A government purchasing system with Chinese characteristics has
initially taken shape, vice-Minister of Finance Lou Jiwei announced
recently.
"We have made remarkable progressspecial organs dealing with
government purchasing have been set up in central and local
governments; a series of rules and regulations, including the
Interim Provisions for the Administration of Government Purchasing,
have been promulgated, thus marking the initial formation of a
government purchasing system; a working pattern combining
centralized and decentralized purchases has been put into place,
while the volume and scope of government purchasing are increasing;
and, the rough draft of a government purchasing information
management system has been completed," said Lou.
Commonly known as "deals under sunshine," government purchasing
began on a trial basis in China in 1996; was rapidly extended to
more localities, commodities and services in 1998; and finally
became a nationwide activity in 2000.
China's achievements in government purchasing are notable. The
nation's total government purchasing volume jumped to 32.8 billion
yuan (US$3.97 billion) in 2000, from 13 billion yuan (US$1.57
billion) in 1999 and 3.1 billion yuan (US$374.98 million) in
1998.
"Nevertheless, we still have a long way to go before the all-round
completion of a government purchasing system with Chinese
characteristics," Lou emphatically concluded.
A Significant Reform
Ju
Jiaren, Director of the General Office of the Finance and Economy
Committee of the
National People's Congress (NPC), and also head of the team
drafting the Government Purchasing Law, attributed the rapid
development of government purchasing to its notable benefits in
controlling government expenditure, raising government fund
efficiency, ensuring purchase quality, facilitating fair
competition, adjusting national economy operations, optimizing
resource allocation, protecting key industries and preventing
corruption.
"Its operation features openness, fairness, justice and
transparency, which are in line with the demands of the market
economy," said Ju. "As a result, both central and local
governments, government organs and enterprises, as well as deal
makers and intermediary agencies, highly appreciate this mode, and
make joint efforts to advance government purchasing."
Experiments in previous years have convinced the public of the
advantages of government purchasing. Since its implementation,
government purchasing has helped reduce annual government purchase
expenditures by 10 percent, and its positive influences also
include improved administration and support for profitable domestic
enterprises.
"Introduction of government purchasing means systematic reforms,"
said vice-minister Lou Jiwei.
Over the 20 years of reform and opening-up, China's financial
system has undergone a series of reforms, and has established the
basic framework for a financial and taxation system suited to the
market economy. Nevertheless, the rate of reform in different
fields has been uneven. On one hand, reforms in the revenue
management system have been effective, as remarkable results have
been achieved; on the other hand, reforms in the currently
mismanaged expenditure management system have been slower. This
expenditure management system is therefore bound to encourage
corruption.
"Exercising government purchasing is an important part of the
efforts to build a market economy-compatible public finance system,
and is also an important step to reform government expenditure
management, as well as a radical measure to prevent corruption,"
Lou announced.
State Legislation
This October 23, the Draft Government Purchasing Law of the
People's Republic of China was submitted to the NPC Standing
Committee for the first examination.
At
the 24th Session of the Standing Committee of the Ninth NPC,
Vice-Chairman of the NPC Finance and Economy Committee, Yao
Zhenyan, explained the draft law, which contains nine chapters and
75 articles that elaborates the responsible parties, methods and
procedures of government purchasing, as well as related inquiries
and complaint procedures, supervision and examination, and
liability division.
Regarding law coverage, Yao noted, "Legally speaking, government
purchasing refers to all commodity, engineering project and service
purchases by government organs, institutions or organizations, as
long as they are paid with financial capital." He added that the
Central Military Commission would formulate military purchasing
rules.
Since China will begin negotiations to become part of the WTO
Government Purchasing Agreement two years after its WTO accession
this November, Yao stated that the opening of China's government
purchasing market will depend on these negotiations. "The drafting
team has done its utmost to ensure that the draft law conforms to
the WTO Government Purchasing Agreement and other international
conventions."
