (Shram aurRozgar Mantralaya)

21. Ministry of Law and Justice(Vidhi aur NyayaMantralaya)

(i). Department of Legal Affairs (Vidhi Karya Vibhag)

(ii). Legislative Department (Vidhayee Vibhag)

(iii). Department of Justice (Nyaya Vibhag)

21A. Ministry of Micro, Small and Medium Enterprises(Sukshma Laghu Aur Madhyam UdyamMantralaya)

21AA. Ministry of Mines (Khan Mantralaya )

21B. Ministry of Minority Affairs (Alpasankhyak KaryaMantralaya)

22. Ministry of New and Renewable Energy (Naveen aurNavikarniya Oorja Mantralaya)

22A. ****

22AA. Ministry of Overseas Indian Affairs (Pravasi BhartiyaKarya Mantralaya)

22B. Ministry of Panchayati Raj (Panchayati RajMantralaya)

23. Ministry of Parliamentary Affairs (Sansadiya KaryaMantralaya)

24. Ministry of Personnel, Public Grievances and Pensions(Karmik Lok Shikayat tatha Pension Mantralaya)

(i). Department of Personnel and Training (Karmik aurPrashikshan Vibhag)


(ii). Department of Administrative Reforms and PublicGrievances (Prashasanik Sudhar aur Lok ShikayatVibhag)

(iii). Department of Pensions and PensionersWelfare(Pension aur Pension Bhogi Kalyan Vibhag)

25. Ministry of Petroleum and Natural Gas (Petroleum aurPrakritik Gas Mantralaya)

26. Ministry of Planning (Yojana Mantralaya)

27. Ministry of Power (VidyutMantralaya)

28. Ministry of Railways (Rail Mantralaya)

29. Ministry of Road Transport and Highways (SadakParivahan aur Raj Marg Mantralaya)

30. Ministry of Rural Development (Gramin VikasMantralaya)

(i). Department of Rural Development (Gramin VikasVibhag)

(ii). Department of Land Resources (Bhumi SansadhanVibhag)

******

31. Ministry of Science and Technology (Vigyan aurPraudyogiki Mantralaya)

(i) Department of Science and Technology (Vigyan aurPraudyogiki Vibhag)

(ii) Department of Scientific and Industrial Research(Vigyan aur Audyogik Anusandhan Vibhag)

(iii). Department of Bio-Technology (BiotechnologyVibhag)

32. Ministry of Shipping (Pot Parivahan Mantralaya)

33. *****

34. Ministry of Social Justice and Empowerment (SamajikNyaya aur Adhikarita Mantralaya)

(i). Department of Social Justice and Empowerment(Samajik Nyaya aur Adhikarita Vibhag)


(ii). Department of Disability Affairs (Nishaktata KaryaVibhag)

35. Ministry of Statistics and Programme Implementation(Sankhyiki aur Karyakram Karyanvayan Mantralaya)

36. Ministry of Steel (Ispat Mantralaya)

37. Ministry of Textiles (Vastra Mantralaya)

38. Ministry of Tourism (Paryatan Mantralaya)

39. Ministry of Tribal Affairs (Janjatiya KaryaMantralaya)

40. Ministry of Urban Development (Shahari VikasMantralaya)

40A. Ministry of Housing and Urban Poverty Alleviation(Awasan aur Shahar Garibi Upshaman Mantrayala)

41. Ministry of Water Resources (Jal SansadhanMantralaya)

41A. Ministry of Women and Child Development (Mahilaaur Bal Vikas Mantralaya)

42. Ministry of Youth Affairs and Sports (YuvakKaryakram aur Khel Mantralaya)

(i). Department of Youth Affairs (Yuvak KaryakramVibhag)

(ii). Department Sports (Khel Vibhag)

43. Department of Atomic Energy (Parmanu Oorja Vibhag)

44. ***

45. Department of Space (Antariksh Vibhag)

46. Cabinet Secretariat (Mantrimandal Sachivalaya)

47. President�s Secretariat (Rashtrapati Sachivalaya)

48. Prime Minister�s Office (Pradhan Mantri Karyalaya)

49. Planning Commission (Yojana Ayog)

50. **

Source: First Schedule of The Government of India (Allocation of Business)Rules, 1961.


Table 4.10: Entities and Products which couldbe proposed as exemptions in Annex I

Ministry/Department

Ministry ofCommunicationsand InformationTechnology(Department ofTelecommunications)

Ministry of Defence(Department ofDefence)

Ministry of Defence(Department ofDefence)

Ministry of Micro,Small and MediumEnterprises

Department ofAtomic Energy

Department of Space

Department of Foodand PublicDistribution

Function Pertaining toProcurement

Procurement of stores andequipment requiredbyDepartment ofTelecommunications

Purchase of food stuffs formilitary requirements andtheir disposal excluding thoseentrusted to Department ofFood and Public Distribution

Procurement Exclusive to theDefence services

All matters relating topreference policies forprocurement of goods procuredand services rendered by microand small enterprises byMinistries or Departments,public sector undertakings andaided institutions of theCentral Government.

Procurement of Stores andEquipment required by theDepartment of Atomic Energy

Establishment, procurementand use of space based systems

Procurement of stores andequipment required by theDepartment of Space

Entering into treaties andagreements with foreigncountries and implementingtreaties, agreements,conventions with foreign

Rationale for Claiming anExemption

National Security

National Security

National Security

Based on negotiations/Countries have advanced thisexemption

National Security

National Security

National Security

Based on negotiations/Countries have advanced thisexemption.




Ministry ofCommerce andIndustry

Ministry of Scienceand Technology(Department ofScience andTechnology)

Ministry ofRailways(Railway Board)

countries relating to trade andcommerce in foodgrains andother foodstuffs.

Trade and commerce in, andsupply and distribution of,foodgrains

Trade and commerce in andthe production, supply anddistribution of sugar andfoodstuffs other thanfoodgrains.

Purchase and Inspection ofstores for Central GovernmentMinistries/Departmentsincluding their attached andsubordinate offices and UnionTerritories, other than theitems of purchase andinspection of stores which aredelegated to other authoritiesby general or special order.

Matters commonly affectingScientific and technologicaldepartments/organisations/institutions e.g. financial,personnel, purchase andimport policies and practices

All matters relating toRailway revenues andexpenditure excluding RailwayInspectorate and RailwayAudit.

Revised GPA exemptsprocurement undertakenthrough the use of funds frominternational funding agencies.



Based on negotiations

Based on negotiations/ SouthKorea had advanced a similarexemption

Based on negotiations/Transportation sector has notbeen opened up by manycountries

Source: Second Schedule on �Distribution of Subjects Among theDepartments� (pursuant to Rule 3 of Government of India (Allocation ofBusiness) Rules, 1961 under the purview of Article 77(3) of the Constitutionavailable at http://cabsec.nic.in/files/allocation/abr_scnd.pdf, accessed on12.12.2012.


Table 4.11: Navratna CPSES

1. Bharat Electronics Limited

2. Bharat PetroleumCorporation Limited

3. Hindustan Aeronautics Limited

4. Hindustan PetroleumCorporation Limited

5. Mahanagar Telephone Nigam Limited

6. National Aluminium Company Limited

7. NMDCLimited

8. Oil India Limited

9. Power Finance Corporation Limited

10. Power Grid Corporation of India Limited

11. Rural Electrification Corporation Limited

12. Rashtriya Ispat Nigam Limited

13. Shipping Corporation of India Limited

14. Neyveli Lignite Corporation Limited

Source: List of Maharatna, Navratna and Miniratna CPSEs available online athttp://dpe.nic.in/publications/list_of_maharatna_navratna-and_miniratna, lastaccessed on 18.03.2013.


Table 4.12: CPSEs in different sectors ranked per their TurnoverAgriculture Name of Central Public Turnover

Sector Enterprise (in Crore)

Agro National Seeds Corporation Ltd. 627.3

Agro State Farms Corporation of India Ltd. 307.71

Agro A&N Islands Forest and Plantation 3.1Dev. Corporation Ltd.

Mining Name of Central Public Sector TurnoverEnterprise (in crore)

Crude Oil Oil and Natural Gas Corporation Ltd. 66154.88

Coal and Lignite South Eastern Coalfields Ltd 13167.76

Other Minerals and NMDC Ltd. 11375.4Metals

Crude Oil Oil India Ltd. 8303.38

Coal and Lignite Northern Coalfields Ltd. 7619.8

Coal and Lignite Mahanadi Coalfields Ltd. 7474.1

Coal and Lignite Central Coalfields Ltd. 7083.13

Coal and Lignite Western Coalfields Ltd. 7073.44

Coal and Lignite Bharat Coking Coal Ltd. 6951.77

Other Minerals and National Aluminium Co. Ltd. 6369.88Metals

Coal and Lignite Eastern Coalfields Ltd. 5924.11

Crude Oil ONGC Videsh Ltd. 5568.26

Other Minerals and KIOCL Ltd. 1803.46Metals

Other Minerals and Hindustan Copper Ltd. 1257.58Metals

Other Minerals and Manganese Ore (India) Ltd. 1145.31Metals

Other Minerals and Uranium Corporation of India Ltd. 727Metals

Coal and Lignite Coal India Ltd. 468.36

Other Minerals and Indian Rare Earths Ltd. 388.66Metals

Other Minerals and FCI Aravali Gypsum &Metals Minerals (India) Ltd. 61.48

Other Minerals and The Bisra Stone Lime Company Ltd. 57.61Metals


Other Minerals and Orissa Minerals Development Co. Ltd. 45.13Metals

Other Minerals and Eastern Investment Ltd. 5.88Metals

Crude Oil Bharat Petro Resources Ltd. 0

Other Minerals and J&K Mineral Development 0Metals Corporation Ltd.

Manufacturing Name of Central Public TurnoverSector Enterprise (in crore)

Petroleum Indian Oil Corporation Ltd. 357179.43

Petroleum Bharat Petroleum Corporation Ltd. 163218.21

Petroleum Hindustan Petroleum Corporation Ltd. 132669.97

Petroleum Mangalore Refinery and 43800.24Petrochemical Ltd.

Heavy Engineering Bharat Heavy Electrical Ltd. 43337

Petroleum Chennai Petroleum Corporation Ltd. 38128.26

Petroleum GAIL (India) Ltd. 32907.09

Transportation Hindustan Aeronautics Ltd 13115.5Equipment

Petroleum Numaligarh Refinery Ltd. 8972.19

Fertilisers National Fertilisers Ltd. 5804.03

Fertilisers Rashtriya Chemicals and Fertilisers Ltd. 5574.1

Medium & Light Bharat Electronics Ltd. 5529.69Engineering

Steel Steel Authority of India Ltd. 4904.74

Transportation BEML Ltd. 3623.52Equipment

Consumer Goods Security Printing and Minting 3164.49Corporation of India Ltd.

Fertilisers Fertilisers and Chemicals (Travancore) Ltd. 2511.92

Medium & Light ITI Ltd. 2138.93Engineering

Medium & Light Balmer Lawrie & Co. Ltd. 2084.33Engineering

Fertilisers Madras Fertilisers Ltd. 1622.91

Transportation Cochin Shipyard Ltd. 1461.72Equipment


Medium & Light Electronics Corporation of India Ltd. 1381.7Engineering

Medium & Light Bharat Dynamics Ltd. 938.27Engineering

Chemicals and Hindustan Organic Chemicals Ltd. 738.04Pharmaceuticals

Heavy Engineering Heavy Engineering Corporation Ltd. 689.69

Consumer Goods Hindustan Paper Corporation Ltd. 661.79

Steel Rashtriya Ispat Nigam Ltd. 658.49

Transportation Hindustan Shipyard Ltd. 652.14Equipment

Textiles National Textile Corporation Ltd. 637.05

Transportation Mazagon Dock Ltd. 636.56Equipment

Transportation Garden Reach Shipbuilders 550.73Equipment & Engineers Ltd.

Consumer Goods HLL Lifecare Limited. 516.92

Transportation Goa Shipyard Ltd. 514.46Equipment

Fertilisers Brahmaputra Valley Fertiliser 401.13Corporation Ltd.

Consumer Goods Cement Corporation of India Ltd. 332.88

Consumer Goods Hindustan Newsprint Ltd. 301.74

Chemicals and Hindustan Insecticides Ltd. 275.04Pharmaceuticals

Medium & Light Instrumentation Ltd. 250.16Engineering

Medium & Light Andrew Yule & Company Ltd. 239.46Engineering

Medium & Light Bharat Pumps & Compressors Ltd 210.21Engineering

Chemicals and Karnataka Antibiotics and 210.04Pharmaceuticals Pharmaceuticals Ltd.

Medium & Light HMT Machine Tools Ltd. 209.02

Engineering Medium & Light 200.86Engineering HMT Ltd.

Transportation Scooters India Ltd. 174.76Equipment

Heavy Engineering Braithwaite and Co. Ltd. 169.71


Medium & Light Central Electronics Ltd. 152.99Engineering

Heavy Engineering Burn Standard Co. Ltd. 151.63

Heavy Engineering Bharat Heavy Plate & Vessels Ltd. 136.98

Medium & Light Rajasthan Electronics & Instruments 133.14Engineering Ltd.

Consumer Goods NEPA Ltd. 104.96

Chemicals and Hindustan Antibiotics Ltd. 95.39Pharmaceuticals

Medium & Light Richardson and Cruddas (1972) Ltd. 84.6Engineering

Medium & Light Biecco Lawrie Ltd. 84.43Engineering

Chemicals and Rajasthan Drugs and Pharmaceuticals 80.67Pharmaceuticals Ltd.

