Tapping the potential?: Procurement, tied aid and the use of country systems in Uganda

December 2nd, 2010

If poor countries are to break away from the clutches of poverty, it is important that the aid they currently receive from the international community is disbursed and used in the most effective ways possible. The European Network on Debt and Development (Eurodad) and the Uganda National Non-Governmental Organisations Forum (UNNGOF) have identifiedpublic procurement and aid agency procurement as key areas where progress can be made to render aid more effective.

Today they launch the report ‘Tapping the potential?: Procurement, tied aid and the use of country systems in  Uganda,’ addressing these issues based on in country and desk-based research. This report follows similar studies on these issues in Ghana and Namibia, and will input to a larger Eurodad research project on public procurement policies and practices of donors and recipient country governments.

Public procurement – the purchasing of goods and supplies, and the contracting of works by government bodies- usually accounts for between 15 and 30% of GDP in a given country. In developing countries a large chunk of this often comes from development aid. In Uganda a massive 30% of GDP is spent on public procurement. It is the largest share of government spending besides wages, and thus if managed smartly, is a real window of opportunity for the government to promote development and fight poverty.

This study, however, finds that the potential of the Ugandan procurement system is not fully exploited. Reforms in recent years were numerous and comprehensive. Driven by donor-led assessments and guided by donor-defined international best practice, they focused on the functionality of the procurement system for purchasing the inputs needed to provide public services, and on the accountability of the procurement process. Eventually, reforms have led to an impressive legal and institutional framework, but not yet to a significant reduction in corruption or to the smoother delivery of public services, which was ostensibly their main purpose. What remains to be achieved is the optimisation of public procurement for achieving the best developmental outcomes, and the incorporation of social and environmental criteria for promoting sustainable and equitable development.

In the Paris Declaration – the key international agreement on aid effectiveness endorsed by governments globally in 2005 – donors committed to using recipient country public procurement systems, as this has multiple positive developmental impacts on the recipient country. However, the extent to which different donors deliver on this commitment varies tremendously in Uganda. In general donors seem to be using Ugandan procurement systems less, not more. This is despite efforts by the government of Uganda to implement reforms as prescribed by donors and in particular the international financial institutions.

With few exceptions most notably in the field of technical assistance, donors have formally untied their aid following the agreements made by the OECD’s Development Assistance Committee. However, where data is available it shows that most larger contracts are still awarded to Northern firms and thus flow back to donor countries rather than promoting development and increasing income in Uganda. Such reverse flows reduce the effectiveness and developmental impact of aid. This may be a result of tendering in lot sizes that are to large for small Ugandan firms to compete with, intransparent tendering, for example insufficient advertising for contracting services, or restrictive eligibility criteria that exclude in particular the small and medium sized enterprises of a developing country such as Uganda.

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Written by Eurodad

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