Public procurement changes run into opposition

Public procurement changes run into opposition

Dadan Wijaksana, The Jakarta Post, Jakarta

The government is reviewing a presidential decree on public
procurements to reduce corruption, but the effort has met with
stiff resistance from various sides, including business
associations.

In preparation since 2000, the revisions to the decree were
recently finalized by a review team comprising various state
departments and institutions. The draft decree giving effect to
the changes is scheduled to come into effect next year.

While the draft decree has yet to be approved by President
Megawati Soekarnoputri, criticism has already been voiced by
business associations, including the Indonesian Chamber of
Commerce and Industry (Kadin), and the National Construction
Services Development Institute (LPJKN).

Kadin and the LPJKN raised objections to the fact that under
the revised decree, contractors will be allowed to win
procurement projects without having to be accredited with either
Kadin or its affiliated associations.

Presidential Decree No. 18/2000 stipulates that only companies
accredited by Kadin and its affiliated associations can
participate in a tender process.

"Under the draft decree, accreditation is not important. This
is, of course, not true as in the current era of free competition
companies need to have certificates setting out their
qualifications," LPJKN chairman Sulistijo recently said.

The two influential private sector organizations also said
that the absence of such accreditation could open the way to
backdoor deals, as the authority to determine the winner of a
tender would entirely lie with the head of the project.

Responding to this, the National Development Planning Board
(Bappenas), which coordinated the work of the review team, said
the main aim of the revision was to avoid or reduce backdoor
deals in the first place.

"Eliminating the certification requirement means a shorter
bureaucratic chain for businessmen who wish to participate in
tenders," a source at Bappenas told The Jakarta Post, adding that
the certification process was prone to abuses and bribery.

Bappenas executive secretary Koensatwanto Inpasihardjo said in
a press statement that the revision was expected to gradually
turn the nation into an efficient economy rather than a high-cost
economy as it was today.

The revised decree was formulated in response to widespread
leakage at almost every stage of the procurement process.

Various international institutions -- including the World Bank
and the Asian Development Bank -- have frequently stated that
corruption in equipment procurement in government institutions
was one of the areas most tainted by corruption in Indonesia.

The World Bank even suggested that leakage in the procurement
process could reach up to 50 percent of all funds allocated for
procurements.

Key points in revision of Presidential Decree No. 18/2000

* Elimination of need for accreditation with Kadin or its
affiliated associations.
* For projects valued below Rp 50 billion, companies do not have
to undergo a pre-qualification process.
* Fewer documents required.
* Medium and large-scale enterprises are prohibited from
participating in tenders for projects reserved for small
businesses, that is, projects worth less than Rp 50 billion.
* Provides a legal basis for the establishment of an agency
tasked with monitoring tender processes, and improving the
quality of the regulations related to procurement.