Chemicals and Bengal Chemicals and Pharmaceuticals 59.77Pharmaceuticals Ltd.

Chemicals and Indian Drugs and Pharmaceuticals Ltd. 55Pharmaceuticals

Consumer Goods Artificial Limbs Manufacturing 54.88Corporation of India

Medium & Light BEL Optronic Devices Ltd.. 52.36Engineering

Steel Mishra Dhatu Nigam Ltd. 50.42

Heavy Engineering Bharat Wagon & Engineering Co. Ltd. 37.54

Consumer Goods Hindustan Photo Films Manufacturing 37.18Co. Ltd.

Medium & Light Vignyan Industries Ltd. 33.82Engineering

Chemicals and Hindustan Fluorocarbons Ltd. 33.52Pharmaceuticals

Petroleum GAIL Gas Ltd. 29.87

Steel Maharashtra Elektrosmelt Ltd. 27.58

Consumer Goods Tyre Corporation of India Ltd. 24.45

Chemicals and Indian Medicines and 24.41Pharmaceuticals Pharmaceuticals Corporation Ltd.

Consumer Goods Hindustan Salts Ltd. 13.22

Heavy Engineering Bharat Bhari Udyog Nigam Ltd. 11.51


Medium & Light HMT (Bearings) Ltd. 11.48Engineering

Consumer Goods Hooghly Printing Co. Ltd. 11.26

Consumer Goods Sambhar Salts Limited 9.96

Medium & Light HMT Watches Ltd. 8.82Engineering

Medium & Light IDPL (Tamilnadu) Ltd. 8.82Engineering

Chemicals and Orissa Drugs & Chemicals Ltd. 6.26Pharmaceuticals

Transportation Hooghly Dock & Port Engineers Ltd. 5.3Equipment

Heavy Engineering Tungabhadra Steel Products Ltd. 3.3

Chemicals and Bharat Immunological and 2.86Pharmaceuticals Biologicals Corporation Ltd.

Heavy Engineering Triveni Structurals Ltd. 2.2

Textiles British India Corporation Ltd. 1.92

Steel Ferro Scrap Nigam Ltd. 1.2

Consumer Goods Hindustan Vegetable Oils 0.72Corporation Ltd.

Medium & Light Hindustan Cables Ltd. 0.2Engineering

Medium & Light HMT Chinar Watches Ltd. 0.1Engineering

Fertilisers Fertiliser Corporation of India Ltd. 0

Fertilisers Hindustan Fertiliser Corporation Ltd. 0

Consumer Goods Nagaland Pulp and Paper Co. Ltd. 0

Textiles Birds Jute & Exports Ltd. 0

Textiles National Jute Manufactures 0Corporation Ltd

Services Name of Central Public Sector TurnoverEnterprise (in Crore)

Trading & Marketing Food Corporation of India Ltd. 75168.6Services

Trading & Marketing MMTC Ltd. 68854.49Services

Telecommunication Bharat Sanchar Nigam Ltd. 21297.32& InformationTechnology


Trading & State Trading Corporation of India Ltd. 19984.84Marketing Services

Transportation Air India Ltd. 13974.39Services

Financial Services Power Finance Corporation Ltd. 10128.49

Trading & PEC Ltd. 9969.94Marketing Services

Transportation Airports Authority of India. 5027.71Services

Trading & Handicrafts & HandloomsMarketing Services Exports Corporation India Ltd. 5006.63

Transportation Container Corporation of India Ltd. 3838.12Services

Financial Services Indian Railway Finance 3818.05Corporation Ltd.

Telecommunication Mahanagar Telephone Nigam Ltd. 3673.95& InformationTechnology

Transportation Shipping Corporation of India Ltd. 3543.42Services

Contract & IRCON International Ltd. 3175.33Construction Services

Contract & National Buildings Construction 3126.77Construction Services Corporation Ltd.

Trading & Marketing Cotton Corporation of India Ltd. 2694.53Services

Industrial Engineers India Ltd. 2652.63Development& TechnicalConsultancy

Financial Services Housing & Urban Development 2276.2Corporation Ltd.

Financial Services India Infrastructure Finance Company 1931.68Ltd.

Trading & Marketing MSTC Ltd. 1819.65Services

Contract & Rail Vikas Nigam Ltd. 1444.65Construction Services

Contract & Bridge & Roof Co. (India) Ltd. 1328.97Construction Services


Transportation Air India Charters Ltd. 1311.28Services

Trading & National Handlooms Development 1282.54Marketing Services Corporation Ltd.

Industrial Engineering Projects (India) Ltd. 1103.68Development& TechnicalConsultancy

Contract & National Projects Construction 1069.46Construction Services Corporation Ltd.

Trading & Antrix Corporation Ltd. 1035.16Marketing Services

Contract & Hindustan Steel Works Const. Ltd. 974.9Construction Services

Trading & Central Warehousing Corporation 967.21Marketing Services

Industrial National Small Industries 850.96Development Corporation Ltd.& TechnicalConsultancy

Industrial Telecommunications Consultants 844.52Development & India Ltd.TechnicalConsultancy

Industrial RITES Ltd. 750.5Development &TechnicalConsultancy

Tourist Services Indian Railway Catering and 741.23Tourism Corporation Ltd.

Financial Services Export Credit Guarantee 674.87Corporation of India Ltd.

Industrial MECON Ltd. 641.38Development &TechnicalConsultancy

Contract & Konkan Railway Corporation Ltd. 600.01ConstructionServices

Industrial Central Mine Planning & 473.29Development & Design Institute Ltd.TechnicalConsultancy


Transportation Dredging Corporation of India Ltd. 457.85Services

Transportation Pawan Hans Helicopters Ltd. 386.46Services

Tourist Services India Tourism Development 367.18Corporation Ltd.

Financial Services Indian Renewable Energy 363.41Dev. Agency Ltd.

Industrial WAPCOS Ltd. 351.18Development &TechnicalConsultancy

Telecommunication RailTel Corporation of India Ltd. 326.27& InformationTechnology

Transportation Airline Allied Services Ltd. 290.35Services

Contract & Hindustan Prefab Ltd. 203.07Construction Services

Trading & India Trade Promotion Organisation 187.97Marketing Services

Transportation Ennore Port Ltd. 185.14Services

Financial Services National Film Development 181.25Corporation Ltd.

Industrial National Informatics Centre 155.3Development & Services Incorporated.TechnicalConsultancy

Contract & BBJ Construction Co. Ltd. 152.6Construction Services

Contract & Mineral Exploration Corporation Ltd. 128.9Construction Services

Contract & Projects and Development India Ltd. 103.85Construction Services

Trading & North Eastern Regional Agricultural 100.69Marketing Services Marketing Corpn. Ltd.

Industrial Power System Operations 97.31Development & Corporation Ltd.TechnicalConsultancy


Industrial Broadcast Engineering 90.79Development & Consultants India Ltd.TechnicalConsultancy

Industrial EdCIL (India) Limited 67.22Development &TechnicalConsultancy

Transportation Fresh & Healthy Enterprises Ltd. 64.35Services

Trading & Central Cottage IndustriesMarketing Services Corporation of India Limited 63.34

Trading & STCL Ltd. 57.99Marketing Services

Tourist Services Hotel Corporation of India Ltd. 48.38

Transportation Air India Air Transport Services Ltd. 48.37Services

Trading & Central Railside WarehouseMarketing Services Company Ltd. 48.36

Trading & Jute Corporation of India Ltd. 47.13Marketing Services

Industrial PFC Consulting Ltd. 46.06Development &TechnicalConsultancy

Industrial Certification Engineers 29.49Development & International Ltd.TechnicalConsultancy

Trading & NTPC Vidyut Vyapar Nigam Ltd. 28.12Marketing Services

Trading & HMT (International) Ltd. 27.89Marketing Services

Financial Services National Minorities Corporation 26.66Development & Finance

Industrial HSCC (India) Ltd. 23.12Development &TechnicalConsultancy

Financial Services National Scheduled Castes Corporation 22.29Finance & Development


Financial Services National Backward Classes 22.21Finance and Development Corp.

Trading & Tamil Nadu Trade Promotion 21.62Marketing Services Organisation

Trading & North Eastern Handicrafts and 17.27Marketing Services Handlooms Dev. Corpn. Ltd.

Financial Services Kumarakruppa Frontier Hotel Pvt. Ltd. 12.05

Financial Services National Scheduled Tribes Finance 10.65& Development Corporation

Contract & Mumbai Railway Vikas 9.47Construction Services Corporation Ltd.

Financial Services National Safai Karamcharis 8.89Finance & Development Corporation

Industrial National Research Development 8.16Development & CorporationTechnicalConsultancy

Tourist Services Assam Ashok Hotel Corporation Ltd. 5.81

Tourist Services Madhya Pradesh Ashok Hotel 5.04Corporation Ltd.

Trading & Karnataka Trade Promotion 3.04Marketing Services Organisation

Tourist Services Ranchi Ashok Bihar Hotel 2.32Corporation Ltd.

Tourist Services Pondicherry Ashok Hotel 2.19Corporation Ltd.

Tourist Services Donyi Polo Ashok Hotel Ltd. 1.96

Transportation Central Inland Water Transport 1.5Services Corporation Ltd.

Contract & IRCON Infrastructure & Services Ltd. 1.1Construction Services

Tourist Services Utkal Ashok Hotel Corporation Ltd. 0

Financial Services Balmer Lawrie Investments Ltd. 0

Financial Services Indian Vaccine Corporation Ltd. 0

Financial Services National Handicapped Finance 0& Development Corporation.

Telecommunication Millennium Telecom Ltd. 0& InformationTechnology


Electricity

Power Generation NTPC Ltd. 55152.01

Transmission Power Grid Corporation of India Ltd. 8388.7

Transmission Rural Electrification Corporation Ltd. 8256.91

Power Generation Nuclear Power Corporation of India Ltd. 6015.83

Power Generation NHPC Ltd. 4046.59

Power Generation Neyveli Lignite Corporation Limited 3949.56

Power Generation Satluj Jal Vidyut Nigam Ltd. 1812.67

Power Generation Tehri Hydro Development Corporation 1683.17Ltd.

Power Generation North Eastern Electric Power 1198.27Corporation Ltd.

Power Generation Narmada Hydroelectric Development 918.4Corporation Ltd.

Transmission NTPC Electric Supply Company Ltd. 57.25

Power Generation Kanti Bijlee Utpadan Nigam Ltd.. 48.58

Power Generation REC Power Distribution Coporation 19.84Ltd.

Transmission REC Transmission Projects Company 15Ltd.

Table 4.13: Investment in State Level Public Enterprises: By Sector

Sector Investment (in Crores) Share in the Total

Power 223771 67.11

Industry 31979 9.59

Financial Services 26968 8.09

Transport Services 17162 5.15

Mining 15071 4.52

Other Services 11668 3.50

Agriculture 6792 2.04

Total 333411 100.00

Source: Table 2 �Investment in SLPEs sector wise� GOI 2007, NationalSurvey on State Level Public Enterprises, Department of Public Enterprises,Government of India, available at http://dpeslpe.gov.in/AboutUs.htm,Department of Public Enterprises, Government of India, last visited on27.11.2012.


Table 4.14: State Level Public EnterpriseswithMaximum Investment

SLPEs Investment in Lakhs

Sardar Sarovar Narmada Nigam Ltd. (Gujarat) 2715842

AP Power Generation Corp. (Andhra Pradesh) 1329721

Maharashtra State Electricity Board Holding Co. 1228743

Vidarbha Irrigation Development (Maharashtra) 993689

Cauvery Neeravari Nigam Ltd. (Karnataka) 966003

Bihar State Electricity Board (Bihar) 944089

AP Housing Corporation (Andhra Pradesh) 868093

WB Power Development Corp. Ltd (West Bengal) 843461

Maharashtra State Power Generation Co. Ltd. 839461(Maharashtra)

Krishna Bhagya Jala Nigam Ltd. (Karnataka) 758653

Table 1.3, Top 10 SLPEs in terms of investment, 2007-08, Volume 1, GOI2007, National Survey on State Level Public Enterprises, Department ofPublic Enterprises, Government of India, available at http://dpeslpe.gov.in/AboutUs.htm, Department of Public Enterprises, Government of India, lastvisited on 27.11.2012.

Table 4.15: Financing used in DifferentSectors by Separate Ministries

Central Projects

Agency Sector Form of FinancingUsed

Ministry of Civil Aviation Airports BOOT

Ministry of Shipping Ports BOT Toll, BOOT

National Highways Authority of India Roads BOT-Toll, BOT-Annuity

Kandla Port Trust Gujarat Ports BOT-Toll

Cochin Port Trust Ports BOT-Toll, Lease

Jawaharlal Nehru Port Trust, Tuticorin Ports BOT-TollPort Trust, Chennai Port Trust,Ennore Port Trust, Kolkata Port Trust

Western Railways Railways BOT-Toll

Airport Authority of India Airports BOO

Source: www.pppindiadatabase.com


The second objective of this chapter is to undertake asystematic study of devolution of finances, centre-state relationsand the �Other Entities� which engage in procurement to applyinsights obtained from earlier chapters to the case of India.9

Devolution of Finances in IndiaClassification of Government Expenditure Transactions

Government expenditure transactions may be classifiedunder the following approaches10 :� Administrative responsibility � the ministry, department or

spending agency that undertakes the expenditure;� Economic category � [Defined by Government Financial

Statistics standards]� Function � [health, education � Defined by the United

Nations]� Programme � policy goals and objectives

Generally, the Ministry of Finance assumes maximumresponsibility on decisions pertaining to procurement.Ministries or departments of state which are charged withthe responsibility of delivering public services are referred toas �line ministries�. Smaller units which also deliver publicservice are referred to as Spending Agencies � these report toeither the Ministry of Finance or the line ministry.11

Inter-Departmental/Inter-Ministerial Coordination onProcurement

While procurement falls under the purview of theDepartment of Expenditure in the Ministry of Finance,international trade is under the purview of the Ministry ofCommerce. It is essential that there is coordination betweenthe different ministries in order to establish a framework forthe exchange of information and to conduct deliberations onthis subject. The Government of India (Allocation of Business)Rules connotes the manner in which the business of the


government of India is transacted in the ministries,departments, secretariats and offices.12

It is essential to note that different facets of expenditureand procurement are handled by different ministries: whilethe Department of Expenditure subsumes responsibility forrouting finances to state governments and PSUs, theDirectorate General of Supplies and Disposals engages inprocurement of subject matter which is common to multipledepartments, and procurement pertaining to specialist subjectslike defence, telecommunications, space and science isundertaken by the specific ministries.

