11 - The long and winding road to the Government Procurement Agreement: Korea's accession experience

Summary

In every country, the government provides public services such as defense, administration, education, and infrastructure to its citizens. In providing these public services, government agencies engage in public procurement of goods and services. The procurement expenditures in a country are always quite a large share of total government expenditures, which often represent a significant share of gross domestic product (GDP). As one would expect, therefore, the size of the world government procurement market is huge. The world's total potential non-defense government procurement market is estimated to be close to $1.5 trillion a year.

It is important for a country to set up an good system of government procurement in order to ensure an efficient allocation of its limited government resources, which come mostly from taxes collected from its citizens. Governments have in fact developed formal rules and procedures in an effort to achieve efficiency in government procurement. Because of their nature, however, government purchases are somewhat different from those of private entities. Public entities are generally believed to be less efficient in purchasing goods and services than private entities. In fact, some researchers have found empirically that, by introducing more competitive tendering and outsourcing from the private sector to the process of government procurement, governments could save 20 percent or more without loss of quality in the goods and services being purchased (see Domberger, Hall, and Li 1995).