Yao added that the draft law has gone through several major
revisions during its formulation, through regular discussions and
the widespread solicitation of opinions.
The law is expected to be implemented next year.
Sharing the Pie
At
the Fourth Beijing Hi-Tech Industries Week in May, a government
purchasing order worth 400 million yuan (US$48.39 million) boosted
the participating businesses, thus convincing the public of the
strong connection between government purchasing and commercial
opportunities.
Globally, government purchasing typically accounts for 30 percent
of the financial expenditure of a market economy country, which
means that China's government purchasing last year should have
amounted to 450 billion yuan (US$54.43 billion), instead of the
mere 30 billion yuan (US$3.63 billion) it was, and should have also
accounted for more than a mere 2 percent of the nation's total
financial expenditure. Government purchasing therefore has a large
return potential.
The current scope of China's government purchasing has expanded
from commodities to engineering projects and services. An
authoritative source said that the volume and scope of government
purchasing will continue to increase over the next several years,
and is expected to exceed 60 billion yuan (US$7.26 billion) this
year and 100 billion yuan (US$12.01 billion) in 2002.
More and more domestic enterprises have tried sharing slices of
this big pie. However, only a few have benefited. For the less
fortunate enterprises in this respect, government purchasing is an
unfamiliar field, and some of these enterprises do not even
understand the concept of government purchasing, let alone the
rules involved.
Yang Jinming, a member of the Government Purchasing Law Drafting
Team and an official with the Ministry of Finance, said efforts
should be made to strengthen the training of suppliers and
disclosure of government purchasing information, in order to ensure
the smoother market entry of the relevant enterprises.
Which enterprises will be appointed as official suppliers of
government purchasing? The candidates must meet certain
criteria.
"Generally, all products in line with industrial policies and the
orientations of economic development, which also meet the demands
of purchasers, are qualified to enter the government purchasing
market," said Yang. "Instead of an administrative act, the supplier
admission system will be based on the enterprises' registry in line
with market demands, and rule-breakers will be blacklisted."
Considering the differences between individual industries and
enterprises, admission and administration of government purchasing
suppliers takes time. Competent departments will therefore
formulate administrative rules for different industries and
varieties of products, both separately and in batches. These
changes will initially be made in the computer products. "Before
that, we will formulate a general rule to enforce some principle
stipulations," Yang stated.
Compared to the buyersmostly government organs with administrative
powerssuppliers usually have fewer decision-making powers in
government purchasing deals. Protecting the interests and rights of
suppliers is therefore important. Yang said the Draft Government
Purchasing Law has, in line with current laws and government setup,
clearly stipulated suppliers' rights to inquire about purchasers,
lodge complaints to appropriate authorities, appeal for
administrative reviews and enter administrative lawsuits, all of
which safeguard their interests and rights.
Government Purchasing Going Online
A
high-level symposium on e-government and government purchasing was
held in south China's Guangzhou, Guangdong Province, in September.
The symposium stated that a large part of next year's government
purchases will be carried out via the web.
Online purchasing will help build an open information channel
between government organs, customers, suppliers and the public,
thus widening the operation of government purchasing.
China's e-business has just begun and is currently advanced mainly
by small B2C (Business-to-Consumer) transactions. The volume of B2B
(Business-to-Business) deals, on the other hand, makes up 77
percent of the global e-business trade, while B2C deals account for
a mere 23 percent. China still has a long way to go before it
becomes a world giant in e-business field and advances its methods
of information dissemination.
Industry insiders said that since online government purchasing is
more practical than online purchases by businesses or individuals,
the government plays a key role in stimulating China's e-business
trade.
They also pointed out that a lack of rules and regulations,
especially those concerning the credit system, is still an obstacle
in the advancement of online government purchasing.
The Draft Government Purchasing Law has focused on the
standardization of the online purchasing system. China has so far
had nearly 40 websites engaged in the government purchasing trade.
Greater progress in this field is anticipated next year.
(Beijing
Review November 21, 2001)