Subject-Specific ProcurementIf a decision taken by one department is likely to affect the

transaction of business allotted to another, the subject-matterbecomes one which concerns more than one department.13 Inthe event a decision concerns more than one department, theconcurrence of all the departments concerned is required. Inthe absence of obtaining such concurrence, the decision willbe taken by the Cabinet.14 The concurrence of the Ministryof Finance is required in cases where the power to sanctionexpenditure, appropriate or re-appropriate funds has not beengranted by it.15 The specific procurements undertaken byspecialist ministries could be specified as exceptions to AnnexI of a possible offer advanced by India owing to the allocationof responsibility to procure a certain subject matter havingbeen allocated to a particular department. Another exampleis that the Directorate General of Supplies and Disposals fallsunder the purview of the Department of Commerce.

Devolution of Funds in Procurement to the StateGovernments and the Public Sector Enterprises

The Department of Expenditure in the Ministry of Financeis responsible for release of central assistance for: the state�s


annual plan, centre�s share of state�s calamity relief funds,assistance from national calamity contingency fund, up-gradation grants and grants for rural/urban local bodies andother grants as recommended by Finance Commissions. Thedepartment is responsible for the appraisal and approval ofPlan Investment/expenditure proposals of central ministries/PSUs, andmatters relating to Expenditure Finance Committee/Public Investment Board procedures and secretariat work forthe Public Investment Board.16

Indian Government ExpenditureThe expenditure of the government is classified under

certain heads which directly relate to the functions of thegovernment: (i) General Services; (ii) Social Services; (iii)Economic Services and (iv) Grants-in-Aid and contributions.17

Budgeting ExerciseIn the budgeting exercise, the Non-Plan expenditure is

estimated first based on how the Non-Plan expenditure wasincurred in the past. What is left from the Revenue is nowavailable as Balance from Current Revenue (BCR). When thisis taken and aggregated with themiscellaneous capital receipts,we are left with the non-debt resources which are availablenow for allocation as plan expenditure. The amount ofborrowing that is planned is then taken together with the non-debt resources to indicate the amount that is available for planexpenditure18 .

A step by step representation of the budgeting exercise ismade in Box 4.2.

The Gross Budgetary Support for Plan is first allocated intosectors, then development heads are identified, and finally planschemes are finalised. The Rangarajan Committee notes thatwhile the non-plan expenditure is more or less fixed, the planexpenditure is based on the availability of resources.19


The Rangarajan Committee also notes that owing to thedirect connection that plan expenditure has with development,non-plan expenditure has started to be perceived asunnecessary expenditure. This has resulted in not payingattention to crucial non-plan expenditure like the maintenanceof assets.20

Procurement by Central EntitiesSection 3 of the Public Procurement Bill outlines the

applicability of the Public Procurement Bill to the followingprocuring entities:21 ministry or department of the centralgovernment or a unit thereof or its attached or subordinateoffice to which powers of procurement have been delegated.

Purchase by a Central Purchase Organisation�Central Purchase Organisation� means a procuring entity

which is authorised by the central government by an order,made in this behalf, to make procurement for one or moreprocuring entities or to enter into rate contracts or frameworkagreements for procurement by other procuring entities� �Section 2(f), Public Procurement Bill, 2012.

Box 4.2: Expostulation on the Flow of Expenditure

Revenue/Resources-Non Plan Expenditure = Balance fromCurrent Revenue (BCR)

Non-Debt Resources = Balance from Current Revenue +Miscellaneous Capital Receipts

Gross Budgetary Support for Plan (Amount Available forPlan Expenditure) = Non-Debt Resources + Amount of NetBorrowing Planned


Strategy for Inclusion of Horizontal PoliciesWe should ask ourselves if we can not only solve the

problems inherent in government expenditure, but also enhancethe country experience for a new entrant through entry intothe GPA.

Public expenditure in India is strongly governed by welfareobjectives. A lot of expenditure is expected to be made forthe purpose of education, rural development, health,agriculture, irrigation and social justice (Refer Table 4.15 forthe split between �Developmental Expenditure� and �Non-Developmental Expenditure�). Energy, investment in scienceand investment in infrastructure are equally significant matters.Table 4.1 describes the sectoral allocation of these sectors inthe tenth and eleventh plan.

It is important to understand the environment in which theentities which are being tabled for an initial entity offer operate.For example, we have understood that certain systemicproblems irk public sector enterprises. Solutions such asprivatisation of loss-making CPSEs, auctioning away theirassets have already been put forth. Increased injection of fundsinto areas where the private sector has been hesitant toparticipate through PPP models is the current solution.

The GPA negotiations pit a new entrant against all the otherparticipants in the GPA collectively at the first instance.Considering the distance between certain new entrants andthe world markets, it is important to first build and establishrelationships with trading partners which are geographicallyclose (India-China, for example). This could help new entrantsgain bargaining clout at the GPA forum and thereby theinterests of countries with large populations which have socialobligations could be better presented.

As noted in the first part of the study, India has immensemarket access to offer to the GPA member- countries, in theevent it considers accession to the GPA. However, in keeping


with the welfare objectives with which India has largelyfunctioned, it is important for India to be able to include offsetswhich allow for transfer of technology, or which createsituations for local employment. As noted in Chapter III, ifother members permit the inclusion of horizontal policies,policies to further social ideals can be maintained under thepurview of the GPA. It has been understood that maintenanceof horizontal policies has been allowed in cases where thecountry advances a large market for market access.

Transfer of TechnologyIt is important to incentivise the transfer of technology. As

noted by a senior negotiator, a few years back there were nomobile phone producers in India, whereas now we exportmobile phones and components. It is critical to create a positiveambience which facilitates the effective transfer of technology.This can occur by allowing for a nesting of different factorscritical for production like land, labour, and capital to occurin certain areas. This should be supplemented by favourablepolicies.

Encouraging those enterprises which increase employmentopportunities� A very senior negotiator at the WTO, noted that the most

debilitating economic element which is all pervasivecurrently is the dearth of jobs (clear statistics onunemployment are not available). During the recessionyears, a total of five million jobs were lost in India. Everyyear youngsters armed with merely a primary schoolqualification are on the road looking for employment � ourservice sector does not provide employment opportunitiesfor these youngsters. The negotiator noted that soon wemay face a �crime epidemic� if this situation remainsunaddressed.


� He also mentioned that manpower development is a veryimportant objective. He mentioned that Nokia and Dellemployed a large number of Indians who were able to gainvaluable work experience and later study abroad to buildcompetencies.At every stage of the negotiations, the choice to not make a

new or improved binding commitment is also present. It helpsto �preserve policy space� for the future. It is critical for Indiato reserve �policy space� wherever possible.

Involving StakeholdersDetailed statistical reporting on procuring activities under

the GPA will provide succinct information on the marketaccess opportunities available for suppliers. This will allownew businesses to identify new, lucrative lines of operationand existing businesses to modify/evolve products for availingof procurement opportunities. In cases where ampleprocurement opportunities are identified, industry memberscan also suggest that bilateral agreements be concluded withcountries which may/may not be party to the GPA.� Local businesses can be integrated into the decision-making

process to suggest possible exemptions, exclusions, focuson technology-transfer provisions, including protection forSMEs which can be reflected in the GPA, preferential tradeagreements, and at the level of individual contracts whichare administered by the procuring entities.

� Sectors supplying to procuring entities, which are nascentin their development, can assert that their industries shouldnot be opened up under multilateral/bilateral procurementagreements. A well-reasoned rationale can be presentedfor barricading these units from competition frominternational suppliers.

� Long-term contracts can be concluded between thebusinesses and the government bodies that they have an


established trading relationship with. This can help ininsulating the domestic businesses from excessivecompetition and in maintaining important tradingrelationships which afford stability in supply to thepurchasing entity.

� Industry-members can conclude joint-ventures andcollaborative agreements with local suppliers in order toexploit market access opportunities in foreign markets.

� Industry members can organise themselves into coalitionsbased on the sector/territory that they operate in to identifyand systemically counter non-tariff barriers which areevolved by other member countries. This can be done byusing both conflict-oriented and non-conflict-orientedmodes of dispute resolution. Posing pertinent questions inthe Trade Policy Review mechanism and under the WTOcommittees on various issues can yield access to marketsto which access was hindered.

� Locally, trade remedies such as anti-dumping and otherpolicies can be utilised to protect the domestic suppliersagainst cheaper, dumped products.

Centre-State Relations: The Indian Federal ExperienceCurrently there are statutorily mandated three tiers of

government. Following the enactment of the 72nd amendmentof the Constitution, the three layers of government are theCentre, the States and the Panchayats and LocalMunicipalities. Defence, foreign affairs, money and banking,communications and facets which add to the macro-management of the economy are assigned to the centre. Publicorder, public health and sanitation, water supply, irrigationand canals, and industries which are not essentially strategicunder public interest are entrusted to the states. Lastly, theconcurrent list contains certain wide areas of economic and


social planning which vests residuary powers in the centre. Inthe event of any conflict between central and state laws, thecentral laws reign supreme. Table 4.2 depicts a representationof the items in the Seventh Schedule pertaining to procurement(includes items which may be incidental/ancillary toprocurement).

The Indian economy, though supposedly decentralised andfederal, can actually be said to be quasi-federal.22 The factorswhich further contribute to this include the power of the centreto decide on matters pertaining to the development andlocation of industries, reservation of the basic industries forthe public sector with investments coming from the centre,the nationalisation of insurance, aviation and thenationalisation of the major commercial banks. China, on theother hand operates on the principle of �market preservingfederalism� which accords autonomy to provinces which runtheir economies.23

The states have sometimes incurred as much as 58 percentof the total expenditure incurred by the central government.However, they contribute to only 38 percent of the revenue.24

As noted above, legislative power in India is accorded to theUnion and the States through three lists: the Union List, theState List and the Concurrent List. The taxes assigned to thecentre under the Union List are: (i) tax on income other thanagricultural land; (ii) duties of custom; (iii) duties of exciseexcept those on alcoholic liquor for human consumption; (iv)corporation tax; (v) estate duty in respect of property otherthan agricultural land; (vi) terminal taxes on goods andpassengers carried by railways, sea or air; (vii) taxes otherthan stamp duty on transactions in stock exchanges and futuresmarkets and taxes on sale and purchase of goods other thannewspapers, when such sale takes place in the course of inter-State trade or commerce. The revenue the states obtain throughtaxation of the state-specific subjects and items does not suffice


for the expenditure incurred by the states in fulfilment ofobjectives to further health, sanitation, etc. The states alsosometimes assume a role in the formulation or implementationof policies pertaining to certain items in the concurrent listpertaining to education, transportation, social security andsocial insurance.

The Constitution contains provisions to ensure that fundswould be transferred to the states in order to implement theirresponsibilities.

The Finance Commission was constituted under the aegisof the Constitution in order to transfer certain revenues tothe states from the centre. These transfers constitute statutorytransfers.The Constitution says that there must be compulsorysharing of the net revenue from non-corporate income taxunder Article 270. The share of the centre and the states isdetermined by the Finance Commission. Under Article 275,the Finance Commission is also required to recommend grantsto states which need it. The Finance Commission was guidedby the �gap filling� approach wherein the states which weredeficit in their revenue were given more funds followingtransfer of their share of central taxes under the devolutionformula drawn up by the Finance Commission. The Stateswhich displayed large deficits in their budget were allocatedmore funds than the states which had been astute in managingtheir funds.

The Planning Commission was envisaged by the centre,outside of the purview of the Constitution. However, it isresponsible for distributing a large amount of funds from thecentre to the states. A large number of grants to the statesbegun to be transferred through the Planning Commission,instead of through the Finance Commission - these transfersconstituted non-statutory transfers.

However, this resulted in the centre appropriating boththe discretion and the authority to determine the allocation of


these funds and expenditures. The transfers which were madefrom the Centre to the State started being routed through boththe Finance Commission and the Planning Commission (apartfrom the discretionary transfers made by the States). The threemain channels through which funds are transferred from thecentre to the states are as follows:1. The Finance Commission decides the shares of the

devolution of taxes, and makes grants.2. The Planning Commission makes grants and loans for the

implementation of the five year plans which are aimed atdevelopment. The Planning Commission is not a statutorybody, and hence the centre channels the plan transfers underArticle 282.

3. The ministries give grants to implement certain projects orcertain schemes.a. Central sector projects � wholly funded by the centreb. Centrally sponsored schemes � requiring the states to

share a proportion of the cost

The expenditure policies of the state gradually becamesubservient to the that of the centre as their five-year planswere supposed to supplement the central plans.25 Furthermore,the states were required to implement the Centrally SponsoredSchemes which were initiated by the centre in the nationalinterest under the provisions relating to economic and socialplanning in the concurrent list. These schemes dealt with issueswhich were under the purview of the states � the schemesrelated to subjects like rural development, health and familywelfare. As noted before, outside of the scope of theConstitution, the Planning Commission uses five-year plansto further developmental objectives. Hence, expenditure isdivided into plan expenditure and non-plan expenditure.26

Centrally Sponsored Schemes: The centre has introducedcertain schemes which fall in the sphere of activity of the States


under the seventh schedule. These includes areas pertainingto health, education, agriculture, skill development,employment, urban development, rural infrastructure etc. Thetotal value of Centrally Sponsored Schemes under the EleventhPlan was INR6,60,506.40 crore of which nine importantCentrally Sponsored Schemes accounted for INR5,24,465.99crore.

There are two modes through which resources are routedfrom the centre to the states: (i) by way of assignments and(ii) by way of transfers which include Non-Plan transfers27

and Plan transfers28 . The Non-Plan Transfers are madethrough the treasury route. The transfers for the Plan schemeare made through the treasury route or the direct transfer/society route. The Central Plan Scheme Monitoring System(CPSMS) is being set up by the Controller General of Accountsto oversee plan schemes of the government.

Demands for excess grants by the central government haveto be presented to the Lok Sabha under Article 115(1) of theConstitution. Earlier the central government used to give thestates assistance both through grants and through loans. Sincethe twelfth Finance Commission, only grants have been given,with loans taken directly from the open market.

Adoption of International TradeObligations: Centre-State Relations

The Power of the parliament to make laws for the Statehas been explicitly dealt with under the Constitution underArticle 24929 and Article 252.30 It has been noted that theparliament has the power to make laws to implement a treatyentered into with a country.31 Article 73 sets out the extentof executive power of the Union. Notably, the proviso toArticle 73(1) notes that �Provided that the executive powerreferred to in sub-clause (a) shall not, save as expressly provided


in this Constitution or in any law made by Parliament, extendin any State to matters with respect to which the Legislatureof the State has also power to made laws.�

P.B. Samant v. Union of IndiaThe petitioners in that case had sought a writ of mandamus

to restrain the Union from furthering negotiations under theUS Dunkel proposals because the sanction of the parliamentand state legislatures had not been sought. The main argumentput forth was that because the Dunkel proposals dealt withsubjects in the State List, it was impermissible for the centralgovernment to exercise executive powers to enter into treatieswith foreign countries. The Bombay High Court did notconsider the contention admissible and referred to a SupremeCourt judgment inMaganbhai Ishwarbhai Patel. The SupremeCourt in Maganbhai Ishwarbhai Patel v. Union of India hadnoted that the executive power of entering into a treaty ofagreement with foreign countries extends beyond the subjectscovered in the Union List and the Concurrent List to thesubjects covered in the State List as well. In the specific caseof the Dunkel proposals, it was noted that the treaty was notself-executing, and the provisions of the treaty were to begiven effect by passing certain laws. The judgment mentionedthat the decision as to whether the government should enterinto a treaty was a policy decision, and the courts could notinterfere in such decision under the writ jurisdiction of India.

The judgment in P.B. Samant v. Union of India had beenissued by the BombayHigh Court in response to the petitionerhaving filed a writ of mandamus seeking to restrain the Unionfrom undertaking and concluding negotiations on internationaltrade. The court noted that the authority of the governmentto enter into a treaty was a policy decision, and by an exerciseof the �separation of powers� doctrine refrained fromcommenting on the conduct of the executive exercise of power.


The judgment stated that in cases where the treaties are notself-executing, it is essential to enact the provisions into thedomestic legal regime. This is particularly important in caseswhere the subjects in the concurrent list and the state list arenegotiated upon. 32

The FDI Debate in StatesIndia has recently adopted the trend of allowing state

governments to decide on whether the application of a certainpolicy is apposite to it. The government allowed 51 percentFDI in multibrand retail through an �enabling policy�33 wherestate governments, however, retained the authority to permitopening of stores by foreign retailers.34

�The above policy is an enabling policy only and theState Governments/Union Territories would be free totake their own decisions in regard to implementation ofthe policy. Therefor retail sales outlets may be set up inthose States/Union Territories which have agreed, oragree in future, to allow FDI inMBRT under this policy.The list of States/Union Territories which have conveyedtheir agreement is annexed. Such agreement, in future,to permit establishment of retail outlets under this policy,would be conveyed to the Government of India throughthe Department of Industrial Policy & Promotion andadditions would bemade to the annexed list accordingly.The establishment of the retail sales outlets will be incompliance of applicable State/Union Territory laws/regulations, such as the Shops and Establishments Actetc.�

State Government ExpenditureThe items of State Government Expenditure under the two

heads (revenue and capital expenditure) are presented in Table4.4. The expenditure is incurred under the broad heads of


Social Services and Economic Services (apart from GeneralServices which includes Defence Services).

Within revenue and capital expenditure, the expenditureis further divided into plan and non-plan expenditure. Table4.5 depicts states ranked per the highest capital expenditureincurred (including plan and non-plan components); Table 4.6depicts states ranked per the highest plan expenditurecomponent in capital expenditure and Table 4.7 lists the stateslinked per the highest non-plan expenditure under capitalexpenditure.

Limitations: It is possible to categorise the highest spendersin the state governments in a certain area under revenue andcapital expenditure. This will help us to identify which stategovernments will be viewed as being critical to procurement.However, this is outside the scope of this paper.

The Public Procurement Bill does not envisage sub-centralprocurement by any state government being subject to itsdisciplines.35 Taking into consideration the spread of subjectsthat the centre and the state have interests in � which alsohave a direct or incidental impact on procurement � it doesseem unlikely that in the event of a possible Indian offer, Indiansub-central entities will also be tabled.

Annex III: Entities in IndiaPublic Sector Enterprises

The need for resorting to public sector enterprises settingup and operating industrial undertakings was identified in theIndustrial Policy Resolution of 1956. The twomotives of theseundertakings were as follows: (i) provision of public utilitiesand industries and (ii) incorporation of industrial undertakingswhich were essential and required large amounts ofinvestment.36 The three forms in which Public Enterprises inthe manufacturing field have been organised are as follows:


(i) Joint Stock Companies (majority); (ii) DepartmentalUndertakings; and (iii) Statutory Corporations.37

Two types of reform have been undertaken on PSEs in India:(i) Reform in the environment in which the PSE functionsthrough a delegation of authority � autonomy is sometimestransferred or delegated to the management of Indian publicsector companies through the conclusion of a Memorandumof Understanding38 ; (ii) �Full Reform� through delegation ofauthority and ownership change � the extent of privatisationof the central government equity holding since if the centralgovernment entity ownership is reduced below 51 percent,the enterprise shifts outside the domain of the centralgovernment ownership.39 The recommendation pertaining toobtaining the approval of the Parliament for reduction ofgovernment shareholdings below 51 percent in Navratna,Miniratna and other CPSEs is contingent on the decision ofthe Supreme Court in the Bharat Petroleum CorporationLimited/Hindustan Petroleum Corporation.40

Member-countries of the GPA have frequently identifiedpublic sector entities which undertake a large quantum ofprocurement and requested that these be included in the revisedoffers submitted by a new member. The data below presentsa ranking of CPSEs from the Public Sector Enterprise Survey2011-12. They have been ranked by turnover.

It is assumed that the turnover represents that the companyis in a position to undertake purchases. However, it is notassumed that all of these purchases will amount of�government procurement� because of the following reasons:(i) Public sector entities frequently procure for the purpose ofcommercial activity; (ii) Public sector entities earn their ownrevenue in multiple cases; (iii) Public Sector Enterprisessometimes functionwith very limited government control. Thisis evident in the composition of the Board of Directors of theCentral Public Sector Enterprise, the Memorandum of


Understanding concluded between a central governmentministry and the Public Sector Enterprise etc.

FinanceThe Transfer of Finance from the centre to PSEs takes place

in the following manner: Annual Plan is the plan componentof the budget and the Internal and Extra Budgetary Resources(IEBR) of PSEs prepared by the Planning Commission. Theplan resources of the centre are constituted by the GrossBudgetary Support for Plan, and the IEBR. Currently, publicsector enterprises are subject to the General Financial Rulesof the government. However, the PSEs do not have access tothe consolidated fund of the state. Their earnings remain withthem and are not deposited in the consolidated fund.41

Reforms in Management of Central Public SectorEnterprises

In 1950-69, the Indian economy focussed on building astrong industrial base which would produce indigenous capitalgoods. The nascent private sector was insufficient to meet thedemand for capital goods, owing to which the state �steppedin with a vision of a mixed economy� approach. In 1969-84,the state nationalised private sector companies andmonopolieswere created in the public and private sectors owing to animport substituting industrial development policy. 42

The panel of experts on reforms in CPSEs recommended(in point 4.1) that the CPSE Board of Directors should begiven greater autonomy to select consultants, vendors withproprietary technologies, technology partners, JV partners,and companies for acquisition.43

The CPSEs have active participation both by members ofthe government and by independent directors.44 The matterspertaining to decision-making (which may include elementspertaining to conduct of procurement) are generally


demarcated by the Articles of Association of a company.Though the number of government appointees on the Boardof Directors of PSEs is limited to two, these directorsinformally wield power in influencing decision-making evenon matters which may not require direct governmentalapproval. �Functional Autonomy� has been recommended asthe way forward in order to motivate good performance. 45

A Memorandum of Understanding (MoU) concludedbetween the government and the management of public sectorenterprises is a �[N]egotiated document between thegovernment and the management of the enterprise clearly theobjectives of the agreement and the obligations of both theparties� with the main purpose of providing a �level-playingfield� to public sector enterprises and the corporate sector.46

MoUs are concluded in the steel, power, pertroleum, fertiliserand petro-chemicals sectors.47 Subsidiary corporations signMoUs with the holding companies similar to the conclusionof an MoU between a CPSE and Government of India.48

The recommendations of the Ad-Hoc Group of Experts(AGE) with respect to CPSEs which were approved by thecabinet were to enhance the powers of Navratna, Miniratnaand other profit-making CPSEs.49

The Arjun-Sengupta Committee Report recommended thatthe �Award of Contracts and Procurement Decisions�pertaining to CPSEs should fall outside the scope of governmentintervention (except the limited extent of the CVC and theCAG).50

Over time, beyond the delegation of financial andadministrative powers like (i) wage revision; (ii) incentiveschemes; (iii) voluntary retirement schemes, (iv) transfer offunctional directors and (v) foreign tours of functionaldirectors, financial powers to incur enhanced capitalexpenditure have been specified;51 investments of up to INRone crore can be made without the prior approval of the


government for additions, modifications and new investments,and investments up to INR 100 crore can be made to incurexpenditure on replacement, renewal of assets if the followingconditions are satisfied: (i) the funds can be sourced by theinternal resources of the company, and the expenditure isincurred on schemes included in the capital budget; (ii) thenew items should have been identified and discussed at theannual plan discussions; (iii) for repairs and maintenance, thepowers being exercised should be within the limits decidedupon in the annual plan discussions.52

ProcurementCurrently the procurement made by CPSEs is governed by

their own independent procurement procedures which arebased on the General Financial Rules (GFR) laid down by theDepartment of Expenditure, Ministry of Finance. The centralgovernment, CPSEs, autonomous and statutory bodies aresubject to audit by the Comptroller and Auditor General ofIndia. Despite having their own procurement rules, they arealso required to follow the guidelines issued by the CentralVigilance Commission. 53

Maintaining an Independent Purchase PreferencePolicy

The government reviewed the Purchase Preference Policyfor Products and Services of Central Public Sector Enterpriseson 25.10.2007, and decided to terminate the policy from31.03.2008 in view of the decision of the Supreme Court inthe matter of M/s Caterpillar India Pvt. Ltd. v. WesternCoalfields Limited.54 However, sector-specific preferentialpurchase policies evolved by certain ministries/departmentsare not covered by this decision. In fact the governmentexplicitly provides that ministries/departments may


independently evolve/review preferential policies for sectorsthey identify as warranting concern.55 The Supreme Courthad called for an analysis to be undertaken on whether thepublic sector enterprises required such preference to beaccorded to them.

Moving Forward: CompetitionMeasures to induce competition in public sector enterprises

included the following: (i) mandating that PSEs reduce theirdependence on the government; (ii) listing PSEs listed on thestock exchange; (iii) privatising PSEs.56 Loss-making CPSEsshould be either subject to disinvestment, or laid open forauctioning of assets and infrastructure by the other CPSEsetc. Currently, the government has decided to disinvest aminority stake in Rashtriya Ispat Nigam Ltd., HindustanAeronautics Ltd, Bharat Heavy Electricals Ltd., and SteelAuthority of India.57 Forty of the CPSEs were listed as of31.03.2008.

The Electricity Sector: Access to electricity is considered amajor indicator of growth. The electricity sector falls underthe concurrent list � the centre is responsible for the creationof policies and the states are required to facilitate and providefor power generation and supply to consumers. The ElectricitySupply Act, 1948 envisaged the formation of State ElectricityBoards.58 Electricity generation resources are unevenlydistributed throughout the country. While hydro resourcesare located in the Himalayan foothills and the North Easternregions, coal is located in the Bihar-Jharkhand-West Bengalarea, with some reserves found in Andhra Pradesh andMadhyaPradesh. Lignite is available in Tamil Nadu and Rajasthan.59

The centre created the National Hydroelectric PowerCorporation and the National Thermal Power Corporation(NTPC) in 1975 in order to press for power generation.60


Currently the focus is on renewable energy sources. Inorder to encourage states to build infrastructure to exchangepower between states, the laying of inter-state lines wasrequired. In order to incentivise the laying down of the inter-state lines, centrally sponsored schemes were created andinterest free loans were given outside the state plans. Fifty-five such inter-state lines were constructed.61

In this portion, we examine the frameworks in which theentities for an Annex I, Annex II, and Annex III entity offercan possibly be tabled by India. The portion pertaining toAnnex IV/Annex V (services) has not been covered in thispart of the report.

Under the Public Procurement Bill, 2012, public privatepartnerships by a procuring entity, or through an agency areincluded within the scope of procurement.62 Public PrivatePartnership means an arrangement between a government/statutory entity/government owned entity on the one side anda private sector entity on the other, for the provision of publicassets and/or public services, through investments being madeand/or management being undertaken by the private sectorentity, for a specified period of time, where there is well definedallocation of risk between the private sector and the publicentity and the private entity receives performance linkedpayments that conform (or are benchmarked) to specified andpre-determined performance standards, measurable by thepublic entity or its representative.63

There were 65 PPP projects in India in 2011. Thegovernment support for project revenue amounted toUS$625.9mn through channels like annuity payments, or userfees, annuity payments, and/or real estate developmentrevenues.64 The popular forms of financing used for certaincentral projects have been provided in Table 4.14.

The financial arrangements or contractual payments whichcan be used for PPP projects may be contractual payments


(advance payments, progress payments, final payments,annuities) or grants-in-aid (block grant, capital grant, matchinggrant, institutional support, etc). Highway Projects can betaken up on toll and annuity bases, whereas the projects withreal estate component can be taken up on a user-charge basisand social sector projects (education, health, irrigation, watersupply ) on an annuity basis65 .

Regulatory Framework for Public Private Partnerships inIndia

Public Private Partnership Appraisal Committee comprisesof the following: (i) Secretary, Department of Economic Affairs(Chairman), (ii) Secretary, Planning Commission, (iii)Secretary, Department of Expenditure, (iv) Secretary,Department of Legal Affairs; and (v) Secretary of theDepartment sponsoring a project.66 The PPP processconstitutes the following stages: (i) Identification; (ii)Development; (iii) Procurement; (iv) Contract Managementand Monitoring. As per the Scheme and Guidelines forFinancial Support to Public Private Partnerships inInfrastructure, though there is an option to exclude or includecertain sectors, the PPP Project is required to be from one ofthe following sectors67 :

Public Private Partnerships may be classified as follows:1. Service contracts2. Operation and maintenance contracts3. Capital projects with operation and maintenance

contracts68

Unlike in private ownership joint ventures, under PPPprojects, the government/public sector continues to retain thelegal ownership of assets. The private partner operates theproject only for a period known as the concession period.The assets are transferred to the government at the conclusion


of the concession period. The government makes investmentsand minimises risk through risk-sharing and subsequentrevenue-sharing.

Sectors in which PPPs operate in India1. Roads and bridges, railways, seaports, airports, inland

waterways;2. Power;3. Urban transport, water supply, sewerage, solid waste

management and other physical infrastructure in urbanareas;

4. Infrastructure projects in Special Economic Zones; and5. International convention centres and other tourism

infrastructure projects.

Viability Gap FundingThe conditions which are required to be fulfilled for

justifying the use of Viability-Gap-Funding are the following:1. The tariff/user charge cannot be increased to eliminate

or reduce the viability gap of the PPP;2. The term of the project cannot be extended in order to

reduce the viability gap;3. There can be no further reduction of capital costs in

order to reduce the viability gap, and that the capitalcosts are reasonable.

The maximum quantum of viability gap funding can onlybe 20 percent of the total project cost: in certain cases, thegovernment or statutory entity which owns the project mayprovide additional grants to the extent of a further twentypercent. The viability gap funding can be in the form of a capitalgrant, at the stage of project construction.� Projects up to INR100 crore have to be sanctioned by the

Empowered Institution;


� Up to INR200 crore, have to be sanctioned by theEmpowered Committee;

� And Above, INR200 crore have to be sanctioned by theEmpowered Committee with the approval of the FinanceMinister.

Projects currently meeting the eligibility criteria are fundedon a first come, first serve basis. It is envisaged that a formulawill be developed in order to encompass a broad sectoralcoverage, and to avoid the pre-emption of funds by a few largeprojects. This raises a question as to why projects are notcategorised by their socio-economic impact. A better basiscould be deployed to allocate the funds in a judicious manner.

Table 4.16: Development Expenditure andNon-DevelopmentExpenditure Items for the Government of India

Expenditure Items 2011-2012(in Rupees Crore)

Developmental Expenditure 1225394.75

Social and Community Services 596507.2

Education, art and culture 292534.38

Agriculture and Allied Services 171231.91

Power, Irrigation and Flood Control 129733.13

Transport & Communications 122582.91

Medical and public health and water supply and sanitation 100604.85

Rural Development 99397.2

Roads & Bridges 94929.82

Social Security and Welfare 71498.04

General Economic Services 62417.67

Power Projects 56870.99

Industry and Minerals Less DCUs 54568.26

Others 52730.21

Fertiliser Subsidy 49997.87


UrbanDevelopment 46655.36

Major and medium irrigation 43845.28

Crop Husbandry 31305.72

Others 24220.13

Housing 23713.68

Others 23462.11

Scientific Services and Research 21891.07

Railways 20000

Family Welfare 17690.93

PublicWorks 17481.67

Minor Irrigation 17049.76

Others 11967.1

Others 11956.22

Animal Husbandry 8544.3

Labour & employment 8109.31

Foreign Trade and Export Promotion 4867.26

Co-operation 4820.2

Soil and Water Conservation 3700.21

Civil Aviation 2466.32

Food Storage andWarehousing 2254.54

Dairy Development 1809.81

Ports, light houses and shipping 1724.66

Broadcasting 1631.58

Posts and Telecommunications 874.13

Relief on account of natural calamities 221.78


Expenditure Items 2011-2012(in Rupees Crore)

Non-Developmental Expenditure 1100828.64

Interest Payments 401185.71

Pension and retirement benefits 171659.34

Defence Services 164415.49

Administrative Services 139428.5

Police 87454.403

Food Subsidy 63676.42

Centre 60572.98

Others 48468.65

Fiscal Services 34512.33

Compensation and assignment to local bodies 32980.22

Others 31738.86

Social Security and Welfare 31566.32

Tax Collection Charges 23601.3

Organs of State 17086.07

Subscription to the IMF 8767.75

Relief for natural calamities 7465.37

External Affairs 3505.48

States 3103.44

Technical and economic cooperation with other countries 2650.01

Border Roads 2463.97

Others 2143.28

Currency, Coinage and Mint 0


ConclusionThis chapter has identified the entities in Annex I(important

ministries) and Annex III(maharatnas and navratnas) whichmay be targeted by negotiating parties.

While listing entities the new entrant has three optionsnamely using a positive list, listing through reference to a law/regulation/rule, and by making a generic reference. The newentrant should consider which approachwould suit its interestskeeping in mind the guidance given in Chapter III.

For Annex I entities, it has been suggested that entitiesshould be listed through the use of the First Schedule of theGovernment of India (Allocation of Business) Rules, 1961.

Entities which undertake procurement for commercialpurposes, specific ministries which undertake procurementwhich could impact national security and specific procurementof foodgrains, and procurement which is undertaken pursuantto international food aid programs etc. have been proposedfor exceptions under Annex I.

With respect to Annex II, the focus has been on drawingout the fact that India, similar to the United States should bein a position to argue that it cannot subject the stategovernments to disciplines pertaining to procurement whichare undertaken by the Central Government.

Similarly, it has been noted that owing to the increasinglevel of independence of Public Sector Enterprises, they maynot be subject to commitments taken by India at aninternational level.

However, with respect to Annex III entities, variousapproaches for listing entities have been provided in thechapter. It is recommended that innovative conditions beincluded (such as requiring back-end infrastructure asadvanced in the FDI policy on retail) in order to augmentinfrastructure capacities. Furthermore, it may be efficient toexplore channels through which the electricity sector can be


improved in India through the use of PPPs in the Agreementon Government Procurement.

Under Annex IV, the 358 products which have beenidentified for preferential purchase from MSMEs should beexcluded for the purpose of procurement.

Owing to the fact that expenditure in India is strongly basedon welfare objectives, these goals are certain to permeate intoany international obligations that India may undertakepertaining to government expenditure, and procurement. It iscritical to weave in horizontal objectives in order to effectivelyenforce the same.


Endnotes1 Second Schedule, Allocation of Business Rules, available at http://

cabsec.nic.in/files/allocation/abr_scnd.pdf, accessed on 12.12.2012.

2 �List of Maharatna, Navratna and Miniratna CPSEs� available athttp://dpe.nic.in/publications/list_of_maharatna_navratna-and_miniratna, last accessed on 18.03.2013.

3 Navratna Status: A Miniratna Category I CPSE should score above60 out of 100; other conditions (i) Net profit to Net Worth (25marks); (ii) Earnings Per Share (EPS) (10 marks); (iii) ManpowerCost: Cost of Production or Services (15 marks); (iii) Gross Profitout of Turnover (15 marks). See Also �No proposal to relax normsto grant Navratna tag to CPSEs� Nov 23, 2012, The EconomicTimes, available online at http://articles.economictimes.indiatimes.com/2012-11-23/news/35317432_1_navratna-status-project-or-wholly-owned-subsidiary-cpses, accessed on 27.11.2012.

4 Page 1 GOI 2007, National Survey on State Level PublicEnterprises, Department of Public Enterprises, Government ofIndia, available at http://dpeslpe.gov.in/AboutUs.htm, Departmentof Public Enterprises, Government of India, last visited on27.11.2012.

5 Pg 253. P. Wang, R. Perin and D. Casalini (2011). AddressingPurchasing Arrangements between Public Sector Entities: What canthe WTO learn from the EU�s experience? In S. Arrowsmith and R.Anderson (Ed.), The WTO Regime on Government Procurement:Challenge and Reform (pp.252- 282), New York, NY: CambridgeUniversity Press.

6 Seventy-four drugs which are mentioned as scheduled drugs underthe Drugs (Price Control) Order, 1995 are subject to price control;Sugarcane is subject to both a Statutory minimum price, and a Fairand Remunerative Price�. Among fertilisers, urea is subject to pricecontrol.

7 Farmers get a minimum assured price under the Price SupportScheme (PSS) � look up agricoop.nic.in/Agristatistics.htm.

8 Of importance if any cultural exemption is claimed.

9 This exercise is purely academic, and cannot be held to amount to arepresentation of a possible Indian offer, if in the event the Indiangovernment undertakes accession into the GPA.


10 International Monetary Fund, �The Expenditure Aggregates andData Sources�, Section 2 of Guidelines for Public ExpenditureManagement, Available online at http://www.imf.org/external/pubs/ft/expend/guide2.htm, accessed on 12.12.2012

11 Fn 8 - International Monetary Fund, �The Expenditure Aggregatesand Data Sources�, Section 2 of Guidelines for Public ExpenditureManagement, Available online at http://www.imf.org/external/pubs/ft/expend/guide2.htm, accessed on 12.12.2012

12 Page 5. Pratap Ranajn Jena (2010) India Public Expenditure andFinancial Accountability: Public Financial ManagementPerformance Assessment Report, National Institute of PublicFinance and Policy, Delhi, accessed at http://www.pefa.org/sites/pefa.org/files/attachments/IN-Mar10-PFMPR-Public.pdf.

13 Explanation to Rule 4 on �Inter-departmental Consultations� TheGovernment of India(Transaction of Business) Rules, 1961.

14 Rule 4 on �Inter-departmental Consultations�, The Government ofIndia(Transaction of Business) Rules, 1961.

15 Rule 4(2), The Government of India(Transaction of Business)Rules, 1961.

16 Second Schedule on �Distribution of Subjects Among theDepartments� (pursuant to Rule 3 of Government of India(Allocation of Business) Rules, 1961 under the purview of Article77(3) of the Constitution available at http://cabsec.nic.in/files/allocation/abr_scnd.pdf, accessed on 12.12.2012.

17 �Guide to the Finance Accounts� , available at http://aghr.cag.gov.in/Fin/engv12009/Guide.pdf, accessed on 12.12.2012.

18 �Plan expenditure� refers to the expenditure undertaken under thedevelopment schemes during a Five Year Plan. Some of the Planexpenditure may carry over some expenditure from earlier five-yearplans. These may be referred to as �spill-overs�.

19 Government of India, Planning Commission of India (2011),Report of the High Level Expert Committee on EfficientManagement of Public Expenditure.

20 Government of India, Planning Commission of India (2011),Report of the High Level Expert Committee on EfficientManagement of Public Expenditure.

21 Section 2(u) indicates that a �Procuring entity� means an entityreferred to in sub-section (2) of section (3).


22 Page 2, Amaresh Bagchi, �Fifty Years of Fiscal Federalism in India:An Appraisal�, Kale Memorial Lecture, delivered at the GokhaleInstitute of Politics & Economics, Pune, December 8, 2001.Available online at

23 Ibid.

24 In the year 2002-2003.

25 The Centre broached into the legislative areas of the state andenacted the Urban Land (Ceiling and Regulation) Act of 1976 eventhough land is a state subject. A similar enactment was the EssentialCommodities Act of 1955.

26 Supriyo De (2012) �Fiscal Policy in India: Trends and Trajectory�available at http://finmin.nic.in/workingpaper/FPI_trends_Trajectory.pdf, accessed on 12.12.2012.

27 Non-Plan transfers comprise of Finance Commission grants andother Non-Plan grants.

28 The four types of Plan grants are as follows: (i) State Plan Schemeswhich include Normal Central Assistance and other Scheme basedCentral Assistance; (ii) Centrally Sponsored Schemes for whichfunds are made available through the consolidated fund of theStates; (iii) Centrally Sponsored Schemes for which the funds aretransferred directly to State/District Level Autonomous Bodies/Implementing Agencies and (iv) a small portion of FinanceCommission grants which are treated as Plan Grants.

29 Article 249: Power of Parliament to legislate with respect to a matterin the State List in the national interest: - (1) Notwithstandinganything in the foregoing provisions of this Chapter, if the Councilof States has declared by resolution supported by not less than two-thirds of the members present and voting that it is necessary orexpedient in the national interest that Parliament should make lawswith respect to any matter enumerated in the State List specified inthe resolution, it shall be lawful for Parliament to make laws for thewhole or any part of the territory of India with respect to thatmatter while the resolution remains in force.

30 Article 252: Power of Parliament to Legislate for Two or MoreStates by Consent and Adoption of Such Legislation by any otherState: - (1) If it appears to the Legislatures of two or more States tobe desirable that any of the matters with respect to whichParliament has no power to make laws for the States except asprovided in articles 249 and 250 should be regulated in such Statesby Parliament by law, and if resolutions to that effect are passed by


all the Houses of the Legislatures of those States, it shall be lawfulfor Parliament to pass an act for regulating that matter accordingly,and any Act so passed shall apply to such States and to any otherState by which it is adopted afterwards by resolution passed in thatbehalf by the House or, where there are two Houses, by each of theHouses of the Legislature of that State.

(2) Any Act so passed by Parliament may be amended or repealedby an Act of Parliament passed or adopted in like manner but shallnot, as respects any State to which it applies, be amended orrepealed by an Act of the Legislature of that State.

31 Article 253: Legislation for Giving Effect to InternationalAgreements: Notwithstanding anything in the foregoing provisionsof this Chapter, Parliament has power to make any law for thewhole or any part of the territory of India for implementing anytreaty, agreement or convention with any other country orcountries or any decision made at any international conference,association or other body.

32 AIR 1994 Bom 323

33 Point 6.2.16.5 (viii) was inserted through Press Note No. 5 (2012Series) pertaining to the �Review of the policy on Foreign DirectInvestment- allowing FDI in Multi-Brand Retail Trading� was issuedby the Department of Industrial Policy & Promotion.

34 �FDI in multi brand retail doesn�t violate current agreements:Government� September 18, 2012, Economic Times, Available athttp://articles.economictimes.indiatimes.com/2012-09-18/news/33926174_1_multi-brand-fdi-general-agreement, accessed on04.01.2013.

35 Section 3 of the Public Procurement Bill outlines the applicability ofthe Public Procurement Bill to the following procuring entities: (a)Ministry or Department of the Central Government or a unitthereof or its attached or subordinate office to which powers ofprocurement have been delegated; (b) any Central Public SectorEnterprise or Undertaking owned or controlled by the CentralGovernment; (c) any company in which more than fifty per cent ofthe paid-up share capital is held (i) by the Central Government ; or(ii) by one or more companies in which the Central Governmentholds more than fifty per cent of the paid-up share capital; or (iii) bythe Central Government and one or more companies in which theCentral Government holds more than fifty per cent of the paid-upshare capital; (d) any body established or constituted under theConstitution whose expenditure is met from the Consolidated Fund


of India; (e) any board or corporation or authority or society ortrust or autonomous body (by whatever name called) established orconstituted under an Act of Parliament or a body owned orcontrolled by the Central Government; (f) any other entity whichthe Central Government may, by notification, specify to be aprocuring entity for the purpose of this Act, being an entity thatreceives substantial financial assistance from the CentralGovernment in so far as the utilisation of such assistance towardsprocurement is covered.

36 Government of India �Organisation of Public Enterprises� 3rd FiveYear Plan, available at http://planningcommission.nic.in/plans/planrel/fiveyr/3rd/3planch16.html.

37 Government of India �Organisation of Public Enterprises� 3rd FiveYear Plan, available at http://planningcommission.nic.in/plans/planrel/fiveyr/3rd/3planch16.html.

38 Page 71, P. Kautish () �Study on Impact of Environmental Changeon Selected Public Sector Enterprises in India� Romanian Economicand Business Review 5 2 68-88.

39 Page 72, P. Kautish () �Study on Impact of Environmental Changeon Selected Public Sector Enterprises in India� Romanian Economicand Business Review 5 2 68-88. The study undertaken by PradeepKautish assesses the impact of two types of reform amongst PublicSector Companies on profitability: Profitability is measuredthrough two specific financial ratios, return on assets, and returnon sales. It was found that the delegation of autonomy has apositive impact on both indicators. However, partial privatisationwas not evidenced to have positively impacted the profitabilityratios.

40 GOI, Ministry of Heavy Industries & Public Enterprises,�Recommendations of Arjun Sengupta Committee Report� dated30.07.2012, available online at http://pib.nic.in/newsite/PrintRelease.aspx?relid=87029, accessed on 14.12.2012.

41 GOI (2011) �Report of the Panel of Experts on Reforms in CentralPublic Sector Enterprises (CPSEs)� Panel Report, PlanningCommission, Government of India. URL

42 The Public Enterprises Selection Board (http://pesb.gov.in/) providesinformation on the management structure of every Central PublicSector Enterprise.




45 Organisation/Functioning of the Boards of Public SectorEnterprises- Decisions of the Government on the Recommendationsof the Economic Administration Reforms Commission Report on�Government and Public Enterprises-Top Management andBoards�. BPE O.M. No. 18/1/84-GM dated 19th September, 1984,available online at http://dpe.nic.in/important_links/dpe_guidelines/personnel_policies/glch2bindex/glch02b10, accessed on12.12.2012.

46 Government of India, Department of Public Enterprises, MoUDivision, available at http://www.dpemou.nic.in/, accessed on12.12.2012.

47 Ibid.

48 Office Memorandum No. 3(10)/2008-DPE(MoU), Department ofPublic Enterprises, �Guidelines for signing Memorandum ofUnderstanding (MoU) between CPSEs and GovernmentDepartments/Ministries; and between Subsidiary CPSEs andHolding Companies for the year 2009-10, dated 26th December2008.

49 GOI, Ministry of Heavy Industries & Public Enterprises,�Recommendations of Arjun Sengupta Committee Report� dated30.07.2012, available online at http://pib.nic.in/newsite/PrintRelease.aspx?relid=87029, accessed on 14.12.2012.

50 Recommendation 2.14, Report of Ad Hoc Group of Experts onEmpowerment of Central Public Sector Enterprises, Department ofPublic Enterprises (2005), available online at http://dpe.nic.in/publications/report_of_ad_hoc_group_of_experts_on_empowerment_of_cpses,accessed on 14.12.2012.

51 �Delegation of Powers to Public Sector Undertakings SigningMemoranda of Understanding with the Government�. BPE 1(18)/88-Fin.(PPU) dated 19th October 1998,aAvailable at http://dpe.nic.in/important_links/dpe_guidelines/memorandum_of_understanding/glch051, accessed on 12.12.2012.


52 DPE O.M. No. 1 (18)/86-DRE (MoU) dated 29th August, 1990�Delegation of Enhanced Powers to Board of Directors of MoUsigning Public Sector Enterprises to Incur Capital Expenditure�,available at http://dpe.nic.in/important_links/dpe_guidelines/memorandum_of_understanding/glch052, accessed on 12.12.2012.

53 Statement of Objects and Reasons, The Public Procurement Bill,2012, issued on 2nd May 2012.

54 Review of Purchase Preference Policy for Products and Services ofCentral Public Sector Enterprises (CPSEs) in view of the judgment ofthe Supreme Court of India in the matter of M/s Caterpillar IndiaPvt. Ltd. v. Western Coalfields Limited, Circular No. 31/10/09,Available at http://dpe.nic.in/important_links/dpe_guidelines/price_purchase_preference/glch0612, accessed on 14.12.2012.

55 Point 3, Op. Cit (earlier note).


57 �Govt Hopeful of Achieving Rs 30,000 crore disinvestment target�Nov 22, 2012, The Economic Times, available online at http://articles.economictimes.indiatimes.com/2012-11-22/news/35300713_1_disinvestment-target-stake-sale-hindustan-copper,accessed on 27.11.2012.

58 GOI (2011) �Annual Report on Working of State Power Utilities &Electricity Departments�. Annual Report, Planning CommissionGovernment of India. URL. http://planningcommission.nic.in/.




62 Section 2(r), Public Procurement Bill, 2012.

63 Draft National Public Private Partnership Policy, 2011. Departmentof Economic Affairs, Government of India, http://www.pppinindia.com/pdf/draftnationalppppolicy.pdf, visited on25th October 2012.


64 Public-Private Infrastructure Advisory Facility (September 2012)Government Support to Public Private Partnerships: 2011Highlights, Private Participation in Infrastructure Database, PPIData Update Note 78, World Bank Group.

65 Para 6.34, Rangarajan Committee Report, Page 51.

66 Department of Economic Affairs, Ministry of Finance, (2008)Scheme and Guidelines for Financial Support to Public PrivatePartnerships in Infrastructure.

67 Department of Economic Affairs, Ministry of Finance, (2008)Scheme and Guidelines for Financial Support to Public PrivatePartnerships in Infrastructure.

68 Point 5.12, Department of Economic Affairs, Ministry of Finance,(2008) Scheme and Guidelines for Financial Support to PublicPrivate Partnerships in Infrastructure

5Conclusion

The first portion of the study presented compelling findingson how accession to the GPA was most likely inconceivableuntil we had �cleaned up our own house�, expungedcorruption, and increased our competence in core sectors.

The final question addressed in this study is whetherdecision-maker possess unqualified latitude to time theirdecision to accede/desist from accession to the WTO GPA.The factors which have to be taken into consideration whilemaking this decision are that of market access opportunitiesand political leverage. If market access opportunities whichare exclusive to GPA accession are lost, the costs of notacceding to the GPA may become increasingly morepronounced. Even those developed countries which have sofar remained outside the scope of the GPA have observedthat they may reconsider the decision to desist from joiningthe GPA if the membership of the WTO GPA increases. Thisis because the member-countries of the GPA may blockprocurement opportunities for countries outside the GPA.

The most compelling message of this study is that thisimportant decision has to take into consideration lost marketaccess opportunities, defending market access which hasalready been tapped into and political leverage to create


valuable opportunities in procurement by including welfare-inducing objectives.

Do the GPA disciplines govern certainty of Market Access?No.

The GPA contains disciplines limited to assuring thatconduct of procurement by a listed entity in such a way as toensure that �covered procurement� is conducted in a fairmanner. The facets pertaining to market access in the GPA isless regulated by the disciplines of the agreement itself, asthey are governed by the terms which are crystallised followingnegotiations. Market access is influenced mostly byconsiderations pertaining to reciprocity.

Does accession to the GPA insulate a new entrant from theapplication of Buy National Laws? No.

Article III: 8 of the GATT exempts governmentprocurement from having to adhere to national treatmentnorms. Owing to the operation of the different Buy Nationallegislation (the recourse to which is attained only by becominga member of either the GPA or an FTA with a country whichimposes such a Buy National obligation), a large number ofcountries which are currently not members of the GPA arefacing the possibility of having large markets closed off tothem. Though entry into the GPA affords a channel tonegotiate the waiver of Buy National or Buy Local laws, itmay not conclusively indicate that a new entrant is guaranteedaccess to all the markets closed off through those laws.

This chapter considers certain objectives pertaining tomarket access, incorporating welfare-related objectives intoprocurement, and applies them to the options present beforeIndia.


ObjectivesThe objectives which are generally pursued by countries

exploring accession to the GPA, which may also be applicableto India, are the following:

1. The �Market Access� Objective� Increasing Market Access for Domestic Suppliers in

Other Markets by concluding bilateral or multilateralagreements/ exploring production capacities in marketsexclusive to government procurement (outside thepurview of disciplines of the Agreement).

� Defending Market Access in Domestic Markets: byadvancing certain sectors/entities as exemptions/exclusions in the negotiated agreements/maintainingNon-Tariff Barriers (NTBs) (which may fall outside thepurview of disciplines mandated by the GPA) ormeasures which aid in the satisfaction of social objectives(which may fall outside the purview of the disciplinesof the GPA).

� Decreasing Market Access for Foreign Suppliers inDomestic Markets by maintaining NTBs, Buy NationalLaws, etc which may generally operate outside thepurview of the disciplines of the GPA.

� Contesting market access opportunities in OtherMarkets currently accessed by Foreign Suppliers byimproving competitiveness, and providing intermediategoods for accessing markets which may be closed offby Buy National Laws, etc.

2. �Political Leverage� as an Objective: Political Leveragefollowing membership of the GPA includes the following:Being in a position to create market access opportunitiesfor a Newer �New Entrant�; being able to influence the


evolution of disciplines governing horizontal policies andnon-trade barriers.

3. �Welfare� as an Objective: India has expounded welfareideals at every level of policy-making. This is evident inthe amount expended as plan expenditure and the amountset aside for developmental expenditure. Facilitatingtechnology transfer, enabling sustainable procurement,affording labour-intensive industries increased marketaccess, allowing for burgeoning employment opportunitiesthrough conditions enforceable through governmentprocurement contracts are examples of welfare-inducingobjectives.

4. �Preserving Policy Space� as an Objective: At various levels,it may be essential to �preserve policy space� in order tocapture the pertinent negotiating space to enact economicor social policies which run concomitantly with the valuesof procurement.

5. �Transparency� as an Objective: Though accession to theGPA may require a new entrant to overhaul its domesticprocurement capabilities, the extent to which this valueinforms and influences the entry of a new entrant into thedisciplines of the GPA may not be considerable. The firstpart of the study dealt with this aspect of governmentprocurement in detail. The current study will refrain fromcommenting on these aspects of procurement � however,it is acknowledged that they do inform the decision-makingprocess.

WayForwardMaking the First Decision: To Negotiate InternationalCommitments/ Refrain and Maintain Status Quo

Can a new entrant preserve market access while remainingoutside the GPA? Can a new entrant preserve market accessand tap into new market opportunities pertaining to


government procurement outside the GPA? These questionshave to be explored after quantification of various factors inorder to inform this decision.

Constituting a mechanism to measure market access isseminal. This must be followed by a detailed analysis ofprocurement within the country and procurementopportunities in foreign markets. A cost-benefit analysis mustbe undertaken � this provides a number which may indicatewhether negotiations for the GPA or entering into a bilateralagreement is essential/beneficial/derogatory to India�sinterests.

Every entity which undertakes procurement at the central,state and PSE and State Level Public Enterprise level must besubject to the following questions.� How much of procurement is undertaken bywhich entity,

of what good or service;� Which goods constitute a large portion of the procurement

undertaken by the entity?� Who are the current suppliers?� With the information availed of, undertake the following

internal analysis entity-wise:- Apportion the suppliers intoDomestic Suppliers, Foreign

Suppliers.- Amongst Domestic Suppliers, further divide the

suppliers into suppliers from labour-intensive sectors,MSMEs etc;

- Determine if the goods can be procured cost-effectivelyfrom other markets (taking into account logisticalindicators and maybe applying the Gravity Equation1)

� Categorise the social policies which need to be prioritisedand maintained.

Measuring Market Access � Tracking mechanisms mustbe constituted in order to determine the extent to which


market access is lost to the suppliers of India owing toplurilateral/bilateral commitments pertaining to the GPA.

Defending and Creating Market Access � Options mustbe explored for defending market access. These optionsinclude concluding independent agreements with member-countries which maintain non-tariff barriers or Buy Nationalpolicies in order to defend market access in these territories.

The conditions pertaining to green procurement etc, mayportend new market opportunities if handled appropriately.Similarly identifying the market for intermediate products mayallow a new entrant or a country with India�s trade/production profile to obtain maximum benefit by workingwith these new laws/policies, thereby creating market accesseven outside concluding any international commitments tothat effect.

This analysis should be further enriched by quantifyingbarriers faced by suppliers when accessing new markets.These include SPS, TBT measures, measures taken to advancegreen procurement, security interests, etc and other exclusionsbothwithin the scope of theWTOGPAand thosewhich operateoutside of the purview of these disciplines. The followingoptions (Box 5.1) present themselves to a new entrant:

Box 5.1: Options for a New Entrant

� Maintain Status Quo with the WTO GPA/Alter StatusQuo with the WTO GPA

� Conclude Bilateral Agreements which deal with targetedareas of procurement beneficial to the New Entrant

� Conclude Bilateral Agreements which accord a waiverof Buy National Laws to the New Entrant

� Conclude equivalence agreements pertaining to TBT andSPS Barriers

� Conclude equivalence agreements pertaining to GreenProcurement opportunities


Policy Stance 1: Maintain Status Quo with the GPA andbilateral trade relations in procurement and disciplinespertaining to procurement;

Policy Stance 2: Maintain atatus quo with the GPA, butconclude different agreements pertaining to bilateralcommitments which defend current market access and createmarket access opportunities.

As has been mentioned earlier, maintaining status quo andabstaining from undertaking any bilateral/multilateralcommitments pertaining to the GPA must be an informeddecision in itself. While �political leverage� and �inducingwelfare through government procurement� cannot bequantified, they should be offered as pertinent factors todecision-makers. The decision on whether to undertakeinternational commitments pertaining to the GPA/otherbilateral agreements must be taken after considering thesefactors. Decision-making w.r.t undertaking a bilateralcommitment on the GPA is outside of the scope of this analysis.

Negotiating Entry Conditions for a New EntrantIn the event the decision to negotiate international

commitments pertaining to the GPA are undertaken, thefollowing analysis applies. This analysis is undertaken for a�New Entrant�. In certain specific situations, the case of Indiais considered. It is reiterated that these hypotheticalconsiderations do not indicate India�s entry or India�s plausibleentity offer.

Calculate Negotiating CapitalThe amount of procurement undertaken by the central,

sub-central and �other entities� in a country must be estimated� this provides a new entrant with an indication of the potentialmarket access. This also provides the new entrant with anindication of the amount of �Negotiating Capital� it can availof.2


Forecasting Market Access OpportunitiesWhile considering market access, there are a few

scenarios(presented in Box 5.2) in which we can forecastmarket access opportunities. It is seminal to note that thesescenarios may significantly modify the quantitative andqualitative aspects informing the negotiation.

Box 5.2: Scenarios Altering Market Access

1. Scenario A [Evolution of a new Market for Goods andServices exclusively/dominantly purchased by theGovernment]It is assumed, there may be a certain revealed preferenceby governments for certain products which may not beadequately represented by consumer markets alone. Thiscan result in indicating a fresh market for GPAopportunities.

1. Quantum of Government Purchasesi. Government Purchases increaseii. Government Purchases decrease owing to factors

such as decentralisation, and delegation ofprocurement to private bodies

With time, existing member countries and new membercountries may submit a large number of the entitiesengaged in procurement to the disciplines of the GPAthereby increasing the value of the accessible market.Alternatively, the opposite can occur, and countries maypresent offers with entities which do not undertake thebulk of the procurement, or raise thresholds, or applyexclusions and exemptions.


Claiming Value or Creating Value in a NegotiationThe process of negotiations as analysed in chapter 3, part

II dealing with country experiences during accession seem toincline more towards claiming value than creating value.Considering India has no obligation to enter the GPA, it canleverage its huge market in order to utilise the flexibilities inthe agreement in the negotiating process in order to �createvalue�.

2. Scope of Government Purchases submitted to thedisciplines of the GPAi. Limited scopeii. Expansive scope

2. Scenario B [Defending Market Access in Buy NationalPolicies]1. Growth/Decrease of the number and Extent of Buy

National Policiesi. Proliferation of Buy National Policies or

Reciprocity Arrangementsii. Buy National Policies abate

2. Concluding Bilateral Agreementsi. The New Entrant/India concludes specific bilateral

agreements which grant a waiver to the NewEntrant while dealing with Buy National Policies,thereby defending market access.

ii. The New Entrant does not conclude specificbilateral agreements, or take any other measureswhich would allow it to defend market access.


Time as ContextA second element which informs this negotiation and

provides a three-dimensional outlook is that of time: Forexample, Buy National laws may increase/decrease; a playerlike China may influence the development of disciplines inthe GPA and thereby make it easier for other developingcountries to enter the GPA; conversely, Chinese accessionmay result in evolving rigorous disciplines for countries whichhave sizeable state enterprises. The GPA is dynamicallyevolving, informed by the predominant systems ofprocurement and practices of its current members.

Prioritise Issues for NegotiationIt is vital to prioritise critical issues for negotiation and

apportion the negotiating capital at the various levels of thenegotiation accordingly so that a new entrant can trade offissues in the different stages of the negotiations.

If a new entrant first concludes FTA commitments priorto entering the GPA, those standards (thresholds, annex offers,etc) may constitute the minimum expectations that membersmay have when it does enter the GPA. This is despite the factthat the disciplines pertaining to Most-Favoured Nation areabsent in the GPA.

While commencing the negotiations it may be very likelythat the two most critical issues pertaining to the negotiationmay be the following: (i) Procurement of sub-central entitiesand (ii) Procurement pertaining to the provision of utilities.

International Framework as ContextThe negotiations on obligations pertaining to government

procurement occur at various levels, outside the frameworkof the GPA (in various FTAs), within the GPA (bilateral andmultilateral) and within the various Annexes (reconciling BuyNational laws, disallowing utilities procurement) etc.


Exceptions and ExclusionsAs noted earlier, members-countries are expanding the

usage of the security exemption provided in the text of theAgreement. It is very likely that this provision will be exploredunder a dispute which will determine the exact scope of theoperation of exclusions and exemptions which are widelyworded.

Buy National LawsIrrespective of the intention of a country in enacting a Buy

National or Buy Local law, it can result in the following effects(which should be quantified):� Provide an impetus to achieve technology transfer, aid

employment creation etc (which may result in monetarylosses/benefits for either negotiating party)

� Close off market access in certain critical sectors such asinfrastructure or in certain product markets such as steel;

� Protect their own markets from the application of suchlaws � thereby enacting such a law in a protectiveframework. In the case of the EU, the application of thereactive law is not subject matter specific � hence if anycountry maintains a Buy Local law in order to encourage anascent domestic industry (e.g. renewable energies), theEU may apply reciprocal laws in any sector.

Horizontal PoliciesThe Horizontal Policies have two facets: (i) they erode

market access opportunities for foreign suppliers and (ii) theycreate social welfare benefits in certain cases. New entrantshave the following options:1. Replicating the horizontal policies (SME preferences, green

procurement) after adapting them into local regulationsand aligning them with international obligations. Thisshould result in creating similar social welfare benefits and


defendingmarket access resulting in mirroring trade barrierimpacts on exports. However, it is critical to observe thatcertain developing countries may be unable to emulate ormirror the maintenance of certain non-tariff barriers (atleast those pertaining to TBT and SPS). This is owing tothe use of extremely sophisticated technology for thepurpose of identifying derogations which are distinct fromcommonly established standards.

DefendingMarket Access andCreatingOpportunitiesResponse to Buy National Laws

The impact of Buy National laws on market accessopportunities has to be assessed keeping in mind whether thecountry undertaking such an exercise intends to accede tothe GPA, or obtain a waiver from the application of this lawfrom the country which is maintaining such measuresindependently. It is also vital to determine the �rules of origin�test which is being applied by a member in its own BuyNational laws in order to identify trading opportunities inintermediate goods.

Sustainable ProcurementCountries have evolved mechanisms to enshrine the values

of sustainability in procurement. Some of these could be owingto the requirement to meet international commitmentspertaining to the reduction of carbon emissions (the KyotoProtocol Target Achievement Plan). While the EU hasproposed that as much as 50 percent of all procurement shouldbe �green�, as discussed earlier, other countries like the USand Japan have come up with similar models to encourage�sustainable� or �green procurement�.

India has conceptualised ECOMARK, a certification issuedby the Bureau of Indian Standards which indicates thatproducts are produced through eco-friendly methods.


This may present market opportunities for local producerswho are engaged in the production of eco-friendly goods, orproducers who use eco-friendly modes of production.However, it is critical to defend market access opportunitiesfor those producers whose products may be excluded owingto the application of certification methods. This may beaccomplished through the conclusion of �agreements onequivalence.�

Small and Medium Sized EnterprisesPolicy w.r.t SMEs: On a side-note, if sector-specific criteria

are evolved for each category of MSME3, procurementinitiatives can be better targeted. Further research has to beconducted in this area. In the event the GPA is modified toenable the removal of discriminatory policies favouring SMEs,India will have to ensure that Indian SMEs are in a position tocash in on opportunities created at that point of time.4

Should a New Entrant/India submit Sub-central or StateGovernment Entities for procurement?

The arguments that can be advanced for a new entrantwhich is a federal unit, to disallow the participation of stategovernments are as follows (specifically Indian stategovernments in the event an offer is made): (i) Legislativebasis in the Constitution, based on an extensive analysis ofthe items in the Seventh Schedule; (ii) Demonstrating thatstate governments� procurement activities are independentof interference from the centre owing to the manner in whichfunds are processed, and routed. The US government had alsosubmitted that providing a direction on state procurementwould amount to an intrusion on how the states spend theirrevenues.

Even though case law in India has indicated that stategovernments are bound by the central government�s executive


actions pertaining to international treaties, the case lawexpostulated until now cannot be conclusive that the stategovernments are necessarily bound by the decision of thecentral government with respect to every subject matter whichis also concomitantly covered by an international treaty/agreement. This has been demonstrated in cases pertainingto allowing FDI in multi-brand retail (as mentioned in theIntroduction).

The representations of the centre on whether or not itpossesses the authority to mandate state governmentparticipation will either have to be uniform across all policydecisions, or every individual decision on adoption ofinternational treaty obligations into a state�s policies have tocontain specific reasoning.

It is likely that states which are highly populated like UttarPradesh, or states which undertake a large amount ofprocurement (after pertinent information is collated in thefuture) or those which incur the highest expenditure may beidentified for inclusion in the requests for improvement whichmay emanate from the Parties to the GPA, after ascertainingthe willingness of the state concerned. Further, the level ofinfrastructure development, and the opportunities for furtherinvestments will be sources of information which will driverequests from members of the GPA.

The following possibilities can be explored with respectto including state governments in a plausible entity offer:1. If, like the United States and Canada, state and local

government entities aremade part of a plausible entity offer,further market access opportunities may be negotiatedwiththe other participants and market access can be limiteduntil �comparable and effective� offers are provided.Offering state government entities as elements ofnegotiating leverage has been attempted by certain Partiesto the GPA.


2. On a broader level, an assessment of who the stategovernments� procurement entities procurewhat from, andthe underlying social or economic rationale can form thebasis for an exemption or exclusion. Further, consideringthe current status, state government entities may be ableto maintain exemptions/exclusions pertaining to thesatisfaction of both economic and social objectives, so longas it is in consonance with the foreign policy and tradepolicy maintained at the central level. This can extend toprocurement of cultural items, aiding certain disadvantagedclasses of society specific to a certain state, areas whichdo not enjoy a high level of economic development, and toeliminate existing contracts with cooperatives orassociations. Procurement of certain goods which aredominantly produced in a certain state can also be excluded� some important materials which have been frequentlyexempted include steel, motor vehicles and coal, andprocurement pertaining to certain purposes liketransportation and infrastructure development (which isundertaken mostly by state governments).

3. Similar to Quebec�s exemption of procurement of culturalor artistic goods, exceptions and exemptions can bemaintained for textiles, handicrafts, temple sculptures andpaintings by new entrants. The notification released by theMinistry of Small andMedium Sized Enterprises pertainingto compulsory procurement of 358 items from SMEs maywell be exempted on similar grounds.

4. Further, they may be able to maintain offsets independentlyafter undertaking an assessment individual to the state.

What are the factors to be borne in mind while consideringnegotiations pertaining to Annex 3 Entities or �OtherEntities� undertaking procurement?


It is important to reflect the exemptions/exclusions whichare generally maintained by certain country members onaccount of reciprocity. The Qualifications to an offer basedon reciprocity detail the extent to which market access islimited in certain sectors or certain product categories. It iscritical to understand that these sectors/product categoriesare not open for procurement opportunities merely onaccession into the Agreement on Government Procurement.Though an option to negotiate mutually acceptablecommitment and to seize that market access is available, whena new entrant evaluates accession, it may be astute to excludecertain sectors/Annexes for certain countries (for example,Annex 2 entities for Canada). Examples of such commitmentsare present in Table 5.1.

Table 5.1: Mirroring Reciprocity in Procurement of Services,Utilities, Annex 2 and Annex 3

New Entrant�s Countries to Sectors in which MarketOffer Whom Market Access is denied

Access is denied

New Entrant Canada Procurement by Annex 2, andAnnex 3 entities, subject tonegotiation of mutuallyacceptable commitments

New Entrant All Mirror the exact coverage inAnnex 4 pertaining to Services

New Entrant EC Contracts undertaken by Annex 3entities for the following purposes:-- Purchase of water- Supply of energy or fuels- Production of energy- Pursuit of such activities is anon-member country

New Entrant EC Mirrors commitments pertainingto contracts in services in Annexes1-3, and categories in 4-5.


Option to Negotiate Mutually Negotiable CommitmentsBy merely acceding to the GPA, parties are not guaranteed

market access to certain Annexes in Appendix I for certaincountries. For example, it is essential to negotiate furthermutually acceptable commitments with Canada in order toaccess procurement by its Annex 2 and Annex 3 entities.

Irrespective of the content of a new entrants� offer, a newentrant will be denied access to the sectors shaded in grey inthe countries in which these qualifications are maintained inTable 3.11 on �Details of Sectors in which Market Access isDenied or Limited by Country Members in the GPA�.

A new entrant faced with this situation has a choice toeither restrict market access to that sector or to open upmarket access to that sector. If it decides to open up marketaccess, it can open market access opportunities only to thosecountries which offer reciprocal commitments. In the eventit decides to open the sector to those countries which do notoffer reciprocal commitments, market access to anotherdifferent, important sector can be negotiated for. Tosummarise, the options available for a new entrant when facedwith a sectoral exclusion are as follows:1. To negotiate to open up those sectors specifically with the

country which maintains such qualifications aftercommitting mutually acceptable commitments;

2. To close the same sectors to all participants in the GPA.This may result in the same qualification being mirroredby the other participants in the GPA;

3. To negotiate opening up of those sectors in the GPA withthe other participants. However, the participants whorefuse to allow access to those sectors should be excluded.

The GPA as an Evolving Discipline � Need for ClarityIndia currently enjoys �Observer� Status in the GPA. It is

vital to explore if this status entails that the Observers can


voice concerns pertaining to the implementation of theagreement whilst remaining outside of the scope of theagreement. Can a status analogous to �enhanced third partystatus� in theWTODispute Settlement Mechanism be availedof in order to clarify certain substantive issues pertaining tothe evolution of the disciplines of the GPA in order to aiddecision-making?

Alternatively, the Committee on Government Procurementcan consider the issues which have been raised for clarification.

Contours of Government Procurement� In cases where one procuring entity procures for other

entities, it is essential to be able to trace the movement ofthe procured item in order to better understand theaffixation of responsibilities therein.

� When procurement pertaining to a certain purpose isexcluded, how is such purpose ascertained by a supplier?This is pertinent in the case of exempting procurementwhich is undertaken for resale, or to use in production ofgoods or services. Another example is that of procurementwhich is undertaken for representational or promotionalpurposes.

� Another example is that of procurement undertaken infurtherance of daily profit-making activities which isexposed to competitive forces in the markets.5 In theEuropean Union entities which engage in competitivemarkets are outside the purview of the directive onregulation (Exempt Markets6). However, these entities areidentified by an investigation of the activities of the entityand pronouncement to that effect.7

� Does the �commercial sale� exclusion include sale at adiscounted rate?


� In cases where procurement is excluded, clarification mustbe sought on the impact on contracts which deal with theprocurement for both excluded and included entities.

Qualifying Covered Procurement without a TextualJustification� Within covered procurement, qualifications persist for

certain products or the purpose of a procurement (for theconstruction of consulates abroad). Is it essential to basethese exemptions or exclusions based on the text of theGPA?

� Can further qualifications to �covered procurement� bepleaded in cases where there is no textual justification?Instances include limiting procurement which isundertaken for the construction of consulates andchanceries abroad.

� Clarification on Exemptions: What is the exact scope andextent of implementation of the exceptions and exclusionsprovided in the Agreement?

� Are purchases which are made for the �purpose ofmaintaining public order� covered under the purview ofArticle XXIII of the erstwhile code?

Countries sometimes deny access to challenge proceduresin cases or procurement by Annex 2 entities, or procurementin the case of SMEs, over reciprocity concerns. It is critical tounderstand whether such denigration of the terms of theagreement was envisaged, or is admissible under the terms ofthe Agreement.

On a side note, it may be essential to constitute a body/cellsimilar to a trade remedy investigation cell in order to addressany such issues encountered by a supplier in a foreign market.

Defining Procurement: Considering that procurement issometimes undertaken with funding from the central


government, but implemented by a state government etc, it isessential to limit and define the exact specifications. Forexample the US has mentioned that restrictions may bemaintained where federal funds are used for mass transit andhighway projects.

LimitationsThis study has only partially fulfilled its objective of

providing a toolkit to aid decision-making for a new entrantinto the GPA. On India, it has not looked inward at theprocurement being undertaken by the central governmentministries or the procurement practices of the various stategovernments or the public sector enterprises. This has resultedin limiting the sources from where conclusions have beendrawn to the various country experiences, and the content ofthe country offers.

The proxy variable used in the current study in order toassess whether India will be able to access a certain GPAmember�s market is that of the extant exports into thosemarkets. Future research may be undertaken with thefollowing proxy variables in order to take into account thefollowing factors: (i) proximity; (ii) trade in intermediategoods; (iii) influence of RTA/FTA chapters on governmentprocurement amongst others.

Areas of Future ResearchWTO-GPA Related

The likelihood of circumvention under the GPA owing tothe following factors: (i) preferences to restrict the applicationof the Agreement to only those entities which are mentionedin the positive list, or exclude entities/services/other elementsmentioned in a negative list, (ii) members not updating theirschedules following privatisation or any other act which


renders the application of GPA disciplines on a public entityinapplicable; (iii) the use of wide exceptions and exclusionswhich are not founded in the Agreement; (iv) undertakingpractices which cannot be checked. Mechanisms have to beevolved in order to clarify ambiguous terms which may inhibitthe operation of the disciplines of the agreement.

As understood in Chapter III, the negotiations for entryinto the WTO GPA have been characterised by membersclaiming market access opportunities from each other withoutgiving due consideration for the state-specific economic, legaland social limitations. Theoretical research and simulationsof the negotiations in the GPA must be conducted in order tounearth areas where value can be created for all the partiesto the Agreement on Government Procurement.

Procurement in India

Sustainable ProcurementAs noted earlier, countries worldwide have begun to

incorporate tenets pertaining to sustainability in themechanisms, requirements, and implementation ofprocurement practices. It is vital to begin by exploring thechannels through which sustainability in procurementpractices can be enforced in India. Following that, compliancewith standards in international law must be ensured.

This, however, would mark a departure from India�sgeneral stance in the WTO that environmental standardsshould not be allowed to act as trade barriers and thatconsiderable future study is required to link environmentalto trade issues in the WTO regime. This stand has been in itsown interest in the WTO, since Indian manufacturing doesnot follow very high standards domestically, because of theextra costs involved. However, it may be in line with India�soverall policy framework to enforce sustainable procurement


consistent with India�s existing multilateral commitments inenvironment, such as under the Kyoto Protocol etc.

Better Post-Contract ManagementThe current Public-Private Partnership framework provides

guidelines for better and improved post-contract management.As mandated, it is essential to put in place institutionalmechanisms for the following functions: (i) financialmanagement, particularly for user-fee based PPPs; (ii)information management in order to manage the bulk of thedocuments, and meeting any information-sharingrequirements. Stage-wise management has been envisaged(concerns specific after issuing the Letter of Agreement, priorto signing the Concession Agreement). Owing to the fact thatit is important to ensure that there is continuity in the provisionof essential services during the life cycle of the project,continuity plans have been conceptualised.

E-Procurement SystemsThe current text of the GPA makes extensive references

to e-procurement. E-procurement is defined by the workinggroup of the World Bank on electronic governmentprocurement as follows: �The use of Information &Communications Technology by governments in conductingtheir procurement relationships with suppliers for theacquisition of goods, works, and consultancy services requiredby the public sector.�

E-sourcing covers the following modes of procurement:(i) forward electronic auctions; (ii) reverse electronicauctions8, (iii) online bidding and tendering, (iv) electronicrequests for quotations or proposals (eRfx).9 Reverse auctionshave been opined to work better for specific commodity likeitems, which are non-strategic, which function in well-established markets.10


It is important to identify the requirements of an e-procurement system in a country (such as interoperability),and to reconcile security interests and concerns pertaining toconfidentiality in the same.

Public Private PartnershipsAs noted earlier, concession contracts and build-operate-

transfer contracts have already been brought within thepurview of the GPA. Free Trade Agreements also containGPA commitments which deal with PPPs independently. PPPsare a distinctive form of bridging the demand for money incertain developing countries by inviting funds from privateorganisations and coalescing government funding, such asViability Gap Funding (and a certain extent of participationin the management).

National Procurement PolicyIt is essential to align the institutions, values and standards

set in procurement at the central, state-government, localgovernment and public sector enterprise levels with a certaindirection. The values which should be applied at a broaderlevel include those of transparency and good governance.Institutional frameworks need to be evolved in order to ensurecompliance with mandated statistical reporting requirements,and in order to ensure better post-contract management.

Imbuing welfare ideals in procurement, reducing costsincurred by systematically eliminating procedural andadministrative hurdles in procurement while procuring anoptimal quality of goods will result in a holistic improvementof procurement practices. These varied objectives can coalescethrough the evolution of an adequate procurement strategyat the central government level, state government, andamongst the various public sector enterprises.


Finally, India has to take an informed decision aboutaccession to the GPA, taking into account the relevant criterionmentioned in this chapter, which include taking intoconsideration lost market access opportunities, defendingmarket access which has already been tapped into and creatingpolitical leverage in order to develop valuable opportunitiesin procurement by including welfare-inducing objectives.


Endnotes1 The Gravity Model can be deployed to calculate if there is a

market opportunity present for commencing production of certaingoods or the provision of certain services where a demand hasbeen demonstrated in certain countries based on certain proxiessuch as the distance between the two countries, how similartheir trading profiles are, etc.

2 The concept of using �Negotiating Capital� has been borrowedfromArvind Panagariya�s lucid directions for developing futurenegotiation positions at theWTO. See,Arvind Panagariya (2003)�India at Doha: Retrospect and Prospect�, WTO and India: AnAgenda for Action in the Post Doha Scenario by Pradeep S.Mehta, Jaipur Printers Pvt. Ltd., Jaipur, page 98.

3 Currently categorised as the enterprises which are engaged inmanufacture, production, processing or preservation of goods,or provision or rendering of services.

4 Annex C, Decision of the Committee on GovernmentProcurement on a Work Programme on SMES, Decision of 30March 2012.

5 Maintained by Japan in Annex 2.

6 Specific utilities markets in given countries may be exempt frompublic procurement rules if it can be proved that: (i) the legal/regulatory environment permits access and competition in thesector concerned, and (ii) the utility operators in the marketconcerned are subject to competitive pressure.

7 See, Commission Decision of 7 January 2005 of the detailedrules for the application of the procedure provided for in Article3 of Directive 2004/17/EC of the European Parliament and ofthe Council coordinating the procurement procedures of entitiesoperating in the water, energy, transport and postal servicessectors, available online at http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:32005D0015:EN:NOT, last visitedon 28.12.2012.

8 �An electronic reverse auction is an online, real time dynamicauction between a buying organisation and a number of suppliers


who compete against each other towin the contract by submittingsuccessively lower-priced bids during a scheduled time period�.

9 Johnson, P and Klassen, R (2005) �E-Procurement�MIT SloanManagement Review 46:2.

10 Johnson, P and Klassen, R (2005) �E-Procurement�MIT SloanManagement Review 46:2.